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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q
 
☒Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
 
For the quarterly period ended December 31, 20172020

OR

☐Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
 
For the transition period from _____ to _____

Commission File No.Number. 001-33794
HILLENBRAND, INC.
(Exact name of registrant as specified in its charter)
Indiana
26-1342272
(State of incorporation)
26-1342272
(I.R.S. Employer Identification No.)
One Batesville Boulevard
Batesville ININ47006
(Address of principal executive offices)(Zip Code)

(812) 934-7500
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, without par valueHINew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes ý☒  No o☐
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes ý☒  No o☐
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer
ý
☒		Accelerated filer
o
☐Emerging growth company☐
Non-accelerated filer
o
☐		(Do not check if a smaller reporting company)Smaller reporting company
o
☐Emerging growth company
o
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o☐
Indicate by check mark whether the registrant is a shell Companycompany (as defined in Rule 12b-2 of the Exchange Act). Yes o☐  No ý☒


The registrant had 63,031,09675,052,673 shares of common stock, no par value per share, outstanding as of January 26, 2018.
28, 2021.


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HILLENBRAND, INC.
INDEX TO FORM 10-Q
 
Page
2
3
4
5
6
67
2429
3242
3342
3343
3343
3443
Exhibits
34
SIGNATURES



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PART I — FINANCIAL INFORMATION


Item 1.FINANCIAL STATEMENTS
 
Hillenbrand, Inc.
Consolidated Statements of IncomeOperations (Unaudited)
(in millions, except per share data)
 
Three Months Ended
December 31,
 20202019
Net revenue$692.5 $566.9 
Cost of goods sold448.3 395.1 
Gross profit244.2 171.8 
Operating expenses131.6 157.4 
Amortization expense13.6 14.8 
Gain on divestiture(31.6)0 
Interest expense21.2 14.7 
Other (expense) income, net(0.4)1.9 
Income (loss) before income taxes109.0 (13.2)
Income tax expense (benefit)31.3 (12.4)
Consolidated net income (loss)77.7 (0.8)
Less: Net income attributable to noncontrolling interests1.3 2.3 
Net income (loss) attributable to Hillenbrand$76.4 $(3.1)
Net income (loss) attributable to Hillenbrand — per share of common stock:  
Basic earnings (loss) per share$1.01 $(0.05)
Diluted earnings (loss) per share$1.01 $(0.05)
Weighted average shares outstanding (basic)75.3 68.4 
Weighted average shares outstanding (diluted)75.5 68.4 
 Three Months Ended
December 31,
 2017 2016
Net revenue$397.2
 $356.1
Cost of goods sold250.9
 230.1
Gross profit146.3
 126.0
Operating expenses89.2
 82.8
Amortization expense7.6
 7.2
Interest expense6.3
 6.1
Other (expense) income, net(0.4) (1.3)
Income before income taxes42.8
 28.6
Income tax expense23.7
 6.7
Consolidated net income19.1
 21.9
Less: Net income attributable to noncontrolling interests1.0
 0.2
Net income(1)$18.1
 $21.7
    
Net income(1)  — per share of common stock:   
Basic earnings per share$0.28
 $0.34
Diluted earnings per share$0.28
 $0.34
Weighted average shares outstanding (basic)63.6
 63.7
Weighted average shares outstanding (diluted)64.1
 64.1
    
Cash dividends declared per share$0.2075
 $0.2050


(1) Net income attributable to Hillenbrand

See Condensed Notes to Consolidated Financial Statements



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Hillenbrand, Inc.
Consolidated Statements of Comprehensive Income (Unaudited)
(in millions)
 
 Three Months Ended
December 31,
 2017 2016
Consolidated net income$19.1
 $21.9
Changes in other comprehensive income (loss), net of tax   
Currency translation adjustment6.3
 (20.9)
Pension and postretirement (net of tax of $0.3 and $2.5)0.7
 4.4
Change in net unrealized gain (loss) on derivative instruments
(net of tax of $0.0 and $0.3)
(0.2) 0.4
Total changes in other comprehensive income (loss), net of tax6.8
 (16.1)
Consolidated comprehensive income25.9
 5.8
Less: Comprehensive income attributable to noncontrolling interests1.1
 0.1
Comprehensive income (2)$24.8
 $5.7

(2) Comprehensive income attributable to Hillenbrand
Three Months Ended
December 31,
 20202019
Consolidated net income (loss)$77.7 $(0.8)
Changes in other comprehensive income, net of tax
Currency translation adjustment59.3 17.3 
Pension and postretirement (net of tax of $0.3 and $0.5)1.2 1.1 
Change in net unrealized gain on derivative instruments (net of tax of $0.3 and $0.2)1.7 1.4 
Total changes in other comprehensive income, net of tax62.2 19.8 
Consolidated comprehensive income139.9 19.0 
Less: Comprehensive income attributable to noncontrolling interests1.4 2.2 
Comprehensive income attributable to Hillenbrand$138.5 $16.8 
 
See Condensed Notes to Consolidated Financial Statements



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Hillenbrand, Inc.
Consolidated Balance Sheets (Unaudited)
(in millions) 
 December 31,
2017		 September 30,
2017
ASSETS 
  
Current Assets 
  
Cash and cash equivalents$77.8
 $66.0
Trade receivables, net189.8
 206.1
Receivables from long-term manufacturing contracts164.7
 125.2
Inventories167.1
 151.6
Prepaid expenses30.4
 28.2
Other current assets16.9
 16.5
Total current assets646.7
 593.6
Property, plant, and equipment, net145.6
 150.4
Intangible assets, net523.1
 523.9
Goodwill651.2
 647.5
Other assets42.5
 41.1
Total Assets$2,009.1
 $1,956.5
    
LIABILITIES 
  
Current Liabilities 
  
Trade accounts payable$152.0
 $158.0
Liabilities from long-term manufacturing contracts and advances171.2
 132.3
Current portion of long-term debt3.8
 18.8
Accrued compensation49.7
 66.9
Other current liabilities145.3
 135.7
Total current liabilities522.0
 511.7
Long-term debt477.0
 446.9
Accrued pension and postretirement healthcare129.1
 129.6
Deferred income taxes57.1
 75.7
Other long-term liabilities55.4
 26.7
Total Liabilities1,240.6
 1,190.6
    
Commitments and contingencies (Note 14)

 

    
SHAREHOLDERS’ EQUITY 
  
Common stock, no par value (63.9 and 63.8 shares issued, 63.1 and 63.1 shares outstanding)—
 —
Additional paid-in capital344.1
 349.9
Retained earnings512.0
 507.1
Treasury stock (0.8 and 0.7 shares)(28.7) (24.4)
Accumulated other comprehensive loss(74.5) (81.2)
Hillenbrand Shareholders’ Equity752.9
 751.4
Noncontrolling interests15.6
 14.5
Total Shareholders’ Equity768.5
 765.9
    
Total Liabilities and Equity$2,009.1
 $1,956.5

See Condensed Notes to Consolidated Financial Statements

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Hillenbrand, Inc.
Consolidated Statements of Cash Flow (Unaudited)
(in millions)
December 31, 2020 (unaudited)September 30,
2020
ASSETS  
Current Assets  
Cash and cash equivalents$265.8 $302.2 
Trade receivables, net307.0 279.5 
Receivables from long-term manufacturing contracts158.9 138.1 
Inventories, net388.5 385.4 
Prepaid expenses and other current assets85.1 83.2 
Current assets held for sale150.0 181.3 
Total current assets1,355.3 1,369.7 
Property, plant, and equipment, net307.6 314.2 
Operating lease right-of-use assets153.0 154.4 
Intangible assets, net965.9 960.7 
Goodwill1,185.9 1,137.8 
Other long-term assets47.6 50.6 
Total Assets$4,015.3 $3,987.4 
LIABILITIES  
Current Liabilities  
Trade accounts payable$274.2 $271.6 
Liabilities from long-term manufacturing contracts and advances214.1 189.1 
Current portion of long-term debt28.1 36.3 
Accrued compensation80.8 96.1 
Current liabilities held for sale23.6 32.5 
Other current liabilities254.7 226.5 
Total current liabilities875.5 852.1 
Long-term debt1,368.3 1,516.3 
Accrued pension and postretirement healthcare171.8 166.8 
Operating lease liabilities119.9 120.9 
Deferred income taxes204.7 185.8 
Other long-term liabilities68.8 66.1 
Total Liabilities2,809.0 2,908.0 
Commitments and contingencies (Note 15)00
SHAREHOLDERS’ EQUITY  
Common stock, no par value (75.8 and 75.8 shares issued, 75.1 and 74.8 shares outstanding)0 0 
Additional paid-in capital717.2 723.6 
Retained earnings541.4 481.4 
Treasury stock (0.7 and 1.0 shares)(32.0)(43.2)
Accumulated other comprehensive loss(40.7)(102.8)
Hillenbrand Shareholders’ Equity1,185.9 1,059.0 
Noncontrolling interests20.4 20.4 
Total Shareholders’ Equity1,206.3 1,079.4 
Total Liabilities and Shareholders’ Equity$4,015.3 $3,987.4 
 
 Three Months Ended
December 31,
 2017 2016
Operating Activities 
  
Consolidated net income$19.1
 $21.9
Adjustments to reconcile net income to cash provided by (used in) operating activities: 
  
Depreciation and amortization13.8
 15.0
Deferred income taxes(14.9) 11.4
Share-based compensation2.3
 2.6
Trade accounts receivable and receivables from long-term manufacturing contracts(20.4) 4.2
Inventories(14.3) (4.7)
Prepaid expenses and other current assets4.4
 (3.3)
Trade accounts payable(7.4) (10.3)
Accrued expenses and other current liabilities12.9
 4.0
Income taxes payable32.0
 (8.8)
Defined benefit plan and postretirement funding(2.8) (82.9)
Defined benefit plan and postretirement expense1.1
 1.7
Other, net1.1
 0.5
Net cash provided by (used in) operating activities26.9
 (48.7)
    
Investing Activities 
  
Capital expenditures(5.6) (4.6)
Other, net0.2
 0.1
Net cash used in investing activities(5.4) (4.5)
    
Financing Activities 
  
Repayments on term loan(148.5) (3.4)
Proceeds from revolving credit facilities, net of financing costs371.8
 182.1
Repayments on revolving credit facilities(213.0) (125.9)
Payments of dividends on common stock(13.1) (13.0)
Repurchases of common stock(15.2) —
Net proceeds on stock plans2.6
 8.6
Other, net2.8
 1.1
Net cash (used in) provided by financing activities(12.6) 49.5
    
Effect of exchange rates on cash and cash equivalents2.9
 (1.7)
    
Net cash flows11.8
 (5.4)
    
Cash and cash equivalents: 
  
At beginning of period66.0
 52.0
At end of period$77.8
 $46.6

See Condensed Notes to Consolidated Financial Statements

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Hillenbrand, Inc.
Consolidated Statements of Cash Flows (Unaudited)
(in millions)
Three Months Ended
December 31,
 20202019
Operating Activities  
Consolidated net income (loss)$77.7 $(0.8)
Adjustments to reconcile net income (loss) to cash provided by operating activities:  
Depreciation and amortization29.3 25.9 
Gain on divestiture(31.6)0 
Deferred income taxes14.4 (29.0)
Amortization of deferred financing costs1.7 0.5 
Share-based compensation4.2 2.3 
Settlement of Milacron share-based equity awards0 5.9 
Trade accounts receivable and receivables from long-term manufacturing contracts(32.8)(9.4)
Inventories, net(2.1)26.3 
Prepaid expenses and other current assets(5.1)14.5 
Trade accounts payable(5.5)(1.8)
Liabilities from long-term manufacturing contracts and advances,
accrued compensation, and other current liabilities9.3 (21.3)
Income taxes payable8.1 6.5 
Defined benefit plan and postretirement funding(2.3)(2.7)
Defined benefit plan and postretirement expense0.8 1.5 
Other, net0.1 (0.6)
Net cash provided by operating activities66.2 17.8 
Investing Activities  
Capital expenditures(5.6)(6.3)
Proceeds from sales of property, plant, and equipment0 13.3 
Acquisition of businesses, net of cash acquired0 (1,503.1)
Proceeds from divestiture, net of cash divested59.4 0 
Net cash provided by (used in) investing activities53.8 (1,496.1)
Financing Activities  
Proceeds from issuance of long-term debt0 725.0 
Repayments on long-term debt(220.0)(9.1)
Proceeds from revolving credit facilities226.0 747.5 
Repayments on revolving credit facilities(163.0)(222.5)
Payment of deferred financing costs0 (5.4)
Payments of dividends on common stock(16.1)(15.8)
Proceeds from stock option exercises3.2 0.2 
Payments for employee taxes on net settlement equity awards(2.9)(1.8)
Other, net(1.3)3.3 
Net cash (used in) provided by financing activities(174.1)1,221.4 
Effect of exchange rates on cash and cash equivalents9.7 0.4 
Net cash flows(44.4)(256.5)
Cash, cash equivalents, and restricted cash:  
At beginning of period311.8 399.4 
At end of period$267.4 $142.9 

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the Consolidated Balance Sheets that sum to the total of the same amounts shown in the Consolidated Statements of Cash Flows:
December 31, 2020December 31, 2019
Cash and cash equivalents$265.8 $142.4 
Short-term restricted cash included in other current assets1.6 0.5 
Total cash, cash equivalents, and restricted cash shown in the Consolidated Statements of Cash Flows$267.4 $142.9 
See Condensed Notes to Consolidated Financial Statements
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Hillenbrand, Inc.
Consolidated Statements of Shareholders’ Equity (Unaudited)
(in millions)
Three Months Ended December 31, 2020
 Shareholders of Hillenbrand, Inc.
 Common StockAdditional
Paid-in
Capital		Retained
Earnings		Treasury StockAccumulated
Other
Comprehensive
Loss		Noncontrolling
Interests		Total
 SharesSharesAmount
Balance at September 30, 202075.8 $723.6 $481.4 1.0 $(43.2)$(102.8)$20.4 $1,079.4 
Total other comprehensive income (loss), net of tax— — — — — 62.1 0.1 62.2 
Net income— — 76.4 — — — 1.3 77.7 
Issuance/retirement of stock for stock awards/options0 (10.9)— (0.3)11.2 — — 0.3 
Share-based compensation— 4.2 — — — — — 4.2 
Dividends ($0.2150 per share)— 0.3 (16.4)— — — (1.4)(17.5)
Balance at December 31, 202075.8 $717.2 $541.4 0.7 $(32.0)$(40.7)$20.4 $1,206.3 
Three Months Ended December 31, 2019
Shareholders of Hillenbrand, Inc.
Common StockAdditional
Paid-in
Capital		Retained
Earnings		Treasury StockAccumulated
Other
Comprehensive
Loss		Noncontrolling
Interests		Total
SharesSharesAmount
Balance at September 30, 201963.9 $345.3 $599.5 1.2 $(50.1)$(140.6)$15.7 $769.8 
Total other comprehensive income (loss), net of tax— — — — — 19.9 (0.1)19.8 
Net (loss) income— — (3.1)— — — 2.3 (0.8)
Issuance/retirement of stock for stock awards/options0 (6.1)— (0.1)4.5 — — (1.6)
Share-based compensation— 2.3 — — — — — 2.3 
Dividends ($0.2125 per share)— 0.1 (15.9)— — — (1.2)(17.0)
Common stock issued to acquire Milacron (see Note 4)11.9 371.3 — — — — — 371.3 
Reclassification of certain income tax effects (1)
— — 6.0 — — (6.0)— 0 
Balance at December 31, 201975.8 $712.9 $586.5 1.1 $(45.6)$(126.7)$16.7 $1,143.8 
(1)Income tax effects of the Tax Act (as defined in Note 2) were reclassified from accumulated other comprehensive loss to retained earnings due to the adoption of ASU 2018-02. See Note 2 for more information.


See Condensed Notes to Consolidated Financial Statements



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Hillenbrand, Inc.
Condensed Notes to Consolidated Financial Statements (Unaudited)
(in millions, except share and per share data)
 
1.Background and Basis of Presentation
1.Background and Basis of Presentation
 
Hillenbrand, Inc. (“Hillenbrand”(the “Company” or “Hillenbrand”) is a global diversified industrial company with multiple market-leadingleading brands that serve a wide variety of industries around the world.  We striveThe Company strives to provide superior return for our shareholders, exceptional value for our customers, and great professional opportunities for our employees, and to be responsible to our communities through deployment of the Hillenbrand Operating Model (“HOM”). The HOM is a consistent and repeatable framework designed to produce sustainable and predictable results.  The HOM describes ourthe Company’s mission, vision, values, and mindset as leaders; applies our management practices in Strategy Management, Segmentation, Lean, Talent Development, and Acquisitions; and prescribes three steps (Understand, Focus, and Grow) designed to make ourthe Company’s businesses both bigger and better.  OurThe Company’s goal is to continue developing Hillenbrand as a world-class global diversified industrial company through the deployment of the HOM. Hillenbrand

Hillenbrand’s portfolio is composed of two business3 reportable operating segments: theAdvanced Process Equipment GroupSolutions designs, develops, manufactures, and Batesville®.  The Process Equipment Group businesses design, develop, manufacture, and serviceservices highly engineered industrial equipment around the world. Molding Technology Solutions is a global leader in highly engineered and customized systems in plastic technology and processing. Batesville is a recognized leader in the North American death care industry.industry in North America. “Hillenbrand,” “the Company,the “Company,” “we,” “us,” “our,” and similar words refer to Hillenbrand and its subsidiaries unless context otherwise requires.
 
The accompanying unaudited consolidated financial statementsConsolidated Financial Statements include the accounts of Hillenbrand and its subsidiaries.  They also include two subsidiaries where the Company’s ownership percentage is less than 100%.  The Company’s fiscal year ends on September 30.  Unless otherwise stated, references to years relate to fiscal years.
 
These unaudited consolidated financial statementsConsolidated Financial Statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial statements and therefore do not include all information required in accordance with accounting principlesUnited States generally accepted in the United Statesaccounting principles (“GAAP”).  The unaudited consolidated financial statementsConsolidated Financial Statements have been prepared on the same basis as, and should be read in conjunction with, the audited consolidated financial statementsConsolidated Financial Statements and notes thereto included in ourthe Company’s latest Annual Report on Form 10-K for the year ended September 30, 2017,2020, as filed with the SEC.  The September 30, 2017 Consolidated Balance Sheet included in this Form 10-Q was derived from audited consolidated financial statements, but does not include all disclosures required by GAAP for a year-end balance sheet included in Form 10-K.SEC on November 12, 2020. In the opinion of management, these financial statementsConsolidated Financial Statements reflect all adjustments necessary to present a fair statement of the Company’s consolidated financial position and the consolidated results of operations and cash flowflows as of the dates and for the periods presented.presented and are normal and recurring in nature. The interim period results are subject to variation and are not necessarily indicative of the results of operations to be expected for the full fiscal year.
 
The preparation of financial statementsthe Consolidated Financial Statements in conformity with GAAP requires usthe Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statementsConsolidated Financial Statements and the reported amounts of revenues and expenses during the period.  Actual results could differ from those estimates.  Examples of such estimates include, but are not limited to, revenue recognition under the percentage-of-completion method, carrying value of businesses held for sale, and the establishment of reserves related to customer rebates, doubtful accounts, warranties, early-pay discounts, inventories, income taxes, litigation, self-insurance, and progress toward achievement of performance criteria under incentive compensation programs.


On March 11, 2020, the World Health Organization declared the outbreak of the novel strain of coronavirus (“COVID-19”) a global pandemic and recommended containment and mitigation measures worldwide, and the effects of the COVID-19 pandemic and such associated measures on management’s estimates and results of operations through December 31, 2020 are reflected in the Consolidated Financial Statements. Given the unprecedented nature of the COVID-19 pandemic, the Company cannot reasonably estimate the full extent of the impact that the COVID-19 pandemic will have on its consolidated financial condition, results of operations, or cash flows in the foreseeable future. The ultimate impact of the COVID-19 pandemic on the Company is highly uncertain and will depend on future developments, and such impacts could exist for an extended period of time, even after the COVID-19 pandemic subsides. Events and changes in circumstances arising after December 31, 2020, including those resulting from the ongoing impacts of the COVID-19 pandemic, will be reflected in management’s estimates for future periods in subsequent periodic filings.
2.Summary of Significant Accounting Policies

2.Summary of Significant Accounting Policies
 
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The significant accounting policies used in preparing these consolidated financial statementsthe Consolidated Financial Statements are consistent with the accounting policies described in ourthe Company’s Annual Report on Form 10-K as of and for 2017,the year ended September 30, 2020, except as described below.


Income taxes

We establish deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Deferred tax assets and liabilities are determined in part based on the differences between the accounting treatment of tax assets and liabilities under GAAP and the tax basis of assets and liabilities using statutory tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in statutory tax rates on deferred tax assets and liabilities is recognized in net income in the period that includes the enactment date. We continue to assert that the majority of the cash at our foreign subsidiaries represents earnings considered to be permanently reinvested for which deferred taxes have not been provided for in our financial statements, as we do not intend, nor do we foresee a need, to repatriate these funds.

On December 22, 2017, the U.S. government enacted tax legislation referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act makes broad and complex changes to the U.S. tax code that will impact our fiscal year ended September 30,

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2018 including, but not limited to (a) reducing the U.S. federal corporate tax rate, (b) requiring a one-time transition tax on certain unrepatriated earnings of foreign subsidiaries (“Transition Tax”), and (c) accelerating expensing of certain capital expenditures. The Tax Act reduced the federal corporate tax rate from 35% to 21%. The Internal Revenue Code stipulates that our fiscal year ending September 30, 2018 will have a blended corporate tax rate of 24.5%, which is based on a proration of the applicable tax rates before and after the effective date of the Tax Act. The statutory tax rate of 21% will apply to future years. With the enactment of the Tax Act, we are evaluating our future cash deployment and may change our permanent reinvestment assertion in future periods.

We have a variety of deferred income tax assets in numerous tax jurisdictions. The recoverability of these deferred income tax assets is assessed periodically and valuation allowances are recognized if it is determined that it is more likely than not that the benefits will not be realized. When performing this assessment, we consider future taxable income, the reversal of existing temporary differences, and tax planning strategies. We account for accrued interest and penalties related to unrecognized tax benefits in income tax expense.

Recently Adopted Accounting Standards


None.

Recently Issued Accounting Standards
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers. ASU 2014-09 requires entities to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The FASB has also issued several updates to ASU 2014-09. The new standard supersedes U.S. GAAP guidance on revenue recognition and requires the use of more estimates and judgments than the present standards. It also requires significant disclosures sufficient to enable users to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers, including qualitative and quantitative disclosures about contracts with customers, significant judgments and changes in judgments, and assets recognized from the costs to obtain or fulfill a contract. ASU 2014-09 will be effective for our fiscal year beginning October 1, 2018, including interim periods within that reporting period, and allows for either full retrospective adoption or modified retrospective adoption.

