Table of Contents

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
ýQuarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
 
For the quarterly period ended June 30, 2018March 31, 2019

OR

oTransition 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
(State of incorporation)
 
26-1342272
(I.R.S. Employer Identification No.)
   
One Batesville Boulevard  
Batesville, IN 47006
(Address of principal executive offices) (Zip Code)
 
(812) 934-7500
(Registrant’s telephone number, including area code)
 
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
Accelerated filerEmerging growth company
 o
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 company (as defined in Rule 12b-2 of the Exchange Act). Yes o  No ý

The registrant had 62,310,98762,621,870 shares of common stock, no par value per share, outstanding as of July 27, 2018.April 26, 2019.
 

1
Table of Contents

HILLENBRAND, INC.
INDEX TO FORM 10-Q
 
  Page
 
PART I — FINANCIAL INFORMATION
 
   
Item 1.
Financial Statements (Unaudited)
 
   
 
Consolidated Statements of Income for the Three and NineSix Months Ended June 30,March 31, 2019 and 2018 and 2017
2
   
 
Consolidated Statements of Comprehensive Income for the Three and NineSix Months Ended June 30,March 31, 2019 and 2018 and 2017
3
   
 
Consolidated Balance Sheets at June 30, 2018,March 31, 2019, and September 30, 20172018
4
   
 
Consolidated Statements of Cash Flow for the NineSix Months Ended June 30,March 31, 2019 and 2018 and 2017
5
Consolidated Statements of Shareholders’ Equity for the Three and Six Months Ended March 31, 2019 and 2018
6
   
 
Condensed Notes to Consolidated Financial Statements
68
   
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
2830
   
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
4142
   
Item 4.
Controls and Procedures
4142
   
 
PART II — OTHER INFORMATION
 
   
Item 1.
Legal Proceedings
4142
   
Item 1A.
Risk Factors
41
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
42
   
Item 6.
Exhibits
4243
   
SIGNATURES
 


1
Table of Contents

PART I — FINANCIAL INFORMATION

Item 1.               FINANCIAL STATEMENTS
 
Hillenbrand, Inc.
Consolidated Statements of Income (Unaudited)
(in millions, except per share data)
 
Three Months Ended
June 30,		 Nine Months Ended
June 30,		Three Months Ended
March 31,		 Six Months Ended
March 31,
2018 2017 2018 20172019 2018 2019 2018
Net revenue$446.0
 $395.9
 $1,295.4
 $1,147.3
$464.6
 $452.2
 $874.9
 $849.4
Cost of goods sold282.3
 243.5
 816.7
 720.3
303.7
 283.6
 567.0
 534.6
Gross profit163.7
 152.4
 478.7
 427.0
160.9
 168.6
 307.9
 314.8
Operating expenses98.4
 86.3
 285.9
 254.7
93.7
 98.3
 184.4
 187.4
Amortization expense7.6
 7.3
 22.7
 21.7
8.6
 7.5
 16.4
 15.1
Impairment charge—
 —
 63.4
 —
—
 63.4
 —
 63.4
Interest expense5.5
 6.5
 17.8
 18.9
5.4
 6.0
 10.9
 12.3
Other (expense) income, net(0.8) (1.1) (2.4) (3.0)
Income before income taxes51.4
 51.2
 86.5
 128.7
Other income (expense), net0.1
 (1.1) 0.6
 (1.5)
Income (loss) before income taxes53.3
 (7.7) 96.8
 35.1
Income tax expense15.2
 16.6
 52.5
 38.2
13.8
 13.6
 28.3
 37.3
Consolidated net income36.2
 34.6
 34.0
 90.5
Consolidated net income (loss)39.5
 (21.3) 68.5
 (2.2)
Less: Net income attributable to noncontrolling interests0.3
 1.7
 1.9
 2.5
1.5
 0.6
 2.2
 1.6
Net income (1)$35.9
 $32.9
 $32.1
 $88.0
Net income (loss) (1)$38.0
 $(21.9) $66.3
 $(3.8)
              
Net income (1) — per share of common stock:       
Net income (loss) (1) — per share of common stock:       
Basic earnings per share$0.57
 $0.52
 $0.51
 $1.38
$0.60
 $(0.34) $1.05
 $(0.06)
Diluted earnings per share$0.56
 $0.52
 $0.50
 $1.37
$0.60
 $(0.34) $1.05
 $(0.06)
Weighted average shares outstanding (basic)62.8
 63.4
 63.2
 63.6
62.9
 63.3
 62.9
 63.5
Weighted average shares outstanding (diluted)63.5
 63.9
 63.9
 64.1
63.4
 63.3
 63.4
 63.5
       
Cash dividends declared per share$0.2075
 $0.2050
 $0.6225
 $0.6150


(1) Net income (loss) attributable to Hillenbrand
 
See Condensed Notes to Consolidated Financial Statements


2
Table of Contents

Hillenbrand, Inc.
Consolidated Statements of Comprehensive Income (Unaudited)
(in millions)
 
 Three Months Ended
June 30,		 Nine Months Ended
June 30,
 2018 2017 2018 2017
Consolidated net income$36.2
 $34.6
 $34.0
 $90.5
Changes in other comprehensive income (loss), net of tax       
Currency translation adjustment(26.1) 25.1
 (5.1) 11.7
Pension and postretirement (net of quarter-to-date tax of $0.2 and $0.4 and year-to-date tax of $0.9 and $5.4)0.7
 0.8
 2.1
 9.7
Change in net unrealized gain on derivative instruments (net of quarter-to-date tax of $0.0 and $0.3 and year-to-date tax of $0.1 and $1.1)(0.1) 0.6
 0.2
 2.1
Total changes in other comprehensive income (loss), net of tax(25.5) 26.5
 (2.8) 23.5
Consolidated comprehensive income10.7
 61.1
 31.2
 114.0
Less: Comprehensive income attributable to noncontrolling interests—
 1.8
 1.6
 2.8
Comprehensive income (2)$10.7
 $59.3
 $29.6
 $111.2
 Three Months Ended
March 31,		 Six Months Ended
March 31,
 2019 2018 2019 2018
Consolidated net income (loss)$39.5
 $(21.3) $68.5
 $(2.2)
Changes in other comprehensive (loss) income, net of tax    
 
Currency translation adjustment(4.6) 14.7
 (9.5) 21.0
Pension and postretirement (net of tax of quarter-to-date tax of $0.1 and $0.4 and year-to-date tax of $0.2 and $0.7)0.3
 0.7
 0.5
 1.4
Change in net unrealized gain (loss) on derivative instruments (net of quarter-to-date tax of $0.9 and $0.1 and year-to-date tax of $2.6 and $0.1)(3.2) 0.5
 (8.4) 0.3
Total changes in other comprehensive (loss) income, net of tax(7.5) 15.9
 (17.4) 22.7
Consolidated comprehensive income (loss)32.0
 (5.4) 51.1
 20.5
Less: Comprehensive income attributable to noncontrolling interests1.5
 0.5
 2.4
 1.6
Comprehensive income (loss) (2)$30.5
 $(5.9) $48.7
 $18.9
 

(2) Comprehensive income (loss) attributable to Hillenbrand
 
See Condensed Notes to Consolidated Financial Statements


3
Table of Contents

Hillenbrand, Inc.
Consolidated Balance Sheets (Unaudited)
(in millions) 
June 30,
2018		 September 30,
2017		March 31,
2019		 September 30,
2018
ASSETS 
  
 
  
Current Assets 
  
 
  
Cash and cash equivalents$71.1
 $66.0
$58.6
 $56.0
Trade receivables, net192.2
 206.1
199.5
 218.5
Receivables from long-term manufacturing contracts178.0
 125.2
164.8
 120.3
Inventories181.7
 151.6
183.0
 172.5
Prepaid expenses29.6
 28.2
24.1
 25.2
Other current assets16.9
 16.5
20.4
 18.1
Total current assets669.5
 593.6
650.4
 610.6
Property, plant, and equipment, net141.8
 150.4
137.6
 142.0
Intangible assets, net496.1
 523.9
477.3
 487.3
Goodwill583.2
 647.5
583.0
 581.9
Other assets43.0
 41.1
37.2
 42.8
Total Assets$1,933.6
 $1,956.5
$1,885.5
 $1,864.6
      
LIABILITIES 
  
 
  
Current Liabilities 
  
 
  
Trade accounts payable$173.1
 $158.0
$207.7
 $196.8
Liabilities from long-term manufacturing contracts and advances176.5
 132.3
125.1
 125.9
Current portion of long-term debt—
 18.8
Accrued compensation66.8
 66.9
55.5
 71.9
Other current liabilities133.1
 135.7
117.5
 137.1
Total current liabilities549.5
 511.7
505.8
 531.7
Long-term debt424.4
 446.9
361.7
 344.6
Accrued pension and postretirement healthcare123.1
 129.6
114.6
 120.5
Deferred income taxes66.6
 75.7
79.4
 76.4
Other long-term liabilities58.5
 26.7
53.9
 47.3
Total Liabilities1,222.1
 1,190.6
1,115.4
 1,120.5
      
Commitments and contingencies (Note 14)

 



 

      
SHAREHOLDERS’ EQUITY 
  
 
  
Common stock, no par value (63.9 and 63.8 shares issued, 62.3 and 63.1 shares outstanding)—
 —
Common stock, no par value (63.9 and 63.9 shares issued, 62.6 and 62.3 shares outstanding)—
 —
Additional paid-in capital348.5
 349.9
343.1
 351.4
Retained earnings499.7
 507.1
571.1
 531.0
Treasury stock (1.6 and 0.7 shares)(68.2) (24.4)
Treasury stock (1.3 and 1.6 shares)(55.6) (67.1)
Accumulated other comprehensive loss(83.7) (81.2)(101.8) (84.2)
Hillenbrand Shareholders’ Equity696.3
 751.4
756.8
 731.1
Noncontrolling interests15.2
 14.5
13.3
 13.0
Total Shareholders’ Equity711.5
 765.9
770.1
 744.1
      
Total Liabilities and Equity$1,933.6
 $1,956.5
$1,885.5
 $1,864.6

 See Condensed Notes to Consolidated Financial Statements

4
Table of Contents

Hillenbrand, Inc.
Consolidated Statements of Cash FlowFlows (Unaudited)
(in millions)
 Six Months Ended
March 31,
 2019 2018
Operating Activities 
  
Consolidated net income (loss)$68.5
 $(2.2)
Adjustments to reconcile net income to cash provided by operating activities: 
  
Depreciation and amortization29.2
 27.8
Impairment charge—
 63.4
Deferred income taxes8.7
 (10.4)
Share-based compensation5.8
 6.2
Trade accounts receivable and receivables from long-term manufacturing contracts(24.8) (34.2)
Inventories(12.1) (25.6)
Prepaid expenses and other current assets(0.8) (10.7)
Trade accounts payable12.7
 12.8
Accrued expenses and other current liabilities(24.6) 10.3
Income taxes payable(12.8) 26.5
Defined benefit plan and postretirement funding(4.6) (5.6)
Defined benefit plan and postretirement expense1.7
 2.3
Other, net(0.4) 0.9
Net cash provided by operating activities46.5
 61.5
    
Investing Activities 
  
Capital expenditures(8.3) (10.6)
Acquisition of business, net of cash acquired(26.2) —
Other, net0.1
 0.1
Net cash used in investing activities(34.4) (10.5)
    
Financing Activities 
  
Repayments on term loan—
 (148.5)
Proceeds from revolving credit facilities, net of financing costs342.0
 701.8
Repayments on revolving credit facilities(323.8) (542.8)
Payments of dividends on common stock(26.2) (26.2)
Repurchases of common stock—
 (38.9)
Proceeds from stock option exercises and other1.4
 9.3
Payments for employee taxes on net settlement equity awards(4.2) (4.1)
Other, net(0.5) (1.0)
Net cash used in financing activities(11.3) (50.4)
    
Effect of exchange rates on cash and cash equivalents2.1
 1.7
    
Net cash flows2.9
 2.3
    
Cash, cash equivalents, and restricted cash: 
  
At beginning of period56.5
 66.7
At end of period$59.4
 $69.0

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:
 Nine Months Ended
June 30,
 2018 2017
Operating Activities 
  
Consolidated net income$34.0
 $90.5
Adjustments to reconcile net income to cash provided by operating activities: 
  
Depreciation and amortization42.0
 42.1
Impairment charge63.4
 —
Deferred income taxes(4.8) 30.3
Share-based compensation8.8
 8.1
Net gain on investments—
 0.2
Trade accounts receivable and receivables from long-term manufacturing contracts(43.4) 3.3
Inventories(32.4) (4.7)
Prepaid expenses and other current assets(2.5) (5.6)
Trade accounts payable17.1
 3.9
Accrued expenses and other current liabilities46.4
 21.5
Income taxes payable28.9
 (4.3)
Defined benefit plan and postretirement funding(8.2) (88.0)
Defined benefit plan and postretirement expense3.4
 5.8
Other, net3.6
 0.6
Net cash provided by operating activities156.3
 103.7
    
Investing Activities 
  
Capital expenditures(16.3) (14.2)
Proceeds from sales of property, plant, and equipment0.4
 2.3
Other, net0.2
 (0.4)
Net cash used in investing activities(15.7) (12.3)
    
Financing Activities 
  
Repayments on term loan(148.5) (10.1)
Proceeds from revolving credit facilities, net of financing costs946.5
 721.2
Repayments on revolving credit facilities(837.2) (725.5)
Payments of dividends on common stock(39.1) (39.0)
Repurchases of common stock(60.6) (28.0)
Net proceeds on stock plans6.2
 11.4
Other, net(1.8) (2.5)
Net cash used in financing activities(134.5) (72.5)
    
Effect of exchange rates on cash and cash equivalents(1.0) 0.6
    
Net cash flows5.1
 19.5
    
Cash and cash equivalents: 
  
At beginning of period66.0
 52.0
At end of period$71.1
 $71.5
 March 31, 2019 March 31, 2018
  Cash and cash equivalents58.6
 68.5
Short-term restricted cash included in other current assets0.8
 0.5
Total cash, cash equivalents, and restricted cash shown in the Consolidated Statements of Cash Flows$59.4
 $69.0

See Condensed Notes to Consolidated Financial Statements

Hillenbrand, Inc.
5Consolidated Statements of Shareholders' Equity (Unaudited)
(in millions)
Table
 Three Months Ended March 31, 2019
 Shareholders of Hillenbrand, Inc.
 Common Stock 
Additional
Paid-in
Capital
 
Retained
Earnings
 Treasury Stock 
Accumulated
Other
Comprehensive
Loss
 
Noncontrolling
Interests
 Total
 Shares   Shares Amount   
Balance at December 31, 201863.9
—
$341.7
 $546.3
 1.4
 $(59.2) $(94.3) $12.9
 $747.4
Total other comprehensive income (loss), net of tax—
 —
 —
 —
 —
 (7.5) —
 (7.5)
Net income—
 —
 38.0
 —
 —
 —
 1.5
 39.5
Issuance/retirement of stock for stock awards/options—
 (2.6) —
 (0.1) 3.6
 —
 —
 1.0
Share-based compensation—
 3.9
 —
 —
 —
 —
 —
 3.9
Dividends ($0.2100 per share)—
 0.1
 (13.2) —
 —
 —
 (1.1) (14.2)
Balance at March 31, 201963.9
 $343.1
 $571.1
 1.3
 $(55.6) $(101.8) $13.3
 $770.1
                
 Six Months Ended March 31, 2019
 Shareholders of Hillenbrand, Inc.
 Common Stock 
Additional
Paid-in
Capital
 
Retained
Earnings
 Treasury Stock 
Accumulated
Other
Comprehensive
Loss
 
Noncontrolling
Interests
 Total
 Shares   Shares Amount   
Balance at September 30, 201863.9
 $351.4
 $531.0
 1.6
 $(67.1) $(84.2) $13.0
 $744.1
Total other comprehensive income (loss), net of tax—
 —
 —
 —
 —
 (17.6) 0.2
 (17.4)
Net income—
 —
 66.3
 —
 —
 —
 2.2
 68.5
Issuance/retirement of stock for stock awards/options—
 (14.3) —
 (0.3) 11.5
 —
 —
 (2.8)
Share-based compensation—
 5.8
 —
 —
 —
 —
 —
 5.8
Dividends ($0.4200 per share)—
 0.2
 (26.4) —
 —
 —
 (2.1) (28.3)
Other—
 —
 0.2
 —
 —
 —
 —
 0.2
Balance at March 31, 201963.9
 $343.1
 $571.1
 1.3
 $(55.6) $(101.8) $13.3
 $770.1

See Condensed Notes to Consolidated Financial Statements


Hillenbrand, Inc.
Consolidated Statements of ContentsShareholders' Equity (Unaudited)
(in millions)
 Three Months Ended March 31, 2018
 Shareholders of Hillenbrand, Inc.
 Common Stock 
Additional
Paid-in
Capital
 
Retained
Earnings
 Treasury Stock 
Accumulated
Other
Comprehensive
Loss
 
Noncontrolling
Interests
 Total
 Shares   Shares Amount   
Balance at December 31, 201763.9
 $344.1
 $512.0
 0.8
 $(28.7) $(74.5) $15.6
 $768.5
Total other comprehensive income (loss), net of tax—
 —
 —
 —
 —
 16.0
 (0.1) 15.9
Net (loss) income—
 —
 (21.9) —
 —
 —
 0.6
 (21.3)
Issuance/retirement of stock for stock awards/options—
 (1.8) —
 (0.1) 4.4
 —
 —
 2.6
Share-based compensation—
 3.9
 —
 —
 —
 —
 —
 3.9
Purchases of common stock—
 —
 —
 0.5
 (23.7) —
 —
 (23.7)
Dividends ($0.2075 per share)—
 0.2
 (13.2) —
 —
 —
 (0.9) (13.9)
Balance at March 31, 201863.9
 $346.4
 $476.9
 1.2
 $(48.0) $(58.5) $15.2
 $732.0
                
 Six Months Ended March 31, 2018
 Shareholders of Hillenbrand, Inc.
 Common Stock 
Additional
Paid-in
Capital
 
Retained
Earnings
 Treasury Stock 
Accumulated
Other
Comprehensive
Loss
 
Noncontrolling
Interests
 Total
 Shares   Shares Amount   
Balance at September 30, 201763.8
 $349.9
 $507.1
 0.7
 $(24.4) $(81.2) $14.5
 $765.9
Total other comprehensive income (loss), net of tax—
 —
 —
 —
 —
 22.7
 —
 22.7
Net (loss) income—
 —
 (3.8) —
 —
 —
 1.6
 (2.2)
Issuance/retirement of stock for stock awards/options0.1
 (10.1) —
 (0.4) 15.3
 —
 —
 5.2
Share-based compensation—
 6.2
 —
 —
 —
 —
 —
 6.2
Purchases of common stock—
 —
 —
 0.9
 (38.9) —
 —
 (38.9)
Dividends ($0.4150 per share)—
 0.4
 (26.4) —
 —
 —
 (0.9) (26.9)
Balance at March 31, 201863.9
 $346.4
 $476.9
 1.2
 $(48.0) $(58.5) $15.2
 $732.0

See Condensed Notes to Consolidated Financial Statements


Hillenbrand, Inc.
Condensed Notes to Consolidated Financial Statements (Unaudited)
(in millions, except share and per share data)data)
 
1.Background and Basis of Presentation
 
Hillenbrand, Inc. (“Hillenbrand”) is a global diversified industrial company with multiple market-leadingleading brands that serve a wide variety of industries acrossaround the globe.world.  We strive 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 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. 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.industry in North America.  “Hillenbrand,” “the Company,” “we,” “us,” “our,” and similar words refer to Hillenbrand and its subsidiaries unless context otherwise requires.
 