We have begun the assessment process and continue to evaluate the impact that ASU 2014-09 will have on our consolidated financial statements and financial reporting processes, including evaluating new disclosure requirements. Based on our initial assessment, which included a comparison of our existing accounting policies and practices against the new standard and a review of contracts active during and through the end of 2016, we believe the key areas of consideration for our financial statements include percentage-of-completion accounting, separate performance obligations, and related revenue recognized over time. Based on our initial assessment, we also expect to adopt this new standard using the modified retrospective method, which will result in a cumulative effect adjustment as of the date of adoption, and we currently do not expect the adoption of ASU 2014-09 to have a material impact on our consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases. ASU 2016-02 requires lessees to recognize a right of use asset and related lease liability for leases that have terms of more than twelve months. For income statement purposes, the FASB retained a dual model, requiring leases to be classified as either operating or finance, with the classifications based on criteria that are similar to those applied under the current lease guidance, without the explicit bright lines. ASU 2016-02 will be effective for our fiscal year beginning on October 1, 2019, with early adoption permitted. We are currently evaluating the impact that ASU 2016-02 will have on our consolidated financial statements.

In June 2016, the FASBFinancial Accounting Standards Board (“FASB”) issued ASUAccounting Standards Update (“ASU”) 2016-13, Measurement of Credit Losses on Financial Statements.Statements (“ASU 2016-13”). ASU 2016-13 replaces the current incurred loss impairment model with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to determine credit loss estimates. ASU 2016-13 will bebecame effective for ourthe Company’s fiscal year beginning on October 1, 2020, with early adoption permitted for our fiscal year beginning October 1, 2019. We are currently evaluating the impact that ASU 2016-13 will have on our consolidated financial statements.

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows: Restricted Cash. ASU 2016-18 requires that2020. As a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. ASU 2016-17 will be effective for our fiscal year beginning

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on October 1, 2018, with early adoption permitted. We expect the adoption of ASU 2016-18 to have a financial statement presentation and disclosure impact only.

In January 2017, the FASB issued ASU 2017-01, Clarifying the Definition of a Business. ASU 2017-01 assists entities in determining whether a transaction involves an asset or a business. Specifically, it states that when substantially allresult of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or group of similar identifiable assets, the set is not a business. If this initial test is not met, a set cannot be considered a business unless it includes an inputCompany's assessment on its trade receivables and a substantive process that together significantly contribute to the ability to create output.receivables from long-term manufacturing contracts, ASU 2017-01 will be effective for our fiscal year beginning on October 1, 2018, with early adoption permitted. We are currently evaluating ASU 2017-01, but do not expect it to have a significant impact on our consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment. ASU 2017-04 eliminates Step 2 from the goodwill impairment test and modifies the concept of impairment from the condition that exists when the carrying amount of goodwill exceeds its implied fair value to the condition that exists when the carrying amount of a reporting unit exceeds its fair value.  ASU 2017-04 will be effective for our fiscal year beginning on October 1, 2020, with early adoption permitted. We are currently evaluating the impact that ASU 2017-04 will have on our consolidated financial statements.

In March 2017, the FASB issued ASU 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. ASU 2017-07 states that an employer must report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period and present the other components of net benefit cost (as defined in paragraphs 715-30-35-4 and 715-60-35-9) in the income statement separately from the service cost component and outside a subtotal of income from operations (if one is presented). In addition, ASU 2017-07 limits the capitalization of compensation costs to the service cost component only (if capitalization is appropriate). ASU 2017-07 will be effective for our fiscal year beginning on October 1, 2018, with early adoption permitted. We are currently evaluating the impact that ASU 2017-07 will have on our consolidated financial statements.

In May 2017, the FASB issued ASU 2017-09, Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting. ASU 2017-09 clarifies when changes to the terms or conditions of a share-based payment award must be accounted for as modifications (in accordance with Topic 718). The new guidance will provide relief to entities that make non-substantive changes to share-based payment awards. ASU 2017-09 will be effective for our fiscal year beginning on October 1, 2018, with early adoption permitted. The amendment would be applied prospectively to an award modified on or after the adoption date. We do not expect ASU 2017-09 to have a significant impact on our consolidated financial statements.

In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. ASU 2017-12 intends to better align an entity's risk management activities and financial reporting for hedging relationships through changes to both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results. The amendments expand and refine hedge accounting for both nonfinancial and financial risk components, and align the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements. In addition, this ASU makes certain targeted improvements to simplify the application of hedge accounting guidance.  ASU 2017-12 will be effective for our fiscal year beginning on October 1, 2019, with early adoption permitted. The amendment would be applied to hedging relationships existing on the date of adoption and the effect of adoption would be reflected as of the beginning of the fiscal year of adoption (that is, the initial application date). We are currently evaluating the impact that ASU 2017-12 will have on our consolidated financial statements.

3.Business Acquisitions

Abel
We completed the acquisition of Abel Pumps LP and Abel GmbH & Co. KG and certain of their affiliates (collectively “Abel”) on October 2, 2015 for €95 in cash.  We utilized borrowings under our former $700.0 revolving credit facility and former $180.0 term loan to fund this acquisition. Based in Büchen, Germany, Abel is a globally-recognized leader in positive displacement pumps. Abel specializes in designing, developing, and manufacturing piston and piston diaphragm pumps as well as pumping solutions and in providing related parts and service. This equipment is sold under the ABEL® Pump Technologybrandinto the power generation, wastewater treatment, mining, general industry, and marine markets. The results of Abel are reported in our Process Equipment Group segment for the relevant periods.

Based on the final purchase allocation, we recorded goodwill of $36 and acquired identifiable intangible assets of $58, which consisted of $5 of trade names not subject to amortization, $9 of developed technology, $3 of backlog, and $41 of customer relationships. In addition, we recorded $14 of net tangible assets, primarily working capital. Goodwill is deductible for tax

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purposes in Germany. Supplemental proforma information has not been provided as the acquisition2016-13 did not have a material impact on consolidated resultsthe Consolidated Financial Statements.

In February 2018, the FASB issued ASU 2018-02, Income Statement-Reporting Comprehensive Income (Topic 220): Reclassification of operations.

Red Valve

On FebruaryCertain Tax Effects from Accumulated Other Comprehensive Income (“ASU 2018-02”). ASU 2018-02 allows for the reclassification of stranded tax effects resulting from the Tax Cuts and Jobs Act of 2017 (the “Tax Act”) from accumulated other comprehensive loss to retained earnings. The Company adopted ASU 2018-02 on October 1, 2016, we completed2019, which resulted in a one-time decrease to accumulated other comprehensive loss and an increase to retained earnings of $6.0 on the acquisition of Red Valve Company, Inc. (“Red Valve”)Consolidated Balance Sheet, primarily related to deferred taxes previously recorded for $130.4 in cash, net of certain adjustments. We utilized borrowings under our former $700.0 revolving credit facility and former $180.0 term loan to fund this acquisition. Based in Carnegie, Pennsylvania, Red Valve is a global leader in highly-engineered valves designed to operate in the harshest municipal and industrial wastewater environments. Its products support mission critical applications in water/wastewater, power and mining,pension and other general industrial markets.postretirement benefits. The resultsadoption of Red Valve are reportedASU 2018-02 did not have an impact to the Consolidated Statements of Operations or Consolidated Statements of Cash Flows.

Recently Issued Accounting Standards
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”). ASU 2019-12 clarifies and simplifies accounting for income taxes by eliminating certain exceptions for intraperiod tax allocation principles, the methodology for calculating income tax rates in our Process Equipment Group segmentan interim period, and recognition of deferred taxes for outside basis differences in an investment, among other updates. ASU 2019-12 will be effective for the relevant periods.

BasedCompany’s fiscal year beginning on October 1, 2021. The Company is currently evaluating the impact of ASU 2019-12 on the final purchase allocation, we recorded goodwill of $59 and acquired identifiable intangible assets of $61, which consisted of $4 of trade names not subjectConsolidated Financial Statements.

No other new accounting pronouncements recently adopted or issued had or are expected to amortization, $8 of developed technology, $1 of backlog, and $48 of customer relationships. In addition, we recorded $10 of net tangible assets, primarily working capital. Goodwill is deductible for tax purposes. Supplemental proforma information has not been provided as the acquisition did not have a material impact on consolidatedthe Consolidated Financial Statements.

3.Revenue Recognition

Net revenue includes gross revenue less sales discounts, customer rebates, sales incentives, and product returns, all of which require the Company to make estimates for the portion of these allowances that have yet to be credited or paid to customers. The Company estimates these allowances using the expected value method, which is based upon historical rates and projections of customer purchases toward contractual rebate thresholds.

Contract balances

The balance in receivables from long-term manufacturing contracts at December 31, 2020 and September 30, 2020 was $158.9 and $138.1, respectively. The change was driven by the impact of net revenue recognized prior to billings. The balance in the liabilities from long-term manufacturing contracts and advances at December 31, 2020 and September 30, 2020 was $214.1 and $189.1, respectively, and consists primarily of cash payments received or due in advance of satisfying performance obligations. The revenue recognized for the three months ended December 31, 2020 and 2019 related to liabilities from long-term manufacturing contracts and advances as of September 30, 2020 and 2019 was $80.1 and $55.3, respectively. During the three months ended December 31, 2020 and 2019, the adjustments related to performance obligations satisfied in previous periods were immaterial.

Transaction price allocated to the remaining performance obligations
As of December 31, 2020, the aggregate amount of transaction price of remaining performance obligations, which corresponds to backlog as defined in Item 2 of this Form 10-Q, for the Company was $1,362.6. Approximately 78% of these performance obligations are expected to be satisfied over the next twelve months, and the remaining performance obligations, primarily within one to three years.

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Disaggregation of revenue

The following tables present net revenue by end market:
Three Months Ended December 31, 2020
Advanced Process SolutionsMolding Technology SolutionsBatesvilleTotal
End Market
  Plastics$194.7 $0 $0 $194.7 
  Automotive0 36.5 0 36.5 
  Chemicals19.1 0 0 19.1 
  Consumer goods0 39.0 0 39.0 
  Food and pharmaceuticals22.8 0 0 22.8 
  Custom molders0 38.9 0 38.9 
Construction0 20.4 0 20.4 
Packaging0 31.7 0 31.7 
  Minerals and mining11.9 0 0 11.9 
  Electronics0 18.4 0 18.4 
Medical0 21.2 0 21.2 
  Death care0 0 164.8 164.8 
  Other industrial42.3 30.8 0 73.1 
    Total$290.8 $236.9 $164.8 $692.5 

Three Months Ended December 31, 2019
Advanced Process SolutionsMolding Technology SolutionsBatesvilleTotal
End Market
  Plastics$202.0 $0 $0 $202.0 
  Automotive0 25.0 0 25.0 
  Chemicals24.4 0 0 24.4 
  Consumer goods0 22.4 0 22.4 
  Food and pharmaceuticals18.0 0 0 18.0 
  Custom molders0 16.8 0 16.8 
Construction0 16.8 0 16.8 
Packaging0 13.8 0 13.8 
  Minerals and mining13.3 0 0 13.3 
  Electronics0 8.3 0 8.3 
Medical— 5.3 — 5.3 
  Death care0 0 127.0 127.0 
  Other industrial48.9 24.9 0 73.8 
    Total$306.6 $133.3 $127.0 $566.9 

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The following tables present net revenue by geographical market:
Three Months Ended December 31, 2020
Advanced Process SolutionsMolding Technology SolutionsBatesvilleTotal
Geographical Markets
Americas$82.1 $124.7 $164.8 $371.6 
Asia127.9 73.3 0 201.2 
Europe, the Middle East, and Africa80.8 38.9 0 119.7 
    Total$290.8 $236.9 $164.8 $692.5 

Three Months Ended December 31, 2019
Advanced Process SolutionsMolding Technology SolutionsBatesvilleTotal
Geographical Markets
Americas$112.9 $80.4 $127.0 $320.3 
Asia108.3 32.9 0 141.2 
Europe, the Middle East, and Africa85.4 20.0 0 105.4 
    Total$306.6 $133.3 $127.0 $566.9 

The following tables present net revenue by products and services:
Three Months Ended December 31, 2020
Advanced Process SolutionsMolding Technology SolutionsBatesvilleTotal
Products and Services
Equipment$197.9 $155.1 $0 $353.0 
Parts and services92.9 65.5 0 158.4 
Death care0 0 164.8 164.8 
Other0 16.3 0 16.3 
    Total$290.8 $236.9 $164.8 $692.5 

Three Months Ended December 31, 2019
Advanced Process SolutionsMolding Technology SolutionsBatesvilleTotal
Products and Services
Equipment$206.0 $82.2 $0 $288.2 
Parts and services100.6 32.2 0 132.8 
Death care0 0 127.0 127.0 
Other0 18.9 0 18.9 
    Total$306.6 $133.3 $127.0 $566.9 

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The following tables present net revenue by timing of transfer:
Three Months Ended December 31, 2020
Advanced Process SolutionsMolding Technology SolutionsBatesvilleTotal
Timing of Transfer
Point in time$146.2 $236.9 $164.8 $547.9 
Over time144.6 0 0 144.6 
    Total$290.8 $236.9 $164.8 $692.5 

Three Months Ended December 31, 2019
Advanced Process SolutionsMolding Technology SolutionsBatesvilleTotal
Timing of Transfer
Point in time$147.3 $133.3 $127.0 $407.6 
Over time159.3 0 0 159.3 
    Total$306.6 $133.3 $127.0 $566.9 


4.Acquisitions and Divestitures

Acquisition of Milacron

Background

On November 21, 2019, the Company completed the acquisition of Milacron, a global leader in highly engineered and customized systems in plastic technology and processing, through a merger of its wholly-owned subsidiary with and into Milacron, resulting in ownership of 100% of Milacron common stock that was issued and outstanding after the acquisition. The acquisition provides Hillenbrand with increased scale and meaningful product diversification, enhancing its ability to serve customers with expanded capabilities across the plastics value chain.

The results of operations.Milacron are reported separately in its own reportable segment (Molding Technology Solutions).


BothPurchase price consideration

As a result of these acquisitions continue Hillenbrand’s strategythe acquisition, Milacron stockholders received $11.80 in cash per share and a fixed exchange ratio of 0.1612 shares of Hillenbrand common stock for each share of Milacron common stock they owned, with cash paid in lieu of fractional shares. In addition, concurrent with the closing of the acquisition, the Company made a cash payment of $772.9 to transformrepay outstanding Milacron debt, including accrued interest. The Company funded the acquisition through a combination of cash on hand, new debt financing, and the issuance of common stock.

Pursuant to the Merger Agreement, certain of Milacron’s outstanding stock options, restricted stock awards, restricted stock unit awards, and performance stock unit awards immediately vested and converted into the right to receive $11.80 per share in cash and 0.1612 shares of Hillenbrand common stock per share. Additionally, certain of Milacron’s stock appreciation rights were canceled and converted into the right to receive a world-class global diversified industrial company by increasing our ability to expand into new markets and geographies within the highly attractive flow control space.lump sum cash payment. The fair value of these acquisitions did not ascribeshare-based equity awards was apportioned between purchase price consideration and immediate expense. The portion of the fair value of partially vested awards associated with pre-acquisition service of Milacron employees represented a significant amount to tangible assets,component of the total purchase price consideration, while the remaining portion of the fair value was immediately recognized as we often seekexpense within operating expenses on the Consolidated Statement of Operations during the three months ended December 31, 2019.
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The following table summarizes the aggregate purchase price consideration to acquire companies with a relatively low physical asset base in order to limit the need to invest significant additional cash post-acquisition.Milacron:

4.Cash consideration paid to Milacron stockholdersSupplemental Balance Sheet Information$835.9 
Repayment of Milacron debt, including accrued interest772.9 
Cash consideration paid to settle outstanding share-based equity awards34.2 
Total cash consideration1,643.0 
Fair value of Hillenbrand common stock issued to Milacron stockholders (1)
356.9 
Stock consideration issued to settle outstanding share-based equity awards (1)
14.4 
Total consideration transferred2,014.3 
Portion of cash settlement of outstanding share-based equity awards recognized as expense (2)
(14.1)
Portion of stock settlement of outstanding share-based equity awards recognized as expense (2)
(5.9)
     Total purchase price consideration$1,994.3 
 December 31,
2017		 September 30,
2017
Trade accounts receivable reserves$20.9
 $21.6
    
Accumulated depreciation on property, plant, and equipment$312.2
 $311.8
    
Inventories: 
  
Raw materials and components$66.9
 $52.6
Work in process43.3
 55.4
Finished goods56.9
 43.6
Total inventories$167.1
 $151.6

5.Intangible Assets and Goodwill

(1)The fair value of the 11.4 million shares of Hillenbrand’s common stock issued as of the acquisition date was determined based on a per share price of $31.26, which was the closing price of Hillenbrand’s common stock on November 20, 2019, the last trading day before the acquisition closed on November 21, 2019. This includes a nominal amount of cash paid in lieu of fractional shares. Additionally, 0.5 million shares of Hillenbrand’s common stock were issued to settle certain of Milacron’s outstanding share-based equity awards, as previously discussed.
(2)In total, $20.0 was immediately recognized as expense within operating expenses on the Consolidated Statements of Operations during the three months ended December 31, 2019, which represents the portion of the fair value of outstanding share-based equity awards that was not associated with pre-acquisition service of Milacron employees, as previously discussed.

Purchase price allocation

The acquisition was accounted for as a business combination in accordance with Accounting Standards Codification (“ASC”) Topic 805, Business Combinations. The purchase price was allocated to the assets acquired and liabilities assumed based on management’s estimate of the respective fair values at the date of acquisition. Goodwill was calculated as the excess of the consideration transferred over the net assets recognized and represents the estimated future economic benefits arising from other assets acquired that could not be individually identified and separately recognized.  The factors contributing to the recognition of goodwill were based on strategic benefits that are expected to be realized from the acquisition.  None of the goodwill is deductible for income tax purposes.

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The following table summarizes the final (as of November 21, 2020) fair values of the assets acquired and liabilities assumed as of the acquisition date:

November 21, 2019
(as initially reported)		Measurement Period AdjustmentsNovember 21, 2019
(as adjusted)
Assets acquired:
Cash and cash equivalents$125.8 $0 $125.8 
Trade receivables135.5 (2.4)133.1 
Inventories288.7 (1.0)287.7 
Prepaid expense and other current assets64.3 4.9 69.2 
Property, plant, and equipment262.9 (29.0)233.9 
Operating lease right-of-use assets41.3 0 41.3 
Identifiable intangible assets865.0 (50.0)815.0 
Goodwill666.5 67.7 734.2 
Other long-term assets22.6 (1.6)21.0 
Total assets acquired2,472.6 (11.4)2,461.2 
Liabilities assumed:
Trade accounts payable110.2 0 110.2 
Liabilities from long-term manufacturing contracts and advances32.7 0 32.7 
Accrued compensation23.2 (2.4)20.8 
Other current liabilities72.2 17.2 89.4 
Accrued pension and postretirement healthcare29.4 0 29.4 
Deferred income taxes166.3 (27.3)139.0 
Operating lease liabilities - long-term31.2 0 31.2 
Other long-term liabilities13.1 1.1 14.2 
Total liabilities assumed478.3 (11.4)466.9 
Total purchase price consideration$1,994.3 $0 $1,994.3 
Measurement period adjustments
The preliminary purchase price allocation was based upon a preliminary valuation, and the Company’s estimates and assumptions are subject to change within the measurement period (defined as one year following the acquisition date). As a result of further refining its estimates and assumptions since the date of the acquisition, the Company recorded measurement period adjustments to the initial opening balance sheet as shown in the table above. Adjustments were primarily made to property, plant, and equipment, identifiable intangible assets, goodwill, other current liabilities, and deferred income taxes. There were no measurement period adjustments materially impacting earnings that would have been recorded in previous reporting periods if the adjustments had been recognized as of the acquisition date.
During the three months ended December 31, 2020, the purchase price allocation for the acquisition was finalized.

Intangible assets identified

The purchase price allocation included $815.0 of acquired identifiable intangible assets. The fair value of the identifiable intangible assets were estimated using the income approach through a discounted cash flow analysis with the cash flow projections. The cash flows were based on estimates used to price the Milacron acquisition, and the discount rates applied were benchmarked with reference to the implied rate of return to the Company’s pricing model and the weighted average cost of capital. Definite-lived intangible assets are being amortized over the estimated useful life on a straight-line basis.  The determination of the useful lives was based upon various industry studies, historical acquisition experience, economic factors, and future cash flows of the Company post acquisition of Milacron.  In addition, Hillenbrand reviewed certain technological trends and considered the relative stability in the current Milacron customer base.

The amounts allocated to intangible assets are as follows:
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Gross Carrying AmountWeighted-Average Useful Life
Customer relationships$560.0 19 years
Trade names150.0 Indefinite
Technology, including patents95.0 10 years
Backlog10.0 3 months
    Total$815.0 

The Company is required to provide additional disclosures about fair value measurements as part of the Consolidated Financial Statements for each major category of assets and liabilities measured at fair value on a nonrecurring basis (including business acquisitions). The working capital assets and liabilities, as well as the property, plant, and equipment acquired, were valued using Level 2 inputs which included data points that are observable, such as definitive sales agreements, appraisals or established market values of comparable assets (market approach). Goodwill and identifiable intangible assets were valued using Level 3 inputs, which are unobservable by nature, and included internal estimates of future cash flows (income approach). Significant increases (decreases) in any of those unobservable inputs, as of the date of the acquisition, in isolation would result in a significantly lower (higher) fair value measurement.  Management used a third-party valuation firm to assist in the determination of the purchase accounting fair values, and specifically those considered Level 3 measurements. Management ultimately oversees the third-party valuation firm to ensure that the transaction-specific assumptions are appropriate for the Company.

Impact on results of operations

The results of Milacron’s operations have been included in Hillenbrand’s Consolidated Financial Statements since the November 21, 2019, acquisition date. The following table provides the results of operations for Milacron included in Hillenbrand’s Consolidated Statements of Operations:
Three Months Ended December 31,
20202019
Net revenue$236.9 $133.3 
Income before income taxes29.7 0.7 

In connection with the acquisition of Milacron, the Company incurred a total of $5.7 and $53.8 of business acquisition and integration costs for the three months ended December 31, 2020 and 2019, respectively, which were primarily recorded within operating expenses in the Consolidated Statements of Operations.

Supplemental Pro Forma Information

The supplemental pro forma financial information presented below is for illustrative purposes only and is not necessarily indicative of the financial position or results of operations that would have been realized if the Milacron acquisition had been completed on the date indicated, does not reflect synergies that might have been achieved, nor is it indicative of future operating results or financial position. The pro forma adjustments are based upon currently available information and certain assumptions that Hillenbrand believes are reasonable under the circumstances.

The supplemental pro forma financial information reflects pro forma adjustments to present the combined pro forma results of operations as if the Milacron acquisition had occurred on October 1, 2019, to give effect to certain events that Hillenbrand believes to be directly attributable to the Milacron acquisition. These pro forma adjustments primarily include:

•an increase to depreciation and amortization expense that would have been recognized due to acquired tangible and intangible assets;
•an adjustment to interest expense to reflect the additional borrowings of Hillenbrand and the repayment of Milacron’s historical debt in conjunction with the acquisition;
•an adjustment to remove business acquisition and integration costs, inventory step-up costs, and backlog amortization, as these costs are non-recurring in nature and will not have a continuing effect on Hillenbrand’s results; and
•the related income tax effects of the adjustments noted above.

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The supplemental pro forma financial information for the periods presented is as follows:
Three Months Ended December 31,
20202019
Net revenue$692.5 $682.6 
Net income attributable to Hillenbrand76.4 22.1 
Net income attributable to Hillenbrand  — per share of common stock:
Basic earnings per share$1.01 $0.29 
Diluted earnings per share1.01 0.29 

Assets and liabilities held for sale

During the fourth quarter of 2020, the Company announced that it had initiated a plan to divest the TerraSource Global and flow control businesses, which includes the Red Valve business (“Red Valve”) and Abel Pump business (“ABEL”), which operate within the Advanced Process Solutions reportable segment, as these businesses were no longer considered a strategic fit with the Company’s long-term growth plan and operational objectives. As discussed below, the Company completed the sale of Red Valve on December 31, 2020, and expects to the complete the divestiture of ABEL during its second fiscal quarter. The divestiture of the TerraSource Global business is expected to occur within the current fiscal year. As of September 30, 2020, the Company determined that these businesses met the criteria to be classified as held for sale, and therefore reclassified the related assets and liabilities as held for sale on the Consolidated Balance Sheets. As of December 31, 2020, the TerraSource Global and ABEL businesses continue to be classified as held for sale.

The following is a summary of the major categories of assets and liabilities that have been classified as held for sale on the Consolidated Balance Sheets:

 December 31,
2020		September 30,
2020
Trade receivables, net$13.5 $19.8 
Inventories18.6 22.0 
Property, plant and equipment, net8.7 12.9 
Operating lease right-of-use assets3.1 4.3 
Intangible assets, net92.5 133.6 
Goodwill20.4 19.5 
Other assets10.0 9.4 
Valuation allowance on disposal group (1)
(23.5)(45.4)
Total assets held for sale (2)
$143.3 $176.1 
 
Trade accounts payable$4.5 $7.3 
Liabilities from long-term manufacturing contracts and advances5.5 4.9 
Operating lease liabilities2.2 4.5 
Deferred income taxes5.5 8.8 
Other liabilities5.9 7.0 
Total liabilities held for sale$23.6 $32.5 
(1)The Company adjusted the carrying value to fair value less costs to sell for certain assets held for sale during the year ended September 30, 2020. There was no adjustment recognized for the three months ended December 30, 2020.
(2)Total assets held for sale in this table exclude certain parcels of real estate that are also classified as held for sale on the Company’s Consolidated Balance Sheets as of December 31, 2020 and September 30, 2020.

The Company determined that the impending exit from these businesses does not represent a strategic shift that had or will have a major effect on its Consolidated Results of Operations, and therefore neither were classified as discontinued operations. The results of operations for these businesses are included within the Advanced Process Solutions reportable segment for all periods presented in this quarterly report.
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Divestiture of Red Valve

On December 31, 2020, the Company completed the divestiture of Red Valve to DeZURIK, Inc. in a transaction valued at $63.0, subject to customary post-closing adjustments. The sale included cash proceeds received at closing of $59.4, including working capital adjustments, and a $5.0 note receivable, included within other long-term assets on the Consolidated Balance Sheet. The sale follows the Company’s previously announced intent to exit the Red Valve business, and Red Valve was classified as held for sale at September 30, 2020.

As a result of the sale, the Company recorded a pre-tax gain of $31.6 in the Consolidated Statement of Operations during the three months ended December 31, 2020. The related tax effect resulted in tax expense of $3.8 and was included within income tax expense in the Consolidated Statement of Operations during the three months ended December 31, 2020. The Company incurred $2.9 of transaction costs associated with the sale during the three months ended December 31, 2020, which were recorded within operating expenses in the Consolidated Statements of Operations.

The Company determined that the divestiture of Red Valve did not represent a strategic shift that had or will have a major effect on its consolidated results of operations, and therefore Red Valve was not classified as a discontinued operation. Red Valve’s results of operations were included within the Advanced Process Solutions reportable segment until the completion of the sale on December 31, 2020.

Agreement to sell ABEL Pumps

In January 2021, the Company announced that it had entered into a definitive agreement with IDEX Corporation to sell ABEL for $103.5, subject to customary post-closing adjustments. The transaction is expected to be completed in the Company’s second fiscal quarter, subject to customary closing conditions. The sale follows the Company’s previously announced intent to exit the ABEL business. The assets and liabilities of ABEL continue to be classified as held for sale as of December 31, 2020, and based on the terms of the agreement, the Company did not recognize a change in carrying value during the three months ended December 31, 2020.

Divestiture of Cimcool

On March 30, 2020, the Company completed the divestiture of its Cimcool business (“Cimcool”), which represented the former Fluids Technologies reportable segment of Milacron before its acquisition by the Company, to DuBois Chemicals, Inc. The sale resulted in cash proceeds received of $221.9, net of cash divested.

The Company determined that the divestiture of Cimcool did not represent a strategic shift that had or will have a major effect on its consolidated results of operations, and therefore Cimcool was not classified as a discontinued operation. Cimcool’s results of operations were included within the Molding Technology Solutions reportable segment until the completion of the sale on March 30, 2020.

Sale of Molding Technology Solutions facility

In December 2019, the Company completed the sale of a Molding Technology Solutions manufacturing facility located in Germany. As a result of the sale, the Company received net cash proceeds of $13.1. There was no material impact to the Consolidated Statement of Operations resulting from the sale of the facility.

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5.Supplemental Consolidated Balance Sheet Information
December 31,
2020		September 30,
2020
Allowance for doubtful accounts$28.9 $24.0 
Warranty reserves$25.6 $23.8 
Accumulated depreciation on property, plant, and equipment$357.5 $342.1 
Inventories, net:  
Raw materials and components$139.6 $133.3 
Work in process94.7 88.7 
Finished goods154.2 163.4 
Total inventories, net$388.5 $385.4 

6.Leases

The Company’s lease portfolio is comprised of operating leases primarily for manufacturing facilities, offices, vehicles, and certain equipment. At the inception of an arrangement, the Company determines whether the arrangement is or contains a lease based on whether the contract conveys the right to control the use of identified property, plant or equipment for a period of time in exchange for consideration. Leases are classified as operating or finance leases at the commencement date of the lease. Operating leases are recorded within operating lease right-of-use assets, other current liabilities, and operating lease liabilities in the Consolidated Balance Sheets. The Company’s finance leases were insignificant as of December 31, 2020. Leases with an initial term of 12 months or less are not recorded on the Consolidated Balance Sheets. We have elected an accounting policy to combine lease and non-lease components for all leases.

Operating lease right-of-use assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As the implicit rate is generally not readily determinable for most leases, the Company uses an incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The incremental borrowing rate reflects the estimated rate of interest that the Company would pay to borrow on a collateralized basis over a similar term in a similar economic environment. Lease expense for operating leases is recognized on a straight-line basis over the lease term.

Leases may include renewal options, and the renewal option is included in the lease term if the Company concludes that it is reasonably certain that the option will be exercised. A certain number of the Company’s leases contain rent escalation clauses, either fixed or adjusted periodically for inflation of market rates, that are factored into the calculation of lease payments to the extent they are fixed and determinable at lease inception. The Company also has variable lease payments that do not depend on a rate or index, primarily for items such as common area maintenance and real estate taxes, which are recorded as variable costs when incurred.

For the three months ended December 31, 2020 and 2019, the Company recognized $8.9 and $8.0, respectively, of operating lease expense, including short-term lease expense and variable lease costs, which were immaterial in each period.

The following table presents supplemental Consolidated Balance Sheet information related to the Company’s operating leases.
December 31, 2020September 30, 2020
Operating lease right-of-use assets$153.0 $154.4 
Other current liabilities$31.1 $31.2 
Operating lease liabilities119.9 120.9 
Total operating lease liabilities$151.0 $152.1 
Weighted-average remaining lease term (in years)7.67.6
Weighted-average discount rate2.5 %2.5 %
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As of December 31, 2020, the maturities of the Company’s operating lease liabilities were as follows:
2021 (excluding the three months ended December 31, 2020)$26.7 
202231.0 
202325.4 
202417.6 
202511.5 
Thereafter53.6 
Total lease payments165.8 
Less: imputed interest(14.8)
Total present value of lease payments$151.0 

Supplemental Consolidated Statement of Cash Flow information is as follows:
Three Months Ended December 31,
20202019
Cash paid for amounts included in the measurement of operating lease liabilities$9.7 $8.0 
Operating lease right-of-use assets obtained in exchange for new operating lease liabilities4.3 13.3 

7.Intangible Assets and Goodwill

Intangible Assets


Intangible assets are stated at the lower of cost or fair value. With the exception of certainmost trade names, intangible assets are amortized on a straight-line basis over periods ranging from three to 21 years, representing the period over which we expectthe Company expects to receive future economic benefits from these assets. We assessThe Company assesses the carrying value of most trade names annually, or more often if events or changes in circumstances indicate there may be an impairment.


The following tables summarize the carrying amounts and related accumulated amortization for intangible assets as of December 31, 20172020 and September 30, 2017.2020:
 December 31, 2020September 30, 2020
 CostAccumulated
Amortization		CostAccumulated
Amortization
Finite-lived assets:    
Trade names$0.2 $(0.2)$0.2 $(0.2)
Customer relationships809.2 (166.8)787.6 (151.8)
Technology, including patents139.7 (55.3)137.6 (51.0)
Software65.4 (55.9)65.6 (54.1)
Backlog0 0 10.0 (10.0)
Other0 0 0.1 (0.1)
 1,014.5 (278.2)1,001.1 (267.2)
Indefinite-lived assets:    
Trade names229.6 — 226.8 — 
Total$1,244.1 $(278.2)$1,227.9 $(267.2)

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 December 31, 2017 September 30, 2017
 Cost 
Accumulated
Amortization
 Cost 
Accumulated
Amortization
Finite-lived assets: 
  
  
  
Trade names$0.2
 $(0.1) $0.2
 $(0.1)
Customer relationships471.2
 (132.4) 468.7
 (125.9)
Technology, including patents81.3
 (41.6) 80.7
 (39.9)
Software57.0
 (46.6) 48.3
 (41.5)
Other0.2
 (0.2) 0.2
 (0.2)
 609.9
 (220.9) 598.1
 (207.6)
Indefinite-lived assets: 
  
  
  
Trade names134.1
 —
 133.4
 —
        
Total$744.0
 $(220.9) $731.5
 $(207.6)


The net change in intangible assets during the three months ended December 31, 20172020 was driven primarily by normal amortization and foreign currency adjustments.

In the third quarter of 2016, the Company recorded a trade name impairment charge of $2.2, included in operating expenses, on two trade names related to the Process Equipment Group segment. The decline in the estimated fair value of these trade names was largely driven by the decreased demand for equipment and parts used in coal mining and coal power. As of December 31, 2017, we had approximately $13 of trade name book value in the Process Equipment Group segment’s reporting units most significantly impacted by demand for coal mining and coal power.

As a result of the required annual impairment assessment performed in the third quarter of 2017, the fair value of trade names was determined to meet or exceed the carrying value for all trade names, resulting in no impairment to trade names.



Goodwill


Goodwill is not amortized, but is subject to annual impairment tests.  Goodwill has been assigned to reporting units.  We assessunits within the reportable segments.  The Company assesses the carrying value of goodwill annually, or more often if events or changes in circumstances indicate there may be impairment.  Impairment testing is performed at a reporting unit level. There were no goodwill impairment charges during the three months ended December 31, 2020 and 2019.


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Process
Equipment
Group
 Batesville Total
Balance September 30, 2017$639.2
 $8.3
 $647.5
Foreign currency adjustments3.7
 —
 3.7
Balance December 31, 2017$642.9
 $8.3
 $651.2
The following table summarizes the changes in the Company’s goodwill, by reportable segment, for the three months ended December 31, 2020.

 Advanced Process SolutionsMolding Technology SolutionsBatesvilleTotal
Balance as of September 30, 2020$485.1 $644.4 $8.3 $1,137.8 
Finalization of Milacron acquisition (see Note 4)0 19.6 0 19.6 
Foreign currency adjustments15.3 13.2 0 28.5 
Balance as of December 31, 2020$500.4 $677.2 $8.3 $1,185.9 
As a result
8.Financing Agreements

The following table summarizes Hillenbrand’s current and long-term debt as of the required annual impairment assessment performeddates reported in the third quarterConsolidated Balance Sheets.
December 31,
2020		September 30,
2020
$500.0 term loan facility (1)
$467.5 $473.7 
$400.0 senior unsecured notes, net of discount (2)
395.0 394.8 
$375.0 senior unsecured notes, net of discount (3)
370.9 370.8 
$225.0 term loan facility (4)
0 213.4 
$100.0 Series A Notes (5)
99.8 99.7 
$900.0 revolving credit facility (excluding outstanding letters of credit)63.0 0 
Other0.2 0.2 
Total debt1,396.4 1,552.6 
Less: current portion(28.1)(36.3)
Total long-term debt$1,368.3 $1,516.3 
(1)Includes debt issuance costs of 2017, the Company tested the recoverability of its goodwill,$1.2 and in all reporting units, the fair value of goodwill was determined to exceed the carrying value, resulting in no impairment of goodwill. Since the fair value of each reporting unit exceeded its carrying value, the second step of the goodwill impairment test was not necessary. The fair value of the reporting unit in the Process Equipment Group segment that is most directly impacted by demand in domestic coal mining and coal power exceeded its carrying value by less than 10%. The carrying value of goodwill$1.3 at December 31, 20172020 and September 30, 2020, respectively.
(2)Includes debt issuance costs of $5.0 and $5.2 at December 31, 2020 and September 30, 2020, respectively.
(3)Includes debt issuance costs of $3.6 and $3.7 at December 31, 2020 and September 30, 2020, respectively.
(4)Includes debt issuance costs of $0.3 at September 30, 2020. This term loan was repaid in December 2020.
(5)Includes debt issuance costs of $0.2 and $0.3 at December 31, 2020 and September 30, 2020, respectively.

Financing for this reporting unit was $71.3. InMilacron Acquisition

Upon completing the event thatacquisition of Milacron on November 21, 2019, Hillenbrand incurred borrowings under its two term loans in aggregate principal amounts of $500.0 and $225.0, which are provided for under the assumptions used (e.g., order backlog, revenue and profit growth rates, discount rate, industry valuation multiples) for this reporting unit are not consistent with actual performance in 2018, we may be required to perform an interim impairment analysis with respect to the carrying value of goodwill for this reporting unit prior to our annual test, and based on the outcome of that analysis, could be required to take a non-cash impairment charge as a result of any such test.


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6.Financing Agreements
 December 31,
2017		 September 30,
2017
$900 revolving credit facility (excluding outstanding letters of credit)$228.5
 $68.0
$180 term loan—
 148.5
$150 senior unsecured notes, net of discount (1)148.9
 148.9
$100 Series A Notes (2)99.6
 99.7
Other3.8
 0.6
Total debt480.8
 465.7
Less: current portion3.8
 18.8
Total long-term debt$477.0
 $446.9
    
(1) Includes debt issuance costs of $0.5 and $0.6 at December 31, 2017 and September 30, 2017.
(2) Includes debt issuance costs of $0.4 and $0.3 at December 31, 2017 and September 30, 2017.
On December 8, 2017, the Company entered into a SecondCompany’s Third Amended and Restated Credit Agreement dated August 28, 2019 and subsequently amended on October 8, 2019, January 10, 2020, and May 29, 2020 (the “Credit Agreement”), which governs our revolving credit facility (the “Facility”), by and among. During the Company and certain of its affiliates, the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent. The Credit Agreement amends and extends the Company’s former credit agreement which provided for a revolving credit facility of up to $700.0 in aggregate principal amount and a term loan in an original principal amount of $180.0.
The Credit Agreement increases the maximum principal amount available for borrowing under the Facility from $700.0 to $900.0. In connection with the Credit Agreement,three months ended December 31, 2020, the Company repaid the existing$225.0 term loan in full with a combination of cash on hand and borrowings underfrom its revolving credit facility.

The $500.0 term loan (the “Term Loan Facility”) matures on the Facility. The aggregatefifth anniversary of the date on which it was borrowed, subject to quarterly amortization payments (equal to 5% of the original principal amount availableof the term loan in each of years 1 and 2, 7.5% in each of years 3 and 4, and 10% in year 5). The Term Loan Facility accrues interest, at the Company’s option, at the LIBO Rate or the Alternate Base Rate (each as defined in the Credit Agreement) plus a margin based on the Company’s leverage ratio, ranging from 1.00% to 2.375% for borrowingterm loans bearing interest at the LIBO Rate and 0.0% to 1.375% for term loans bearing interest at the Alternate Base Rate. For the three months ended December 31, 2020 and 2019, the weighted average interest rates for the Term Loan Facility were 2.75% and 3.49%, respectively.

In addition to the Term Loan Facility, Hillenbrand incurred $650.0 of additional borrowings from its revolving credit facility under the Credit Agreement may be expanded, subject(the “Revolver”) at the closing of the Milacron acquisition. The additional borrowings under the Term Loan Facility, the $225.0 term loan that has since been repaid, and the Revolver, in addition to the approval$375.0 of senior unsecured notes issued during the quarter ended September 30, 2019, were used to pay a portion of the lenders, by an additional $450.0. The Credit Agreement extendscash consideration in connection with the maturity dateacquisition of the Facility to December 8, 2022. New deferred financing costsMilacron, fees and expenses related to the Credit Agreement were $2.1, which along with existing costs of $1.0, are being amortized to interest expense over the term of the Facility.

On December 8, 2017, the Company and certain of its domestic subsidiaries entered into the fourth amendment to the private shelf agreement (as amended, the “Shelf Agreement”), which amends the private shelf agreement dated December 6, 2012, among the Company, the subsidiary guarantors, PGIM, Inc. (f/k/a Prudential Investment Management, Inc.) and each Prudential Affiliate (as defined therein), pursuant to which the Company issued its 4.60% Series A unsecured notes maturing December 15, 2024 ( the “Series A Notes”). The amendment conforms certain terms of the Shelf Agreement with those contained in the Credit Agreement.

The Credit Agreement and the Shelf Agreement provide the Company with increased flexibility in its financial covenants, specifically: the maximum ratio of Indebtedness to EBITDA (as defined in the agreements, “Leverage Ratio”) of 3.5 to 1.0 allows for the application of cash as a reduction to Indebtedness (subject to certain limitations); the maximum Leverage Ratioresulting from an acquisition, in excess of $75.0 is increased to 4.0 to 1.0 for a period of three consecutive quarters following such acquisition; and the minimum ratio of EBITDA (as defined in the agreements) to interest expense is reduced to 3.0 to 1.0. Additionally, both the Credit Agreement and the Shelf Agreement provide the Company with increased flexibility to sell assets and to incur debt atrepay certain indebtedness of Milacron and its international subsidiaries.subsidiaries upon closing the acquisition.


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With respect to the Facility, as of December 31, 2017, weRevolver, the Company had $7.8$7.4 in outstanding letters of credit issued and $663.7$829.6 of maximum borrowing capacity. $569.2capacity under the Revolver as of December 31, 2020. $829.6 of this borrowing capacity was immediately available based on ourthe Company’s most restrictive leverage covenant with additional amounts available in the event of a qualifying acquisition.at December 31, 2020. The weighted-average interest rates on borrowings under the FacilityRevolver were 1.44%2.52% and 1.40%3.13% for the three months ended December 31, 20172020 and 2016.2019, respectively. The weighted average facility fee was 0.21%0.30% and 0.23% for the0.17% three months ended December 31, 20172020 and 2016. The weighted average interest rate on the term loan was 2.60% and 1.94% for the three months ended December 31, 2017 (until the date of repayment) and 2016.

We have interest rate swaps on $50.0 of outstanding borrowings under the Facility in order to manage exposure to our variable interest payments. Additionally, we have cross currency swaps on $55.0 of outstanding borrowings under the Facility to manage currency and interest rate risk exposure on foreign currency denominated debt.  The cross currency swaps are not designated as hedging instruments for accounting purposes.2019, respectively.
 

Other credit arrangements
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In the normal course of business, operating companies within the Advanced Process Equipment Group providesSolutions reportable segment provide to certain customers bank guarantees and other credit arrangements in support of performance, warranty, advance payment, and other contractual obligations. This form of trade finance is customary in the industry and, as a result, we maintainthe Company maintains adequate capacity to provide the guarantees. As of December 31, 2017, we2020, the Company had credit arrangements totaling $228.2,$437.8, under which $176.1$264.9 was utilized,used for this purpose. These arrangements include our €150.0the Company’s Syndicated Letter of Guarantee Facility (as amended, the “LG Facility”“L/G Facility Agreement”) and other ancillary credit facilities.


Covenants related to current financing agreements

The Credit Agreement, the LGL/G Facility Agreement, and the Series A Notes pursuant to the Private Shelf Agreement, dated as of December 6, 2012 (as amended, the “Shelf Agreement”), contain the following financial covenants for the current quarter: a maximum leverage ratio (as defined in the agreements) of 4.75 to 1.00 and a minimum ratio of EBITDA (as defined in the agreements) to interest expense of 3.0 to 1.00.

As of December 31, 2020, Hillenbrand was in compliance with all covenants under these agreements. Additionally, the Credit Agreement, the L/G Facility Agreement, and the Shelf Agreement require usprovide the Company with the ability to meetsell assets and to incur debt at its international subsidiaries under certain conditions including compliance with covenants, absenceconditions.

All obligations of default,the Company arising under the Credit Agreement, the $400.0 and continued accuracy of certain representations and warranties. As of December 31, 2017, we were in compliance with all covenants.

The Facility, our$375.0 senior unsecured notes, the Series A Notes, and LGthe L/G Facility Agreement are fully and unconditionally, and jointly and severally, guaranteed by certain of the Company’s domestic subsidiaries.

We had restricted cashThe Credit Agreement, the L/G Facility Agreement, and the Shelf Agreement each contain certain other customary covenants, representations and warranties and events of $0.5default. The indentures governing both the $400.0 and $0.8 included$375.0 senior unsecured notes do not limit the Company’s ability to incur additional indebtedness. They do, however, contain certain covenants that restrict the Company’s ability to incur secured debt and to engage in other current assets incertain sale and leaseback transactions. The indentures also contain customary events of default. The indentures provide holders of the Consolidated Balance Sheets atsenior unsecured notes with remedies if the Company fails to perform specific obligations. As of December 31, 20172020, Hillenbrand was in compliance with all covenants and September 30, 2017.there were no events of default.