The accompanying unaudited consolidated 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 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 principles generally accepted in the United States (“GAAP”).  The unaudited consolidated financial statements have been prepared on the same basis as, and should be read in conjunction with, the audited consolidated financial statements and notes thereto included in our latest Annual Report on Form 10-K for the year ended September 30, 2017,2018, as filed with the SEC.  The September 30, 20172018 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.  In the opinion of management, these 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 flow as of the dates and for the periods presented.
 
The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of certain assets and liabilities and disclosuresdisclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenuerevenues and expenseexpenses 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 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.


2.Summary of Significant Accounting Policies
 
The significant accounting policies used in preparing these consolidated financial statements are consistent with the accounting policies described in our Annual Report on Form 10-K for 2017,2018, except as described below.

Income taxes

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, 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.

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

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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. However, 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

In JanuaryAugust 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting Standards Update (“ASU”) 2017-04, Simplifying the Test for Goodwill Impairment.Hedging Activities. ASU 2017-04 eliminates Step 2 from2017-12 intends to better align an entity's risk management activities and financial reporting for hedging relationships through changes to both the goodwill impairment testdesignation and modifiesmeasurement guidance for qualifying hedging relationships and the conceptpresentation of impairment fromhedge results. The amendments expand and refine hedge accounting for both nonfinancial and financial risk components, and align 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.  We early adopted this standard for fiscal year 2018. See Note 5 of Part I and Critical Accounting Estimates, of this Form 10-Q for further information on the impact this adoption had on our consolidated results of operations, financial position, and cash flows.

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 requirespresentation of the useeffects of more estimatesthe hedging instrument and judgments than the present standards. It also requires significant disclosures sufficienthedged item in the financial statements. In addition, this ASU makes certain targeted improvements to enable users to understandsimplify the nature, amount, timing, and uncertaintyapplication 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.hedge accounting guidance. ASU 2014-09 will be effective2017-12 was early adopted for our fiscal year beginning on October 1, 2018 including interim periods within that reporting period, and allows for either full retrospective adoption or modified retrospective adoption.

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, 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. We are actively executing our implementation plan and have developed new accounting policies and created draft disclosures under the new standard. We are also evaluating changes in our internal controls over revenue recognition and continue to implement system changes and enhancements to facilitate the collection of data required for disclosures under the new standard. As previously disclosed, we expect to adopt this new standard using the modified retrospective method, which would result in a cumulative effect adjustment as of the date of adoption. We currently believe the most significant impact of theprospective basis. The adoption of this standard relates to the increased financial statement disclosures. We currently dodid not expect the adoption of ASU 2014-09 to have a materialsignificant impact on our consolidated results of operations, financial position, and cash flows.

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 existing accounting policies and consolidated financial statements, and expect that there will be increases in assets and liabilities on the Consolidated Balance Sheet upon adoption, due to the recording of right-of-use assets and corresponding lease liabilities.
In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Statements. 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 be effective

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for our fiscal year beginning on October 1, 2020, with early adoption permitted for our fiscal year beginning on 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 that 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 2016-18 will bebecame effective and was adopted for our fiscal year beginning on October 1, 2018, with early adoption permitted. We expect the2018. The adoption of ASU 2016-18 to havehad 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 all 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 input and a substantive process that together significantly contribute to the ability to create output.  ASU 2017-01 will bebecame effective and was adopted for our fiscal year beginning on October 1, 2018, with early2018. The adoption permitted. We are currently evaluatingof ASU 2017-01 but dodid not expect it to have a significant impact 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 bebecame effective and was adopted for our fiscal year beginning on October 1, 2018. On the Consolidated Statements of Income, the adoption of this standard resulted in the reclassification of $0.1 credit from Cost of goods sold to Other income (expense), net, for the three months ended March 31, 2018, with early adoption permitted. We are currently evaluatingand $0.2 credit from Cost of goods sold and $0.1 from Operating expenses to Other income (expense), net, for the impact that ASU 2017-07 will have on our consolidated financial statements.six months ended March 31, 2018.

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 bebecame effective and was adopted for our fiscal year beginning on October 1, 2018, with early2018. The adoption permitted. The update would be applied prospectively to an award modified on or after the adoption date. We do not expectof ASU 2017-09 todid not have a significant impact on our consolidated financial statements.

In August 2017,Beginning in 2014, the FASB issued ASU 2017-12,No. 2014-09, DerivativesRevenue from Contracts with Customers (“ASC 606”), plus a number of related ASUs designed to clarify and Hedging (Topic 815): Targeted Improvementsinterpret ASC 606. The new standard requires entities to Accountingrecognize 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 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 measurementthose goods or services. The new standard supersedes U.S. GAAP 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 theon revenue recognition and presentationrequires the use of more estimates than the previously effective 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. The new standard became effective for our fiscal year beginning on October 1, 2018 and was adopted on a modified retrospective basis. The Company elected the practical expedient and only evaluated contracts for which substantially all revenue had not been recognized under ASC Topic 605, with the cumulative effect of the new guidance recorded as of the date of initial application.

The primary changes from the adoption of ASC 606 resulted from certain performance obligations that were previously recognized at a point in time that are now recognized over time. The cumulative effect of the changes made to the Consolidated Balance Sheet as of October 1, 2018 for the adoption of ASC 606 was as follows:

 Balance at September 30, 2018 Adjustments due to ASC 606 Balance at October 1, 2018
Assets     
Receivables from long-term manufacturing contracts$120.3
 $1.9
 $122.2
Inventories172.5
 (1.6) 170.9
      
Liabilities     
Deferred income taxes$76.4
 $0.1
 $76.5
      
Shareholders’ Equity     
Retained earnings$531.0
 $0.2
 $531.2

The following tables summarize the impacts of adopting ASC 606 on the Company’s consolidated financial statements as of and for the three and six months ended March 31, 2019.

Consolidated Statements of Income:
 Three Months Ended March 31, 2019 Six Months Ended March 31, 2019
 As Reported Adjustments Due to ASC 606 Balances without Adoption As Reported Adjustments Due to ASC 606 Balances without Adoption
Net revenue$464.6
 $(0.1) $464.5
 $874.9
 $(1.1) $873.8
Cost of goods sold303.7
 (0.1) 303.6
 567.0
 (1.0) 566.0
Gross profit160.9
 —
 160.9
 307.9
 (0.1) 307.8
Income before income taxes53.3
 —
 53.3
 96.8
 (0.1) 96.7
Consolidated net income39.5
 —
 39.5
 68.5
 (0.1) 68.4

Consolidated Balance Sheet:
 March 31, 2019
 As Reported Adjustments Due to ASC 606 Balances without Adoption
Assets    

Receivables from long-term manufacturing contracts$164.8
 $(3.0) $161.8
Inventories183.0
 2.7
 185.7
      
Liabilities     
Deferred income taxes$79.4
 $(0.1) $79.3
      
Shareholders’ Equity     
Retained earnings$571.1
 $(0.2) $570.9

The Company has elected the following as a result of adopting the new standard on revenue recognition:

Hillenbrand elected not to adjust the promised amount of consideration for the effects of the hedging instrumenttime value of money for contracts in which the anticipated period between when Hillenbrand transfers the goods or services to the customer and when the hedged item incustomer pays is equal to one year or less.

Hillenbrand elected to account for shipping and handling activities that occur after the financial statements. customer has obtained control of a good as fulfillment activities rather than as a promised service.


Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, and that are collected by the Company from a customer, are excluded from revenue.

Recently Issued Accounting Standards
In addition, thisFebruary 2016, the FASB issued ASU makes certain targeted improvements2016-02, Leases. ASU 2016-02 requires lessees to simplifyrecognize a right of use asset and related lease liability for leases that have terms of more than twelve months. For income statement purposes, the application of hedge accounting guidance.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 2017-122016-02 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 adoption2019. We have developed an implementation plan and the effect of adoption would be reflected as of the beginning of the fiscal year of adoption (that is, the initial application date). Wewe are currently evaluatinggathering data to further assess the impact that ASU 2017-122016-02 will have on our consolidated financial statements. The adoption is anticipated to have a significant impact on assets and liabilities within our Consolidated Balance Sheets due to the recognition of right-of-use assets and corresponding lease liabilities.

In February 2018,June 2016, the FASB issued ASU 2018-02,2016-13, ReclassificationMeasurement of Certain Tax Effects from Accumulated Other Comprehensive IncomeCredit Losses on Financial Statements.. ASU 2018-02 allows2016-13 replaces the current incurred loss impairment model with a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Act. The amendments in this ASU also require certain disclosures about stranded tax effects. The amendments eliminate the stranded tax effects resulting from the Tax Actmethodology that reflects expected credit losses and will improve the usefulness of information reported to financial statement users. However, because the amendments only relate to the reclassification of the income tax effects of the Tax Act, the underlying guidance that requires that the effectconsideration of a change in tax laws or rates be included in income from continuing operations is not affected.broader range of reasonable and supportable information to determine credit loss estimates. ASU 2018-022016-13 will be effective for our fiscal year beginning on October 1, 2019,2020, with early adoption permitted.permitted for our fiscal year beginning October 1, 2019. We are currently evaluating the impact that ASU 2018-022016-13 will have on our consolidated financial statements.

3.Revenue Recognition

We adopted ASC 606, Revenue from Contracts with Customers, on October 1, 2018. As a result, we have changed our accounting policy for revenue recognition as detailed below.

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

Performance Obligations & Contract Estimates

The Process Equipment Group designs, engineers, manufactures, markets, and services differentiated process and material handling equipment and systems for a wide variety of industries. A large portion of our revenue across the Process Equipment Group is derived from manufactured equipment, which may be standard, customized to meet customer specifications, or turnkey.

Our contracts with customers in the Process Equipment Group segment often include multiple performance obligations. Performance obligations are promises in a contract to transfer a distinct good or service to the customer, and are the basis for determining how revenue is recognized. For instance, a contract may include obligations to deliver equipment, installation services, and spare parts. We frequently have contracts for which the equipment and the installation services, as well as highly engineered or specialized spare parts, are all considered a single performance obligation, as in these instances the installation services and/or spare parts are not separately identifiable. However, due to the varying nature of equipment and contracts across the Process Equipment Group, we also have contracts where the installation services and/or spare parts are deemed to be separately identifiable and are therefore deemed to be distinct performance obligations.

A contract’s transaction price is allocated to each distinct performance obligation based on its respective stand-alone selling price, and recognized as revenue when, or as, the performance obligation is satisfied. When a distinct performance obligation is not sold separately, the value of the standalone selling price is estimated considering all reasonably available information. When an obligation is distinct, as defined in ASC606, we allocate a portion of the contract price to the obligation and recognize it separately from the other performance obligations.

The timing of revenue recognition for each performance obligation is either over time or at a point in time. We recognize revenue over time for contracts that have an enforceable right to collect payment for performance completed to-date upon customer cancellation and provide one or more of the following: (i) service over a period of time, (ii) highly customized equipment, or (iii) parts which are highly engineered and have no alternative use. Revenue generated from standard equipment and highly customized equipment or parts contracts without an enforceable right to payment for performance completed to-date, as well as non-specialized parts sales and sales of death care products, is recognized at a point in time.


We use the input method of “cost-to-cost” to recognize revenue over time. Accounting for these contracts involves management judgment in estimating total contract revenue and cost. Contract revenues are largely determined by negotiated contract prices and quantities, modified by our assumptions regarding contract options, change orders, and incentive and award provisions associated with technical performance clauses. Contract costs are incurred over longer periods of time and, accordingly, the estimation of these costs requires judgment. We measure progress based on costs incurred to date relative to total estimated cost at completion. Incurred cost represents work performed, which corresponds with, and we believe thereby best depicts, the transfer of control to the customer. Contract costs include labor, material, and certain overhead expenses. Cost estimates are based on various assumptions to project the outcome of future events, including labor productivity and availability, the complexity of the work to be performed, the cost of materials, and the performance of subcontractors. Significant factors that influence these estimates include inflationary trends, technical and schedule risk, internal and subcontractor performance trends, business volume assumptions, asset utilization, and anticipated labor agreements. Revenue and cost estimates are regularly monitored and revised based on changes in circumstances. Anticipated losses on long-term contracts are recognized immediately when such losses become evident. We maintain financial controls over the customer qualification, contract pricing, and estimation processes to reduce the risk of contract losses.

Stand-alone service revenue is recognized either over time proportionately over the period of the underlying contract or as invoiced, depending on the terms of the arrangement. Stand-alone service revenue is not material to the Company.

For the Process Equipment Group and Batesville segment products where revenue is recognized at a point in time, we recognize it when our customers take control of the asset. We define this as the point in time at which the customer has the capability of full beneficial use of the asset as intended per the contract.

Contract balances

In the Process Equipment Group segment, the Company requires an advance deposit based on the terms and conditions of contracts with customers for many of its contracts. Payment terms generally require an upfront payment at the start of the contract, and the remaining payments during the contract or within a certain number of days of delivery. Typically, revenue is recognized within one year of receiving an advance deposit. For contracts where an advance payment is received greater than one year from expected revenue recognition, or a portion of the payment due extends beyond one year, the Company has determined it does not constitute a significant financing component.

The timing of revenue recognition, billings, and cash collections can result in customer receivables, advance payments, and billings in excess of revenue recognized. Customer receivables include amounts billed and currently due from customers and are included in Trade receivables, net, as well as unbilled amounts (contract assets) which are included in Receivables from long-term manufacturing contracts on our Consolidated Balance Sheets. Amounts are billed in accordance with contractual terms or as work progresses in accordance with contractual terms. Unbilled amounts arise when the timing of billing differs from the timing of revenue recognized, such as when contract provisions require specific milestones to be met before a customer can be billed. Unbilled amounts primarily relate to performance obligations satisfied over time when the cost-to-cost method is used and the revenue recognized exceeds the amount billed to the customer as there is not yet a right to payment in accordance with contractual terms. Unbilled amounts are recorded as a contract asset when the revenue associated with the contract is recognized prior to billing and derecognized when billed in accordance with the terms of the contract. Trade receivables are recorded at face amounts and represent the amounts we believe to be collectible. The Company maintains allowances for doubtful accounts for estimated losses as a result of customers’ inability to make required payments. Management evaluates the aging of the customer receivable balances, the financial condition of its customers, historical trends and the time outstanding of specific balances to estimate the amount of customer receivables that may not be collected in the future, and records the appropriate provision.

Advance payments and billings in excess of revenue recognized are included in Liabilities from long-term manufacturing contracts and advances on our Consolidated Balance Sheets. Advance payments and billings in excess of revenue recognized represent contract liabilities and are recorded when customers remit contractual cash payments in advance of us satisfying performance obligations under contractual arrangements, including those with performance obligations satisfied over time. Billings in excess of revenue recognized primarily relate to performance obligations satisfied over time when the cost-to-cost method is used and revenue cannot yet be recognized as the Company has not completed the corresponding performance obligation. Contract liabilities are derecognized when revenue is recognized and the performance obligation is satisfied.

The balance in Receivables from long-term manufacturing contracts at March 31, 2019 and September 30, 2018 was $164.8 and $120.3. The change was driven by the adoption of ASC 606 ($3.0) and the impact of net revenue recognized prior to billings ($41.5). The balance in the Liabilities from long-term manufacturing contracts and advances at March 31, 2019 and September 30, 2018 was $125.1 and $125.9 and consists primarily of cash payments received or due in advance of satisfying our performance obligations. The revenue recognized for the six months ended March 31, 2019 related to Liabilities from long-term manufacturing

contracts and advances as of September 30, 2018 was $107.0. During the six months ended March 31, 2019, the adjustments related to performance obligations satisfied in previous periods were immaterial.

Costs incurred to obtain a customer contract are not material to the Company. The Company elected to apply the practical expedient to not capitalize contract costs to obtain contracts with a duration of one year or less, which are expensed as incurred.

Transaction price allocated to the remaining performance obligations
As of March 31, 2019, 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 $960.5. Approximately 85% of these obligations are expected to be satisfied over the next twelve months, and the remaining performance obligations, primarily within one to three years.

Disaggregation of revenue
 Three Months Ended March 31, 2019 Six Months Ended March 31, 2019
 Process Equipment Group Batesville Total Process Equipment Group Batesville Total
Revenue by End Market           
  Plastics$202.2
 $—
 $202.2
 $363.1
 $—
 $363.1
  Chemicals22.9
 —
 22.9
 52.5
 —
 52.5
Food & Pharmaceuticals24.4
 —
 24.4
 40.9
 —
 40.9
  Minerals & Mining22.2
 —
 22.2
 50.2
 —
 50.2
  Water & Wastewater7.7
 —
 7.7
 17.2
 —
 17.2
  Death Care—
 137.9
 137.9
 —
 266.0
 266.0
  Other47.3
 —
 47.3
 85.0
 —
 85.0
    Total$326.7
 $137.9
 $464.6
 $608.9
 $266.0
 $874.9

8
 Three Months Ended March 31, 2019 Six Months Ended March 31, 2019
 Process Equipment Group Batesville Total Process Equipment Group Batesville Total
Products and Services           
Equipment$227.6
 $—
 $227.6
 $411.0
 $—
 $411.0
Parts and Services99.1
 —
 99.1
 197.9
 —
 197.9
Death Care—
 137.9
 137.9
 —
 266.0
 266.0
    Total$326.7
 $137.9
 $464.6
 $608.9
 $266.0
 $874.9

Table of Contents
 Three Months Ended March 31, 2019 Six Months Ended March 31, 2019
 Process Equipment Group Batesville Total Process Equipment Group Batesville Total
Timing of Transfer           
Point in Time$176.8
 $137.9
 $314.7
 $340.5
 $266.0
 $606.5
Over Time149.9
 —
 149.9
 268.4
 —
 268.4
    Total$326.7
 $137.9
 $464.6
 $608.9
 $266.0
 $874.9


3.4.Business Acquisitions

Abel
We completed the acquisition of Abel Pumps LPBurnaby Machine and Abel GmbH & Co. KG and certain of their affiliates (collectively “Abel”Mill Equipment Ltd. (“BM&M”) on October 2, 2015in November 2018 for €95$26.2 in cash.  We utilized borrowings underused our former $700.0 revolving credit facility and former $180.0 term loan(the “Facility”) to fund thisthe acquisition.  Based in Büchen, Germany, Abel isCanada, BM&M provides high-speed gyratory screeners for 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.variety of industries. The results of Abel areBM&M will be reported in ourthe Process Equipment Group segment for the relevant periods.

segment. Based on the finalour purchase price allocation, we recorded goodwill$14 of $36 and acquired identifiable intangible assets of $58,intangibles, which consisted of $5$10 of customer relationships, $1 of trade names not subject to amortization, $9 of developed technology,and $3 of backlog, and $41 of customer relationships.backlog.  In addition, we recorded $14$9 of goodwill and $3 of net tangible assets, primarily working capital.  Goodwill is deductible for tax purposes in Germany. Supplemental proforma information has not been provided as the acquisition did not have a material impact on consolidated results of operations.

Red Valve

On February 1, 2016, we completed the acquisition of Red Valve Company, Inc. (“Red Valve”) 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, and other general industrial markets. The results of Red Valve are reported in our Process Equipment Group segment for the relevant periods.

Based on the final purchase price allocation, we recorded goodwill of $59 and acquired identifiable intangible assets of $61, which consisted of $4 of trade names not subject 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 consolidated results of operations.

Both of these acquisitions continue Hillenbrand’s strategy to transform into 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. The fair value of these acquisitions did not ascribe a significant amount to tangible assets, as we often seek to acquire companies with a relatively low physical asset base in order to limit the need to invest significant additional cash post-acquisition.

4.5.Supplemental Balance Sheet Information
 
June 30,
2018		 September 30,
2017		March 31,
2019		 September 30,
2018
Trade accounts receivable reserve$19.6
 $21.6
Trade accounts receivable reserves$21.0
 $22.2
      
Accumulated depreciation on property, plant, and equipment$318.9
 $311.8
$310.6
 $303.8
      
Inventories: 
  
 
  
Raw materials and components$67.7
 $52.6
$71.3
 $68.3
Work in process51.2
 55.4
49.5
 44.7
Finished goods62.8
 43.6
62.2
 59.5
Total inventories$181.7
 $151.6
$183.0
 $172.5
 

RestrictedWe had restricted cash of $0.5$0.8 and $0.8 are$0.5 included in Other current assets in the Consolidated Balance Sheets at June 30, 2018March 31, 2019 and at September 30, 2017.2018.


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5.6.Intangible Assets and Goodwill

Intangible Assets

Intangible assets are stated at the lower of cost or fair value. With the exception of most 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 expect to receive future economic benefits from these assets. We assess 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 June 30, 2018March 31, 2019 and September 30, 2017.
2018.

June 30, 2018 September 30, 2017March 31, 2019 September 30, 2018
Cost 
Accumulated
Amortization
 Cost 
Accumulated
Amortization
Cost 
Accumulated
Amortization
 Cost 
Accumulated
Amortization
Finite-lived assets: 
  
  
  
 
  
  
  
Trade names$0.2
 $(0.1) $0.2
 $(0.1)$0.2
 $(0.2) $0.2
 $(0.2)
Customer relationships465.2
 (142.7) 468.7
 (125.9)469.2
 (158.8) 464.5
 (148.4)
Technology, including patents79.9
 (43.9) 80.7
 (39.9)78.2
 (47.3) 79.6
 (45.1)
Software57.6
 (48.0) 48.3
 (41.5)58.5
 (50.6) 58.0
 (48.9)
Other0.2
 (0.2) 0.2
 (0.2)2.8
 (1.7) 0.2
 (0.2)
603.1
 (234.9) 598.1
 (207.6)608.9
 (258.6) 602.5
 (242.8)
Indefinite-lived assets: 
  
  
  
 
  
  
  
Trade names127.9
 —
 133.4
 —
127.0
 —
 127.6
 —
              
Total$731.0
 $(234.9) $731.5
 $(207.6)$735.9
 $(258.6) $730.1
 $(242.8)

As a result of the required annual impairment assessment performed in the third quarter of 2018, 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.

The net change in intangible assets during the ninesix months ended June 30, 2018 was driven by normal amortization, foreign currency translation, and an impairment charge on certain trade names. An impairment charge of $4.6 pre-tax ($3.5 after tax) was recorded during the quarter ended March 31, 2019 was driven primarily by the acquisition of BM&M in November 2018, for trade names most directly impacted by domestic coal mining and coal power. As of June 30, 2018, we had approximately $4 of trade name book value remaining in the Process Equipment Group segment most directly impacted by domestic coal mining and coal power. In conjunction with our impairment testing, we also reassessed the useful lives of other definite-livedwhich included intangible assets specific toof approximately $14, normal amortization, and foreign currency adjustments. See Note 4 for further detail on the intangibles impacted by domestic coal mining and coal power, resulting in no significant changes in amortization.acquisition of BM&M.

Goodwill

Goodwill is not amortized, but is subject to annual impairment tests.  Goodwill has been assigned to reporting units.  We assess 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.

 
Process
Equipment
Group
 Batesville Total
Balance September 30, 2017$639.2
 $8.3
 $647.5
Impairment charge(58.8) —
 (58.8)
Foreign currency adjustments(5.5) —
 (5.5)
Balance June 30, 2018$574.9
 $8.3
 $583.2
 
Process
Equipment
Group
 Batesville Total
Balance September 30, 2018$573.6
 $8.3
 $581.9
Acquisition9.1
 —
 9.1
Foreign currency adjustments(8.0) —
 (8.0)
Balance March 31, 2019$574.7
 $8.3
 $583.0


Impairment

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Testing for impairment of goodwill and indefinite lived assets must be performed annually, or on an interim basis upon the occurrence of triggering events or substantive changes in circumstances that indicate carrying value is impaired.  In connection with the preparation of the quarterly financial statements for the second quarter of 2018, an interim impairment assessment was performed at the previously mentioneda reporting unit in the Process Equipment Group segment.segment most directly impacted by domestic coal mining and coal power. During the quarter ended March 31, 2018, published industry reports reduced their forecasts for domestic coal production and consumption. The reporting unit also experienced a larger than expected decline in orders for equipment and parts used in the domestic coal mining and coal power industries. In conjunction with these events and as part of the long-term strategic forecasting process, the Company made the decision to redirect strategic investments for growth, significantly reducing the reporting unit’s terminal growth rate. As a result of this change in expected future cash flows, along with comparable fair value information, management concluded that the reporting unit carrying value exceeded its fair value, resulting in a goodwill impairment charge of $58.8. The pre-impairment goodwill balance$58.8 during the quarter ended March 31, 2018. Intangible asset impairment charges for trade names associated with the same reporting unit was $71.3.  A 10% further reduction inwere $4.6 pre-tax ($3.5 after tax) based on similar factors during the fair value of this reporting unit would indicate a potential additional impairment of $7.4. 

As a result of the required annual impairment assessment performed in the third quarter of 2018, the Company tested the recoverability of its goodwill, and in all reporting units, the fair value of goodwill was determined to exceed the carrying value, resulting in no impairment of goodwill. As of June 30, 2018, the fair value of the reporting unit in the Process Equipment Group segment that is most directly impacted by domestic coal mining and coal power exceeded its carrying value by less than 10%.ended March 31, 2018.

6.7.Financing Agreements
June 30,
2018		 September 30,
2017		March 31,
2019		 September 30,
2018
$900 revolving credit facility (excluding outstanding letters of credit)$175.6
 $68.0
$112.6
 $95.7
$180 term loan—
 148.5
$150 senior unsecured notes, net of discount (1)149.2
 148.9
149.5
 149.3
$100 Series A Notes (2)99.6
 99.7
99.6
 99.6
Other—
 0.6
1.7
 —
Total debt424.4
 465.7
363.4
 344.6
Less: current portion—
 18.8
Less: current portion (3)1.7
 —
Total long-term debt$424.4
 $446.9
$361.7
 $344.6
      
(1) Includes debt issuance costs of $0.4 and $0.6 at June 30, 2018 and September 30, 2017.
(2) Includes debt issuance costs of $0.4 and $0.3 at June 30, 2018 and September 30, 2017.
(1) Includes debt issuance costs of $0.3 and $0.4 at March 31, 2019 and September 30, 2018.(1) Includes debt issuance costs of $0.3 and $0.4 at March 31, 2019 and September 30, 2018.
(2) Includes debt issuance costs of $0.4 and $0.4 at March 31, 2019 and September 30, 2018.(2) Includes debt issuance costs of $0.4 and $0.4 at March 31, 2019 and September 30, 2018.
(3) Included in Other current liabilities in the Consolidated Balance Sheets.(3) Included in Other current liabilities in the Consolidated Balance Sheets.

OnOur private shelf agreement expired in March 8, 2018, the Company2019. We entered into a Syndicated Letter of Guarantee Facilitythis Private Shelf Agreement (the “L/G Facility Agreement”) by and among the Company and certain of its affiliates, the lenders party thereto, and Commerzbank Finance & Covered Bond S.A., acting as agent. The L/G Facility Agreement replaces the Company’s former Syndicated L/G Facility Agreement dated as of June 3, 2013 and permits the Company and certain of its subsidiaries to request that one or more of the lenders issue up to an aggregate of €150.0 in unsecured letters of credit, bank guarantees or other surety bonds (collectively, the “Guarantees”).

The Guarantees carry an annual fee that varies based on the Company’s leverage ratio. The L/G Facility Agreement also provides for a leverage-based commitment fee assessed on the undrawn portion of the facility. The L/G Facility Agreement matures in December 2022, but can be extended or terminated earlier under certain conditions. New deferred financing costs related to the L/G Facility Agreement were $1.0, which along with existing costs of $0.6, are being amortized to interest expense over the term of the agreement.

On December 8, 2017, the Company entered into a Second Amended and Restated Credit Agreement (the “Credit Agreement”), which governs our revolving credit facility (the “Facility”), by and among the Company and certain of its affiliates, the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent. The Credit Agreement amended and extended 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 increased the maximum principal amount available for borrowing under the Facility from $700.0 to $900.0. In connection with the Credit Agreement, the Company repaid the existing term loan in full with borrowings under the Facility. The aggregate principal amount available for borrowing under the Credit Agreement may be expanded, subject to the

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approval of the lenders, by an additional $450.0. The Credit Agreement extended the maturity date of the Facility to December 8, 2022. New deferred financing costs 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 agreement6, 2012 (as amended, the “Shelf Agreement”), which amended the private shelf agreement dated December 6, 2012, among the Company, the subsidiary guarantors, PGIM, Inc. (f/k/awith Prudential Investment Management, Inc. (“Prudential”) and each Prudential Affiliate (as defined therein), pursuant to which the Company that became a purchaser thereunder, and on December 15, 2014, we issued its$100.0 in 4.60% Series A unsecured notes maturing December 15, 2024 (the “Series(“Series A Notes”). The amendment conformed certain terms of the Shelf Agreement with those contained in the Credit Agreement. pursuant thereto, which remain outstanding.

The Credit Agreement, the L/G Facility 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 of Indebtedness (subject to certain limitations); the maximum Leverage Ratio resulting 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, the Credit Agreement, the L/G Facility Agreement, and the Shelf Agreement provide the Company with increased flexibility to sell assets and to incur debt at our international subsidiaries.
With respect to the Facility,revolving credit facility, as of June 30, 2018,March 31, 2019, we had $7.3$7.2 in outstanding letters of credit issued and $717.1$780.2 of maximum borrowing capacity. $698.7$741.6 of this borrowing capacity iswas immediately available based on our most restrictiveleverage covenant at March 31, 2019, with additional amounts available in the event of a qualifying acquisition. The weighted-average interest rates on borrowings under the Facility were 1.70%2.73% and 1.77%2.57% for the three and ninesix months ended June 30, 2018,March 31, 2019, and 1.46%2.03% and 1.43%1.82% for the same periods in the prior year. The weighted average facility fee was 0.13%0.12% and 0.16%0.11% for the three and ninesix months ended June 30, 2018,March 31, 2019, and 0.23%0.15% and 0.17% for the same periods in the prior year. The weighted average interest rate on the Facility’s term loan was 2.60% for 2018 (until the date of repayment) and 2.39% and 2.16% for the three and nine months ended June 30, 2017.

 
We have interest rate swaps on $50.0 of outstanding borrowings under the Facility in order to manage exposure to our variable interest payments.

In the normal course of business, the Process Equipment Group provides 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 maintain adequate capacity to provide the guarantees. As of June 30, 2018,March 31, 2019, we had credit arrangements and insurance programs totaling $250.3,$300.9, under which $208.0$210.6 was utilized, for this purpose. These arrangements include our L/G€150.0 Syndicated Letter of Guarantee Facility Agreement(as amended, the “LG Facility”) and other ancillary guaranteecredit facilities.

The Credit Agreement,Facility, the L/GLG Facility, Agreement, and the Shelf AgreementSeries A Notes, require us to meet certain conditions including compliance with covenants, absence of default, and continued accuracy of certain representations and warranties. Financial covenants include a maximum ratio of Indebtedness to EBITDA (as defined in the agreements, “Leverage Ratio”) of 3.5 to 1.0 including the application of cash as a reduction of Indebtedness (subject to certain limitations); a maximum Leverage Ratio resulting from an acquisition in excess of $75.0 of 4.0 to 1.0 for a period of three consecutive quarters following such acquisition; and a minimum ratio of EBITDA (as defined in the agreements) to interest expense of 3.0 to 1.0. As of June 30, 2018,March 31, 2019, we were in compliance with all covenants.

All obligations of the Company arising under the Credit Agreement, ourThe Facility, senior unsecured notes, 4.60% Series A unsecured notes issued under the Shelf Agreement the (“Series A Notes,Notes”), and the L/GLG Facility Agreement are fully and unconditionally, and jointly and severally, guaranteed by certain of the Company’s domestic subsidiaries.

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7.8.Retirement Benefits
 
Defined Benefit Plans
 
U.S. Pension Benefits Non-U.S. Pension BenefitsU.S. Pension Benefits Non-U.S. Pension Benefits
Three Months Ended June 30, Three Months Ended June 30,Three Months Ended March 31, Three Months Ended March 31,
2018 2017 2018 20172019 2018 2019 2018
Service costs$0.7
 $0.8
 $0.5
 $1.5
$0.6
 $0.7
 $0.4
 $0.4
Interest costs2.2
 2.3
 0.3
 0.2
2.5
 2.1
 0.3
 0.3
Expected return on plan assets(3.5) (3.4) (0.2) (0.2)(3.3) (3.5) (0.2) (0.1)
Amortization of unrecognized prior service costs, net—
 0.1
 0.1
 0.1
0.1
 0.1
 —
 —
Amortization of net loss0.8
 0.7
 0.2
 0.1
0.2
 0.8
 0.3
 0.3
Net pension costs$0.2
 $0.5
 $0.9
 $1.7
$0.1
 $0.2
 $0.8
 $0.9
       
U.S. Pension Benefits Non-U.S. Pension Benefits
Nine Months Ended June 30, Nine Months Ended June 30,
2018 2017 2018 2017
Service costs$2.1
 $2.7
 $1.5
 $2.3
Interest costs6.5
 6.6
 0.9
 0.5
Expected return on plan assets(10.5) (10.1) (0.5) (0.5)
Amortization of unrecognized prior service costs, net0.1
 0.3
 0.1
 0.1
Amortization of net loss2.4
 2.8
 0.7
 0.8
Net pension costs$0.6
 $2.3
 $2.7
 $3.2
During 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. During 2017, we also 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 a defined contribution structure over a three-year sunset period. These changes caused immaterial remeasurements for the Plan for the affected populations.
 U.S. Pension Benefits Non-U.S. Pension Benefits
 Six Months Ended March 31, Six Months Ended March 31,
 2019 2018 2019 2018
Service costs$1.2
 $1.4
 $0.7
 $1.0
Interest costs5.1
 4.3
 0.6
 0.6
Expected return on plan assets(6.6) (7.0) (0.3) (0.3)
Amortization of unrecognized prior service costs, net0.1
 0.1
 —
 —
Amortization of net loss0.4
 1.6
 0.5
 0.5
Net pension costs$0.2
 $0.4
 $1.5
 $1.8

Postretirement Healthcare Plans — Net postretirement healthcare costs were $0.0 and $0.1not significant for the three and ninesix months ended June 30, 2018,March 31, 2019 and $0.1 and $0.3 for the same periods in the prior year.2018.

Defined Contribution Plans — Expenses related to our defined contribution plans were $3.0$2.9 and $8.6$5.7 for the three and ninesix months ended June 30, 2018,March 31, 2019 and $2.7$2.9 and $8.4$5.6 for the same periods in the prior year.
 
8.9.Income Taxes
 
TheThe effective tax rates for the three months ended June 30,March 31, 2019 and 2018 were 25.9% and 2017 were 29.6% and 32.4%(176.6)%. The decrease in the effective tax rate was primarily due to the Tax Act and was partially offset by an increase in the reserve for unrecognized tax benefits.

The effective tax rates for the nine months ended June 30, 2018 and 2017 were 60.7% and 29.7%. The highernegative effective tax rate in the periodprior year quarter primarily resulted from the nondeductible portion of the previously mentioned impairment charge recorded in the Process Equipment Group segment duringand the second quarter and anresulting loss before tax for the quarter. Additionally, the current year increase in the reserveeffective tax rate includes the effect of an unfavorable geographic mix of pretax income, partially offset by the full implementation of the Tax Cuts and Jobs Act (“Tax Act”).


The effective tax rates for unrecognizedthe six months ended March 31, 2019 and 2018 were 29.2% and 106.3%. The high effective tax benefits. Additionally,rate in the prior year primarily resulted from the nondeductible portion of the previously mentioned impairment charge recorded in the Process Equipment Group segment and the impact of the Tax Act, resulted in a higher tax rate as compared to the prior year driven by the items discussed below. Additionally, the current year decrease in the effective tax rate is partially driven by the full implementation of the Tax Act, partially offset by the effects of an unfavorable geographic mix of pretax income and an increase in reserve for uncertain tax positions.