7.Retirement Benefits
9.Retirement Benefits
 
Defined Benefit Plans

 U.S. Pension Benefits Non-U.S. Pension Benefits
 Three Months Ended December 31, Three Months Ended December 31,
 2017 2016 2017 2016
Service costs$0.7
 $1.0
 $0.6
 $0.4
Interest costs2.2
 2.2
 0.3
 0.2
Expected return on plan assets(3.5) (3.3) (0.2) (0.1)
Amortization of unrecognized prior service costs, net—
 0.1
 —
 —
Amortization of net loss0.8
 1.1
 0.2
 —
Net pension costs$0.2
 $1.1
 $0.9
 $0.5
Components of net periodic pension (benefit) cost included in the Consolidated Statements of Operations were as follows:
U.S. Pension BenefitsNon-U.S. Pension Benefits
Three Months Ended December 31,Three Months Ended December 31,
 2020201920202019
Service costs$0.2 $0.4 $0.5 $0.6 
Interest costs1.5 2.0 0.2 0.2 
Expected return on plan assets(2.7)(3.2)(0.2)(0.1)
Amortization of net loss0.5 1.2 0.7 0.4 
Net periodic (benefit) pension cost$(0.5)$0.4 $1.2 $1.1 
During
Defined Contribution Plans

Expenses related to the first quarter of 2017, we made an $80.0 contribution to our U.S. defined benefit pension plan (the “Plan”) using cash on hand and funds borrowed from our former $700.0 revolving credit facility and former $180.0 term loan. During 2017, we began implementing a plan to transition our U.S. employees not covered by a collective bargaining agreement and our employees covered by a collective bargaining agreement at two of our U.S. facilities from a defined benefit-based model to aCompany’s defined contribution structure over a three-year sunset period. These changes caused immaterial remeasurements for the Plan for the affected populations.

Postretirement Healthcare Plans — Net postretirement healthcare costsplans were $0.0$3.7 and $0.1$3.3 for the three months ended December 31, 20172020 and 2016.2019, respectively.

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Defined Contribution Plans — Expenses related to our defined contribution plans were $2.7 and $2.6 for the three months ended December 31, 2017 and 2016.
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10.Income Taxes
 
8.Income Taxes
The effective tax rates for the three months ended December 31, 20172020 and 20162019 were 55.4%28.7% and 23.4%.93.9%, respectively. The increasedifference in the effective tax rate in the current quarter relative to the federal statutory tax rate was primarily attributable to an unfavorable geographic mix of pretax income, the impact that tax loss carryforwards and the tax loss on the sale of Red Valve had on foreign tax credit determinations related to foreign income inclusions, as well as deferred taxes recognized on accumulated earnings of foreign subsidiaries. The decrease in the effective tax rate from the prior year is primarily due to the prior year net loss position and the tax benefit recognized from the revaluation of current and deferred tax balances in connection with enacted statutory tax rate reductions in certain foreign jurisdictions, which significantly increased the tax rate in the prior year, partially offset by the impact of nondeductible expenses associated with the Milacron acquisition.

The acquisition of Milacron was completed during the three monthsquarter ended December 31, 2017 2019, through the merger of a Hillenbrand wholly-owned subsidiary with and into Milacron, resulting in 100% ownership of Milacron common stock that was primarily due the impact of the Tax Act. Shortlyissued and outstanding after the Tax Act was enacted,acquisition. In connection with the SEC staff issued Staff Accounting Bulletin No. 118, Income Tax Accounting Implicationsacquisition, the Company recorded a deferred tax asset of $5.9 and a deferred tax liability of $139.0 associated with the Tax Cutsdifference between the financial accounting basis and Jobs Act (“SAB 118”) which provides guidance on accountingthe tax basis in the acquired assets and liabilities assumed. Included in the acquired deferred taxes were deferred tax assets for the Tax Act’s impact. SAB 118 provides a measurement period,carryforward of Milacron’s tax net operating losses from federal, state, and foreign tax jurisdictions of $65.5, which in no case should extend beyond one year fromwere partially offset by the Tax Act enactment date, during which a company acting in good faith may complete the accounting for the impactsrecognition of the Tax Act under Accounting Standards Codification Topic 740 (“ASC 740”). Per SAB 118, the Company must reflect the income tax effectspreliminary valuation allowances of the Tax Act in the reporting period in which the accounting under ASC 740 is complete.

In accordance with SAB 118, to the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete, the Company can determine a reasonable estimate for those effects and record a provisional estimate in the

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financial statements in the first reporting period in which a reasonable estimate can be determined. If a Company cannot determine a provisional estimate to be included in the financial statements, the Company should continue to apply ASC 740 based on the provisions of the tax laws that were in effect immediately prior to the Tax Act being enacted. If a Company is unable to provide a reasonable estimate of the impacts of the Tax Act in a reporting period, a provisional amount must be recorded in the first reporting period in which a reasonable estimate can be determined.

The impact of the federal tax rate reduction from 35.0% to 24.5% was recognized in the rate applied to earnings. We have reflected the tax effect of the temporary differences that will originate subsequent to the Tax Act and are required to be remeasured at the 21% tax rate. In addition, we have recorded a provisional discrete net tax expense of $14.3$22.0 related to the Tax Act in the period ending December 31, 2017. This net expense includes a benefitestimated realizability of $14.9 due to the remeasurement of our deferred tax accounts to reflect the impactthese items. The utilization of the corporate rate reduction on ouracquired U.S. federal and state net deferred tax balances. While we are ableoperating losses to make a reasonable estimatereduce Hillenbrand’s taxable income will be limited annually under Section 382 of the impact of the reduction in corporate rate on the deferred tax balances, we are continuing to analyze the temporary differences that existed on the date of enactment and the temporary differences originating in the current fiscal year.

These benefits were more than offset by a net expense for the Transition Tax of $28.9. We will not be able to precisely determine the amount of the Transition TaxInternal Revenue Code. The annual Section 382 limitation is $39.6 until the end of fiscal 2018 because certain cash and cash equivalent balances at September 30, 2018 and current year earningsnet operating losses are key inputs in the calculation. Additionally, other information needs to be verified, including cumulative foreign earnings, to precisely compute the amount of the Transition Tax. Provisional Transition Tax of $2.3 and $26.6 is included in other current liabilities and other long-term liabilities in the Consolidated Balance Sheet at December 31, 2017.utilized.


The enactment dates for many of the provisions within the Tax Act are for tax years beginning after December 31, 2017, and as a result, certain provisions are not effective until our fiscal year ending September 30, 2019. The provisions that are not effective until our fiscal year 2019 and, as such, have not been incorporated into the current period tax provision, include creating a base erosion anti-abuse tax, eliminating U.S. federal income taxes on dividends from foreign subsidiaries, limiting the amount of deductible interest expense, the repeal of the domestic production activity deduction, limitations on the utilization of foreign tax credits to reduce the U.S. income tax liability as well as other provisions. With the enactment of the Tax Act, we are evaluating our future cash deployment and may change our permanent reinvestment assertion in future periods.

11.Earnings per share
9.Earnings Per Share

The dilutive effects of performance-based stock awards were included in the computation of diluted earnings per share at the level the related performance criteria were met through the respective consolidated balance sheet date.  At both December 31, 20172020 and 2016,2019, potential dilutive effects, representing approximately 400,000448,000 and 600,000256,000 shares, respectively, were excluded from the computation of diluted earnings per share as the related performance criteria were not yet met, although we expectthe Company expects to meet various levels of criteria in the future.

Three Months Ended
December 31,
 20202019
Net income (loss) attributable to Hillenbrand$76.4 $(3.1)
Weighted average shares outstanding (basic - in millions)75.3 68.4 
Effect of dilutive stock options and other unvested equity awards (in millions) (1)
0.2 0 
Weighted average shares outstanding (diluted - in millions)75.5 68.4 
Basic earnings (loss) per share$1.01 $(0.05)
Diluted earnings (loss) per share$1.01 $(0.05)
Shares with anti-dilutive effect excluded from the computation of diluted earnings per share (in millions)1.4 2.4 
 Three Months Ended
December 31,
 2017 2016
Net income(1)$18.1
 $21.7
Weighted average shares outstanding (basic - in millions)63.6
 63.7
Effect of dilutive stock options and other unvested equity awards (in millions)0.5
 0.4
Weighted average shares outstanding (diluted - in millions)64.1
 64.1
    
Basic earnings per share$0.28
 $0.34
Diluted earnings per share$0.28
 $0.34
    
Shares with anti-dilutive effect excluded from the computation of diluted earnings per share (in millions)0.2
 0.7
(1) Net income attributable to Hillenbrand

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10.Shareholders’ Equity
During(1)As a result of the three months ended December 31, 2017, we paid approximately $13.1 of cash dividends.  We also repurchased approximately 375,000 shares of our common stocknet loss attributable to Hillenbrand during the three months ended December 31, 2017, at a total cost2019, the effect of approximately $15.2.stock options and other unvested equity awards would be antidilutive. In connectionaccordance with our share-based compensation plans discussed furtherGAAP, they have been excluded from the diluted earnings per share calculation.

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12.Accumulated Other Comprehensive Loss

The following tables summarize the changes in Note 12, we also issued approximately 436,000 sharesthe accumulated balances for each component of common stock, of which approximately 300,000 shares were treasury stock.accumulated other comprehensive loss:

 Pension and
Postretirement		Currency
Translation		Net
Unrealized
Gain (Loss)
on Derivative
Instruments		Total
Attributable
to
Hillenbrand,
Inc.		Noncontrolling
Interests		Total
Balance at September 30, 2020$(69.6)$(21.1)$(12.1)$(102.8)  
Other comprehensive income (loss) before reclassifications      
Before tax amount0 59.2 1.7 60.9 $0.1 $61.0 
Tax expense0 0 (0.4)(0.4)0 (0.4)
After tax amount0 59.2 1.3 60.5 0.1 60.6 
Amounts reclassified from accumulated other comprehensive loss(1)
1.2 0 0.4 1.6 0 1.6 
Net current period other comprehensive income (loss)1.2 59.2 1.7 62.1 0.1 $62.2 
Balance at December 31, 2020$(68.4)$38.1 $(10.4)$(40.7)  
11.Other Comprehensive Income (Loss)
 
Pension and
Postretirement
 
Currency
Translation
 
Net
Unrealized
Gain (Loss)
on Derivative
Instruments
 
Total
Attributable
to
Hillenbrand,
Inc.
 
Noncontrolling
Interests
 Total
Balance at September 30, 2016$(67.5) $(61.6) $(0.7) $(129.8)  
  
Other comprehensive income before reclassifications 
  
  
  
  
  
Before tax amount5.7
 (20.8) 0.6
 (14.5) $(0.1) $(14.6)
Tax expense(2.1) —
 (0.3) (2.4) —
 (2.4)
After tax amount3.6
 (20.8) 0.3
 (16.9) (0.1) (17.0)
Amounts reclassified from accumulated other comprehensive income(1)0.8
 —
 0.1
 0.9
 —
 0.9
Net current period other comprehensive income (loss)4.4
 (20.8) 0.4
 (16.0) $(0.1) $(16.1)
Balance at December 31, 2016$(63.1) $(82.4) $(0.3) $(145.8)  
  
(1)Amounts are net of tax.
 Pension and
Postretirement		Currency
Translation		Net
Unrealized
Gain (Loss)
on Derivative
Instruments		Total
Attributable
to
Hillenbrand,
Inc.		Noncontrolling
Interests		Total
Balance at September 30, 2019$(62.3)$(64.7)$(13.6)$(140.6)  
Other comprehensive income (loss) before reclassifications      
Before tax amount0 17.4 1.3 18.7 $(0.1)$18.6 
Tax expense0 0 (0.3)(0.3)0 (0.3)
After tax amount0 17.4 1.0 18.4 (0.1)18.3 
Amounts reclassified from accumulated other comprehensive loss(1)
1.1 0 0.4 1.5 0 1.5 
Net current period other comprehensive income (loss)1.1 17.4 1.4 19.9 $(0.1)$19.8 
Reclassification of certain income tax effects (2)
(6.0)0 0 (6.0)
Balance at December 31, 2019$(67.2)$(47.3)$(12.2)$(126.7)  
 
Pension and
Postretirement
 
Currency
Translation
 
Net
Unrealized
Gain (Loss)
on Derivative
Instruments
 
Total
Attributable
to
Hillenbrand,
Inc.
 
Noncontrolling
Interests
 Total
Balance at September 30, 2017$(45.3) $(36.9) $1.0
 $(81.2)  
  
Other comprehensive income before reclassifications 
  
  
  
  
  
Before tax amount—
 6.2
 0.2
 6.4
 $0.1
 $6.5
Tax expense—
 —
 (0.1) (0.1) —
 (0.1)
After tax amount—
 6.2
 0.1
 6.3
 0.1
 6.4
Amounts reclassified from accumulated other comprehensive income(1)0.7
 —
 (0.3) 0.4
 —
 0.4
Net current period other comprehensive income (loss)0.7
 6.2
 (0.2) 6.7
 $0.1
 $6.8
Balance at December 31, 2017$(44.6) $(30.7) $0.8
 $(74.5)  
  
(1)Amounts are net of tax.
(2)Income tax effects of the Tax Act were reclassified from accumulated other comprehensive loss to retained earnings due to the adoption of ASU 2018-02.













22
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Reclassifications out of Accumulated Other Comprehensive Incomeaccumulated other comprehensive loss include: 

 Three Months Ended December 31, 2020
 
Amortization of Pension and Postretirement (1)
(Gain)/Loss on 
 Net Loss
Recognized		Derivative
Instruments		Total
Affected line in the Consolidated Statement of Operations:   
Net revenue$0 $0 $0 
Cost of goods sold0 0 0 
Other income, net1.3 0.5 1.8 
Total before tax$1.3 $0.5 $1.8 
Tax expense(0.2)
Total reclassifications for the period, net of tax$1.6 
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 Three Months Ended December 31, 2016
 
Amortization of Pension and
Postretirement (1)
 (Gain)/Loss on  
 
Net Loss
Recognized
 
Prior Service Costs
Recognized
 
Derivative
Instruments
 Total
Affected Line in the Consolidated Statement of Operations: 
  
  
  
Net revenue$—
 $—
 $0.1
 $0.1
Cost of goods sold0.8
 0.1
 —
 0.9
Operating expenses0.3
 —
 —
 0.3
Other income (expense), net—
 —
 0.1
 0.1
Total before tax$1.1
 $0.1
 $0.2
 $1.4
Tax expense 
  
  
 (0.5)
Total reclassifications for the period, net of tax 
  
  
 $0.9


 Three Months Ended December 31, 2017
 
Amortization of Pension and
Postretirement (1)
 (Gain)/Loss on  
 
Net Loss
Recognized
 
Prior Service Costs
Recognized
 
Derivative
Instruments
 Total
Affected Line in the Consolidated Statement of Operations: 
  
  
  
Net revenue$—
 $—
 $(0.4) $(0.4)
Cost of goods sold0.7
 —
 —
 0.7
Operating expenses0.4
 —
 —
 0.4
Other income (expense), net—
 —
 —
 —
Total before tax$1.1
 $—
 $(0.4) $0.7
Tax expense      (0.3)
Total reclassifications for the period, net of tax      $0.4

(1)These accumulated other comprehensive incomeloss components are included in the computation of net periodic pension (benefit) cost (see Note 7)9).

 Three Months Ended December 31, 2019
 
Amortization of Pension and Postretirement (1)
(Gain)/Loss on 
 Net Loss
Recognized		Derivative
Instruments		Total
Affected line in the Consolidated Statement of Operations:   
Net revenue$0 $0.1 $0.1 
Cost of goods sold0 (0.2)(0.2)
Other income, net1.6 0.5 2.1 
Total before tax$1.6 $0.4 $2.0 
Tax expense  (0.5)
Total reclassifications for the period, net of tax  $1.5 
12.Share-Based Compensation
(1)These accumulated other comprehensive loss components are included in the computation of net periodic pension (benefit) cost (see Note 9).

 Three Months Ended
December 31,
 2017 2016
Share-based compensation costs$2.3
 $2.6
Less impact of income tax benefit0.6
 1.0
Share-based compensation costs, net of tax$1.7
 $1.6
13.Share-Based Compensation
Three Months Ended
December 31,
 20202019
Share-based compensation costs$4.2 $2.3 
Less impact of income tax benefit(1.0)(0.5)
Share-based compensation costs, net of tax$3.2 $1.8 
 
We haveThe Company has share-based compensation with long-term performance-based metrics that are contingent upon ourthe Company’s relative total shareholder return and the creation of shareholder value. Relative total shareholder return is determined by comparing ourthe Company’s total shareholder return during a three-year period to the respective total shareholder returns of companies in a designated performance peer group.group or stock index, as applicable. Creation of shareholder value is measured by the cumulative cash returns and final period net operating profit after tax compared to the established hurdle rate over a three-year period.  For the performance-based awards contingent upon the creation of shareholder value, compensation expense is adjusted each quarter based upon actual results to date and any changes to forecasted information on each of the separate grants. 
 
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During the three months ended December 31, 2017, we2020, the Company made the following grants:

15
Table of Contents

Number of

Units
Stock options352,107
Time-based stock awards18,223277,891 
Performance-based stock awards (maximum that can be earned)230,890362,282 
 
Stock options granted during fiscal 2018 had a weighted-average exercise price of $45.78 and a weighted-average grant date fair value of $11.10.  OurThe Company’s time-based stock awards and performance-based stock awards granted during the first quarter of fiscal 20182021 had weighted-average grant date fair values of $45.14$38.03 and $53.39.$44.39, respectively.  Included in the performance-based stock awards granted during the first quarter of fiscal 20182021 are 110,717213,536 units whose payout level is based upon the Company’s relative total shareholder return over the three-year measurement period, as described above.  These units will be expensed on a straight-line basis over the measurement period and are not subsequently adjusted after the grant date.
 
13.Other Income (Expense), Net
 Three Months Ended
December 31,
 2017 2016
Equity in net income (loss) of affiliates$—
 $0.7
Foreign currency exchange loss, net(0.3) (0.8)
Other, net(0.1) (1.2)
Other income (expense), net$(0.4) $(1.3)
14.Other (Expense) Income, Net
Three Months Ended
December 31,
 20202019
Interest income$0.6 $1.3 
Foreign currency exchange gain, net0.4 0.1 
Other, net(1.4)0.5 
Other (expense) income, net$(0.4)$1.9 
  
14.Commitments and Contingencies
15.Commitments and Contingencies
 
Like most companies, we areHillenbrand is involved from time to time in claims, lawsuits, and government proceedings relating to ourits operations, including environmental, patent infringement, business practices, commercial transactions, product and general liability, workers’ compensation, auto liability, employment, and other matters.  The ultimate outcome of these matters cannot be predicted with certainty.  An estimated loss from these contingencies is recognized when we believethe Company believes it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated; however, it is difficult to measure the actual loss that might be incurred related to litigation.these matters.  If a loss is not considered probable and/or cannot be reasonably estimated, we arethe Company is required to make a disclosure if there is at least a reasonable possibility that a significant loss may have been incurred.  Legal fees associated with claims and lawsuits are generally expensed as incurred.
 
Claims other than employment and employment-related matterscovered by insurance have in most instances deductibles and self-funded retentions up to $0.5 per occurrence or per claim, depending upon the type of coverage and policy period.  OutsideFor auto, workers compensation, and general liability claims in the U.S., outside insurance companies and third-party claims administrators generally assist in establishing individual claim reserves, and anreserves. An independent outside actuary provides estimates of ultimate projected losses, including incurred but not reported claims, which are used to establish reserves for losses.  ClaimFor all other types of claims, reserves for employment-related matters are established based upon advice from internal and external counsel and historical settlement information for claims and related fees when such amounts are considered probable of payment.
 
The liabilities recorded amounts represent ourthe best estimate of costs that the costs weCompany will incur in relation to such exposures, but it is possible that actual costs will differ from those estimates.


15.Fair Value Measurements
16.Fair Value Measurements
 
Fair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date.  The authoritative guidance establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available.  Observable inputs are from sources independent of the Company.  Unobservable inputs reflect the Company’s assumptions about the factors market participants would use in valuing the asset or liability, developed based upon the best information available in the circumstances.  The categorization of financial assets and liabilities within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.  The hierarchy is broken down into three levels:
 

1624
Table of Contents

Level 1:Inputs are quoted prices in active markets for identical assets or liabilities.
Level 2:Inputs include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, and inputs (other than quoted prices) that are observable for the asset or liability, either directly or indirectly.
Level 3:Inputs are unobservable for the asset or liability.
 
Carrying      
Value at
December 31,		 Fair Value at December 31, 2017
Using Inputs Considered as:		Carrying Value at December 31, 2020Fair Value at December 31, 2020
Using Inputs Considered as:
2017 Level 1 Level 2 Level 3 Level 1Level 2Level 3
Assets: 
  
  
  
Assets:    
Cash and cash equivalents$77.8
 $77.8
 $—
 $—
Cash and cash equivalents$265.8 $265.8 $0 $0 
Investments in rabbi trust6.8
 6.8
 —
 —
Investments in rabbi trust4.4 4.4 0 0 
Derivative instruments4.1
 —
 4.1
 —
Derivative instruments4.8 0 4.8 0 
       
Liabilities: 
  
  
  
Liabilities:    
$150 senior unsecured notes148.9
 159.7
 —
 —
Revolving credit facility228.5
 —
 228.5
 —
$100 Series A Notes99.6
 —
 105.4
 —
RevolverRevolver63.0 0 63.0 0 
$500.0 term loan$500.0 term loan468.7 0 468.7 0 
$400.0 senior unsecured notes$400.0 senior unsecured notes400.0 433.9 0 0 
$375.0 senior unsecured notes$375.0 senior unsecured notes374.5 421.0 0 0 
$100.0 Series A Notes$100.0 Series A Notes100.0 0 104.6 0 
Derivative instruments1.7
 —
 1.7
 —
Derivative instruments1.3 0 1.3 0 
 
 Carrying Value at September 30, 2020Fair Value at September 30, 2020
Using Inputs Considered as:
 Level 1Level 2Level 3
Assets:    
Cash and cash equivalents$302.2 $302.2 $0 $0 
Investments in rabbi trust3.9 3.9 0 0 
Derivative instruments2.6 0 2.6 0 
Liabilities:    
$500.0 term loan475.0 0 475.0 0 
$400.0 senior unsecured notes400.0 429.0 0 0 
$375.0 senior unsecured notes374.5 409.0 0 0 
$225.0 term loan213.7 0 213.7 0 
$100.0 Series A Notes100.0 0 105.3 0 
Derivative instruments1.6 0 1.6 0 

Valuation Techniques
•Cash and cash equivalents and investments in rabbi trust are classified within Level 1 of the fair value hierarchy. Financial instruments classified as Level 1 are based on quoted market prices in active markets. The types of financial instruments the Company classifies within Level 1 include most bank deposits, money market securities, and publicly traded mutual funds. The Company does not adjust the quoted market price for such financial instruments.
•The Company estimates the fair value of foreign currency derivatives using industry accepted models.  The significant Level 2 inputs used in the valuation of derivatives include spot rates, forward rates, and volatility.  These inputs were obtained from pricing services, broker quotes, and other sources.
•The fair value of the amounts outstanding under the revolving credit facility approximatedRevolver, the $500.0 term loan, and the $225.0 term loan approximate carrying value, at December 31, 2017.  as the Company believes their variable interest rate terms correspond to current market terms.
•The fair values of the revolving credit facility and Series A Notes were estimated based on internally developedinternally-developed models, using current market interest rate data for similar issues, as there is no active market for our revolving credit facility orthe Series A Notes.