The Tax Act was enacted on December 22, 2017. The majority of the provisions of the Tax Act were to be effective for tax years beginning after December 31, 2017 (which corresponds to Hillenbrand’s current fiscal year ending September 30, 2019). As a non-calendar year end company, certain of the provisions of the Tax Act were effective for us for the fiscal year ended September 30, 2018, while others became effective for our current fiscal year ending September 30, 2019. The Tax Act reduced the federal corporate tax rate from 35% to 21%, which became effective on January 1, 2018. The Internal Revenue Code provides that our fiscal year ended September 30, 2018 had a blended U.S. 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% applies to fiscal year ending September 30, 2019 and future years. Shortly after the Tax Act was enacted, the SEC staff issued Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act(“ (“SAB 118”), which provides guidance on accounting for the Tax Act’s impact. SAB 118 provides a measurement period, which in no case should extend beyond one year from the Tax Act enactment date, during which a company acting in good faith may complete the accounting for the impacts of the Tax Act under Accounting Standards Codification Topic 740 (“ASC 740”). Per SAB 118, the Company must reflect the income tax effects of the Tax Act in the reporting period in which the accounting under ASC 740 is complete.


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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 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%under the Tax Act to 24.5% was recognized in the rate applied to earnings. We have reflectedearnings for the tax effectfiscal year ended September 30, 2018. The reduction for this period was from 35.0% to 24.5%. The further reduction of temporary differences originating in the current period at the 24.5% federal tax rate and haveto the statutory tax rate of 21% under the Tax Act is being recognized in the deferred tax effect of such differences that will reverse in future periods atrate applied to earnings for the 21% federal tax rate.fiscal year ending September 30, 2019. In addition, we

We recorded a provisional discrete net tax expense of $14.3 related to the Tax Act in the quarter ended December 31, 2017. This net expense includes a benefit of $14.9 due to the remeasurement of our deferred tax items to reflect the impact of the corporatefederal tax rate reduction on our net deferred tax balances. While we are ableliabilities.

Furthermore, Hillenbrand is subject to make a reasonable estimateone-time transition tax on certain unrepatriated earnings of foreign subsidiaries (the “Transition Tax”) as enacted pursuant to the impact of the reduction in corporate rateTax Act. This Transition Tax was imposed on the deferred tax balances, we are continuingaccumulated earnings of foreign subsidiaries at an effective rate of 15.5% of foreign earnings attributable to analyzecash and cash equivalents, and 8% of the temporary differences that existed onresidual foreign earnings. During the date of enactment and the temporary differences that have originated since. As a result, we have recorded an additional $0.7 of tax expense from temporary differences originating in the current fiscal year related to the change in the tax rate.

These benefits were more than offset byended September 30, 2018, we recorded a provisional net expense for the Transition Tax of $28.9$24.6. During the quarter ended December 31, 2018, we completed our determination of the effect of the Transition Tax and, pursuant to SAB 118, we recognized a $0.5 increase to the Transition Tax liability, resulting in a Transition Tax liability of $25.1. Hillenbrand elected to pay the Transition Tax over eight years and made the first installment payment of $2.0 during the quarter ended December 31, 2017. We will not be able to precisely determine the amount of the2018. The remaining 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 in order to precisely compute the amount of the Transition Tax. Provisional Transition Tax of $2.3 and $26.6liability is included in Other current liabilities ($2.0) and Other long-term liabilities respectively,($21.1) in the Consolidated Balance Sheet at June 30, 2018. AsMarch 31, 2019.

In connection with the Tax Act, we evaluated our future cash deployment needs and revised our permanent reinvestment assertions. While we continue to assert permanent reinvestment for the earnings of June 30, 2018,certain of our foreign subsidiaries, we have not recordedrecognized an adjustment to the provisionaladditional $1.3 of deferred tax expense recognizedliability during the quarter ended December 31, 2017. We expect to recognize an adjustment to the provisional tax expense once2018, associated with those foreign subsidiaries where we have determined the actual tax impact, pursuant to SAB 118.no longer maintain a permanent reinvestment assertion.

TheAs noted above, the enactment dates for many of the provisions within the Tax Act arewere for tax years beginning after December 31, 2017, and as a result, certain provisions arewere not effective until our current fiscal year ending September 30, 2019. TheThese provisions that are not effective until our fiscal year 2019 and, as such, have not been incorporated into the current period tax provision, and include creating a base erosion anti-abuse tax,recognizing global intangible low-taxed income and foreign derived intangible income, eliminating U.S. federal income taxes on dividends from foreign subsidiaries, eliminating the domestic production activity deduction, limiting the amount of deductible interest expense, limiting the repeal of the domestic production activity deduction, limitations on the utilizationuse of foreign tax credits to reduce the U.S. income tax liability, and limiting the deduction of executive compensation, 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.


9.10.Earnings Per Shareper 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 balance sheet date.  At June 30,March 31, 2019 and 2018, and 2017, potential dilutive effects, representing approximately 400,000 and 600,000 shares at each period, were excluded from the computation of diluted earnings per share as the related performance criteria were not yet met, although we expect to meet various levels of criteria in the future.


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Three Months Ended
June 30,		 Nine Months Ended
June 30,		Three Months Ended
March 31,		 Six Months Ended
March 31,
2018 2017 2018 20172019 2018 2019 2018
Net income (1)$35.9
 $32.9
 $32.1
 $88.0
Net income (loss) (1)$38.0
 $(21.9) $66.3
 $(3.8)
Weighted average shares outstanding (basic - in millions)62.8
 63.4
 63.2
 63.6
62.9
 63.3
 62.9
 63.5
Effect of dilutive stock options and other unvested equity awards (in millions)0.7
 0.5
 0.7
 0.5
0.5
 —
 0.5
 —
Weighted average shares outstanding (diluted - in millions)63.5
 63.9
 63.9
 64.1
63.4
 63.3
 63.4
 63.5
              
Basic earnings per share$0.57
 $0.52
 $0.51
 $1.38
$0.60
 $(0.34) $1.05
 $(0.06)
Diluted earnings per share$0.56
 $0.52
 $0.50
 $1.37
$0.60
 $(0.34) $1.05
 $(0.06)
              
Shares with anti-dilutive effect excluded from the computation of diluted earnings per share (in millions)0.5
 0.6
 0.4
 0.8
1.1
 1.2
 0.9
 1.0
 
(1) Net income (loss) attributable to Hillenbrand
10.Shareholders’ Equity
During the nine months ended June 30, 2018, we paid approximately $39.1 of cash dividends.  We also repurchased approximately 1,377,000 shares of our common stock during the nine months ended June 30, 2018, at a total cost of approximately $60.6. In connection with our share-based compensation plans discussed further in Note 12, we also issued approximately 584,000 shares of common stock, of which approximately 448,000 shares were from treasury stock.

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
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)  
  
Balance at September 30, 2018$(41.0) $(44.1) $0.9
 $(84.2)  
  
Other comprehensive income before reclassifications 
  
  
  
  
  
 
  
  
  
  
  
Before tax amount11.3
 11.4
 3.4
 26.1
 $0.3
 $26.4
—
 (9.7) (11.0) (20.7) $0.2
 $(20.5)
Tax expense(4.1) —
 (1.2) (5.3) —
 (5.3)—
 —
 2.6
 2.6
 —
 2.6
After tax amount7.2
 11.4
 2.2
 20.8
 0.3
 21.1
—
 (9.7) (8.4) (18.1) 0.2
 (17.9)
Amounts reclassified from accumulated other comprehensive income(1)2.5
 —
 (0.1) 2.4
 —
 2.4
0.5
 —
 —
 0.5
 —
 0.5
Net current period other comprehensive income9.7
 11.4
 2.1
 23.2
 $0.3
 $23.5
Balance at June 30, 2017$(57.8) $(50.2) $1.4
 $(106.6)  
  
Net current period other comprehensive income (loss)0.5
 (9.7) (8.4) (17.6) $0.2
 $(17.4)
Balance at March 31, 2019$(40.5) $(53.8) $(7.5) $(101.8)  
  
(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, 2017$(45.3) $(36.9) $1.0
 $(81.2)  
  
Other comprehensive income before reclassifications 
  
  
  
  
  
Before tax amount—
 21.0
 0.8
 21.8
 $—
 $21.8
Tax expense—
 —
 (0.2) (0.2) —
 (0.2)
After tax amount—
 21.0
 0.6
 21.6
 —
 21.6
Amounts reclassified from accumulated other comprehensive income(1)1.4
 —
 (0.3) 1.1
 —
 1.1
Net current period other comprehensive income (loss)1.4
 21.0
 0.3
 22.7
 $—
 $22.7
Balance at March 31, 2018$(43.9) $(15.9) $1.3
 $(58.5)  
  
 (1)  Amounts are net of tax.

15
Table of Contents

 
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—
 (4.8) (0.2) (5.0) $(0.3) $(5.3)
Tax expense—
 —
 —
 —
 —
 —
After tax amount—
 (4.8) (0.2) (5.0) (0.3) (5.3)
Amounts reclassified from accumulated other comprehensive income(1)2.1
 —
 0.4
 2.5
 —
 2.5
Net current period other comprehensive income (loss)2.1
 (4.8) 0.2
 (2.5) $(0.3) $(2.8)
Balance at June 30, 2018$(43.2) $(41.7) $1.2
 $(83.7)  
  
(1)  Amounts are net of tax.
Reclassifications out of Accumulated Other Comprehensive Income include: 
 Three Months Ended June 30, 2017
 
Amortization of Pension and
Postretirement (1)
 
(Gain)/Loss on
Derivative
Instruments
  
 
Net Loss
Recognized
 
Prior Service Costs
Recognized
  Total
Affected Line in the Consolidated Statement of Operations: 
  
  
  
Net revenue$—
 $—
 $(0.2) $(0.2)
Cost of goods sold0.5
 0.1
 (0.2) 0.4
Operating expenses0.2
 —
 —
 0.2
Other income (expense), net—
 —
 —
 —
Total before tax$0.7
 $0.1
 $(0.4) $0.4
Tax expense 
  
  
 (0.1)
Total reclassifications for the period, net of tax 
  
  
 $0.3
        
 Nine Months Ended June 30, 2017
 
Amortization of Pension and
Postretirement (1)
 
(Gain)/Loss on
Derivative
Instruments
  
 
Net Loss
Recognized
 
Prior Service Costs
Recognized
  Total
Affected Line in the Consolidated Statement of Operations:       
Net revenue$—
 $—
 $—
 $—
Cost of goods sold2.4
 0.2
 (0.2) 2.4
Operating expenses1.1
 0.1
 —
 1.2
Other income (expense), net—
 —
 0.1
 0.1
Total before tax$3.5
 $0.3
 $(0.1) $3.7
Tax expense 
  
  
 (1.3)
Total reclassifications for the period, net of tax 
  
  
 $2.4



16
Table of Contents
 Three Months Ended March 31, 2019
 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 sold—
 —
 (0.1) (0.1)
Operating expenses—
 —
 —
 —
Other income (expense), net0.4
 —
 —
 0.4
Total before tax$0.4
 $—
 $—
 $0.4
Tax expense      (0.1)
Total reclassifications for the period, net of tax      $0.3

Three Months Ended June 30, 2018Six Months Ended March 31, 2019
Amortization of Pension and
Postretirement (1)		 (Gain)/Loss on  Amortization of Pension and
Postretirement (1)		 (Gain)/Loss on  
Net Loss
Recognized		 Prior Service Costs
Recognized		 Derivative
Instruments		 TotalNet Loss
Recognized		 Prior Service Costs
Recognized		 Derivative
Instruments		 Total
Affected Line in the Consolidated Statement of Operations: 
  
  
  
 
  
  
  
Net revenue$—
 $—
 $0.9
 $0.9
$—
 $—
 $0.2
 $0.2
Cost of goods sold0.6
 —
 —
 0.6
—
 —
 (0.2) (0.2)
Operating expenses0.3
 0.1
 —
 0.4
—
 —
 —
 —
Other income (expense), net—
 —
 —
 —
0.7
 —
 —
 0.7
Total before tax$0.9
 $0.1
 $0.9
 $1.9
$0.7
 $—
 $—
 $0.7
Tax expense      (0.5)      (0.2)
Total reclassifications for the period, net of tax      $1.4
      $0.5
       
Nine Months Ended June 30, 2018
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$—
 $—
 $0.5
 $0.5
Cost of goods sold1.9
 0.1
 —
 2.0
Operating expenses1.0
 —
 —
 1.0
Other income (expense), net—
 —
 —
 —
Total before tax$2.9
 $0.1
 $0.5
 $3.5
Tax expense      (1.0)
Total reclassifications for the period, net of tax      $2.5

(1) These accumulated other comprehensive income components are included in the computation of net periodic pension cost (see Note 7)8).


 Three Months Ended March 31, 2018
 
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$—
 $—
 $—
 $—
Cost of goods sold—
 —
 —
 —
Operating expenses—
 —
 —
 —
Other income (expense), net0.9
 —
 —
 0.9
Total before tax$0.9
 $—
 $—
 $0.9
Tax expense 
  
  
 (0.2)
Total reclassifications for the period, net of tax 
  
  
 $0.7

 Six Months Ended March 31, 2018
 
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 sold—
 —
 —
 —
Operating expenses—
 —
 —
 —
Other income (expense), net2.0
 —
 —
 2.0
Total before tax$2.0
 $—
 $(0.4) $1.6
Tax expense      (0.5)
Total reclassifications for the period, net of tax      $1.1

(1) These accumulated other comprehensive income components are included in the computation of net periodic pension cost (see Note 8).

12.Share-Based Compensation
 
Three Months Ended
June 30,		 Nine Months Ended
June 30,		Three Months Ended
March 31,		 Six Months Ended
March 31,
2018 2017 2018 20172019 2018 2019 2018
Share-based compensation costs$2.6
 $2.4
 $8.8
 $8.1
$3.9
 $3.9
 $5.8
 $6.2
Less impact of income tax benefit0.7
 0.9
 2.3
 2.9
0.9
 1.0
 1.3
 1.6
Share-based compensation costs, net of tax$1.9
 $1.5
 $6.5
 $5.2
$3.0
 $2.9
 $4.5
 $4.6
 
We have share-based compensation with long-term performance-based metrics that are contingent upon our relative total shareholder return and the creation of shareholder value. Relative total shareholder return is determined by comparing our total shareholder return during a three-year period to the respective total shareholder returns of companies in a designated performance peer group. 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. 
 

17
Table of Contents


During the ninesix months ended June 30, 2018,March 31, 2019, we made the following grants:

 
 
Number of
Units
Stock options479,991431,726
Time-based stock awards31,62123,921
Performance-based stock awards (maximum that can be earned)230,890334,335
 
Stock options granted during fiscal 20182019 had a weighted-average exercise price of $45.94$41.31 and a weighted-average grant date fair value of $11.28.$10.15.  Our time-based stock awards and performance-based stock awards granted during fiscal 20182019 had weighted-average grant date fair values of $45.62$41.29 and $53.35.$41.77.  Included in the performance-based stock awards granted during 2018fiscal 2019 are 111,126181,994 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
June 30,		 Nine Months Ended
June 30,		Three Months Ended
March 31,		 Six Months Ended
March 31,
2018 2017 2018 20172019 2018 2019 2018
Equity in net income of affiliates$(0.1) $(1.2) $(0.1) $(0.2)
Foreign currency exchange (loss) gain, net(0.1) 0.5
 (0.9) (0.9)
Equity in net income (loss) of affiliates$—
 $—
 $(0.1) $—
Foreign currency exchange gain (loss), net0.1
 (0.5) 0.5
 (0.8)
Other, net(0.6) (0.4) (1.4) (1.9)—
 (0.6) 0.2
 (0.7)
Other income (expense), net$(0.8) $(1.1) $(2.4) $(3.0)$0.1
 $(1.1) $0.6
 $(1.5)
  
14.Commitments and Contingencies
 
Like most companies, we are involved from time to time in claims, lawsuits, and government proceedings relating to our 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 believe 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 are 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 covered 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.  For auto, workers compensation, and general liability, outside insurance companies and third-party claims administrators generally assist in establishing individual claim reserves. An independent outside actuary often provides estimates of ultimate projected losses, including incurred but not reported claims, which are used to establish reserves for losses.  For all other types of claims, reserves are established based upon advice from internal and external counsel and historical settlement information for claims when such amounts are considered probable of payment.

The recorded amounts represent our best estimate of the lossescosts we will incur in relation to such exposures, but it is possible that actual lossescosts will differ from those estimates.

Aldrees Litigation
 
In April 2016, Hamad M. Aldrees & Partners Holding Co. for Industry and Mining (Closed Joint Company) (“Aldrees”) filed a lawsuit against Company subsidiary Rotex Europe Limited (“Rotex”) in the High Court of Justice, Queen’s Bench Division, Technology and Construction Court (the “High Court”) in London, England (the “Aldrees Litigation”). The Aldrees Litigation arises as a result ofresulted from an agreement made in 2010 for Rotex to supply, among other things, five mineral separating machines. Aldrees has alleged breach of contract and misrepresentation by Rotex and iswas seeking damages of approximately £38.5.
 

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Table of Contents

The Company is defending this matter vigorously.  The trial concluded in the third quarter butof fiscal 2018 and a result has not been announced, andfinal decision was released by the timingHigh Court in March 2019 awarding a fraction of the claimed damages to Aldrees. This result of the trial is unknown. The Company doesdid not believe that the outcome of this lawsuit will have a material adverse effectimpact on the Company’s consolidated results of operations, financial statements. If Aldrees prevails at trial, however, the outcome could be materially adverse to the Company’s financial statements for the particular period, depending, in part, upon the operating resultsposition, or cash flows for such period.flows.


15.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:
 
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      
Carrying Value at
June 30, 2018		 Fair Value at June 30, 2018
Using Inputs Considered as:		Value at
March 31,		 Fair Value at March 31, 2019
Using Inputs Considered as:
 Level 1 Level 2 Level 32019 Level 1 Level 2 Level 3
Assets: 
  
  
  
 
  
  
  
Cash and cash equivalents$71.1
 $71.1
 $—
 $—
$58.6
 $58.6
 $—
 $—
Investments in rabbi trust4.1
 4.1
 —
 —
4.0
 4.0
 —
 —
Derivative instruments3.0
 —
 3.0
 —
2.2
 —
 2.2
 —
Indefinite-lived assets4.0
 —
 —
 4.0
              
Liabilities: 
  
  
  
 
  
  
  
$150 senior unsecured notes149.6
 156.2
 —
 —
149.8
 154.0
 —
 —
Revolving credit facility175.6
 —
 175.6
 —
112.6
 —
 112.6
 —
$100 Series A Notes100.0
 —
 100.0
 —
100.0
 —
 105.4
 —
Derivative instruments2.1
 —
 2.1
 —
12.4
 —
 12.4
 —
 
The fair value of the amounts outstanding under the Facilityrevolving credit facility approximated carrying value at June 30, 2018.March 31, 2019.  The fair values of the Facilityrevolving credit facility and Series A Notes arewere estimated based on internally developed models, using current market interest rate data for similar issues, as there is no active market for our Facilityrevolving credit facility or Series A Notes.

Derivative instruments

The Company has hedging programs in place to manage its currency exposures. The objectives of our hedging programs are to mitigate exposures in gross margin and non-functional-currency-denominated assets and liabilities. Under these programs, we use derivative financial instruments to manage the economic impact of fluctuations in currency exchange rates. These include foreign currency exchange forward contracts, which generally have terms up to 24 months. Additionally, the Company has derivative instruments in place to hedge the interest rate associated with $150.0 of ten-year, fixed-rate financing we expect to issue in the future. These derivative instruments terminate in December 2020, if not settled earlier in connection with the underlying expected future financing. Our objectives in using these derivatives are to reduce volatility in future interest expense and to manage our exposure to interest rate movements.

The fair values of the Company’s derivative instruments arewere based upon pricing models using inputs derived from third-party pricing services or observable market data such as currency spot and forward rates.  These values are periodically validated by comparing to third-party broker quotes.  The aggregate notional value of these foreign currency derivatives was $190.1$283.3 at June 30, 2018.March 31, 2019. The derivatives are included at fair value in Other current assets, Other assets, Other current liabilities, and Other long-term liabilities on the Consolidated Balance Sheet.

The indefinite-lived assets are trade names for which an impairment was recorded during the quarter ended March 31, 2018. See Note 5 for further information.Sheets.
 

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Table of Contents


16.
Segment and Geographical Information
 
Three Months Ended June 30, Nine Months Ended June 30,Three Months Ended March 31, Six Months Ended March 31,
2018 2017 2018 20172019 2018 2019 2018
Net revenue 
  
  
  
 
  
    
Process Equipment Group$316.7
 $258.9
 $880.8
 $724.6
$326.7
 $299.8
 $608.9
 $564.1
Batesville129.3
 137.0
 414.6
 422.7
137.9
 152.4
 266.0
 285.3
Total$446.0
 $395.9
 $1,295.4
 $1,147.3
$464.6
 $452.2
 $874.9
 $849.4
              
Adjusted EBITDA        
  
    
Process Equipment Group$58.2
 $50.3
 $153.7
 $120.3
$55.5
 $49.9
 $101.7
 $95.5
Batesville25.6
 33.5
 92.1
 107.2
31.6
 38.6
 58.3
 66.5
Corporate(12.4) (11.5) (32.9) (28.5)(12.2) (12.2) (21.0) (20.5)
              
Net revenue (2)(1)
        
  
    
United States$226.7
 $224.5
 $691.7
 $653.1
$232.4
 $246.2
 $447.2
 $465.0
Germany130.7
 103.9
 370.9
 304.7
141.6
 129.8
 252.9
 240.2
All other foreign business units88.6
 67.5
 232.8
 189.5
90.6
 76.2
 174.8
 144.2
Total$446.0
 $395.9
 $1,295.4
 $1,147.3
$464.6
 $452.2
 $874.9
 $849.4
(1) We attribute revenue to a geography based upon the location of the business unit that consummates the external sale.
(2) In 2017, the Company corrected its disclosure of net revenue by geography. The effect of this adjustment for the three months ended June 30, 2017 was to decrease Germany net revenue by $10.1, from $114.0 as previously disclosed, to $103.9, and to increase the All other foreign business units net revenue by the same amount, from $57.4 as previously disclosed, to $67.5. The effect of this adjustment for the nine months ended June 30, 2017 was to decrease Germany net revenue by $29.5, from $334.2 as previously disclosed, to $304.7, and to increase the All other foreign business units net revenue by the same amount, from $160.0 as previously disclosed, to $189.5. 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.

 June 30,
2018		 September 30,
2017
Total assets assigned 
  
Process Equipment Group$1,705.9
 $1,722.2
Batesville191.3
 203.4
Corporate36.4
 30.9
Total$1,933.6
 $1,956.5
    
Tangible long-lived assets, net 
  
United States$79.0
 $84.4
Germany38.2
 39.0
All other foreign business units24.6
 27.0
Total$141.8
 $150.4


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Table of Contents
 March 31,
2019		 September 30,
2018
Total assets assigned 
  
Process Equipment Group$1,667.9
 $1,638.8
Batesville187.0
 191.8
Corporate30.6
 34.0
Total$1,885.5
 $1,864.6
    
Tangible long-lived assets, net 
  
United States$74.3
 $76.6
Germany38.6
 40.7
All other foreign business units24.7
 24.7
Total$137.6
 $142.0

The following schedule reconciles segment adjusted EBITDA to consolidated net income.
income (loss).
Three Months Ended
June 30,		 Nine Months Ended
June 30,		Three Months Ended
March 31,		 Six Months Ended
March 31,
2018 2017 2018 20172019 2018 2019 2018
Adjusted EBITDA:              
Process Equipment Group$58.2
 $50.3
 $153.7
 $120.3
$55.5
 $49.9
 $101.7
 $95.5
Batesville25.6
 33.5
 92.1
 107.2
31.6
 38.6
 58.3
 66.5
Corporate(12.4) (11.5) (32.9) (28.5)(12.2) (12.2) (21.0) (20.5)
Less: 
  
  
  
 
  
    
Interest income(0.3) (0.2) (1.1) (0.5)(0.2) (0.3) (0.4) (0.8)
Interest expense5.5
 6.5
 17.8
 18.9
5.4
 6.0
 10.9
 12.3
Income tax expense15.2
 16.6
 52.5
 38.2
13.8
 13.6
 28.3
 37.3
Depreciation and amortization14.2
 13.5
 42.0
 42.1
15.1
 14.0
 29.2
 27.8
Impairment charge—
 —
 63.4
 —
—
 63.4
 —
 63.4
Business acquisition, development, and integration0.1
 0.4
 2.6
 1.0
0.5
 0.2
 1.1
 2.5
Restructuring and restructuring related0.5
 0.9
 1.7
 8.8
0.7
 0.7
 1.2
 1.2
Consolidated net income$36.2
 $34.6
 $34.0
 $90.5
Inventory step-up0.1
 —
 0.2
 —
Consolidated net income (loss)$39.5
 $(21.3) $68.5
 $(2.2)
 

21
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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.


22
Table of Contents

Condensed Consolidating Statements of Income
Three Months Ended June 30, 2018 Three Months Ended June 30, 2017Three Months Ended March 31, 2019 Three Months Ended March 31, 2018
Parent Guarantors Non-
Guarantors		 Eliminations Consolidated Parent Guarantors Non-
Guarantors		 Eliminations ConsolidatedParent Guarantors 
Non-
Guarantors
 Eliminations Consolidated Parent Guarantors 
Non-
Guarantors
 Eliminations Consolidated
Net revenue$—
 $232.7
 $273.2
 $(59.9) $446.0
 $—
 $225.4
 $226.6
 $(56.1) $395.9
$—
 $230.6
 $294.1
 $(60.1) $464.6
 $—
 $250.9
 $256.4
 $(55.1) $452.2
Cost of goods sold—
 125.9
 189.9
 (33.5) 282.3
 —
 115.2
 158.7
 (30.4) 243.5
—
 126.8
 210.0
 (33.1) 303.7
 —
 129.7
 181.0
 (27.1) 283.6
Gross profit—
 106.8
 83.3
 (26.4) 163.7
 —
 110.2
 67.9
 (25.7) 152.4
—
 103.8
 84.1
 (27.0) 160.9
 —
 121.2
 75.4
 (28.0) 168.6
Operating expenses13.6
 62.9
 48.3
 (26.4) 98.4
 11.3
 58.7
 42.0
 (25.7) 86.3
13.7
 60.9
 46.1
 (27.0) 93.7
 13.6
 64.8
 47.9
 (28.0) 98.3
Amortization expense—
 3.3
 4.3
 —
 7.6
 —
 3.3
 4.0
 —
 7.3
—
 3.4
 5.2
 —
 8.6
 —
 3.2
 4.3
 —
 7.5
Impairment charge—
 —
 —
 —
 —
 —
 —
 —
 —
 —
—
 —
 —
 —
 —
 —
 63.4
 —
 —
 63.4
Interest expense4.6
 —
 0.9
 —
 5.5
 5.6
 —
 0.9
 —
 6.5
4.7
 0.1
 0.6
 —
 5.4
 5.3
 —
 0.7
 —
 6.0
Other (expense) income, net—
 (1.1) 0.3
 —
 (0.8) (0.2) (2.0) 1.1
 —
 (1.1)
Equity in net income of subsidiaries34.8
 3.6
 —
 (38.4) —
 45.3
 2.2
 —
 (47.5) —
Income before income taxes16.6
 43.1
 30.1
 (38.4) 51.4
 28.2
 48.4
 22.1
 (47.5) 51.2
Other income (expense), net(0.2) (0.1) 0.4
 —
 0.1
 (0.1) (0.2) (0.8) —
 (1.1)
Equity in net income (loss) of subsidiaries51.4
 3.5
 —
 (54.9) —
 (5.1) 1.8
 —
 3.3
 —
Income (loss) before income taxes32.8
 42.8
 32.6
 (54.9) 53.3
 (24.1) (8.6) 21.7
 3.3
 (7.7)
Income tax expense (benefit)(19.3) 9.9
 24.6
 —
 15.2
 (4.7) 16.3
 5.0
 —
 16.6
(5.2) 10.6
 8.4
 —
 13.8
 (2.2) 9.4
 6.4
 —
 13.6
Consolidated net income35.9
 33.2
 5.5
 (38.4) 36.2
 32.9
 32.1
 17.1
 (47.5) 34.6
Consolidated net income (loss)38.0
 32.2
 24.2
 (54.9) 39.5
 (21.9) (18.0) 15.3
 3.3
 (21.3)
Less: Net income attributable to                                      
noncontrolling interests—
 —
 0.3
 —
 0.3
 —
 —
 1.7
 —
 1.7
—
 —
 1.5
 —
 1.5
 —
 —
 0.6
 —
 0.6
Net income (1)$35.9
 $33.2
 $5.2
 $(38.4) $35.9
 $32.9
 $32.1
 $15.4
 $(47.5) $32.9
Consolidated comprehensive (loss) income$10.7
 $33.8
 $(20.4) $(13.4) $10.7
 $59.3
 $32.5
 $43.3
 $(74.0) $61.1
Net income (loss) (1)$38.0
 $32.2
 $22.7
 $(54.9) $38.0
 $(21.9) $(18.0) $14.7
 $3.3
 $(21.9)
Consolidated comprehensive income (loss)$30.5
 $32.4
 $19.6
 $(50.5) $32.0
 $(5.9) $(17.6) $30.1
 $(12.0) $(5.4)
Less: Comprehensive income attributable                                      
to noncontrolling interests—
 —
 —
 —
 —
 —
 —
 1.8
 —
 1.8
—
 —
 1.5
 —
 1.5
 —
 —
 0.5
 —
 0.5
Comprehensive income (2)$10.7
 $33.8
 $(20.4) $(13.4) $10.7
 $59.3
 $32.5
 $41.5
 $(74.0) $59.3
Comprehensive income (loss) (2)$30.5
 $32.4
 $18.1
 $(50.5) $30.5
 $(5.9) $(17.6) $29.6
 $(12.0) $(5.9)


23
Table of Contents

Nine Months Ended June 30, 2018 Nine Months Ended June 30, 2017Six Months Ended March 31, 2019 Six Months Ended March 31, 2018
Parent Guarantors Non-
Guarantors		 Eliminations Consolidated Parent Guarantors Non-
Guarantors		 Eliminations ConsolidatedParent Guarantors 
Non-
Guarantors
 Eliminations Consolidated Parent Guarantors 
Non-
Guarantors
 Eliminations Consolidated
Net revenue$—
 $701.8
 $758.7
 $(165.1) $1,295.4
 $—
 $656.8
 $647.0
 $(156.5) $1,147.3
$—
 $446.7
 $541.9
 $(113.7) $874.9
 $—
 $469.1
 $485.5
 $(105.2) $849.4
Cost of goods sold—
 369.8
 531.7
 (84.8) 816.7
 —
 341.6
 460.9
 (82.2) 720.3
—
 242.6
 384.4
 (60.0) 567.0
 —
 244.8
 341.1
 (51.3) 534.6
Gross profit—
 332.0
 227.0
 (80.3) 478.7
 —
 315.2
 186.1
 (74.3) 427.0
—
 204.1
 157.5
 (53.7) 307.9
 —
 224.3
 144.4
 (53.9) 314.8
Operating expenses38.4
 188.8
 139.0
 (80.3) 285.9
 32.3
 174.5
 122.2
 (74.3) 254.7
23.9
 122.3
 91.9
 (53.7) 184.4
 24.5
 126.4
 90.4
 (53.9) 187.4
Amortization expense—
 10.0
 12.7
 —
 22.7
 —
 10.1
 11.6
 —
 21.7
—
 6.7
 9.7
 —
 16.4
 —
 6.7
 8.4
 —
 15.1
Impairment charge—
 63.4
 —
 —
 63.4
 —
 —
 —
 —
 —
—

—

—

—

—
 —
 63.4
 —
 —
 63.4
Interest expense15.7
 —
 2.1
 —
 17.8
 16.4
 —
 2.5
 —
 18.9
9.2
 0.1
 1.6
 —
 10.9
 11.1
 —
 1.2
 —
 12.3
Other (expense) income, net(0.1) (2.2) (0.1) —
 (2.4) (0.6) (2.4) —
 —
 (3.0)
Equity in net income of subsidiaries67.1
 6.8
 —
 (73.9) —
 116.8
 5.9
 —
 (122.7) —
Income before income taxes12.9
 74.4
 73.1
 (73.9) 86.5
 67.5
 134.1
 49.8
 (122.7) 128.7
Other income (expense), net(0.5) (0.1) 1.2
 —
 0.6
 (0.4) 0.3
 (1.4) —
 (1.5)
Equity in net income (loss) of subsidiaries93.4
 5.7
 —
 (99.1) —
 32.3
 3.2
 —
 (35.5) —
Income (loss) before income taxes59.8
 80.6
 55.5
 (99.1) 96.8
 (3.7) 31.3
 43.0
 (35.5) 35.1
Income tax expense (benefit)(19.2) 34.8
 36.9
 —
 52.5
 (20.5) 47.0
 11.7
 —
 38.2
(6.5) 20.5
 14.3
 —
 28.3
 0.1
 24.9
 12.3
 —
 37.3
Consolidated net income32.1
 39.6
 36.2
 (73.9) 34.0
 88.0
 87.1

38.1
 (122.7) 90.5
Consolidated net income (loss)66.3
 60.1
 41.2
 (99.1) 68.5
 (3.8) 6.4
 30.7
 (35.5) (2.2)
Less: Net income attributable to                                      
noncontrolling interests—
 —
 1.9
 —
 1.9
 —
 —
 2.5
 —
 2.5
—
 —
 2.2
 —
 2.2
 —
 —
 1.6
 —
 1.6
Net income (1)$32.1
 $39.6
 $34.3
 $(73.9) $32.1
 $88.0
 $87.1
 $35.6
 $(122.7) $88.0
Consolidated comprehensive income$29.6
 $41.1
 $31.0
 $(70.5) $31.2
 $111.2
 $92.2
 $51.4
 $(140.8) $114.0
Net income (loss) (1)$66.3
 $60.1
 $39.0
 $(99.1) $66.3
 $(3.8) $6.4
 $29.1
 $(35.5) $(3.8)
Consolidated comprehensive income (loss)$48.7
 $60.2
 $31.4
 $(89.2) $51.1
 $18.9
 $7.3
 $51.4
 $(57.1) $20.5
Less: Comprehensive income attributable                                      
to noncontrolling interests—
 —
 1.6
 —
 1.6
 —
 —
 2.8
 —
 2.8
—
 —
 2.4
 —
 2.4
 —
 —
 1.6
 —
 1.6
Comprehensive income (2)$29.6
 $41.1
 $29.4
 $(70.5) $29.6
 $111.2
 $92.2
 $48.6
 $(140.8) $111.2
Comprehensive income (loss) (2)$48.7
 $60.2
 $29.0
 $(89.2) $48.7
 $18.9
 $7.3
 $49.8
 $(57.1) $18.9

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



24


Table of Contents












Condensed Consolidating Balance Sheets
June 30, 2018 September 30, 2017March 31, 2019 September 30, 2018
Parent Guarantors 
Non-
Guarantors
 Eliminations Consolidated Parent Guarantors 
Non-
Guarantors
 Eliminations ConsolidatedParent Guarantors 
Non-
Guarantors
 Eliminations Consolidated Parent Guarantors 
Non-
Guarantors
 Eliminations Consolidated
Cash and cash equivalents$0.3
 $5.8
 $65.0
 $—
 $71.1
 $0.1
 $4.9
 $61.0
 $—
 $66.0
$0.2
 $5.3
 $53.1
 $—
 $58.6
 $1.1
 $5.8
 $49.1
 $—
 $56.0
Trade receivables, net—
 111.5
 80.7
 —
 192.2
 —
 114.5
 91.6
 —
 206.1
—
 105.7
 93.8
 —
 199.5
 —
 124.5
 94.0
 —
 218.5
Receivables from long-term                   
manufacturing contracts—
 6.4
 171.6
 —
 178.0
 —
 8.5
 116.7
 —
 125.2
Receivables from long-term manufacturing contracts—
 8.4
 156.4
 —
 164.8
 —
 5.3
 115.0
 —
 120.3
Inventories—
 79.5
 105.1
 (2.9) 181.7
 —
 68.2
 85.9
 (2.5) 151.6
—
 82.9
 103.0
 (2.9) 183.0
 —
 76.7
 98.6
 (2.8) 172.5
Prepaid expenses3.2
 8.6
 17.8
 —
 29.6
 2.1
 7.6
 18.5
 —
 28.2
Prepaid expense2.9
 7.7
 13.5
 —
 24.1
 2.7
 7.0
 15.5
 —
 25.2
Intercompany receivables—
 1,078.1
 79.0
 (1,157.1) —
 —
 1,050.4
 93.9
 (1,144.3) —
—
 1,130.9
 49.1
 (1,180.0) —
 —
 1,131.1
 79.1
 (1,210.2) —
Other current assets0.4
 1.8
 15.1
 (0.4) 16.9
 0.2
 1.6
 14.4
 0.3
 16.5
—
 1.9
 18.1
 0.4
 20.4
 —
 3.2
 14.6
 0.3
 18.1
Total current assets3.9
 1,291.7
 534.3
 (1,160.4) 669.5
 2.4
 1,255.7
 482.0
 (1,146.5) 593.6
3.1
 1,342.8
 487.0
 (1,182.5) 650.4
 3.8
 1,353.6
 465.9
 (1,212.7) 610.6
Property, plant and equipment, net4.0
 61.7
 76.1
 —
 141.8
 4.7
 64.5
 81.2
 —
 150.4
3.6
 58.9
 75.1
 —
 137.6
 3.8
 60.2
 78.0
 —
 142.0
Intangible assets, net3.4
 199.5
 293.2
 —
 496.1
 3.6
 211.3
 309.0
 —
 523.9
2.8
 188.6
 285.9
 —
 477.3
 3.2
 196.0
 288.1
 —
 487.3
Goodwill—
 225.0
 358.2
 —
 583.2
 —
 283.9
 363.6
 —
 647.5
—
 225.0
 358.0
 —
 583.0
 —
 225.0
 356.9
 —
 581.9
Investment in consolidated subsidiaries2,206.0
 653.8
 —
 (2,859.8) —
 2,298.0
 664.1
 —
 (2,962.1) —
2,290.8
 668.0
 —
 (2,958.8) —
 2,263.1
 653.9
 —
 (2,917.0) —
Other assets15.8
 31.2
 1.2
 (5.2) 43.0
 20.2
 29.0
 4.4
 (12.5) 41.1
27.1
 26.5
 1.9
 (18.3) 37.2
 15.7
 28.2
 5.9
 (7.0) 42.8
Total Assets$2,233.1
 $2,462.9
 $1,263.0
 $(4,025.4) $1,933.6
 $2,328.9
 $2,508.5
 $1,240.2
 $(4,121.1) $1,956.5
$2,327.4
 $2,509.8
 $1,207.9
 $(4,159.6) $1,885.5
 $2,289.6
 $2,516.9
 $1,194.8
 $(4,136.7) $1,864.6
                                      