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Table of Contents
•The fair values of the Company’s derivative instruments$400.0 and $375.0 senior unsecured notes were based upon pricing models using inputs derived from third-party pricing services or observable market data such ason quoted prices in active markets.

Derivative instruments

The Company has hedging programs in place to manage its currency spotexposures. The objectives of the Company’s hedging programs are to mitigate exposures in gross margin and forwardnon-functional-currency-denominated assets and liabilities. Under these programs, the Company uses derivative financial instruments to manage the economic impact of fluctuations in currency exchange rates. These values are periodically validated by comparinginclude foreign currency exchange forward contracts, which generally have terms up to third-party broker quotes.24 months. The aggregate notional value of derivatives was $247.0$224.7 and $232.8 at December 31, 2017.2020 and September 30, 2020, respectively. The derivatives are includedrecorded at fair value primarily in other current assets, other assets and other current liabilities on the balance sheet.Consolidated Balance Sheets.


17
17.Segment and Geographical Information

TableThe Company currently conducts operations through three reportable operating segments: Advanced Process Solutions, Molding Technology Solutions, and Batesville. The Company’s operating segments maintain separate financial information for which results of Contents
operations are evaluated on a regular basis by the Company’s chief operating decision maker in deciding how to allocate resources and in assessing performance.


The Company records the direct costs of business operations to the reportable operating segments, including stock-based compensation, asset impairments, restructuring activities, and business acquisition costs.  Corporate provides management and administrative services to each reportable segment.  These services include treasury management, human resources, legal, business development, and other public company support functions such as internal audit, investor relations, financial reporting, and tax compliance.  With limited exception for certain professional services and back-office and technology costs, the Company does not allocate these types of corporate expenses to the reportable segments.

The following tables present financial information for the Company’s reportable segments and significant geographical locations:
 Three Months Ended
December 31,
 20202019
Net revenue  
Advanced Process Solutions$290.8 $306.6 
Molding Technology Solutions236.9 133.3 
Batesville164.8 127.0 
Total$692.5 $566.9 
Adjusted EBITDA (1)
  
Advanced Process Solutions$48.5 $51.5 
Molding Technology Solutions48.4 26.3 
Batesville52.3 23.0 
Corporate(11.2)(8.9)
Net revenue (2)
  
United States$328.7 $282.0 
China111.9 57.0 
Germany34.3 35.8 
India41.5 34.3 
All other foreign business units176.1 157.8 
Total$692.5 $566.9 
16.Segment and Geographical Information
 Three Months Ended December 31,
 2017 2016
Net revenue 
  
Process Equipment Group$264.3
 $221.6
Batesville132.9
 134.5
Total$397.2
 $356.1
    
Adjusted EBITDA 
  
Process Equipment Group$45.6
 $32.7
Batesville27.9
 31.0
Corporate(8.3) (7.3)
    
Net revenue (1)(2)
 
  
United States$218.8
 $201.3
Germany110.4
 94.6
All other foreign business units68.0
 60.2
Total$397.2
 $356.1
(1)Adjusted earnings before interest, income tax, depreciation, and amortization (“adjusted EBITDA”) is a non-GAAP measure used by management to measure segment performance and make operating decisions. See the Operating Performance Measures section of Management’s Discussion and Analysis for further information on adjusted EBITDA, which is reconciled to consolidated net income (loss) below.
(1) We attribute(2)The Company attributes net revenue to a geography based upon the location of the end customer. Previously, the Company attributed net revenue to a geography based upon the location of the business unit that consummates the external sale.sale for
(2) In 2017,
26
Table of Contents
purpose of this disclosure. As such, the Company corrected its disclosure of net revenue by geography. The effect of this adjustmentfigures for the three months ended December 31, 2016 was2019, have been revised to decrease Germany net revenue by $9.8, from $104.4 as previously disclosed,conform to $94.6, and to increase the All other foreign business units net revenue by the same amount, from $50.4 as previously disclosed, to $60.2. Management performed an assessment of the materiality of this correction and concluded that the net revenue by geography as originally disclosed was not material to previously issued financial statements.current year methodology.
 December 31,
2020		September 30,
2020
Total assets assigned  
Advanced Process Solutions$1,659.2 $1,666.5 
Molding Technology Solutions2,074.7 2,032.4 
Batesville233.0 225.3 
Corporate48.4 63.2 
Total$4,015.3 $3,987.4 
Tangible long-lived assets, net  
United States$173.6 $182.4 
Germany114.8 110.4 
China55.4 54.2 
All other foreign business units116.8 121.6 
Total$460.6 $468.6 
 December 31,
2017		 September 30,
2017
Total assets assigned 
  
Process Equipment Group$1,776.4
 $1,722.2
Batesville198.7
 203.4
Corporate34.0
 30.9
Total$2,009.1
 $1,956.5
    
Tangible long-lived assets, net 
  
United States$80.5
 $84.4
Germany39.0
 39.0
All other foreign business units26.1
 27.0
Total$145.6
 $150.4


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Table of Contents

The following schedule reconciles reportable segment adjusted EBITDA to consolidated net income.income (loss).

Three Months Ended
December 31,		 Three Months Ended
December 31,
2017 201620202019
Adjusted EBITDA:   Adjusted EBITDA:
Process Equipment Group$45.6
 $32.7
Advanced Process SolutionsAdvanced Process Solutions$48.5 $51.5 
Molding Technology SolutionsMolding Technology Solutions48.4 26.3 
Batesville27.9
 31.0
Batesville52.3 23.0 
Corporate(8.3) (7.3)Corporate(11.2)(8.9)
Less: 
  
Less:  
Interest income(0.5) (0.2)Interest income(0.6)(1.3)
Interest expense6.3
 6.1
Interest expense21.2 14.7 
Income tax expense23.7
 6.7
Income tax expense (benefit)Income tax expense (benefit)31.3 (12.4)
Depreciation and amortization13.8
 15.0
Depreciation and amortization29.3 25.9 
Business acquisition, development, and integration2.3
 0.3
Restructuring and restructuring related0.5
 6.6
Consolidated net income$19.1
 $21.9
Business acquisition, disposition, and integration costsBusiness acquisition, disposition, and integration costs9.1 53.8 
Restructuring and restructuring related chargesRestructuring and restructuring related charges1.5 2.4 
Inventory step-up Inventory step-up0 9.6 
Gain on divestitureGain on divestiture(31.6)0 
OtherOther0.1 0 
Consolidated net income (loss)Consolidated net income (loss)$77.7 $(0.8)

1918. Restructuring
Table of Contents

17.Condensed Consolidating Information
Certain 100% owned domestic subsidiaries of Hillenbrand fully and unconditionally, jointly and severally, agreed to guarantee all of the indebtedness and guarantee obligations relating to our obligations under our senior unsecured notes.  The following are the condensed consolidating financial statements, including the guarantors, which present the statements of income, balance sheets, and cash flows of (i) the parent holding company, (ii) the guarantor subsidiaries, (iii) the non-guarantor subsidiaries, and (iv) eliminations necessary to present the information for Hillenbrand on a consolidated basis.

Condensed Consolidating Statements of Income
 Three Months Ended December 31, 2017 Three Months Ended December 31, 2016
 Parent Guarantors 
Non-
Guarantors
 Eliminations Consolidated Parent Guarantors 
Non-
Guarantors
 Eliminations Consolidated
Net revenue$—
 $218.2
 $229.1
 $(50.1) $397.2
 $—
 $202.7
 $202.9
 $(49.5) $356.1
Cost of goods sold—
 114.6
 160.5
 (24.2) 250.9
 —
 109.2
 145.5
 (24.6) 230.1
Gross profit—
 103.6
 68.6
 (25.9) 146.3
 —
 93.5
 57.4
 (24.9) 126.0
Operating expenses11.1
 61.4
 42.6
 (25.9) 89.2
 9.6
 58.7
 39.4
 (24.9) 82.8
Amortization expense—
 3.5
 4.1
 —
 7.6
 —
 3.4
 3.8
 —
 7.2
Interest expense5.8
 —
 0.5
 —
 6.3
 5.4
 —
 0.7
 —
 6.1
Other income (expense), net(0.1) (0.2) (0.1) —
 (0.4) —
 —
 (1.3) —
 (1.3)
Equity in net income (loss) of subsidiaries37.4
 1.4
 —
 (38.8) —
 28.8
 2.2
 —
 (31.0) —
Income (loss) before income taxes20.4
 39.9
 21.3
 (38.8) 42.8
 13.8
 33.6
 12.2
 (31.0) 28.6
Income tax expense (benefit)2.3
 15.5
 5.9
 —
 23.7
 (7.9) 11.7
 2.9
 —
 6.7
Consolidated net income (loss)18.1
 24.4
 15.4
 (38.8) 19.1
 21.7
 21.9
 9.3
 (31.0) 21.9
Less: Net income attributable to                   
noncontrolling interests—
 —
 1.0
 —
 1.0
 —
 —
 0.2
 —
 0.2
Net income (loss) (1)$18.1
 $24.4
 $14.4
 $(38.8) $18.1
 $21.7
 $21.9
 $9.1
 $(31.0) $21.7
Consolidated comprehensive income (loss)$24.8
 $24.9
 $21.3
 $(45.1) $25.9
 $5.7
 $21.5
 $(11.6) $(9.8) $5.8
Less: Comprehensive income attributable                   
     to noncontrolling interests—
 —
 1.1
 —
 1.1
 —
 —
 0.1
 —
 0.1
Comprehensive income (loss) (2)$24.8
 $24.9
 $20.2
 $(45.1) $24.8
 $5.7
 $21.5
 $(11.7) $(9.8) $5.7


(1) Net income attributable to Hillenbrand
(2) Comprehensive income attributable to Hillenbrand











20
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Condensed Consolidating Balance Sheets
 December 31, 2017 September 30, 2017
 Parent Guarantors 
Non-
Guarantors
 Eliminations Consolidated Parent Guarantors 
Non-
Guarantors
 Eliminations Consolidated
Cash and cash equivalents$0.8
 $7.4
 $69.6
 $—
 $77.8
 $0.1
 $4.9
 $61.0
 $—
 $66.0
Trade receivables, net—
 109.0
 80.8
 —
 189.8
 —
 114.5
 91.6
 —
 206.1
Receivables from long-term manufacturing contracts—
 12.3
 152.4
 —
 164.7
 —
 8.5
 116.7
 —
 125.2
Inventories—
 72.0
 97.8
 (2.7) 167.1
 —
 68.2
 85.9
 (2.5) 151.6
Prepaid expense3.2
 8.7
 18.5
 —
 30.4
 2.1
 7.6
 18.5
 —
 28.2
Intercompany receivables—
 1,085.2
 81.0
 (1,166.2) —
 —
 1,050.4
 93.9
 (1,144.3) —
Other current assets0.1
 1.7
 15.2
 (0.1) 16.9
 0.2
 1.6
 14.4
 0.3
 16.5
Total current assets4.1
 1,296.3
 515.3
 (1,169.0) 646.7
 2.4
 1,255.7
 482.0
 (1,146.5) 593.6
Property, plant and equipment, net3.7
 62.2
 79.7
 —
 145.6
 4.7
 64.5
 81.2
 —
 150.4
Intangible assets, net4.3
 210.8
 308.0
 —
 523.1
 3.6
 211.3
 309.0
 —
 523.9
Goodwill—
 283.9
 367.3
 —
 651.2
 —
 283.9
 363.6
 —
 647.5
Investment in consolidated subsidiaries2,366.7
 666.2
 —
 (3,032.9) —
 2,298.0
 664.1
 —
 (2,962.1) —
Other assets19.9
 28.9
 1.6
 (7.9) 42.5
 20.2
 29.0
 4.4
 (12.5) 41.1
Total Assets$2,398.7
 $2,548.3
 $1,271.9
 $(4,209.8) $2,009.1
 $2,328.9
 $2,508.5
 $1,240.2
 $(4,121.1) $1,956.5
                    
Trade accounts payable$0.3
 $39.3
 $112.1
 $0.3
 $152.0
 $1.0
 $36.7
 $120.0
 $0.3
 $158.0
Liabilities from long-term manufacturing contracts and advances—
 33.0
 138.2
 —
 171.2
 —
 26.2
 106.1
 —
 132.3
Current portion of long-term debt—
 —
 3.8
 —
 3.8
 18.0
 —
 0.8
 —
 18.8
Accrued compensation1.9
 13.2
 34.6
 —
 49.7
 7.6
 17.9
 41.4
 —
 66.9
Intercompany payables1,168.9
 —
 —
 (1,168.9) —
 1,142.8
 4.0
 —
 (1,146.8) —
Other current liabilities24.3
 42.8
 78.2
 —
 145.3
 14.0
 42.2
 79.3
 0.2
 135.7
Total current liabilities1,195.4
 128.3
 366.9
 (1,168.6) 522.0
 1,183.4
 127.0
 347.6
 (1,146.3) 511.7
Long-term debt422.0
 —
 55.0
 —
 477.0
 392.0
 —
 54.9
 —
 446.9
Accrued pension and postretirement healthcare0.8
 32.7
 95.6
 —
 129.1
 0.8
 33.3
 95.5
 —
 129.6
Deferred income taxes—
 16.4
 49.0
 (8.3) 57.1
 —
 27.5
 60.9
 (12.7) 75.7
Other long-term liabilities27.6
 17.8
 10.0
 —
 55.4
 1.3
 15.3
 10.1
 —
 26.7
Total Liabilities1,645.8
 195.2
 576.5
 (1,176.9) 1,240.6
 1,577.5
 203.1
 569.0
 (1,159.0) 1,190.6
Total Hillenbrand Shareholders’ Equity752.9
 2,353.1
 679.8
 (3,032.9) 752.9
 751.4
 2,305.4
 656.7
 (2,962.1) 751.4
Noncontrolling interests—
 —
 15.6
 —
 15.6
 —
 —
 14.5
 —
 14.5
Total Equity752.9
 2,353.1
 695.4
 (3,032.9) 768.5
 751.4
 2,305.4
 671.2
 (2,962.1) 765.9
Total Liabilities and Equity$2,398.7
 $2,548.3
 $1,271.9
 $(4,209.8) $2,009.1
 $2,328.9
 $2,508.5
 $1,240.2
 $(4,121.1) $1,956.5


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Condensed Consolidating Statements of Cash Flow
 Three Months Ended December 31, 2017 Three Months Ended December 31, 2016
 Parent Guarantors 
Non-
Guarantors
 Eliminations Consolidated Parent Guarantors 
Non-
Guarantors
 Eliminations Consolidated
Net cash provided by (used in)
     operating activities
$17.2
 $5.4
 $4.3
 $—
 $26.9
 $(72.6) $3.6
 $20.3
 $—
 $(48.7)
                    
Investing activities: 
  
  
  
  
  
  
  
  
  
Capital expenditures(1.0) (3.0) (1.6) —
 (5.6) (0.2) (2.0) (2.4) —
 (4.6)
Other, net—
 0.1
 0.1
 —
 0.2
 0.2
 —
 (0.1) —
 0.1
Net cash used in investing activities(1.0) (2.9) (1.5) —
 (5.4) —
 (2.0) (2.5) —
 (4.5)
                    
Financing activities: 
  
  
  
  
  
  
  
  
  
Repayments on term loan(148.5) —
 —
 —
 (148.5) (3.4) —
 —
 —
 (3.4)
Proceeds from revolving credit facilities,
     net of financing costs
264.7
 —
 107.1
 —
 371.8
 135.0
 —
 47.1
 —
 182.1
Repayments on revolving credit facilities(106.0) —
 (107.0) —
 (213.0) (59.0) —
 (66.9) —
 (125.9)
Payment of dividends on common stock(13.1) —
 —
 —
 (13.1) (13.0) —
 —
 —
 (13.0)
Repurchases of common stock(15.2) —
 —
 —
 (15.2) —
 —
 —
 —
 —
Net proceeds on stock plans2.6
 —
 —
 —
 2.6
 8.6
 —
 —
 —
 8.6
Other, net—
 —
 2.8
 —
 2.8
 —
 —
 1.1
 —
 1.1
Net cash (used in) provided by
     financing activities
(15.5) —
 2.9
 —
 (12.6) 68.2
 —
 (18.7) —
 49.5
                    
Effect of exchange rates on cash and
     cash equivalents
—
 —
 2.9
 —
 2.9
 —
 —
 (1.7) —
 (1.7)
                    
Net cash flow0.7
 2.5
 8.6
 —
 11.8
 (4.4) 1.6
 (2.6) —
 (5.4)
Cash and equivalents at beginning of
     period
0.1
 4.9
 61.0
 —
 66.0
 4.4
 5.6
 42.0
 —
 52.0
Cash and equivalents at end of period$0.8
 $7.4
 $69.6
 $—
 $77.8
 $—
 $7.2
 $39.4
 $—
 $46.6

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18.Restructuring
 
The following schedule details the restructuring charges by reportable segment and the classification of those charges on the income statement.Consolidated Statements of Operations.
Three Months Ended December 31, 2020Three Months Ended December 31, 2019
Cost of goods soldOperating expensesTotalCost of goods soldOperating expensesTotal
Advanced Process Solutions$0.6 $0.9 $1.5 $0.7 $0.9 $1.6 
Molding Technology Solutions0.1 0.3 0.4 0 0.8 0.8 
Batesville0 0.2 0.2 0.1 0.3 0.4 
Corporate0 0.2 0.2 0 0.3 0.3 
Total$0.7 $1.6 $2.3 $0.8 $2.3 $3.1 
 Three Months Ended December 31, 2017 Three Months Ended December 31, 2016
 Cost of goods sold Operating expenses Total Cost of goods sold Operating expenses Total
Process Equipment Group$—
 $0.2
 $0.2
 $—
 $—
 $—
Batesville—
 —
 —
 6.3
 —
 6.3
Corporate—
 (0.1) (0.1) —
 1.6
 1.6
Total$—
 $0.1
 $0.1
 $6.3
 $1.6
 $7.9


The restructuring charges during the three months ended December 31, 2020 and 2019, related primarily to severance costs. The severance costs within the closureMolding Technology Solutions and Corporate reportable segments were primarily related to the
27
Table of a Batesville plant and corporate functional restructuring.Contents
ongoing integration of Milacron. At December 31, 2017, $0.92020, $5.4 of restructuring costs were accrued and expected to be paid in 2018.


over the next twelve months.
23
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Item 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OF
OPERATIONS
 
(financial amounts in millions, except share and per share data, throughout Management’s Discussion and Analysis)

FORWARD-LOOKING STATEMENTS AND FACTORS THAT MAY AFFECT FUTURE RESULTS
 
Throughout this Form 10-Q, we make a number of “forward-looking statements” that are within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995.1995, and that are intended to be covered by the safe harbor provided under these sections. As the words imply, these are statements about future sales, earnings, cash flow, results of operations, uses of cash, financings, share repurchases, ability to meet deleveraging goals, and other measures of financial performance or potential future plans or events, strategies, objectives, beliefs, prospects, assumptions, expectations, and expectationsprojected costs or savings or transactions of the Company that might or might not happen in the future, as contrasted with historical information. Forward-looking statements are based on assumptions that we believe are reasonable, but by their very nature are subject to a wide range of risks. If our assumptions prove inaccurate or unknown risks and uncertainties materialize, actual results could vary materially from Hillenbrand’s expectations and projections.
 
Accordingly, in this Form 10-Q, we may say something like:
 
“We expect that future revenue associated with theAdvanced Process Equipment GroupSolutions will be influenced by order backlog.”
 
That is a forward-looking statement, as indicated by the word “expect” and by the clear meaning of the sentence.
 
Other words that could indicate we are making forward-looking statements include:
 
intendbelieveplanexpectmaygoalwouldproject
becomepursueestimatewillforecastcontinuecouldanticipate
targetencouragepromiseimproveprogresspotentialshouldimpact
 
This is not an exhaustive list, but is intended to give you an idea of how we try to identify forward-looking statements.  The absence of any of these words, however, does not mean that the statement is not forward-looking.
 
Here is the key point:  Forward-looking statements are not guarantees of future performance or events, and our actual results or events could differ materially from those set forth in any forward-looking statements.


Any number of factors, many of which are beyond our control, could cause our performance to differ significantly from what is described in the forward-looking statements. This includes risks related to the impactongoing COVID-19 pandemic and the societal, governmental, and individual responses thereto, including supply chain disruptions; loss of contracts and/or customers; erosion of some customers’ credit quality; downgrades of the Tax ActCompany’s credit quality; closure or temporary interruption of the Company’s or suppliers’ manufacturing facilities; travel, shipping and logistical disruptions; loss of human capital or personnel,
and general economic calamities, in addition to a variety of risks related to our integration of Milacron. Shareholders, potential investors, and other readers are urged to consider these risks and uncertainties in evaluating forward-looking statements and are cautioned not to place undue reliance on the Company’s financial position, results of operations, and cash flows.forward-looking statements. For a discussion of factors that could cause actual results to differ from those contained in forward-looking statements, see the discussions under the heading “Risk Factors” in Item 1A of Part I of the Company’s Form 10-K filed with the SEC on November 15, 2017,12, 2020, and in Item 1A of Part II of this Form 10-Q.  We10-Q, as well as other risks and uncertainties detailed in our other filings with the SEC from time to time.  The forward looking information in this Form 10-Q speaks only as of the date covered by this report and we assume no obligation to update or revise any forward-looking statements.
 
EXECUTIVE OVERVIEW
Hillenbrand is a global diversified industrial company with multiple leading brands that serve a wide variety of industries around the world. Hillenbrand’s portfolio is composed of three reportable operating segments: Advanced Process Solutions, Molding Technology Solutions, and Batesville®. Advanced Process Solutions designs, develops, manufactures, and services highly engineered industrial equipment around the world. Molding Technology Solutions is a global leader in highly engineered
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and customized systems in plastic technology and processing. Batesville is a recognized leader in the death care industry in North America.

We strive to provide superior return for our shareholders, exceptional value for our customers, great professional opportunities for our employees, and to be responsible to our communities through deployment of the HOM. The HOM is a consistent and repeatable framework designed to produce sustainable and predictable results. The HOM describes our mission, vision, values, and mindset as leaders; applies our management practices in Strategy Management, Segmentation, Lean, Talent Development, and Acquisitions; and prescribes three steps (Understand, Focus, and Grow) designed to make our businesses both bigger and better. Our goal is to continue developing Hillenbrand as a world-class global diversified industrial company through the deployment of the HOM.

Our strategy is to leverage our historically strong financial foundation and the implementation of the HOM to deliver sustainable profit growth, revenue expansion, and substantial free cash flow and then reinvest available cash in new growth initiatives that are focused on building platforms with leadership positions in our core markets and near adjacencies, both organically and inorganically, in order to create shareholder value.

During the three months ended December 31, 2020, the following operational decisions and economic developments had an impact on our current and future cash flows, results of operations, and financial position.

COVID-19 Impact

The COVID-19 pandemic is impacting Hillenbrand very differently by business, geography, and function. The scope and nature of these impacts continue to evolve, sometimes rapidly. It is too early to quantify the impact for 2021 or beyond, but the actions being undertaken to reduce the severity and spread of COVID-19 are currently creating disruptions, and are likely to continue to create significant disruptions, with respect to consumer demand, our ability to continue to manufacture products, and the reliability and sufficiency of our supply chain. Accordingly, management is continually evaluating the Company’s liquidity position, communicating with and monitoring the actions of our customers and suppliers, and reviewing our near- and longer-term financial performance as we manage the Company through the uncertainty related to COVID-19.

We cannot reasonably estimate the duration, spread, or severity of the COVID-19 pandemic; however, as a result of the current circumstances, we expect to continue to experience an adverse impact during at least the first part of 2021 within our Advanced Process Solutions and Molding Technology Solutions segments, including the potential for impairment of certain intangible and other long-lived assets. Should these conditions continue further into 2021 for these two segments, the Company would similarly expect an adverse impact on its net revenue, results of operations, and cash flows in such year, depending upon the severity and length of time such conditions persist. The COVID-19 pandemic has had a favorable impact on the Batesville segment’s net revenue, results of operations, and cash flows. However, we are currently not able to predict the extent and duration of this favorable impact for the remainder of fiscal 2021 or the impact that the estimated increase in deaths due to the COVID-19 pandemic will have on deaths when the pandemic has subsided. The timing and effectiveness of vaccine development and rollout could also have a significant impact on the Company’s consolidated net revenue, results of operations, and cash flows during 2021.

We continue to take actions intended to help minimize the risk to our company, employees, customers, and the communities in which we operate, as well as to lessen the financial impact on the business while protecting our ability to continue to generate profitable growth over the long-term. For information regarding these actions, see the discussion under Part 1, Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended September 30, 2020. We continue to believe the Company has sufficient liquidity to operate in the current business environment as a result of these actions.

Employee Safety and Health

We have implemented a number of employee safety measures across our plants and other locations in an attempt to contain the spread of COVID-19. For information regarding these measures, see the discussion under Part 1, Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended September 30, 2020.

Divestiture of Red Valve
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On December 31, 2020, the Company completed the divestiture of Red Valve to DeZURIK, Inc. in a transaction valued at $63.0, subject to customary post-closing adjustments. The sale included cash proceeds received at closing of $59.4, including working capital adjustments, and a $5.0 note receivable, included within other long-term assets on the Consolidated Balance Sheet. The sale follows the Company's previously announced intent to exit the Red Valve business, and Red Valve was classified as held for sale at September 30, 2020.

As a result of the sale, the Company recorded a pre-tax gain of $31.6 in the Consolidated Statement of Operations during the three months ended December 31, 2020. The related tax effect resulted in tax expense of $3.8 and was included within income tax expense in the Consolidated Statement of Operations during the three months ended December 31, 2020. The Company incurred $2.9 of transaction costs associated with the sale during the three months ended December 31, 2020, which were recorded within operating expenses in the Consolidated Statements of Operations.

Red Valve’s results of operations were included within the Advanced Process Solutions reportable segment until the completion of the sale on December 31, 2020.

Agreement to sell ABEL Pumps

In January 2021, the Company announced that it had entered into a definitive agreement to sell ABEL to IDEX Corporation for $103.5, subject to customary post-closing adjustments. The transaction is expected to be completed in the Company’s second fiscal quarter, subject to customary closing conditions. The sale follows the Company’s previously announced intent to exit the ABEL business. The assets and liabilities of ABEL continue to be classified as held for sale as of December 31, 2020, and based on the terms of the agreement, the Company did not recognize a change in carrying value during the three months ended December 31, 2020.

OPERATING PERFORMANCE MEASURES
 
The following discussion compares our results for the three months ended December 31, 2017,2020, to the same period in fiscal year 2017.2020.  The Company’s fiscal year ends on September 30.  Unless otherwise stated, references to years relate to fiscal years.  We begin the discussion at a consolidated level and then provide separate detail about theAdvanced Process Equipment Group,Solutions, Molding Technology Solutions, Batesville, and Corporate.  These financial results are prepared in accordance with accounting principlesUnited States generally accepted in the U.S.accounting principles (“GAAP”).
 
We also provide certain non-GAAP operating performance measures. These non-GAAP measures are referred to as “adjusted” measures and exclude expenses associated with business acquisition, development,acquisitions, disposition, and integration, and restructuring and restructuring related charges.charges, inventory step-up, backlog amortization, and debt financing activities related to the acquisition of Milacron (including net interest expense on the $375.0 senior unsecured notes for the period prior to completing the acquisition).  The related income tax impact for all of these items is also excluded. The measures also exclude the non-recurring tax benefits and expenses related to the interaction of certain provisions of the Tax Act.Act and certain tax items related to the acquisition of Milacron, including the revaluation of deferred tax balances in connection with enacted statutory tax rate reductions in certain foreign jurisdictions. Non-GAAP information is provided as a supplement, not as a substitute for, or as superior to, measures of financial performance prepared in accordance with GAAP.
 
We use this non-GAAP information internally to make operating decisions and believe it is helpful to investors because it allows more meaningful period-to-period comparisons of our ongoing operating results.  The information can also be used to perform trend analysis and to better identify operating trends that may otherwise be masked or distorted by these types of items.  We believe this information provides a higher degree of transparency.
 
An important non-GAAP measure that we use is adjusted earnings before interest, income tax, depreciation, and amortization

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(“adjusted EBITDA”).EBITDA. A part of Hillenbrand’s strategy is to selectively acquire companies that we believe can benefit from the Hillenbrand Operating Model (“HOM”)HOM to spur faster and more profitable growth. Given that strategy, it is a natural consequence to incur related expenses, such as amortization from acquired intangible assets and additional interest expense from debt-funded acquisitions. Accordingly, we use adjusted EBITDA, among other measures, to monitor our business performance. Adjusted EBITDA is not a recognized term under GAAP and therefore does not purport to be an alternative to net income (loss). Further, the Company’s measure of adjusted EBITDA may not be comparable to similarly titled measures of other companies.
 
Another important non-GAAP operational measure used is backlog. Backlog is not a term recognized under GAAP; however, it is a common measurement used in industries with extended lead times for order fulfillment, (long-term contracts), like those in which ourAdvanced Process Equipment Group competes. Order backlogSolutions and Molding Technology Solutions compete. Backlog represents the amount of consolidated net revenue that
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we expect to realize on contracts awarded related to theAdvanced Process Equipment Group.Solutions and Molding Technology Solutions. For purposes of calculating backlog, 100% of estimated net revenue attributable to consolidated subsidiaries is included. Backlog includes expected net revenue from large systems and equipment, as well as replacementaftermarket parts, components, and service. The length of time that projects typically remain in backlog can span from days for replacementaftermarket parts or service to approximately 18 to 24 months for larger system sales.sales within Advanced Process Solutions. The majority of the backlog within Molding Technology Solutions is expected to be fulfilled within the next twelve months. Backlog includes expected net revenue from the remaining portion of firm orders not yet completed, as well as net revenue from change orders to the extent that they are reasonably expected to be realized. We include in backlog the full contract award, including awards subject to further customer approvals, which we expect to result in revenue in future periods. In accordance with industry practice, our contracts may include provisions for cancellation, termination or suspension at the discretion of the customer.


We expect that future net revenue associated with theAdvanced Process Equipment GroupSolutions and Molding Technology Solutions will be influenced by backlog because of the lead time involved in fulfilling engineered-to-order equipment for customers. Although backlog can be an indicator of future net revenue, it does not include projects and aftermarket parts orders that are booked and shipped within the same quarter. The timing of order placement, size, extent of customization, and customer delivery dates can create fluctuations in backlog and net revenue. Revenue attributable to backlog may also be affected by foreign exchange fluctuations for orders denominated in currencies other than U.S. dollars.


We calculate the foreign currency impact on net revenue, gross profit, and operating expenses, backlog, consolidated net income (loss), and adjusted EBITDA in order to better measure the comparability of results between periods. We calculate the foreign currency impact by translating current year results at prior year foreign exchange rates. This information is provided because exchange rates can distort the underlying change in sales,these metrics, either positively or negatively. The cost structures for Corporate and Batesville are generally not significantly impacted by the fluctuation in foreign exchange rates, and we do not disclose the foreign currency impact in the Operations Review section below where the impact is not significant.
 
See page 3038 for reconciliation of adjusted EBITDA to consolidated net income (loss), the most directly comparable GAAP measure.measure, to our non-GAAP adjusted EBITDA. We use other non-GAAP measures in certain other instances and include information reconciling such non-GAAP measures to the respective most directly comparable GAAP measures. Given that there is no GAAP financial measure comparable to backlog, a quantitative reconciliation is not provided.
 
CRITICAL ACCOUNTING ESTIMATES
 
For the three months ended December 31, 2017,2020, there were no significant changes to our critical accounting estimates, as outlined in our Annual Report on Form 10-K as of and for 2017, except as described below.

2017 Tax Cuts and Jobs Act

On December 22, 2017, the Tax Act was enacted. While certain of the provisions of the Tax Act are effective for tax years beginning after December 31, 2017 (which corresponds to Hillenbrand’s fiscal year endingyear-end September 30, 2019), several provisions are effective for the fiscal year ending September 30, 2018. The Tax Act reduced the federal corporate tax rate from 35% to 21% and is effective on January 1, 2018. The Internal Revenue Code provides that our fiscal year ending September 30, 2018 have a blended corporate tax rate of 24.5%, which is based on a proration of the applicable tax rates before and after effective date of the Tax Act. The statutory tax rate of 21% will apply to future years.While we are able to make a reasonable estimate of the impact of the reduction in corporate rate, we are continuing to analyze the temporary differences that existed on the date of enactment and the temporary differences originating in the current fiscal year.2020.


Furthermore, Hillenbrand is subject to the Transition Tax. This Transition Tax is imposed on the deferred accumulated earnings of foreign subsidiaries at an effective rate of 15.5% of foreign earnings attributable to cash and cash equivalents and 8% of the residual foreign earnings. It is anticipated that Hillenbrand will elect to pay the Transition Tax over eight years. We have recorded tax expense based on an estimate of the annual effective rate taking into account the reduced corporate tax rate for the year. Additionally, we have recorded a provisional deferred tax benefit for the impact of the reduced corporate tax rate on the U.S. net deferred tax liability and a provisional tax liability for the Transition Tax. While we are able to make a reasonable

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estimate of the impact of the reduction in corporate rate on the deferred tax balance, we are continuing to analyze the temporary differences that existed on the date of enactment and the temporary differences originating in the current fiscal year. Furthermore, we will not be able to precisely determine the amount of the Transition Tax until the end of fiscal 2018 because certain cash and cash equivalent balances at September 30, 2018 and current year earnings are key inputs in the calculation. Additionally, other information needs to be verified, including cumulative foreign earnings, to precisely compute the amount of the Transition Tax. Therefore tax expense associated with these provisions may be adjusted throughout the year as we refine our estimate.  

EXECUTIVE OVERVIEW
(financial amounts in millions, except share and per share data, throughout Management’s Discussion and Analysis)
Hillenbrand is a global diversified industrial company with multiple market-leading brands that serve a wide variety of industries around the world. Hillenbrand’s portfolio is composed of two business segments: the Process Equipment Group and Batesville®. The Process Equipment Group businesses design, develop, manufacture, and service highly engineered industrial equipment around the world. Batesville is a recognized leader in the North American death care industry.

We strive to provide superior return for our shareholders, exceptional value for our customers, and great professional opportunities for our employees through deployment of the HOM. The HOM is a consistent and repeatable framework designed to produce sustainable and predictable results. The HOM describes our mission, vision, values and mindset as leaders; applies our management practices in Strategy Management, Segmentation, Lean, Talent Development, and Acquisitions; and prescribes three steps (Understand, Focus, and Grow) designed to make our businesses both bigger and better. Our goal is to continue developing Hillenbrand as a world-class global diversified industrial company through the deployment of the HOM.

Our strategy is to leverage our historically strong financial foundation and the HOM to deliver sustainable profit growth, revenue expansion and substantial free cash flow and then reinvest available cash in new growth initiatives that are focused on building leadership positions in our core markets and near adjacencies, both organically and inorganically, in order to create shareholder value.

OPERATIONS REVIEW — CONSOLIDATED
 
 Three Months Ended December 31,
 20202019 (1)
 Amount% of Net
Revenue		Amount% of Net
Revenue
Net revenue$692.5 100.0 $566.9 100.0 
Gross profit244.2 35.3 171.8 30.3 
Operating expenses131.6 19.0 157.4 27.8 
Amortization expense13.6 14.8 
Gain on divestiture(31.6)— 
Interest expense21.2 14.7 
Other (expense) income, net(0.4)1.9 
Income tax expense (benefit)31.3 (12.4)
Net income (loss) attributable to Hillenbrand76.4 (3.1)
 Three Months Ended December 31,
 2017 2016
 Amount 
% of Net
Revenue
 Amount 
% of Net
Revenue
Net revenue$397.2
 100.0 $356.1
 100.0
Gross profit146.3
 36.8 126.0
 35.4
Operating expenses89.2
 22.5 82.8
 23.3
Amortization expense7.6
 1.9 7.2
 2.0
Interest expense6.3
 1.6 6.1
 1.7
Other (expense) income, net(0.4) 0.1 (1.3) 0.4
Income taxes23.7
 6.0 6.7
 1.9
Net income(1)18.1
 4.6 21.7
 6.1

(1) Net income attributableIncluded 40 days of operations related to Hillenbrand.Milacron following its acquisition on November 21, 2019 

Three Months Ended December 31, 20172020 Compared to Three Months Ended December 31, 20162019
 
Net revenue increased $41.1 (12%$125.6 (22%), which includesincluded favorable foreign currency impact of $12.1.
•The Process Equipment Group’s net revenue increased $42.7 (19%(3%), primarily due to favorable foreign currency impact ($11.8) and increased demand for screening and separating equipment (including equipment that processes proppants for hydraulic fracturing), plastics projects, and equipment and systems used in food and pharmaceutical applications.


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•Batesville’sAdvanced Process Solutions’ net revenue decreased $1.6 (1%$15.8 (5%), primarily due to lower volume (10%) largely driven by a decrease in volume ($2.2),large polyolefin systems sales, and lower parts and service revenue driven by delays associated with the COVID-19 pandemic, partially offset by an increase in demand for other capital equipment. Foreign currency impact improved net revenue by 4%.

•Molding Technology Solutions’ net revenue increased $103.6 (78%) primarily due to an additional 50 days of revenue compared to the first quarter of fiscal 2020 as a result of the timing of the Milacron acquisition (closed November 21, 2019), partially offset by the divestiture of Cimcool, which occurred in the second quarter of 2020. Foreign currency impact improved net revenue by 1%.

•Batesville’s net revenue increased $37.8 (30%), primarily due to an increase in volume (28%) and an increase in average selling price. Lowerprice (2%). Higher volume was driven by a decreasean increase in burial casket sales resultingprimarily due to estimated higher deaths from what we estimate to be a decrease in North American burials driventhe COVID-19 pandemic, partially offset by thean estimated increased rate at which families opted for cremation.

Gross profit increased $20.3 (16%$72.4 (42%), which includesincluded favorable foreign currency impact of $3.9.(3%). Gross profit margin improved 140500 basis points to 36.8%35.3%. 
 
•TheAdvanced Process Equipment Group’sSolutions’ gross profit increased $16.7 (20%decreased $2.5 (2%), primarily due to favorable foreigndriven by a decrease in large polyolefin systems sales, lower parts and service revenue, driven by delays associated with the COVID-19 pandemic, and cost inflation, partially offset by an increase in demand for other capital equipment, pricing and productivity improvements, and cost containment. Foreign currency impact ($3.9) and increased demand for screening and separating equipment (including equipment that processes proppants for hydraulic fracturing), plastics projects, and equipment and systems used in food and pharmaceutical applications.improved gross profit by 5%. Gross profit margin improved 30100 basis points to 37.3%34.6% in 2018, fiscal 2021, primarily driven bydue to pricing and productivity improvements and pricing improvements,cost containment, partially offset by unfavorable product mix.cost inflation.

•Batesville’s gross profit increased $3.6 (8%) and gross profit margin improved 310 basis points to 35.8%.  The increase in gross profit and gross profit margin was primarily due to a decrease in restructuring and restructuring related charges and the impact of supply chain initiatives, partially offset by the decline in volume and higher commodity, fuel, and healthcare costs.

Batesville’sAdvanced Process Solutions’ gross profit included restructuring and restructuring related charges ($0.10.6 in 2018fiscal 2021 and $6.4$0.7 in 2017)fiscal 2020). Excluding these charges, adjusted gross profit decreased $2.7 (5%$2.3 (2%) and adjusted gross profit margin decreased 160improved 100 basis points to 35.9%,34.9%.

•Molding Technology Solutions’ gross profit increased $45.4 (155%) primarily driven bydue to an additional 50 days of gross profit compared to the decline in volume and higher commodity, fuel, and healthcare costs,first quarter of fiscal 2020 as a result of the timing of the Milacron acquisition (closed November 21, 2019), partially offset by supply chain initiatives.

Operating expenses increased $6.4 (8%),the divestiture of Cimcool, which included unfavorable foreignoccurred in the second quarter of 2020. Foreign currency impact improved gross profit by 2%. Gross profit margin improved 950 basis points to 31.5% in 2021, primarily due to inventory step-up charges of $2.4. The increase was primarily driven by an increase$9.6 in fiscal 2020 that did not repeat.

Molding Technology Solutions’ gross profit included inventory step-up charges of $9.6 in fiscal 2020, business acquisition, development,disposition, and integration costs and variable compensation, partially offset by a decreaseof $0.7 in restructuring and restructuringfiscal 2021 (including severance costs related charges. Our operating expense-to-revenue ratio improved by 80 basis points to 22.5% in 2018.  Operating expenses included the following items:
 Three Months Ended December 31,
 2017 2016
Business acquisition, development, and integration costs$2.3
 $0.3
Restructuring and restructuring related charges0.4
 1.7
On an adjusted basis, which excluded business acquisition, development, and integration costsintegration), and restructuring and restructuring related charges operating expenses increased $5.7 (7%), which included unfavorable foreign currency impact of $2.4. The increase in adjusted operating expenses was primarily driven by an increase in variable compensation. Adjusted operating expenses as a percentage of net revenue improved 90 basis points in 2018 to 21.8%.

Other (expense) income, net was $0.4 of other expense in 2018, compared to $1.3 of other expense in 2017. The decrease was driven primarily by decreased foreign currency exchange losses.
The effective tax rate was 55.4%$0.2 in fiscal 2018 compared to 23.4% in fiscal 2017.  The increase in the effective tax rate during the three months ended December 31, 2017 was primarily due to the impact of the Tax Act, which reduced the federal corporate tax rate from 35% to 21%. The Internal Revenue Code provides that our fiscal year ending September 30, 2018 have a blended corporate tax rate of 24.5%, which is based on a proration of the applicable tax rates before2021. Excluding these charges, adjusted gross profit increased $36.8 (95%) and after effective date of the Tax Act. The statutory tax rate of 21% will apply to future years. The impact of the tax rate reduction was recognized in the rate applied to earnings as well as a provisional tax benefit of $14.9 related to the revaluation of our domestic net deferred tax liability. While we are able to make a reasonable estimate of the impact of the reduction in corporate rate on the deferred tax balances, we are continuing to analyze the temporary differences that existed on the date of enactment and the temporary differences originating in the current fiscal year. These favorable adjustments were more than offset by the provisional recognition of an estimated $28.9 tax expense for the Transition Tax. We will not be able to precisely determine the amount of the Transition Tax until the end of fiscal 2018 because certain cash and cash equivalent balances at September 30, 2018 and current year earnings are key inputs in the calculation. Additionally, other information needs to be verified, including cumulative foreign earnings, to precisely compute the amount of the Transition Tax. Therefore, tax expense associated with these provisions may be adjusted throughout the year as we refine our estimate.


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Our adjusted effective income tax rate, which excludes the impact of the Transition Tax and the revaluation of the deferred tax balances discussed above, was 22.1% in fiscal 2018 compared to 26.5% in fiscal 2017. Management expects the Tax Act to favorably impact the Company’s net income, diluted earnings per share, and cash flows in future periods, due primarily to the reduction in the federal corporate tax rate from 35% to 21%. Additionally, the Tax Act could incentivize additional investments in facilities and infrastructure in the U.S. that may increase future demand in the end-markets that the Company serves.

Management currently estimates that the Company’s consolidated adjusted effective income tax rate for full-year fiscal 2018 will be approximately 26% to 28%, compared with nearly 32% for the prior year. The aforementioned tax-related estimates may differ from actual results, possibly materially, due to changes in interpretations of the Tax Act and assumptions made by the Company, as well as guidance that may be issued and actions the Company may take as a result of the Tax Act.
OPERATIONS REVIEW — PROCESS EQUIPMENT GROUP
 Three Months Ended December 31,
 2017 2016
 Amount 
% of Net
Revenue
 Amount 
% of Net
Revenue
Net revenue$264.3
 100.0 $221.6
 100.0
Gross profit98.7
 37.3 82.0
 37.0
Operating expenses56.3
 21.3 51.2
 23.1
Amortization expense7.6
 2.9 7.1
 3.2
Three Months Ended December 31, 2017 Compared to Three Months Ended December 31, 2016
Net revenue increased $42.7 (19%), primarily due to favorable foreign currency impact ($11.8) and increased demand for screening and separating equipment (including equipment that processes proppants for hydraulic fracturing), plastics projects, and equipment and systems used in food and pharmaceutical applications. Order backlog increased $191.2 (37%) from $519.8 on December 31, 2016, to $711.0 on December 31, 2017, which included favorable foreign currency impact of $57.1. The increase in backlog is primarily driven by an increase in orders for projects in the plastics industry, as well as screening and separating equipment that processes proppants (used in hydraulic fracturing).

On a sequential basis, order backlog increased $78.8 (12%) to $711.0 at December 31, 2017, up from $632.2 at September 30, 2017.
Gross profit increased $16.7 (20%), primarily due to favorable foreign currency impact ($3.9) and increased demand for screening and separating equipment (including equipment that processes proppants for hydraulic fracturing), plastics projects, and equipment and systems used in food and pharmaceutical applications. Grossgross profit margin improved 30280 basis points to 37.3% in 2018, primarily31.9%. The adjusted gross profit margin improvement was driven by productivity and pricing improvements, partially offset by unfavorable product mix.which included savings from restructuring actions taken in the prior year.