Trade accounts payable$0.9
 $59.7
 $112.8
 $(0.3) $173.1
 $1.0
 $36.7
 $120.0
 $0.3
 $158.0
$0.2
 $62.9
 $144.6
 $—
 $207.7
 $—
 $62.4
 $134.4
 $—
 $196.8
Liabilities from long-term manufacturing                   
contracts and advances—
 17.6
 158.9
 —
 176.5
 —
 26.2
 106.1
 —
 132.3
Current portion of long-term debt—
 —
 —
 —
 —
 18.0
 —
 0.8
 —
 18.8
Liabilities from long-term manufacturing contracts and advances—
 24.6
 100.5
 —
 125.1
 —
 26.6
 99.3
 —
 125.9
Accrued compensation5.0
 19.4
 42.4
 —
 66.8
 7.6
 17.9
 41.4
 —
 66.9
3.9
 13.6
 38.0
 —
 55.5
 7.2
 20.1
 44.6
 —
 71.9
Intercompany payables1,157.5
 2.5
 —
 (1,160.0) —
 1,142.8
 4.0
 —
 (1,146.8) —
1,176.6
 6.3
 —
 (1,182.9) —
 1,206.2
 6.1
 —
 (1,212.3) —
Other current liabilities19.6
 41.6
 71.9
 —
 133.1
 14.0
 42.2
 79.3
 0.2
 135.7
22.8
 47.4
 58.3
 (11.0) 117.5
 19.4
 38.9
 78.1
 0.7
 137.1
Total current liabilities1,183.0
 140.8
 386.0
 (1,160.3) 549.5
 1,183.4
 127.0
 347.6
 (1,146.3) 511.7
1,203.5
 154.8
 341.4
 (1,193.9) 505.8
 1,232.8
 154.1
 356.4
 (1,211.6) 531.7
Long-term debt322.3
 —
 102.1
 —
 424.4
 392.0
 —
 54.9
 —
 446.9
333.6
 —
 28.1
 —
 361.7
 300.2
 —
 44.4
 —
 344.6
Accrued pension and                   
postretirement healthcare0.8
 32.1
 90.2
 —
 123.1
 0.8
 33.3
 95.5
 —
 129.6
Accrued pension and postretirement healthcare0.7
 29.1
 84.8
 —
 114.6
 0.7
 29.8
 90.0
 —
 120.5
Deferred income taxes—
 22.6
 49.3
 (5.3) 66.6
 —
 27.5
 60.9
 (12.7) 75.7
—
 26.6
 59.7
 (6.9) 79.4
 0.7
 22.9
 60.9
 (8.1) 76.4
Other long-term liabilities30.7
 17.9
 9.9
 —
 58.5
 1.3
 15.3
 10.1
 —
 26.7
32.8
 12.5
 8.6
 —
 53.9
 24.1
 14.3
 8.9
 —
 47.3
Total Liabilities1,536.8
 213.4
 637.5
 (1,165.6) 1,222.1
 1,577.5
 203.1
 569.0
 (1,159.0) 1,190.6
1,570.6
 223.0
 522.6
 (1,200.8) 1,115.4
 1,558.5
 221.1
 560.6
 (1,219.7) 1,120.5
Hillenbrand Shareholders’ Equity696.3
 2,249.5
 610.3
 (2,859.8) 696.3
 751.4
 2,305.4
 656.7
 (2,962.1) 751.4
Total Hillenbrand Shareholders’ Equity756.8
 2,286.8
 672.0
 (2,958.8) 756.8
 731.1
 2,295.8
 621.2
 (2,917.0) 731.1
Noncontrolling interests—
 —
 15.2
 —
 15.2
 —
 —
 14.5
 —
 14.5
—
 —
 13.3
 —
 13.3
 —
 —
 13.0
 —
 13.0
Total Shareholders’ Equity696.3
 2,249.5
 625.5
 (2,859.8) 711.5
 751.4
 2,305.4
 671.2
 (2,962.1) 765.9
Total Equity756.8
 2,286.8
 685.3
 (2,958.8) 770.1
 731.1
 2,295.8
 634.2
 (2,917.0) 744.1
Total Liabilities and Equity$2,233.1
 $2,462.9
 $1,263.0
 $(4,025.4) $1,933.6
 $2,328.9
 $2,508.5
 $1,240.2
 $(4,121.1) $1,956.5
$2,327.4
 $2,509.8
 $1,207.9
 $(4,159.6) $1,885.5
 $2,289.6
 $2,516.9
 $1,194.8
 $(4,136.7) $1,864.6



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Condensed Consolidating Statements of Cash Flow
 
 Nine Months Ended June 30, 2018 Nine Months Ended June 30, 2017
 Parent Guarantors 
Non-
Guarantors
 Eliminations Consolidated Parent Guarantors 
Non-
Guarantors
 Eliminations Consolidated
Net cash provided by (used in)
     operating activities
$186.0
 $126.6
 $(32.0) $(124.3) $156.3
 $33.2
 $129.0
 $70.2
 $(128.7) $103.7
                    
Investing activities: 
  
  
  
  
  
  
  
  
  
Capital expenditures(1.5) (7.5) (7.3) —
 (16.3) (0.5) (7.2) (6.5) —
 (14.2)
Proceeds from sales of property, plant, and
     equipment
—
 —
 0.4
 —
 0.4
 —
 1.9
 0.4
 —
 2.3
Other, net—
 0.1
 0.1
 —
 0.2
 2.7
 (0.4) (2.7) —
 (0.4)
Net cash provided by (used in) investing
     activities
(1.5) (7.4) (6.8) —
 (15.7) 2.2
 (5.7) (8.8) —
 (12.3)
                    
Financing activities: 
  
  
  
  
  
  
  
  
  
Repayments on term loan(148.5) —
 —
 —
 (148.5) (10.1) —
 —
 —
 (10.1)
Proceeds from revolving credit facilities,
     net of financing costs
530.6
 —
 415.9
 —
 946.5
 233.0
 —
 488.2
 —
 721.2
Repayments on revolving credit facilities(472.9) —
 (364.3) —
 (837.2) (207.0) —
 (518.5) —
 (725.5)
Payment of dividends - intercompany—
 (118.3) (6.0) 124.3
 —
 —
 (122.6) (6.1) 128.7
 —
Payment of dividends on common stock(39.1) —
 —
 —
 (39.1) (39.0) —
 —
 —
 (39.0)
Repurchases of common stock(60.6) —
 —
 —
 (60.6) (28.0) —
 —
 —
 (28.0)
Net proceeds on stock plans6.2
 —
 —
 —
 6.2
 11.4
 —
 —
 —
 11.4
Other, net—
 —
 (1.8) —
 (1.8) —
 —
 (2.5) —
 (2.5)
Net cash provided by (used in)
     financing activities
(184.3) (118.3) 43.8
 124.3
 (134.5) (39.7) (122.6) (38.9) 128.7
 (72.5)
                    
Effect of exchange rates on cash and
     cash equivalents
—
 —
 (1.0) —
 (1.0) —
 —
 0.6
 —
 0.6
                    
Net cash flow0.2
 0.9
 4.0
 —
 5.1
 (4.3) 0.7
 23.1
 —
 19.5
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$0.3
 $5.8
 $65.0
 $—
 $71.1
 $0.1
 $6.3
 $65.1
 $—
 $71.5

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 Six Months Ended March 31, 2019 Six Months Ended March 31, 2018
 Parent Guarantors 
Non-
Guarantors
 Eliminations Consolidated Parent Guarantors 
Non-
Guarantors
 Eliminations Consolidated
Net cash provided by (used in)
     operating activities
$(4.7) $103.0
 $54.6
 $(106.4) $46.5
 $143.6
 $125.0
 $(82.8) $(124.3) $61.5
                    
Investing activities: 
  
  
  
  
  
  
  
  
  
Capital expenditures(0.4) (3.6) (4.3) —
 (8.3) (1.4) (5.0) (4.2) —
 (10.6)
Acquisition of business, net of cash
     acquired
—
 —
 (26.2) —
 (26.2) —
 —
 —
 —
 —
Other, net—
 0.1
 —
 —
 0.1
 —
 0.1
 —
 —
 0.1
Net cash used in investing activities(0.4) (3.5) (30.5) —
 (34.4) (1.4) (4.9) (4.2) —
 (10.5)
                    
Financing activities: 
  
  
  
  
  
  
  
  
  
Repayments on term loan—
 —
 —
 —
 —
 (148.5) —
 —
 —
 (148.5)
Proceeds from revolving credit facilities,
     net of financing costs
164.0
 —
 178.0
 —
 342.0
 445.7
 —
 256.1
 —
 701.8
Repayments on revolving credit facilities(130.8) 

 (193.0) —
 (323.8) (379.2) —
 (163.6) —
 (542.8)
Payment of dividends - intercompany—
 (100.0) (6.4) 106.4
 —
 —
 (118.3) (6.0) 124.3
 —
Payment of dividends on common stock(26.2) —
 —
 —
 (26.2) (26.2) —
 —
 —
 (26.2)
Repurchases of common stock—
 —
 —
 —
 —
 (38.9) —
 —
 —
 (38.9)
Proceeds from stock option exercises and
     other
1.4
 —
 —
 —
 1.4
 9.3
 —
 —
 —
 9.3
Payments for employee taxes on net
     settlement equity awards
(4.2) —
 —
 

 (4.2) (4.1) —
 —
 —
 (4.1)
Other, net—
 —
 (0.5) —
 (0.5) —
 —
 (1.0) —
 (1.0)
Net cash (used in) provided by
     financing activities
4.2
 (100.0) (21.9) 106.4
 (11.3) (141.9) (118.3) 85.5
 124.3
 (50.4)
                    
Effect of exchange rates on cash and
     cash equivalents
—
 —
 2.1
 —
 2.1
 —
 —
 1.7
 —
 1.7
                    
Net cash flow(0.9) (0.5) 4.3
 —
 2.9
 0.3
 1.8
 0.2
 —
 2.3
Cash, cash equivalents and restricted cash at
     beginning of period
1.1
 5.8
 49.6
 —
 56.5
 0.1
 5.0
 61.6
 —
 66.7
Cash, cash equivalents and restricted cash at
     end of period
$0.2
 $5.3
 $53.9
 $—
 $59.4
 $0.4
 $6.8
 $61.8
 $—
 $69.0

18.Restructuring
 
The following schedule details the restructuring charges by segment and the classification of those charges on the income statement.
Three Months Ended June 30, 2018 Three Months Ended June 30, 2017Three Months Ended March 31, 2019 Three Months Ended March 31, 2018
Cost of goods sold Operating expenses Total Cost of goods sold Operating expenses TotalCost of goods sold Operating expenses Total Cost of goods sold Operating expenses Total
Process Equipment Group$0.3
 $0.2
 $0.5
 $—
 $0.2
 $0.2
$0.2
 $—
 $0.2
 $(0.1) $—
 $(0.1)
Batesville—
 —
 —
 (0.1) —
 (0.1)0.1
 0.4
 0.5
 —
 0.2
 0.2
Corporate—
 (0.1) (0.1) —
 —
 —
—
 —
 —
 —
 0.7
 0.7
Total$0.3
 $0.1
 $0.4
 $(0.1) $0.2
 $0.1
$0.3
 $0.4
 $0.7
 $(0.1) $0.9
 $0.8
           
Nine Months Ended June 30, 2018 Nine Months Ended June 30, 2017
Cost of goods sold Operating expenses Total Cost of goods sold Operating expenses Total
Process Equipment Group$0.2
 $0.4
 $0.6
 $—
 $0.5
 $0.5
Batesville—
 0.2
 0.2
 6.3
 —
 6.3
Corporate—
 0.5
 0.5
 —
 2.1
 2.1
Total$0.2
 $1.1
 $1.3
 $6.3
 $2.6
 $8.9

 Six Months Ended March 31, 2019 Six Months Ended March 31, 2018
 Cost of goods sold Operating expenses Total Cost of goods sold Operating expenses Total
Process Equipment Group$0.4
 $0.1
 $0.5
 $(0.1) $0.2
 $0.1
Batesville0.2
 0.5
 0.7
 —
 0.2
 0.2
Corporate—
 —
 —
 —
 0.6
 0.6
Total$0.6
 $0.6
 $1.2
 $(0.1) $1.0
 $0.9

The charges related primarily to the closure of a Batesville plant, corporate functional restructuring, and severance costs at the Process Equipment Group.costs. At June 30, 2018, $1.1March 31, 2019, $0.7 of restructuring costs were accrued and expected to be paid over the next twelve months.in fiscal 2019.


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Item 2.        MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
 
FORWARD-LOOKING STATEMENTS AND FACTORS THAT MAY AFFECT FUTURE RESULTS
 
Throughout this Form 10-Q, we make a number of “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.  As the words imply, these are statements about future plans, objectives, beliefs, and expectations 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 the Process Equipment Group 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:
 
intend believe plan expect may goal would
become pursue estimate will forecast continue could
target encourage promise improve progress potential should
 
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, and our actual results 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 the impact of the Tax Act on the Company’s financial position, results of operations, and cash flows. 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, 2017,13, 2018, and in Item 1A of Part II of this Form 10-Q.  We assume no obligation to update or revise any forward-looking statements.
 
OPERATING PERFORMANCE MEASURES
 
The following discussion compares our results for the three and ninesix months ended June 30, 2018,March 31, 2019, to the same periods in fiscal year 2017.2018.  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 the Process Equipment Group, Batesville, and Corporate.  These financial results are prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”).
 
We also provide certain non-GAAP operating performance measures.  These non-GAAP measures are referred to as “adjusted” measures and exclude impairment charges, expenses associated with business acquisition, development, and integration, and restructuring and restructuring related charges.charges, and inventory step-up.  The related income tax for all of these items is also excluded.  The measures also exclude the non-recurring tax benefits and expenses related to the Tax Act. 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 (“

(“adjusted EBITDA”). A part of Hillenbrand’s strategy is to selectively acquire companies that we believe can benefit from the

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Hillenbrand Operating Model (“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.
 
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 our Process Equipment Group competes. Order backlogBacklog represents the amount of consolidated revenue that we expect to realize on contracts awarded related to the Process Equipment Group. For purposes of calculating backlog, 100% of estimated revenue attributable to consolidated subsidiaries is included. Backlog includes expected revenue from large systems and equipment, as well as replacement parts, components, and service. The length of time that projects remain in backlog can span from days for replacement parts or service to approximately 18 to 36 months for larger system sales. Backlog includes expected revenue from the remaining portion of firm orders not yet completed, as well as 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 revenue associated with the Process Equipment Group 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 revenue, it does not include projects and 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 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, 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 below where the impact is not significant.
 
See page 3839 for reconciliation of adjusted EBITDA to consolidated net income, the most directly comparable GAAP measure. 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 and ninesix months ended June 30, 2018,March 31, 2019, there were no significant changes to our critical accounting estimates, as outlined in our Annual Report on Form 10-K for 2017,2018, except as described below.

2017 Tax Cuts and Jobs Act

— On December 22, 2017, the Tax Act was enacted. While certainThe majority of the provisions of the Tax Act arewere to be effective for tax years beginning after December 31, 2017 (which corresponds to Hillenbrand’s current fiscal year ending 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 isbecame effective on January 1, 2018. As a non-calendar year end company, certain of the provisions of the Tax Act were effective for the fiscal year ended September 30, 2018, while others became effective for us for our current fiscal year ending September 30, 2019. The Internal Revenue Code provides that our fiscal year endingended September 30, 2018 havehad a blended U.S. 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 applyapplies to fiscal year ending September 30, 2019 and future years.

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 thatDuring the fiscal year ended September 30, 2018, we recorded a provisional net expense for the Transition Tax of $24.6. During the quarter ended December 31, 2018, we completed our determination of the Transition Tax and, pursuant to SAB 118, we recognized a $0.5 increase to the Transition Tax liability, resulting in a final Transition tax liability of $25.1. Hillenbrand will electelected to pay the Transition Tax over eight years. We have recorded tax expense based on an estimateyears and made the first installment payment of the annual effective rate taking into account the reduced corporate tax rate for the year. Additionally, during the period ended December 31, 2017, we 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 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 that have originated since. Furthermore, we will not be able to precisely determine the amount of the Transition Tax until the end of

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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.  As of June 30, 2018, we have not recorded an adjustment to the provisional tax expense recognized$2.0 during the quarter ended December 31, 2017.2018. In connection with the Tax Act, we evaluated our future cash deployment needs and revised our permanent reinvestment assertions. While we continue to assert permanent reinvestment for the earnings of certain of our foreign subsidiaries, we recognized an additional $1.3 of deferred tax liability during the quarter ended December 31, 2018, associated with those foreign subsidiaries where we no longer maintain a permanent reinvestment assertion.

Revenue Recognition — Net revenue includes gross revenue less sales discounts, customer rebates, sales incentives, and product returns, all of which require us to make estimates for the portion of these allowances that have yet to be credited or paid to our customers. We expectestimate these allowances using the expected value method, which is based upon historical rates and projections of customer purchases toward contractual rebate thresholds.
Performance Obligations & Contract Estimates

The Process Equipment Group designs, engineers, manufactures, markets, and services differentiated process and material handling equipment and systems for a wide variety of industries. A large portion of our revenue across the Process Equipment Group is derived from manufactured equipment, which may be standard, customized to recognize an adjustmentmeet customer specifications, or turnkey.

Our contracts with customers in the Process Equipment Group segment often include multiple performance obligations. Performance obligations are promises in a contract to transfer a distinct good or service to the provisional tax expense oncecustomer, and are the basis for determining how revenue is recognized. For instance, a contract may include obligations to deliver equipment, installation services, and spare parts. We frequently have contracts for which the equipment and the installation services, as well as highly engineered or specialized spare parts, are all considered a single performance obligation, as in these instances the installation services and/or spare parts are not separately identifiable. However, due to the varying nature of equipment and contracts across the Process Equipment Group, we also have determinedcontracts where the actual tax impact, pursuantinstallation services and/or spare parts are deemed to SAB 118.be separately identifiable and are therefore deemed to be distinct performance obligations.

Asset Impairment Determinations

We have updated our critical accounting estimate for Asset Impairment DeterminationsA contract’s transaction price is allocated to reflecteach distinct performance obligation based on its respective stand-alone selling price, and recognized as revenue when, or as, the adoption of ASU 2017-04.

Goodwill and other intangible assets with indefinite lives, primarily trade names, areperformance obligation is satisfied. When a distinct performance obligation is not amortized; rather, they are tested for impairment at least annually and uponsold separately, the occurrence of certain triggering events or substantive changes in circumstances that indicate that the fair value may be impaired.
Impairment of goodwill is tested at the reporting unit level.  A reporting unit is an operating segment or one level below an operating segment.  For the purpose of the goodwill impairment test, the Company can elect to perform a quantitative or qualitative analysis. If the qualitative test is elected, qualitative factors are assessed to determine whether it is more likely than not that the fair values of its reporting units are less than the respective carrying values of those reporting units. Such factors we consider in a qualitative analysis include, but are not limited to, macroeconomic conditions, industry and market considerations, cost factors, Company-specific events, events affecting the reporting unit, and the overall financial performance of the reporting unit. If after performing the qualitative analysis, the Company determines that it is more likely than not that the fair value of a reporting until is less than its carrying amount, then the Company must perform the quantitative goodwill impairment test.

If we elect to perform or are required to perform a quantitative analysis, we compare the carrying amount of the reporting unit’s net assets, including goodwill, to the fair value of the reporting unit.  If the fair value exceeds the carrying value, no further evaluationstandalone selling price is required and no impairment lossestimated considering all reasonably available information. When an obligation is recognized.  If the carrying amount exceeds the fair value, an impairment charge is recognized for the difference between carrying amount and fair value, not to exceed the original amount of goodwill.
In determining the estimated fair valuedistinct, as defined in ASC606, we allocate a portion of the reporting units when performing a quantitative analysis, we consider both the market approach and the income approach.  Weighting is equally attributed to both the market and income approaches in arriving at the fair value of the reporting units.
Under the market approach, we utilize the guideline company method, which involves calculating valuation multiples based on operating data from comparable publicly traded companies.  Multiples derived from these companies provide an indication of how much a knowledgeable investor in the marketplace would be willing to pay for a company.  These multiples are then appliedcontract price to the operating data for our reporting units to arrive at an indication of value. obligation and recognize it separately from the other performance obligations.

Under the income approach, the fair valueThe timing of the reporting unit is based on the present value of estimated future cash flows utilizing a market-based weighted-average cost of capital determined separatelyrevenue recognition for each reporting unit.
To determine the reasonableness of the calculated fair values of our reporting units, the Company reviews the assumptions described below to ensure that neither the market approach nor the income approach yields significantly different valuations.  We selected these valuation approaches because we believe the combination of these approaches, along with our best judgment regarding underlying assumptions and estimates, provides us with the best estimate of fair value of our reporting units.  We believe these valuation approaches are appropriate for the industry and widely accepted by investors.
Determining the fair value of a reporting unit requires us to make significant judgments, estimates, and assumptions.  While we believe that the estimates and assumptions underlying our valuation methodology are reasonable, these estimates and assumptions could have a significant impact on whether an impairment chargeperformance obligation is recognized and also on the magnitude of any such charge.  The results of an impairment analysis are as ofeither over time or at a point in time. There isWe recognize revenue over time for contracts that have an enforceable right to collect payment for performance completed to-date upon customer cancellation and provide one or more of the following: (i) service over a period of time, (ii) highly customized equipment, or (iii) parts which are highly engineered and have no assurance that actual future earningsalternative use. Revenue generated from standard equipment and highly customized equipment or cash flows of our reporting units will not decline significantly from our projections.  We will monitor any changesparts contracts without an enforceable right to our assumptions and will evaluate goodwill as required or otherwise deemed warranted during future periods.
The key assumptionspayment for the market and income approaches we use to determine fair value of our reporting units are updated at least annually.  Those assumptions and estimates include market data and market multiples (7.2-14.5 times adjusted EBITDA), discount rates (7.6-12.5%), and terminal growth rates (0.0-3.0%),performance completed to-date, as well as future levelsnon-specialized parts sales and sales of death care products, is recognized at a point in time.

We use the input method of “cost-to-cost” to recognize revenue growth, operating margins, depreciation, amortization,over time. Accounting for these contracts involves management judgment in estimating total contract revenue and working capital requirements,cost. Contract revenues are largely determined by negotiated contract prices and quantities, modified by our assumptions regarding contract options, change orders, and incentive and award provisions associated with technical performance clauses. Contract costs are incurred over longer periods of time and, accordingly, the estimation of these costs requires judgment. We measure progress based on costs incurred to date relative to total estimated cost at completion. Incurred cost represents work performed, which corresponds with, and we believe thereby best depicts, the transfer of control to the customer. Contract costs include labor, material, and certain overhead expenses. Cost estimates are based uponon various assumptions to project the Company’s strategic plan. 

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Hillenbrand’s strategic plan is updated as partfuture events, including labor productivity and availability, the complexity of its annual planning process and is reviewed and approved by managementthe work to be performed, the cost of materials, and the Boardperformance of Directors.  The strategic plan may besubcontractors. Significant factors that influence these estimates include inflationary trends, technical and schedule risk, internal and subcontractor performance trends, business volume assumptions, asset utilization, and anticipated labor agreements. Revenue and cost estimates are regularly monitored and revised as necessary based on changes in market conditionscircumstances. Anticipated losses on long-term contracts are recognized immediately when such losses become evident. We maintain financial controls over the customer qualification, contract pricing, and estimation processes to reduce the risk of contract losses.

Stand-alone service revenue is recognized either over time proportionately over the period of the underlying contract or other changes in the reporting units. The discount rate assumption is basedas invoiced, depending on the overall after-tax rate of return required by a market participant whose weighted-average cost of capital includes both equity and debt, including a risk premium.
Although there are always changes in assumptions to reflect changing business and market conditions, our overall valuation methodology and the types of assumptions we use have remained consistent.  While we use the best available information to prepare the cash flow and discount rate assumptions, actual future cash flows or market conditions could differ significantly resulting in future impairment charges related to recorded goodwill balances.
Similar to goodwill, the Company can elect to perform the impairment test for indefinite-lived intangibles other than goodwill (primarily trade names) using a qualitative analysis, considering similar factors as outlined in the goodwill discussion in order to determine if it is more likely than not that the fair valuesterms of the trade names are less thanarrangement. Stand-alone service revenue is not material to the respective carrying values.  IfCompany.

For the Process Equipment Group and Batesville segment products where revenue is recognized at a point in time, we elect to perform or are required to perform a quantitative analysis, the test consists of a comparisonrecognize it when our customers take control of the fair valueasset. We define this as the point in time at which the customer has the capability of the indefinite-lived intangible asset to the carrying valuefull beneficial use of the asset as ofintended per the impairment testing date.  We estimate the fair value of indefinite-lived intangibles using the relief-from-royalty method, which we believe is an appropriate and widely used valuation technique for such assets.  The fair value derived from the relief-from-royalty method is measured as the discounted cash flow savings realized from owning such trade names and not being required to pay a royalty for their use.contract.


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-leadingleading 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®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.industry in North America.

We strive 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 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 platforms with 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 June 30, Nine Months Ended June 30,Three Months Ended March 31, Six Months Ended March 31,
2018 2017 2018 20172019 2018 2019 2018
Amount 
% of Net
Revenue
 Amount 
% of Net
Revenue
 Amount 
% of Net
Revenue
 Amount 
% of Net
Revenue
Amount 
% of Net
Revenue
 Amount 
% of Net
Revenue
 Amount 
% of Net
Revenue
 Amount 
% of Net
Revenue
Net revenue$446.0
 100.0 $395.9
 100.0 $1,295.4
 100.0 $1,147.3
 100.0$464.6
 100.0 $452.2
 100.0
 $874.9
 100.0 $849.4
 100.0
Gross profit163.7
 36.7 152.4
 38.5 478.7
 37.0 427.0
 37.2160.9
 34.6 168.6
 37.3
 307.9
 35.2 314.8
 37.1
Operating expenses98.4
 22.1 86.3
 21.8 285.9
 22.1 254.7
 22.293.7
 20.2 98.3
 21.7
 184.4
 21.1 187.4
 22.1
Amortization expense7.6
 1.7 7.3
 1.8 22.7
 1.8 21.7
 1.98.6
 1.9 7.5
 1.7
 16.4
 1.9 15.1
 1.8
Impairment charge��
 — —
 — 63.4
 4.9 —
 ——
 — 63.4
 14.0
 —
 — 63.4
 7.5
Interest expense5.5
 1.2 6.5
 1.6 17.8
 1.4 18.9
 1.65.4
 1.2 6.0
 1.3
 10.9
 1.2 12.3
 1.4
Other (expense) income, net(0.8) 0.2 (1.1) 0.3 (2.4) 0.2 (3.0) 0.3
Other income (expense), net0.1
 — (1.1) 0.2
 0.6
 0.1 (1.5) 0.2
Income taxes15.2
 3.4 16.6
 4.2 52.5
 4.1 38.2
 3.313.8
 3.0 13.6
 3.0
 28.3
 3.2 37.3
 4.4
Net income (1)35.9
 8.0 32.9
 8.3 32.1
 2.5 88.0
 7.7
Net income (loss) (1)38.0
 8.2 (21.9) (4.8) 66.3
 7.6 (3.8) (0.4)
 
 
(1) Net income (loss) attributable to Hillenbrand.

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Three Months Ended June 30, 2018March 31, 2019 Compared to Three Months Ended June 30, 2017March 31, 2018
 
Net revenue increased $50.1 (13%$12.4 (3%), which included favorableunfavorable foreign currency impact (3%(4%).
 
•The Process Equipment Group’s net revenue increased $57.8 (22%$26.9 (9%), primarily due to higher volume (17%(11%)., the acquisition of BM&M, and pricing. Foreign currency impact increaseddecreased net revenue by 5%.

•Batesville’s net revenue decreased $7.7 (6%$14.5 (10%), primarily due to a decrease in volume (3%(9%), the impact of a multi-year contract renewal with a key customer that included an upfront incentive (2%), and.  Lower volume was primarily driven by a decrease in average selling price (1%).burial sales resulting from what we estimate to be a decrease in North American burials driven by lower estimated deaths and the increased rate at which families opted for cremation.

Gross profit increased $11.3 (7%decreased $7.7 (5%), which included favorableunfavorable foreign currency impact (3%). Gross profit margin decreased 180270 basis points to 36.7%34.6%. 
 
•
The Process Equipment Group’s gross profit increased $18.4 (18%$2.3 (2%), primarily due to higher volume. Foreign currency impact increased gross profitvolume, pricing and productivity improvements, and the acquisition of BM&M, partially offset by 4%. Gross profit margin decreased 130 basis pointsunfavorable mix due to 37.7%, primarily driven by thean increased proportion of lower margin, large system projectssystems sales in plastics.
plastics and cost inflation. Foreign currency impact decreased gross profit by 5%. Gross profit margin decreased 240 basis points to 34.7% in 2019, primarily due to an increased proportion of lower margin, large systems sales in plastics and cost inflation, partially offset by pricing and productivity improvements.

The Process Equipment Group’s gross profit included restructuring and restructuring related charges of $0.3$0.2 and inventory step-up charges of $0.1 in 2018.fiscal 2019. Excluding these charges, adjusted gross profit increased $18.7 (19%$2.7 (2%), which included favorable foreign currency impact (4%). Adjusted and adjusted gross profit margin decreased 120220 basis points to 37.8%, primarily driven by the increased proportion of lower margin, large system projects in plastics.
34.8%.
•
Batesville’s gross profit decreased $7.1 (14%$10.0 (17%) and gross profit margin decreased 330 basis points to 34.3%34.4%.  The decrease in gross profit and gross profit margin was primarily due to inflationthe decrease in volume. Inflation in commodities fuel,and wages and benefits, the impact of the key customer contract renewal, the decline in volume, and supply chain inefficiencies. These items were partiallywas offset by productivity gains, including benefits resulting from the manufacturing footprint reduction in the prior year.improvements.

Batesville’s gross profit included restructuring and restructuring related charges of $0.3($0.1 in 2017.fiscal 2019). Excluding these charges, adjusted gross profit decreased $7.4 (14%$9.9 (17%) and adjusted gross profit margin decreased 350320 basis points to 34.3%34.5%.

Operating expenses increased $12.1 (14%decreased $4.6 (5%), primarily due to an increase in growth investments, litigation expenses, and variable compensation, as well as cost inflation, partially offset by a decrease in restructuring and restructuring related charges and business acquisition, development, and integration costs.. Foreign currency impact increaseddecreased operating expenses by 3%.

Operating The remaining decrease was driven primarily by productivity improvements and lower litigation expenses, as a percentage of net revenue increased 30partially offset by cost inflation. Our operating expense-to-revenue ratio improved by 150 basis points to 22.1%.20.2% in 2019.  Operating expenses included the following items:
 
Three Months Ended June 30,Three Months Ended March 31,
2018 20172019 2018
Business acquisition, development, and integration costs$0.1
 $0.4
$0.5
 $0.2
Restructuring and restructuring related charges0.2
 0.5
0.4
 0.8
 
On an adjusted basis, which excludesexcluded business acquisition, development, and integration costs and restructuring and restructuring related charges, operating expenses increased $12.7 (15%), which included unfavorable foreign currency impact (3%decreased $4.5 (5%). Adjusted operating expenses as a percentage of net revenue increased 40improved 150 basis points in 20182019 to 22.0%20.0%.

Amortization expenseincreased increased $0.3,$1.1 (15%) primarily due to unfavorable foreign currency impactamortization on the acquired intangibles of $0.3.BM&M.

Interest expensedecreased $1.0,$0.6, primarily due to lower average borrowingsborrowings.

Impairment charge decreased $63.4 due to the goodwill and a reductiontrade name impairments recorded in 2018. See Note 6 of Part I of this Form 10-Q for further information on the Facility fee.impairment charges.

Other income (expense) income,, net was $0.8$0.1 of other expenseincome in fiscal 2018,2019, compared to $1.1 of other expense in fiscal 2017.2018. The decrease in expensechange was driven primarily by higher equity earnings from affiliates, partially offset by an increase indecreased foreign currency exchange loss.losses.
 

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The effective tax rate was 29.6%25.9% in fiscal 2018,2019 compared to 32.4%(176.6)% in fiscal 2017.2018. The negative effective tax rate during the three months ended March 31, 2018 primarily resulted from the nondeductible portion of the impairment charge recorded in the Process Equipment Group segment and the resulting loss before tax for the quarter. The Tax Act resulted in a reducedreduction of the domestic statutory tax rate (21% versusfrom 35%) as compared to the same quarter in the prior year. 21%. The Internal Revenue Code provides that our fiscal year endingended September 30, 2018 hashad a domestic 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 domestic statutory tax rate of 21% will applyapplies to the fiscal year ending September 30, 2019 and future years. The reduction in the effective tax rate resulting from the Tax Act was partially offset by an increase in the reserve for unrecognized tax benefits.

OurExcluding the tax effect of all adjustments discussed above, as well as the impairment charge, our adjusted effective income tax rate which excludes the impact of the Transition Tax and the revaluation of the deferred tax balances as a result of the Tax Act, was 29.2%25.9% in fiscal 2018,2019 compared to 32.4%25.4% in fiscal 2017.2018. The reductionincrease in the adjusted effective tax rate resulting from the Tax Act was primarily due to an unfavorable geographic mix of pretax income, partially offset by an increase in the reserve for unrecognized tax benefits. We expect 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 for equipment 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 by the Internal Revenue Service, and actions the Company may take as a resultfull implementation of the Tax Act.

NineSix Months Ended June 30, 2018March 31, 2019 Compared to NineSix Months Ended June 30, 2017March 31, 2018
 
Net revenue increased $148.1 (13%$25.5 (3%), which included favorableunfavorable foreign currency impact (4%(3%).
 
•The Process Equipment Group’s net revenue increased $156.2 (22%$44.8 (8%), primarily due to higher volume (14%(9%)., pricing, and the acquisition of BM&M. Foreign currency impact increaseddecreased net revenue by 6%4%.

•Batesville’s net revenue decreased $8.1 (2%$19.3 (7%), primarily due to a decrease in volume (1%(7%), Lower volume was primarily driven by a decrease in burial sales resulting from what we estimate to be a decrease in North American burials driven by lower estimated deaths and the impact of a multi-year contract renewal with a key customer that included an upfront incentive (1%).  increased rate at which families opted for cremation.  

Gross profit increased $51.7 (12%decreased $6.9 (2%), which included favorableunfavorable foreign currency impact (4%(2%). Gross profit margin decreased 20190 basis points to 37.0%35.2%. 
 
•
The Process Equipment Group’s gross profit increased $57.9 (21%$6.4 (3%), primarily due to higher volume. Foreign currency impact increased gross profitvolume, pricing and productivity improvements and the acquisition of BM&M, partially offset by 6%. Gross profit margin decreased 10 basis pointsunfavorable mix due to 37.3% in 2018, primarily driven by thean increased proportion of lower margin, large systems projectssales in plastics and cost inflation. Foreign currency impact decreased gross profit by 4%. Gross profit margin decreased 160 basis points to 35.6% in 2019, primarily due to an increased proportion of lower margin, large systems sales in plastics and cost inflation, partially offset by pricing and productivity and pricing improvements.

The Process Equipment Group’s gross profit included restructuring and restructuring related charges of $0.4 and inventory step-up charges of $0.2 in 2018.fiscal 2019. Excluding these charges, adjusted gross profit increased $58.1 (21%$7.0 (3%), which included favorable foreign currency impact (6%). Adjusted and adjusted gross profit margin remained flat at 37.4% compareddecreased 160 basis points to prior year.35.6%.