Operating expenses•Batesville’s gross profit increased $5.1 (10%), primarily driven by unfavorable foreign currency impact of $2.3 and an increase in variable compensation. Operating expenses as a percentage of net revenue improved by 180 basis points to 21.3% in 2018.
Operating expenses included restructuring and restructuring related charges ($0.2 in 2018 and $0.1 in 2017).  Excluding these items, adjusted operating expenses increased $5.0 (10%), which was primarily driven by unfavorable foreign currency impact of $2.3 and an increase in variable compensation. Adjusted operating expenses as a percentage of net revenue improved 190 basis points to 21.2% in 2018.


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OPERATIONS REVIEW — BATESVILLE
 Three Months Ended December 31,
 2017 2016
 Amount % of Net Revenue Amount % of Net Revenue
Net revenue$132.9
 100.0 $134.5
 100.0
Gross profit47.6
 35.8 44.0
 32.7
Operating expenses21.8
 16.4 21.3
 15.8
Amortization expense—
 — 0.1
 0.1
Three Months Ended December 31, 2017 Compared to Three Months Ended December 31, 2016
Net revenue decreased $1.6 (1%), primarily due to a decrease in volume ($2.2), partially offset by an increase in average selling price. Lower volume was driven by a decrease in burial sales resulting from what we estimate to be a decrease in North American burials driven by the increased rate at which families opted for cremation.
Gross profit increased $3.6 (8%$29.5 (75%) and gross profit margin improved 3101080 basis points to 35.8%41.8%.  The increase in gross profit and gross profit margin was primarily due to a decrease in restructuringhigher volume and restructuring related charges and the impact of supply chainproductivity initiatives, partially offset by the declineinflation in volumewages and higher commodity, fuel, and healthcare costs.benefits.


GrossBatesville’s gross profit included restructuring and restructuring related charges ($0.1 in 2018fiscal 2020). Excluding these charges, adjusted gross profit increased $29.6 (75%) and $6.4adjusted gross profit margin improved 1080 basis points to 41.9%.

Operating expenses decreased $25.8 (16%), primarily due to decreases in 2017)business acquisition, disposition, and integration costs related to the acquisition of Milacron and productivity initiatives, which included savings from prior year restructuring and cost containment actions, partially offset by the addition of Molding Technology Solutions’ operating expenses and an increase in variable compensation. Foreign currency impact decreased operating expenses by 1%. Our operating expense-to-revenue ratio improved by 880 basis points to 19.0% in fiscal 2021.  Operating expenses included the following items:
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 Three Months Ended December 31,
 20202019
Business acquisition, disposition, and integration costs$9.7 $53.8 
Restructuring and restructuring related charges1.5 1.7 
On an adjusted basis, which excluded business acquisition, disposition, and integration costs and restructuring and restructuring related charges, operating expenses increased $20.4 (20%), primarily due to the addition of Molding Technology Solutions’ operating expenses and an increase in variable compensation, partially offset by productivity initiatives, which included savings from prior year restructuring and cost containment actions. Adjusted operating expenses as a percentage of net revenue improved 30 basis points in fiscal 2021 to 17.7%.

Amortization expense decreased $1.2 (8%), primarily driven by certain intangible assets being classified as held for sale as of September 30, 2020, resulting in no amortization for those assets during fiscal 2021. See Note 4 included in Part 1, Item 1 of this Form 10-Q for more information. In addition, there was $4.2 of backlog amortization recorded in fiscal 2020, resulting from the acquisition of Milacron, that did not repeat in fiscal 2021. These decreases were partially offset by an additional 50 days of amortization expense in fiscal 2021 compared to the first quarter of fiscal 2020 as a result of the timing of the Milacron acquisition (closed November 21, 2019).

Gain on divestiture increased $31.6 due to the gain realized on the divestiture of Red Valve on December 31, 2020. See Note 4 included in Part 1, Item 1 of this Form 10-Q for more information.

Interest expense increased $6.5 (44%), primarily due to an additional 50 days in fiscal 2021 of interest expense on the increased borrowings as a result of the Milacron acquisition compared to the first quarter of fiscal 2020 as a result of the timing of the Milacron acquisition (closed November 21, 2019). See Note 8 of Part I, Item 1 of this Form 10-Q for a discussion of the debt financing. On an adjusted basis, which excludes $2.4 of interest expense on the $375.0 senior unsecured notes for the period prior to completing the acquisition of Milacron (October 1, 2019 through November 20, 2019), interest expense increased by $8.3 (68%).

Other expense (income), net was $0.4 of expense in fiscal 2021, compared to $1.9 income in fiscal 2020. This change is primarily driven by a decrease in interest income. Fiscal 2020 included interest earned on the proceeds from the $375.0 senior unsecured notes during the period prior to completing the acquisition of Milacron.
The effective tax rate was 28.7% in fiscal 2021 compared to 93.9% in fiscal 2020. The difference in the effective tax rate in the current quarter relative to the federal statutory tax rate was primarily attributable to an unfavorable geographic mix of pretax income, the impact that tax loss carryforwards and the tax loss on the sale of Red Valve had on foreign tax credit determinations related to foreign income inclusions, as well as deferred taxes recognized on accumulated earnings of foreign subsidiaries. The decrease in the effective tax rate from the prior year is primarily due to the prior year net loss position and the tax benefit recognized from the revaluation of current and deferred tax balances in connection with enacted statutory tax rate reductions in certain foreign jurisdictions, which significantly increased the tax rate in the prior year, partially offset by the impact of nondeductible expenses associated with the Milacron acquisition.

Our adjusted effective income tax rate was 28.5% in fiscal 2021 compared to 22.0% in fiscal 2020. The adjusted effective income tax rate excludes the impact of the following items:

•the tax impact of the sale of Red Valve ($3.9 expense in fiscal 2021);
•the negative tax effect of the Milacron tax loss carryforwards on foreign income inclusion and foreign tax credits: ($3.7 expense in fiscal 2021 and $0.6 benefit in fiscal 2020);
•certain tax items related to the acquisition of Milacron ($1.1 benefit in fiscal 2020);
•the revaluation of deferred tax balances in connection with enacted statutory tax rate reductions in certain foreign jurisdictions ($5.7 benefit in fiscal 2020); and
•the tax effect of the adjustments previously discussed within this section.

The increase in the current year quarter’s adjusted effective tax rate was attributable to the increase in deferred taxes recognized for taxes on accumulated earnings of foreign subsidiaries and the prior year impact of the deferred tax benefit recognized from the revaluation of current and deferred tax balances in connection with enacted statutory tax rate reductions in certain foreign jurisdictions.
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OPERATIONS REVIEW — ADVANCED PROCESS SOLUTIONS
 Three Months Ended December 31,
 20202019
 Amount% of Net
Revenue		Amount% of Net
Revenue
Net revenue$290.8 100.0 $306.6 100.0 
Gross profit100.6 34.6 103.1 33.6 
Operating expenses56.2 19.3 57.0 18.6 
Amortization expense4.8 7.3 
Three Months Ended December 31, 2020 Compared to Three Months Ended December 31, 2019
Net revenuedecreased $15.8 (5%) primarily due to lower volume (10%) largely driven by a decrease in large polyolefin systems sales, and lower parts and service revenue driven by delays associated with the COVID-19 pandemic, partially offset by an increase in demand for other capital equipment. Foreign currency impact improved net revenue by 4%. Order backlog increased $169.7 (19%) from $900.9 on December 31, 2019, to $1,070.6 on December 31, 2020. The increase in backlog was primarily driven by increased demand in engineered plastics as well as customer delays related to orders in progress. Foreign currency impact increased order backlog by 8%.

On a sequential basis, order backlog increased $82.6 (8%) to $1,070.6 at December 31, 2020, up from $988.0 at September 30, 2020. The increase in backlog was primarily driven by an increase in orders for projects in the engineered plastics industry.
Gross profit decreased $2.5 (2%), primarily driven by a decrease in large polyolefin systems sales, lower parts and service revenue, driven by delays associated with the COVID-19 pandemic, and cost inflation, partially offset by an increase in demand for other capital equipment, pricing and productivity improvements, and cost containment. Foreign currency impact improved gross profit by 5%. Gross profit margin improved 100 basis points to 34.6% in fiscal 2021, primarily due to pricing and productivity improvements and cost containment, partially offset by cost inflation.

Advanced Process Solutions’ gross profit included restructuring and restructuring related charges ($0.6 in fiscal 2021 and $0.7 in fiscal 2020). Excluding these charges, adjusted gross profit decreased $2.7 (5%$2.3 (2%) and adjusted gross profit margin decreased 160improved 100 basis points to 35.9%34.9%.

Operating expenses decreased $0.8 (1%), primarily driven by the decline in volumedue to savings from restructuring actions and higher commodity, fuel, and healthcare costs,reduced discretionary spending, partially offset by supply chain initiatives.
cost inflation and an increase in variable compensation. Foreign currency impact increased operating expenses by 4%. Operating expenses as a percentage of net revenue increased $0.5by 70 basis points to 19.3% in fiscal 2021.

Operating expenses included restructuring and restructuring related charges ($0.7 in fiscal 2021 and $0.9 in fiscal 2020) and business acquisition, disposition, and integration costs of $0.6 in fiscal 2021. Excluding these items, adjusted operating expenses decreased $1.0 (2%) to $21.8 and adjusted operating expenses as a percentage of net revenue increased 60 basis points to 16.4%18.9% in fiscal 2021.

Amortization expense decreased $2.5 (34%) primarily driven by certain intangible assets being classified as held for sale as of September 30, 2020, resulting in no amortization for those assets during fiscal 2021. See Note 4 included in Part 1, Item 1 of this Form 10-Q for more information.

OPERATIONS REVIEW — MOLDING TECHNOLOGY SOLUTIONS
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 Three Months Ended December 31,
 20202019 (1)
 Amount% of Net
Revenue		Amount% of Net
Revenue
Net revenue$236.9 100.0 $133.3 100.0 
Gross profit74.7 31.5 29.3 22.0 
Operating expenses36.0 15.2 21.9 16.4 
Amortization expense8.8 7.5 

(1) Included 40 days of operations related to Milacron following its acquisition on November 21, 2019

Three Months Ended December 31, 2020 Compared to Three Months Ended December 31, 2019

Milacron’s fiscal year 2020 results were significantly impacted by the non-recurring effects of the fair value adjustments to inventories and backlog required by acquisition accounting. These fair value adjustments are being charged to the Consolidated Statements of Operations over the respective periods that inventory is expected to be consumed and backlog is expected to be realized as net revenue.

Net revenueincreased $103.6 (78%) primarily due to an additional 50 days of revenue compared to the first quarter of fiscal 2020, partially offset by the divestiture of Cimcool, which occurred in the second quarter of 2020. Foreign currency impact improved net revenue by 1%. Order backlog increased $145.2 (99%) from $146.8 on December 31, 2019, to $292.0 on December 31, 2020. The increase in backlog was primarily driven by an increase in orders within our injection molding equipment product lines.

On a sequential basis, order backlog increased $49.4 (20%) to $292.0 at December 31, 2020, up from $242.6 at September 30, 2020. The increase in backlog was primarily driven by an increase in orders within our injection molding equipment product lines.

Gross profit increased $45.4 (155%) primarily due to an additional 50 days of gross profit compared to the first quarter of fiscal 2020, partially offset by the divestiture of Cimcool, which occurred in the second quarter of 2020. Foreign currency impact improved gross profit by 2%. Gross profit margin improved 950 basis points to 31.5% in 2021, primarily due to inventory step-up charges of $9.6 in fiscal 2020 that did not repeat.

Molding Technology Solutions’ gross profit included inventory step-up charges ($9.6 in fiscal 2020), business acquisition, disposition and integration costs ($0.7 in fiscal 2021), and restructuring and restructuring related charges ($0.2 in fiscal 2021). Excluding these charges, adjusted gross profit increased $36.8 (95%) and adjusted gross profit margin improved 280 basis points to 31.9%. The adjusted gross profit margin improvement was driven by productivity improvements, which included savings from restructuring actions taken in the prior year.

Operating expenses increased $14.1 (64%), primarily due an additional 50 days of operating expenses compared to the first quarter of fiscal 2020, partially offset by the divestiture of Cimcool, which occurred in the second quarter of 2020. Operating expenses as a percentage of net revenue improved by 120 basis points to 15.2% in fiscal 2021.

Operating expenses included business acquisition, disposition, and integration costs (including severance costs related to the integration) ($0.3 in fiscal 2021 and $4.0 in fiscal 2020) and restructuring and restructuring related charges ($0.3 in fiscal 2020). Excluding these items, adjusted operating expenses increased $18.1 (103%) and adjusted operating expenses as a percentage of net revenue increased 190 basis points to 15.1% in fiscal 2021.

Amortization expense increased $1.3 (17%) primarily due to an additional 50 days of amortization expense in fiscal 2021 compared to the first quarter of fiscal 2020, partially offset by $4.2 of backlog amortization recorded in fiscal 2020 that did not repeat in fiscal 2021.

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OPERATIONS REVIEW — BATESVILLE
 Three Months Ended December 31,
 20202019
 Amount% of Net RevenueAmount% of Net Revenue
Net revenue$164.8 100.0 $127.0 100.0 
Gross profit68.9 41.8 39.4 31.0 
Operating expenses18.6 11.3 18.5 14.6 
Three Months Ended December 31, 2020 Compared to Three Months Ended December 31, 2019
Net revenue increased $37.8 (30%), primarily due to an increase in volume (28%) and an increase in average selling price (2%). Higher volume was driven by an increase in burial casket sales primarily due to estimated higher deaths from the COVID-19 pandemic, partially offset by an estimated increased rate at which families opted for cremation.

Gross profit increased $29.5 (75%) and gross profit margin improved 1080 basis points to 41.8%.  The increase in gross profit and gross profit margin was primarily due to higher volume and productivity initiatives, partially offset by inflation in wages and benefits.

Gross profit included restructuring and restructuring related charges ($0.1 in fiscal 2020). Excluding these charges, adjusted gross profit increased $29.6 (75%) and adjusted gross profit margin improved 1080 basis points to 41.9%.
Operating expenses increased $0.1 (1%) to $18.6 primarily due to an increase in variable compensation.compensation, partially offset by productivity initiatives and cost containment actions. Operating expenses as a percentage of net revenue improved 330 basis points to 11.3%, primarily due to the increase in volume.


Operating expenses included restructuring and restructuring related charges ($0.4 in fiscal 2020). Excluding these charges, adjusted operating expenses increased $0.2 (1%) and adjusted operating expenses as a percentage of net revenue improved 320 basis points to 11.1% in fiscal 2020.

REVIEW OF CORPORATE EXPENSES
 
Three Months Ended December 31, Three Months Ended December 31,
2017 2016 20202019
Amount % of Net Revenue Amount % of Net Revenue Amount% of Net RevenueAmount% of Net Revenue
Core operating expenses$8.6
 2.2 $8.4
 2.4Core operating expenses$13.3 1.9 $10.2 1.8 
Business acquisition, development, and integration costs2.3
 0.6 0.3
 0.1
Restructuring and restructuring related charges0.2
 — 1.6
 0.4
Business acquisition, disposition, and integration costsBusiness acquisition, disposition, and integration costs7.5 1.1 49.8 8.8 
Operating expenses$11.1
 2.8 $10.3
 2.9Operating expenses$20.8 3.0 $60.0 10.6 
 
CoreCorporate operating expenses primarily represent operating expenses excluding restructuring and restructuring related charges and costs related to business acquisition, development,disposition, and integration, which we incur as a result of our strategy to grow through selective acquisitions.


Business acquisition, development,disposition, and integration costs include legal, tax, accounting, and other advisory fees and due diligence costs associated with investigationinvestigating opportunities (including acquisition and disposition) and integrating completed acquisitions.acquisitions (including severance).
 
Three Months Ended December 31, 20172020 Compared to Three Months Ended December 31, 20162019
 
Operating expenses increased $0.8 (8%decreased $39.2 (65%), primarily due to a decrease in business acquisition, disposition and integration costs as a result of the acquisition of Milacron, partially offset by an increase in business acquisition, development, and integration costs and variable compensation partially offset by a decrease in restructuring and restructuring related charges. Thesethe addition of Milacron. Total operating expenses as a percentage of net revenue were 2.8%3.0%, an improvement of 760 basis points from the prior year.

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Core operating expenses increased $3.1 (30%), primarily driven by an increase in variable compensation and the addition of Milacron.  Total core expenses as a decreasepercentage of net revenue were 1.9%, an increase of 10 basis points from the prior year.


Core operating expenses increased $0.2 (2%), primarily due to an increase in variable compensation.  These expenses as a percentage of net revenue were 2.2%, a decrease of 20 basis points from the prior year.

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NON-GAAP OPERATING PERFORMANCE MEASURES
 
The following is a reconciliation from the most directly comparable GAAP operating performance measure to our non-GAAP adjusted EBITDA.
 
 Three Months Ended December 31,
 20202019
Consolidated net income (loss)$77.7 $(0.8)
Interest income(0.6)(1.3)
Interest expense21.2 14.7 
Income tax expense (benefit)31.3 (12.4)
Depreciation and amortization29.3 25.9 
EBITDA$158.9 $26.1 
Business acquisition, disposition, and integration costs (1)
9.1 53.8 
Restructuring and restructuring related charges (2)
1.5 2.4 
Inventory step-up (3)
— 9.6 
Gain on divestiture (4)
(31.6)— 
Other0.1 — 
Adjusted EBITDA$138.0 $91.9 
 Three Months Ended December 31,
 2017 2016
Consolidated net income$19.1
 $21.9
Interest income(0.5) (0.2)
Interest expense6.3
 6.1
Income tax expense23.7
 6.7
Depreciation and amortization13.8
 15.0
EBITDA$62.4
 $49.5
Business acquisition, development, and integration2.3
 0.3
Restructuring and restructuring related0.5
 6.6
Adjusted EBITDA$65.2
 $56.4
(1)Business acquisition, disposition, and integration costs during the three months ended December 31, 2020 primarily included professional fees and employee-related costs attributable to the integration of Milacron and divestiture of Red Valve. Business acquisition, disposition, and integration costs during the three months ended December 31, 2019 primarily included expenses for the settlement of outstanding Milacron share-based equity awards, professional fees, and severance and employee-related costs in connection with the acquisition and integration of Milacron.
(2)Restructuring and restructuring-related charges primarily included severance costs, unrelated to the acquisition and integration of Milacron, during the three months ended December 31, 2020 and 2019.
(3)Represents the non-cash charges related to the fair value adjustment of inventories acquired in connection with the acquisition of Milacron during the three months ended December 31, 2019.
(4)Represents the gain on the divestiture of Red Valve during the three months ended December 31, 2020. See Note 4 included in Part 1, Item 1 of this Form 10-Q for more information.

Three Months Ended December 31, 2020 Compared to Three Months Ended December 31, 2019

Consolidated net income (loss) increased $78.5 (9813%) for 2018the three months ended December 31, 2020, compared to 2017 decreased $2.8 (13%),the same period in fiscal 2020. The increase was primarily driven by a decrease in business acquisition, disposition, and integration costs, as well as a decrease in inventory step-up charges, primarily in relation to the acquisition of Milacron, the gain on divestiture of Red Valve, higher volume at Batesville, an increase inadditional 50 days of results from Molding Technology Solutions compared to the effective tax ratefirst quarter of fiscal 2020 as a result of the Tax Act, atiming of the Milacron acquisition (closed November 21, 2019), and pricing and productivity improvements. This increase in consolidated net income (loss) was partially offset by an increase in income tax expense, decrease in volume at Batesville,Advanced Process Solutions, an increase in business acquisition, development,interest expense, and integration costs, an increase in variable compensation, and unfavorable product mix. This decrease incompensation. Foreign currency impact improved consolidated net income was partially offset by a favorable foreign currency impact ($0.8), increased demand for screening and separating equipment (including equipment that processes proppants for hydraulic fracturing), plastics projects, and equipment and systems used in food and pharmaceutical applications, a decrease in restructuring and restructuring related charges, and productivity and pricing improvements.$1.5.


Consolidated adjusted EBITDA increased $46.1 (50%) for 2018the three months ended December 31, 2020, compared to 2017 increased $8.8 (16%),the same period in fiscal 2020. The increase was primarily due an additional 50 days of results from Molding Technology Solutions compared to favorable foreign currency impact ($1.4)the first quarter of fiscal 2020 as a result of the timing of the Milacron acquisition (closed November 21, 2019), increased demand for screeninghigher volume at Batesville, and separating equipment (including equipment that processes proppants for hydraulic fracturing), plastics projects, and equipment and systems used in food and pharmaceutical applications,pricing and productivity and pricing improvements. This increase in consolidated adjusted EBITDA was partially offset by a decrease in volume at Batesville,Advanced Process Solutions and an increase in variable compensation, and unfavorable product mix.compensation. Foreign currency impact improved adjusted EBITDA by $3.0.


LIQUIDITY AND CAPITAL RESOURCES
 
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In this section, we discuss our ability to access cash to meet business needs. We discuss how we see cash flow being affected for the next twelve months and how we intend to use it. We describe actual results in generating and utilizing cash by comparing the first three months of 20182021 to the same period last year. Finally, we identify other significant matters that could affect liquidity on an ongoing basis.


Ability to Access Cash


Our debt financing includeshas historically included revolving credit facilities, term loans, and long-term notes including the Series A Notes, and our Facility as part of our overall financing strategy. We believe we have ready access to capital markets and regularly review and adjust the optimal mix of fixed-rate and variable-rate debt. In additiondebt within our capital structure in order to achieve a target range based on our financing strategy.

We have taken proactive measures to maintain financial flexibility within the landscape of the COVID-19 pandemic. We believe the Company ended the quarter with, and continues to have, sufficient liquidity to operate in the current business environment. Hillenbrand increased cash balancesholdings over the past four quarters (from December 31, 2019 to December 31, 2020) by $123.4, primarily with cash proceeds from the issuance of $400.0 in senior unsecured notes in June 2020, net cash proceeds of $221.9 from the divestiture of the Cimcool business in March 2020, net cash proceeds of $59.4 from the divestiture of the Red Valve business in December 2020, and cash generated from operations, partially offset by repayments made on the Revolver, repayment of the $225.0 term loan, and the maturity of the $150.0 senior unsecured notes. As of December 31, 2020, Hillenbrand was in full compliance with all covenants under its financing agreements. We continue to evaluate additional measures to maintain financial flexibility and general working capital requirements as a result of the COVID-19 pandemic. As the impact of the COVID-19 pandemic on the economy and our abilityoperations has been changing frequently and evolving rapidly, we will continue to access additional long-term financing,closely monitor our liquidity and capital resources through the disruption caused by the COVID-19 pandemic.

As of December 31, 2020, we had $663.7$829.6 of maximum borrowing capacity available under the Facility as of December 31, 2017,Revolver, of which $569.2$829.6 of this borrowing capacity was immediately available based on our most restrictive leverage covenant with additional amountsas amended in January 2020. The available inborrowing capacity reflects a reduction of $7.4 for outstanding letters of credit issued under the event of a qualifying acquisition.Revolver. The Company may request an increase of up to $450.0 in the total borrowing capacity under the Facility,Revolver, subject to approval of the lenders.


In the normal course of business, operating companies within the Advanced Process Equipment Group providesSolutions reportable segment provide to certain customers bank guarantees and other credit arrangements in support of performance, warranty, advance payment, and other contractual obligations. This form of trade finance is customary in the industry and, as a result, we are required to maintain adequate capacity to provide the guarantees. As of December 31, 2017,2020, we had guarantee arrangements totaling $228.2,$437.8, under which $176.1$264.9 was utilizedused for this purpose. These arrangements include the €150.0 LGL/G Facility Agreement under which unsecured letters of credit, bank guarantees, or other surety

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bonds may be issued. The Company may request an increase to the total capacity under the LGL/G Facility Agreement by an additional €70.0, subject to approval of the lenders. In January 2020, the L/G Facility Agreement was amended to expand the size of the existing €150.0 facility by an additional €25.0.


We have significant operations outside the U.S. TheWe continue to assert that the basis differences in the majority of our foreign earnings is consideredsubsidiaries continue to be indefinitelypermanently reinvested in foreign jurisdictions whereoutside of the U.S. We have recorded tax liabilities associated with distribution taxes on expected distributions of available cash and current earnings. The Company has made, and intends to continue to make, substantial investments in our businesses in foreign jurisdictions to support the ongoing development and growth of our international operations. Accordingly, no U.S. federal and state income taxes have been accrued onAs of December 31, 2020, we had a transition tax liability of $18.3 pursuant to the portion of our foreign earnings that is considered to be indefinitely reinvested in foreign jurisdictions.Tax Act. The cash at our internationalforeign subsidiaries totaled $68.6$246.5 at December 31, 2017. While we do not intend, nor do we foresee a need,2020. We continue to repatriate these funds, repatriation of these funds under current regulatory and tax law for use in domestic operations would expose us to additional taxes. However, with the enactment of the Tax Act, we are evaluatingactively evaluate our future cashglobal capital deployment and may change this assertion in future periods.cash needs.


12-month Outlook


COVID-19 impact

As discussed in the COVID-19 Impact section above, the Company has taken actions aimed to safeguard its capital position in the current COVID-19 environment. We believe the 12-month outlook for our business remains positive. Although cash flow from operationsCompany has sufficient liquidity to operate in the Process Equipment Group naturally experiences substantial fluctuations drivencurrent business environment. The challenges posed by changesthe COVID-19 pandemic on our businesses have evolved rapidly over the past three quarters and will continue to evolve further. Consequently, we will continue to evaluate our financial position in working capital requirements at Coperion (duelight of future developments, particularly those relating to the typeCOVID-19 pandemic, and we plan to take necessary steps to manage through such developments.
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Events resulting from the effects of the ongoing COVID-19 pandemic may negatively impact our ability to comply with the covenants under the Revolver, which could lead us to seek an amendment or waivers from our lenders, limit access to or require accelerated repayment of our existing credit facilities, or require us to pursue alternative financing. We have no assurance that any such alternative financing, if required, could be obtained at terms acceptable to us, or at all, including as a result of the effects of the COVID-19 pandemic on the financial markets at such time.

TerraSource Global and geographyflow control businesses

During the fourth quarter of customer projects2020, the Company announced that it had initiated a plan to divest the TerraSource Global and flow control businesses, which operate within the Advanced Process Solutions reportable segment, as these businesses were no
longer considered a strategic fit with the Company’s long-term growth plan and operational objectives. On December 31, 2020, the Company completed the divestiture of its Red Valve business and in process at any given time), we believe weJanuary 2021, the Company announced that it entered into a definitive agreement to sell its ABEL Pumps business, subject to customary post-closing adjustments. The Company still intends to divest the TerraSource Global business. We have significant flexibilityused and continue to meet our financial commitments, including working capital needs, capital expenditures, and financing obligations. We expect to continueuse cash proceeds generated from the divestiture of these businesses primarily to use a combinationfurther reduce our outstanding debt.

Leverage update

The Company’s net leverage (defined as debt, net of somecash, to adjusted EBITDA) at December 31, 2020 was 2.2x. Given the strength of the Company’s balance sheet and with leverage within our cash flows from operationstargeted range, the Company will resume consideration of share repurchases and borrowings under our Facility to fund acquisitions. In considering attractive targets, we often look for companies with a relatively low physical asset base, in order to limit the need to invest significant additional cash into targets post-acquisition.strategic acquisitions.


Other activities

The Tax Act will requirerequires the Company to pay a transition tax on unremitted earnings of its foreign subsidiaries, resulting in an estimated amountliability of $28.9.$18.3 recorded as of December 31, 2020. The portion of thistransition tax we anticipate to pay inliability under the next twelve monthsTax Act is $2.3, with the remainderexpected to be paid over the next sevenfive years.

In addition, we expectDecember 2018, our Board of Directors authorized a new share repurchase program of up to $200.0. Given the lower corporate tax ratestrength of 21% to benefitthe Company’s balance sheet and with leverage within our cash flow in current and future periods; however,targeted range, the amount and useCompany will resume consideration of those benefits has not yet been determined.share repurchases.


Our anticipated contribution to our defined benefit pension plans in 2018fiscal 2021 is $9.9,$11.0, of which $2.8$2.3 was made during the three months ended December 31, 2017.2020. We will continue to monitor plan funding levels, performance of the assets within the plans, and overall economic activity, and we may make additional discretionary funding decisions based on the net impact of the above factors.


The aggregate amount of our quarterly cash dividends increased as a result of the additional common stock issued in connection with the acquisition of Milacron. We currently expect to pay quarterly cash dividends in the future comparable to those we paid in 2017, which will require approximately $13.1$16.1 each quarter based on our outstanding common stock at December 31, 2017.2020. We increased our quarterly dividend in 2018fiscal 2021 to $0.2075$0.2150 per common share from $0.2050$0.2125 per common share paid in 2017.fiscal 2020. As of the date of this filing, the Company is committed to paying our dividend, and our policy remains unchanged. As with all discretionary cash outlays, if the current economic challenges become significantly more pronounced or extend over a longer-than-expected period, the Company would evaluate all opportunities to preserve capital, including a dividend adjustment. We cannot predict whether, and to what extent, such an adjustment would be made given the various potential factors that could exist at such time.


We believe existing cash, cash flows from operations, borrowings under existing arrangements, and the issuance of debt will be sufficient to fund our operating activities and cash commitments for investing and financing activities.activities for at least the next twelve months. Based on these factors, we believe our current liquidity position is strongsufficient and will continue to meet all of our financial commitments forin the foreseeable future.current business environment. However, as mentioned above, management is continuing to evaluate the Company’s liquidity position, communicating with and monitoring the actions of our customers and suppliers, and reviewing our near-term financial performance as we manage the Company through the uncertainty related to the COVID-19 pandemic.


Cash Flows
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Three Months Ended December 31,
Three Months Ended December 31,20202019
(in millions)2017 2016
Cash flows provided by (used in) 
  
Cash flows provided by (used in)  
Operating activities$26.9
 $(48.7)Operating activities$66.2 $17.8 
Investing activities(5.4) (4.5)Investing activities53.8 (1,496.1)
Financing activities(12.6) 49.5
Financing activities(174.1)1,221.4 
Effect of exchange rates on cash and cash equivalents2.9
 (1.7)Effect of exchange rates on cash and cash equivalents9.7 0.4 
Increase (decrease) in cash and cash equivalents$11.8
 $(5.4)
Net cash flowsNet cash flows$(44.4)$(256.5)


Operating Activities
 
Operating activities provided $26.9$66.2 of cash during the first three months of fiscal year 2018,2021, and used $48.7provided $17.8 of cash during the first three months of fiscal year 2017,2020, a $75.6 (155%$48.4 (272%) increase.  The increase in operating cash flow in fiscal 2021 was primarily duelargely attributable to our $80.0 contributiona decrease in payments for business acquisition, disposition, and integration costs in relation to the Company’s U.S. defined benefit pension planacquisition of Milacron compared to the prior period, the additional cash flow provided by Molding Technology Solutions in 2017 that did not repeat in 2018,fiscal 2021, partially offset by the timing ofchanges in working capital requirements within the Process Equipment Group.requirements.


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Working capital requirements for theAdvanced Process Equipment GroupSolutions and Molding Technology Solutions reportable segments may continue to fluctuate in the future due primarily to the type of product and geography of customer projects in process at any point in time.  Working capital needs are lower when advance payments from customers are more heavily weighted toward the beginning of the project. Conversely, working capital needs are higher when a larger portion of the cash is to be received in later stages of manufacturing.  
 
Investing Activities
 
The $0.9 increase inInvesting activities provided $53.8 of cash used in investing activities induring the first three months of fiscal 20182021, and used $1,496.1 during the first three months of fiscal 2020. The use of cash in fiscal 2020 was primarily due to an increasefor the acquisition of Milacron of $1,503.1. The cash provided in capital expenditures.the current year was primarily the result of the divestiture of Red Valve resulting in proceeds of $59.4. See Note 4 included in Part 1, Item 1 of this Form 10-Q for further details on this acquisition and divestiture.

Financing Activities
 
Cash used in financing activities was largely impacted by net borrowing activity.  Our general practice is to utilizeuse our cash to pay down debt unless it is needed for an acquisition.  Cash used in financing activities during the first three months of 2018fiscal 2021 was $12.6,$174.1, including $10.3$157.0 of proceeds, net of debt repayments.  Cash provided by financing activities in the first three months of fiscal 20172020 was $49.5.$1,221.4, including $1,240.9 of proceeds, net of debt repayments. The decreasechange in cash provided by financing activities was primarily due to financing activity for the borrowings used to fundacquisition of Milacron in the $80.0 contribution toprior year, including the Company’s U.S. defined benefit pension plan in 2017 that did not repeat in 2018, partially offset byissuance of two term loan commitments totaling $725.0 along with an increase in repurchasesnet borrowings on the Revolver of common stock in 2018.$525.0 million.
 
We returned approximately $13.1$16.1 to shareholders during the first three months of 2018fiscal 2021 in the form of quarterly dividends.  We increased our quarterly dividend in 2018fiscal 2021 to $0.2075$0.2150 per common share from $0.2050$0.2125 per common share paid during 2017. We repurchased approximately 375,000 shares of our common stock in the first three months of 2018, at a total cost of approximately $15.2.fiscal 2020.


Off-Balance Sheet Arrangements
 
There wereAs part of its normal course of business, Hillenbrand is a party to various financial guarantees and other commitments. These arrangements involve elements of performance and credit risk that are not included in the Consolidated Balance Sheets. The possibility that Hillenbrand would have to make actual cash expenditures in connection with these obligations is largely dependent on the performance of the guaranteed party, or the occurrence of future events that Hillenbrand is unable to predict. We have no significant changes in off-balance sheet arrangements,financing agreements or guarantees at December 31, 2020, that we believe are reasonably likely to have a current or future effect on our financial condition, results of operations, or cash flows.

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Summarized Financial Information for Guarantors and the Issuer of Guaranteed Securities

Summarized financial information of Hillenbrand (the “Parent”) and our subsidiaries that are guarantors of our senior unsecured notes (the “Guarantor Subsidiaries”) is shown below on a combined basis as describedthe “Obligor Group.” The Company’s senior unsecured notes are guaranteed by certain of our wholly-owned domestic subsidiaries and rank equally in Management’s Discussionright of payment with all of our existing and Analysisfinancial information of Financial Conditionthe Obligor Group. All intercompany balances and Resultstransactions between the Parent and Guarantor Subsidiaries have been eliminated and all information excludes subsidiaries that are not issuers or guarantors of Operations, Liquidityour senior unsecured notes, including earnings from and Capital Resources,investments in our Annual Report on Form 10-K for 2017.these entities.

December 31, 2020September 30, 2020
Combined Balance Sheets Information:
Current assets (1)
$1,526.7 $2,088.7 
Non-current assets7,834.7 4,548.4 
Current liabilities (1)
2,748.4 2,067.7 
Non-current liabilities1,464.7 1,596.8 
Three Months Ended
December 31, 2020		For the Year Ended
September 30, 2020
Combined Statements of Operations Information:
Net revenue (2)
$253.9 $859.6 
Gross profit105.8 387.0 
Net income (loss) attributable to Obligors216.0 (32.1)
(1) Current assets include intercompany receivables from non-guarantors of $642.3 as of December 31, 2020. Current liabilities include intercompany payables to non-guarantors $256.2 as of September 30, 2020.
(2) Revenue includes intercompany sales with non-guarantors of $10.4 as of December 31, 2020 and $55.5 as of September 30, 2020, respectively.

Recently Adopted and Issued Accounting Standards
 
For a summary of recently issued and adopted accounting standards applicable to us, see Item 1, Note 2 of Part I of this Form 10-Q.


Item 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
A full discussion of quantitative and qualitative disclosures about market risk may be found in Item 7A of our 20172020 Form 10-K filed with the SEC on November 15, 2017.12, 2020.  There have been no material changes in this information since the filing of our 20172020 Form 10-K.


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Item 4.CONTROLS AND PROCEDURES
 
Our management, with the participation of our President and Chief Executive Officer and our Senior Vice President and Chief Financial Officer (the “Certifying Officers”), evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)).  Based upon that evaluation, the Certifying Officers concluded that our disclosure controls and procedures as of the end of the period covered by this report are effective.


There have been noIn the ordinary course of business, we review our system of internal control over financial reporting and make changes to our systems and processes to improve such controls and increase efficiency, while ensuring that we maintain an effective internal control environment. Changes may include such activities as implementing new, more efficient systems, automating manual processes, and updating existing systems.

The acquisition of Milacron, which was completed on November 21, 2019, resulted in a material change in the Company's internal controls over financial reporting. The Company is continuing the process of designing and integrating policies, processes, operations, technology, and other components of internal controls over financial reporting (as definedof Milacron. Management believes the control design and implementation thereof have appropriately addressed the underlying risks.
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There were no other changes in Rules 13a-15(f) and 15d-15(f) ofinternal control over financial reporting identified in the Exchange Act)evaluation for the period covered by this reportquarter ended December 31, 2020, that have materially affected, or are reasonably likely to materially affect, the Company’sour internal control over financial reporting.reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act.


PART II — OTHER INFORMATION
 
Item 1.LEGAL PROCEEDINGS
 
Information pertaining to legal proceedings can be found in Note 1415 to the interim consolidated financial statementsConsolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.
 
Item 1A.RISK FACTORS


For information regarding the risks we face, see the discussion under Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended September 30, 2017, and the revised risk factors below.2020.


Changes in the United States political environment could negatively impact our business.

The 2016 presidential and congressional elections in the United States have resulted in significant uncertainty with respect to, and have resulted in and could result in additional changes in, legislation, regulation and government policy. While it is not possible to predict whether and when any such additional changes will occur, changes at the local, state or federal level could significantly impact our business and the industries in which we compete.  Specific legislative and regulatory proposals discussed during and after the election that could have a material impact on us include, but are not limited to, changes to existing trade agreements or entry into new trade agreements, import and export regulations, tariffs and customs duties, public company reporting requirements, environmental regulation and antitrust enforcement.  To the extent changes in the political environment have a negative impact on the Company or our markets, it may materially and adversely impact our business, results of operations and financial condition in the periods to come.

The effective tax rate of the Company may be negatively impacted by economic downturns as well as changes to tax laws in jurisdictions in which we operate.

We are subject to income taxes in the United States and various other global jurisdictions. Our effective tax rate could be adversely affected by changes in the mix of earnings by jurisdiction and the valuation of deferred tax assets and liabilities. We recognize deferred tax assets and liabilities based on the differences between the financial statement carrying amounts and the tax basis of assets and liabilities. Significant judgment is required in determining our provision for income taxes. We regularly review our deferred tax assets for recoverability and establish a valuation allowance if it is more likely than not that some portion or all of a deferred tax asset will not be realized. If we are unable to generate sufficient future taxable income, if there is a material change in the actual effective tax rates, or if there is a change to the time period within which the underlying temporary differences become taxable or deductible, we could be required to increase our valuation allowance against our deferred tax assets, which could result in a material increase in our effective tax rate.

In addition, the recently enacted Tax Act makes significant changes to the U.S. Internal Revenue Code. Such changes include a reduction in the corporate tax rate, limitations on certain corporate deductions and credits, and a Transition Tax on the deemed repatriation of foreign earnings. Some of the Tax Act changes could have a negative impact on our business. The estimated impact of the new law is based on management’s current knowledge and assumptions and recognized impacts could be materially different from current estimates based on actual results in 2018 and our further analysis of the new law. Changes in other tax laws or tax rulings could also have a material impact on our effective tax rate. Additionally, many countries in the European Union, as well as a number of other countries and organizations such as the Organization for Economic Cooperation and Development, are actively considering changes to existing tax laws. Certain proposals could include recommendations that could increase our tax obligations in many countries where we do business. Any changes in the taxation of our activities in such jurisdictions may result in a material increase in our effective tax rate.

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Item 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The following table summarizes repurchases of common stock during the three months ended December 31, 2017.
Period 
Total
Number
of Shares
Purchased
 
Average
Price Paid
per Share
 
Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Programs
 
Maximum Dollar Amount
that May Yet be
Purchased Under Plans or
Programs
         
October 280,910
 $39.19
 280,910
 $89.6
November —
 $—
 —
 $89.6
December 94,300
 $44.75
 94,300
 $85.4
Total 375,210
 $40.59
 375,210
 $85.4

On July 24, 2008, our Board of Directors approved a stock repurchase program for the repurchase of up to $100.0 of our common stock. On February 23, 2017, our Board of Directors approved an increase of $100.0 to the existing stock repurchase program. The authorization brings the maximum cumulative repurchase authorization up to $200.0. The repurchase program has no expiration date, but may be terminated by the Board of Directors at any time. As of December 31, 2017, we had repurchased approximately 3,950,000 shares for approximately $114.6 in the aggregate. Such shares were classified as treasury stock. We repurchased approximately 375,210 shares of our common stock during the first quarter of fiscal 2018, at a total cost of approximately $15.2. At December 31, 2017, we had approximately $85.4 remaining for share repurchases under the existing Board authorization.


Item 6.EXHIBITS
 
The exhibits filed with this report are listed on the Exhibit Index, which is incorporated herein by reference.below.  In reviewing any agreements included as exhibits to this report, please remember that they are included to provide you with information regarding their terms and are not intended to provide any other factual or disclosure information about us or the other parties to the agreements.  The agreements may contain representations and warranties by the parties to the agreements, including us.  Except where explicitly stated otherwise, these representations and warranties have been made solely for the benefit of the other parties to the applicable agreement and:
 
•should not necessarily be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate;
•may have been qualified by disclosures that were made to the other party in connection with the negotiation of the applicable agreement, which disclosures are not necessarily reflected in the agreement;
•may apply standards of materiality in a way that is different from what may be viewed as material to you or other investors; and
•were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement and are subject to more recent developments.
 
Accordingly, these representations and warranties may not describe the actual state of affairs as of the date they were made or at any other time.


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Restated and Amended Articles of Incorporation of Hillenbrand, Inc., effective as of February 13, 2020 (Incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K filed February 14, 2020)
Amended and Restated Code of By-Laws of Hillenbrand, Inc. effective as of February 13, 2020 (Incorporated by reference to Exhibit 3.2 to Current Report on Form 8-K filed February 14, 2020)

Employment Agreement, dated March 30, 2020, by and between Mold-Masters (2007) Limited and Ling An-Heid
Fourth Amendment Agreement, dated December, 2020, among Hillenbrand, Inc., certain of its subsidiaries party thereto, the lenders party thereto, and Commerzbank Finance & Covered Bond S.A., acting as agent
List of Guarantor Subsidiaries of Hillenbrand, Inc.
Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Exhibit 101
The following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2020, formatted in Inline XBRL: (i) Consolidated Statements of Operations, (ii) Consolidated Statements of Comprehensive Income, (iii) Consolidated Balance Sheets, (iv) Consolidated Statements of Cash Flows, (v) Consolidated Statements of Shareholders’ Equity, and (vi) Notes to Consolidated Financial Statements, tagged as blocks of text and including detailed tags.
Exhibit 104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
*Filed herewith.
** Management contracts or compensatory plans or arrangements required to be filed as exhibits to this form pursuant to Item     6 of this Form 10-Q.
*** Certain schedules and exhibits have been omitted pursuant to Item 601(b)(10)(iv) of Regulation S-K. Hillenbrand hereby undertakes to furnish supplemental copies of any of the omitted schedules and exhibits upon request by the U.S. Securities and Exchange Commission.

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SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
HILLENBRAND, INC.
Date: January 31, 2018February 3, 2021BY:/s/ Kristina A. Cerniglia
Kristina A. Cerniglia
Senior Vice President and Chief Financial Officer
Date: January 31, 2018February 3, 2021/s/ Eric M. TeegardenAndrew S. Kitzmiller
Eric M. TeegardenAndrew S. Kitzmiller
Vice President, Controller, and Chief Accounting Officer







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EXHIBIT INDEX
Exhibit 3.1
Restated and Amended Articles of Incorporation of Hillenbrand, Inc., effective March 31, 2008 (Incorporated by reference to Exhibit 3.1 to Quarterly Report on Form 10-Q filed August 12, 2008)
Exhibit 3.2
Articles of Correction of the Restated and Amended Articles of Incorporation of Hillenbrand, Inc., effective March 31, 2008 (Incorporated by reference to Exhibit 3.2 to Quarterly Report on Form 10-Q filed August 12, 2008)
Exhibit 3.3
Articles of Amendment of the Restated and Amended Articles of Incorporation of Hillenbrand, Inc., effective February 27, 2015 (Incorporated by reference to Exhibit 3.3 to Quarterly Report on Form 10-Q filed May 11, 2015)
Exhibit 3.4
Amended and Restated Code of By-laws of Hillenbrand, Inc. (Incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K filed February 26, 2015)
Exhibit 10.1
Second Amended and Restated Credit Agreement, dated as of December 8, 2017, among Hillenbrand, Inc., the subsidiary borrowers and subsidiary guarantors named therein, the lenders named therein, and JPMorgan Chase Bank, N.A., as administrative agent for the lenders (Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed December 12, 2017)
Exhibit 10.2
Amendment No. 4 to the Private Shelf Agreement, dated as of December 8, 2017, by and among Hillenbrand, Inc., PGIM, Inc. (f/k/a Prudential Investment Management, Inc.), the subsidiary guarantors named therein, and the additional parties thereto (Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed December 12, 2017)
Exhibit 31.1*
Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Exhibit 31.2*
Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Exhibit 32.1*
Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Exhibit 32.2*
Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Exhibit 101.INSInstance document
Exhibit 101.SCHSchema document
Exhibit 101.CALCalculation linkbase document
Exhibit 101.LABLabels linkbase document
Exhibit 101.PREPresentation linkbase document
Exhibit 101.DEFDefinition linkbase document
*Filed herewith.

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