•
Batesville’s gross profit decreased $6.2 (4%$13.3 (13%) and gross profit margin decreased 70230 basis points to 36.2%34.4%.  The decrease in gross profit and gross profit margin was primarily due to the decrease in volume and inflation in commodities fuel,and wages, and benefits, the decline in volume, and the impact of the key customer contract renewal, along with supply chain inefficiencies. These items were partially offset by productivity gains, including benefits resulting from the manufacturing footprint reduction in the prior year.improvements.

Batesville’s grossprofit included restructuring and restructuring related charges ($0.10.2 in 2018fiscal 2019 and $7.0$0.1 in 2017)fiscal 2018). Excluding these charges, adjusted gross profit decreased $13.1 (8%(13%) and adjusted gross profit margin decreased 240220 basis points to 36.2%34.5%.

Operating expenses increased $31.2 (12%decreased $3.0 (2%), primarily due to an increase in variable compensation,. Foreign currency impact decreased operating expenses by 2%. In addition, productivity improvements, lower litigation expenses, and growth investments, as well as cost inflation and highera decrease in business acquisition, development, and integration costs, partiallywere more than offset by a decreasecost inflation, an increase in restructuringstrategic project investments, and restructuring related charges. Foreign currency impact increasedthe acquisition of BM&M. Our operating expensesexpense-to-revenue ratio improved by 4%.


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Operating expenses as a percentage of net revenue improved 10100 basis points to 22.1%.21.1% in 2019.  Operating expenses included the following items:
 
Nine Months Ended June 30,Six Months Ended March 31,
2018 20172019 2018
Business acquisition, development, and integration costs$2.6
 $1.0
$1.1
 $2.5
Restructuring and restructuring related charges1.4
 3.2
0.6
 1.2
 
On an adjusted basis, which excludesexcluded business acquisition, development, and integration costs and restructuring and restructuring related charges, operating expenses increased $31.4 (13%decreased $1.0 (1%), which included unfavorable foreign. Foreign currency impact (4%)decreased operating expenses by 2%. Productivity improvements and lower litigation expenses were more than offset by cost inflation, an increase in strategic project investments, and the acquisition of BM&M. Adjusted operating expenses as a percentage of net revenue remained flat at 21.8% comparedimproved 70 basis points in 2019 to the same period in the prior year.20.9%.

Amortization expense increased $1.0,$1.3 (9%) primarily due to unfavorable foreign currency impactamortization on the acquired intangibles of $1.0.BM&M.

Interest expense decreased $1.4, primarily due to lower average borrowings.

Impairment charge increaseddecreased $63.4 due to the goodwill and trade name impairments recorded in the second quarter of 2018. See Note 56 of Part I of this Form 10-Q for further information on the impairment charges.
Interest expensedecreased$1.1, primarily due to lower average borrowings and a reduction in the Facility fee.

Other income (expense) income,, net was $2.4$0.6 of other income in 2019, compared to $1.5 of other expense in fiscal 2018, compared to $3.0 of other expense in fiscal 2017.2018. The decrease in expensechange was driven primarily driven by higher equity earnings from affiliates.decreased foreign currency exchange losses.
 
The effective tax rate was 60.7%29.2% in fiscal 20182019 compared to 29.7%106.3% in fiscal 2017.2018. The higherhigh effective tax rate induring the periodsix months ended March 31, 2018 primarily resultsresulted from the nondeductible portion of the impairment charge recorded in the Process Equipment Group segment. Additionally,segment and the resulting loss before tax and the impact of the Tax Act, resulted in a higher tax rate as compared to the prior year driven by the items discussed below. Additionally, the current year decrease in the effective tax rate is partially driven by the full implementation of the Tax Act, partially offset by an unfavorable geographic mix of pretax income and an increase in reserve for uncertain tax positions.

The Tax Act resulted in a reducedreduction of the domestic statutory rate (21% versusfrom 35%) to 21%. The Internal Revenue Code provides that our fiscal year endingended September 30, 2018 hashad a domestic 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 domestic statutory tax rate of 21% will applyapplies to the fiscal year ending September 30, 2019 and future years. TheDuring the quarter ended December 31, 2017, we recognized a provisional net tax expense of $14.3, pursuant to SAB 118, for 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 that have originated since. As a result, we have recorded an additional $0.7 of temporary difference originating in the current fiscal year related to the change in the tax rate.

The favorable adjustments related to the revaluation of our domestic net deferred tax liability, were more than offset by the provisionalas well as a recognition of the estimated Transition Tax liability. During the quarter ended December 31, 2018, we recognized an estimated $28.9 tax expense for the Transition Tax. We will not be ableadditional $0.5 increase 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 including cumulative foreign earnings must be verified, 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.liability.

Our adjusted effective income tax rate whichwas 27.3% in fiscal 2019 compared to 23.9% in fiscal 2018. The adjusted effective income tax rate excludes the impact of the impairment charge, Transition Tax ($0.5 in fiscal 2019 and $28.9 in fiscal 2018), the revaluation of the deferred tax balances ($14.9 benefit in fiscal 2018), and accrued deferred tax liability associated with the permanent reinvestment assertions ($1.3 in fiscal 2019). The adjusted effective income tax rate also excludes the tax effect of the previously mentioned impairment charge, as a resultwell as the tax impact of the adjustments discussed above. Excluding these items, the increase in the adjusted effective tax rate was primarily due to an unfavorable geographic mix of pretax income and an increase in reserve for uncertain tax positions, partially offset by the full implementation of the Tax Act, was 25.8% in fiscal 2018, compared to 30.3% in fiscal 2017. The reduction in the effective tax rate resulting from the Tax Act was partially offset by an increase in the reserve for unrecognized tax benefits.Act.

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OPERATIONS REVIEW — PROCESS EQUIPMENT GROUP
 
Three Months Ended June 30, Nine Months Ended June 30,Three Months Ended March 31, Six Months Ended March 31,
2018 2017 2018 20172019 2018 2019 2018
Amount 
% of Net
Revenue
 Amount 
% of Net
Revenue
 Amount 
% of Net
Revenue
 Amount 
% of Net
Revenue
Amount 
% of Net
Revenue
 Amount 
% of Net
Revenue
 Amount 
% of Net
Revenue
 Amount 
% of Net
Revenue
Net revenue$316.7
 100.0 $258.9
 100.0 $880.8
 100.0 $724.6
 100.0$326.7
 100.0 $299.8
 100.0 $608.9
 100.0 $564.1
 100.0
Gross profit119.3
 37.7 100.9
 39.0 328.8
 37.3 270.9
 37.4113.4
 34.7 111.1
 37.1 216.5
 35.6 210.1
 37.2
Operating expenses64.8
 20.5 54.9
 21.2 184.5
 20.9 160.6
 22.261.8
 18.9 63.4
 21.1 123.4
 20.3 119.6
 21.2
Amortization expense7.6
 2.4 7.2
 2.8 22.7
 2.6 21.5
 3.08.6
 2.6 7.5
 2.5 16.4
 2.7 15.1
 2.7
Impairment charge—
 — —
 — 63.4
 7.2 —
 ——
 — 63.4
 21.1 —
 — 63.4
 11.2
 
Three Months Ended June 30, 2018March 31, 2019 Compared to Three Months Ended June 30, 2017March 31, 2018
 
Net revenueincreased $57.8 (22%$26.9 (9%), primarily due to higher volume (17%(11%), largely driven by increased demand for large systems in plastics, projects, partsin addition to the acquisition of BM&M and service, and screening and separating equipment (including equipment that processes proppants for hydraulic fracturing). Foreign currency impact increased net revenue by 5%. Order backlog increased $176.6 (29%) from $606.2 on June 30, 2017, to $782.8 on June 30, 2018, primarily due to orders for polyolefin projects in the plastics industry, partially offset by lower orders in screening and separating equipment. Foreign currency impact increased order backlog by 1%.

On a sequential basis, order backlog increased $30.1 (4%) to $782.8 at June 30, 2018, up from $752.7 at March 31, 2018. This increase was primarily driven by orders in the plastics industry,pricing, partially offset by a decreasedecline in separation equipment orders related to processing proppants.
Gross profit increased $18.4 (18%), primarily due to higher volume largely driven by increased demand for plastics projects, parts and service, and screening and separating equipment. Foreign currency impact increased gross profit by 4%. Gross profit margin decreased 130 basis points to 37.7% in 2018, primarily driven by the increased proportion of lower margin, large system projects in plastics.
The Process Equipment Group’s gross profit included restructuring and restructuring related charges of $0.3 in 2018. Excluding these charges, adjusted gross profit increased $18.7 (19%), which included favorable foreign currency impact (4%). Adjusted gross profit margin decreased 120 basis points to 37.8%, primarily driven by the increased proportion of lower margin, large system projects in plastics.
Operating expenses increased $9.9 (18%), primarily due to an increase in variable compensation and litigation expenses, and cost inflation. Foreign currency impact increased operating expenses by 4%. Operating expenses as a percentage of net revenue improved 70 basis points to 20.5% in 2018.

Operating expenses included restructuring and restructuring related charges ($0.2 in 2018 and $0.4 in 2017) and business acquisition, development, and integration costs ($0.3 in 2017).  Excluding these items, adjusted operating expenses increased $10.4 (19%), which included unfavorable foreign currency impact (4%). Adjusted operating expenses as a percentage of net revenue improved 50 basis points to 20.4% in 2018.

Amortization expense increased $0.4, primarily due to unfavorable foreign currency impact of $0.3.

Nine Months Ended June 30, 2018 Compared to Nine Months Ended June 30, 2017
Net revenue increased $156.2 (22%), primarily due to higher volume (14%) largely driven by increased demand for screening and separating equipment (including equipment that processes proppants for hydraulic fracturing), plastics projects, and parts and service. Foreign currency impact increaseddecreased net revenue by 6%5%. Order backlog increased $207.8 (28%) from $752.7 on March 31, 2018, to $960.5 on March 31, 2019. The increase in backlog is primarily driven by an increase in orders for projects in the plastics industry. Foreign currency impact decreased order backlog by 9%.

On a sequential basis, order backlog increased $14.1 (1%) to $960.5 at March 31, 2019, up from $946.4 at December 31, 2018.
 
Gross profit increased $57.9 (21%$2.3 (2%), primarily due to higher volume, largely drivenpricing and productivity improvements, and the acquisition of BM&M, partially offset by increased demand for screening and separating equipment (including equipment that processes proppants for hydraulic fracturing), plastics projects, and parts and service. Foreign currency impact increased gross profit by 6%. Gross profit margin decreased 10 basis pointsunfavorable mix due to 37.3% in 2018, primarily driven by thean increased proportion of lower margin, large systems projectssales in plastics and cost inflation. Foreign currency impact decreased gross profit by 5%. Gross profit margin decreased 240 basis points to 34.7% in 2019, primarily due to an increased proportion of lower margin, large systems sales in plastics and cost inflation, partially offset by pricing and productivity and pricing improvements.

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The Process Equipment Group’s gross profit included restructuring and restructuring related charges of $0.2 and inventory step-up charges of $0.1 in 2018.fiscal 2019. Excluding these charges, adjusted gross profit increased $58.1 (21%$2.7 (2%) and adjusted gross profit margin decreased 220 basis points to 34.8%.

Operating expenses decreased $1.6 (3%), which includedprimarily due to favorable foreign currency impact (6%(4%) and lower litigation expenses, partially offset by cost inflation, an increase in variable compensation, and the acquisition of BM&M. Operating expenses as a percentage of net revenue improved by 220 basis points to 18.9% in 2019.

Operating expenses included business acquisition, development, and integration costs ($0.1 in 2019). AdjustedExcluding these items, adjusted operating expenses decreased $1.7 (3%) and adjusted operating expenses as a percentage of net revenue improved 220 basis points to 18.9% in 2019.

Amortization expense increased $1.1 (15%) primarily due to amortization on the acquired intangibles of BM&M.

Impairment charge decreased $63.4 due to the goodwill and trade name impairments recorded in 2018. See Note 6 of Part I of this Form 10-Q for further information on the impairment charges.

Six Months Ended March 31, 2019 Compared to Six Months Ended March 31, 2018

Net Revenueincreased $44.8 (8%), primarily due to higher volume (9%), largely driven by increased demand for large systems in plastics, in addition to pricing and the acquisition of BM&M, partially offset by a decline in demand for screening and separating equipment (including equipment that processes proppants for hydraulic fracturing). Foreign currency impact decreased net revenue by 4%.

Gross Profit increased $6.4 (3%), primarily due to higher volume, pricing and productivity improvements and the acquisition of BM&M, partially offset by unfavorable mix due to an increased proportion of lower margin, large systems sales in plastics and cost inflation. Foreign currency impact decreased gross profit by 4%. Gross profit margin decreased 160 basis points to 35.6% in 2019, primarily due to an increased proportion of lower margin, large systems sales in plastics and cost inflation, partially offset by pricing and productivity improvements.

The Process Equipment Group’s gross profit included restructuring and restructuring related charges of $0.4 and inventory step-up charges of $0.2 in fiscal 2019. Excluding these charges, adjusted gross profit increased $7.0 (3%) and adjusted gross profit margin remained flat at 37.4% compareddecreased 160 basis points to prior year.35.6%.

Operating expenses increased $23.9 (15%$3.8 (3%), primarily driven by an increase in strategic project investments, cost inflation, an increase in variable compensation, and the acquisition of BM&M, partially offset by lower litigation expenses, and cost inflation.expenses. Foreign currency impact increaseddecreased operating expenses by 6%3%. Operating expenses as a percentage of net revenue improved 130by 90 basis points to 20.9%20.3% in 2018.2019.
 
Operating expenses included restructuring and restructuring related charges ($0.1 in fiscal 2019 and $0.2 in fiscal 2018) and business acquisition, development, and integration costs ($0.4 in 2018 and $0.8 in 2017)2019).  Excluding these items, adjusted operating expenses increased $24.8 (16%$3.4 (3%), which included unfavorable foreign currency impact (6%). Adjusted and adjusted operating expenses as a percentage of net revenue improved 110100 basis points to 20.9%20.2% in 2018.2019.

Amortization expense increased $1.2,$1.3 (9%) primarily due to unfavorable foreign currency impactamortization on the acquired intangibles of $1.0.BM&M.

Impairment charge increaseddecreased $63.4 due to the goodwill and trade name impairments recorded in the second quarter of 2018. See Note 56 of Part I of this Form 10-Q for further information on the impairment charges.

OPERATIONS REVIEW — BATESVILLE
 
Three Months Ended June 30, Nine Months Ended June 30,Three Months Ended March 31, Six Months Ended March 31,
2018 2017 2018 20172019 2018 2019 2018
Amount % of Net Revenue Amount % of Net Revenue Amount 
% of
Revenue
 Amount 
% of
Revenue
Amount % of Net Revenue Amount % of Net Revenue Amount % of Net Revenue Amount % of Net Revenue
Net revenue$129.3
 100.0 $137.0
 100.0 $414.6
 100.0 $422.7
 100.0$137.9
 100.0 $152.4
 100.0 $266.0
 100.0 $285.3
 100.0
Gross profit44.4
 34.3 51.5
 37.6 149.9
 36.2 156.1
 36.947.5
 34.4 57.5
 37.7 91.4
 34.4 104.7
 36.7
Operating expenses20.6
 15.9 20.5
 15.0 63.6
 15.3 62.2
 14.718.8
 13.6 21.4
 14.0 38.4
 14.4 43.3
 15.2
Amortization expense—
 — 0.1
 0.1 —
 — 0.2
 —
 
Three Months Ended June 30, 2018March 31, 2019 Compared to Three Months Ended June 30, 2017March 31, 2018
 
Net revenue decreased $7.7 (6%$14.5 (10%), primarily due to a decrease in volume (3%), the impact of a multi-year contract renewal with a key customer that included an upfront incentive (2%), and a decrease in average selling price (1%(9%). The decrease inLower volume was primarily driven by a decrease in burial sales resulting from what we estimate to be a decrease in North American burials driven by lower estimated deaths and the estimated increased rate at which families opted for cremation.

Gross profit decreased $7.1 (14%$10.0 (17%) and gross profit margin decreased 330 basis points to 34.3%34.4%.  The decrease in gross profit and gross profit margin was primarily due to inflationthe decrease in volume. Inflation in commodities fuel,and wages and benefits, the impact of the key customer contract renewal, the decline in volume, and supply chain inefficiencies. These items were partiallywas offset by productivity gains, including benefits resulting from the manufacturing footprint reduction in the prior year.improvements.

GrossBatesville’s gross profit included restructuring and restructuring related charges of $0.3($0.1 in 2017.fiscal 2019). Excluding these charges, adjusted gross profit decreased $7.4 (14%$9.9 (17%) and adjusted gross profit margin decreased 350320 basis points to 34.3%34.5%.

 
Operating expenses increased $0.1 (0.5%decreased $2.6 (12%) to $20.6,$18.8 and operating expenses as a percentage of net revenue increased 90decreased 40 basis points to 15.9%13.6%, primarily due to wageproductivity initiatives and benefit inflation.a decrease in variable compensation.

Operating expenses included $0.4 of restructuring and restructuring related charges in fiscal 2019 and $0.2 in fiscal 2018. Excluding these charges, adjusted operating expenses decreased $2.8 (13%) and adjusted operating expenses as a percentage of net revenue improved 60 basis points to 13.3% in fiscal 2019.

Six Months Ended March 31, 2019 Compared to Six Months Ended March 31, 2018

Nine Months Ended June 30, 2018 Compared to Nine Months Ended June 30, 2017
Net revenuedecreased $8.1 (2%$19.3 (7%), primarily due to a decrease in volume (1%) and the impact of a multi-year contract renewal with a key customer that included an upfront incentive (1%(7%). The decrease inLower volume was primarily driven by a decrease in burial sales resulting from what we estimate to be a decrease in North American burials driven by lower estimated deaths and the estimated increased rate at which families opted for cremation.

Gross profit decreased $6.2 (4%$13.3 (13%) and gross profit margin decreased 70230 basis points to 36.2%34.4%.  The decrease in gross profit and gross profit margin was primarily due to the decrease in volume and inflation in commodities fuel,and wages, and benefits, the decline in volume, and the impact of the key customer contract renewal, along with supply chain inefficiencies. These items were partially offset by productivity gains, including benefits resulting from the manufacturing footprint reduction in the prior year.improvements.


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GrossBatesville’s gross profit included restructuring and restructuring related charges ($0.10.2 in 2018fiscal 2019 and $7.0$0.1 in 2017)fiscal 2018). Excluding these charges, adjusted gross profit decreased $13.1 (8%(13%) and adjusted gross profit margin decreased 240220 basis points to 36.2%34.5%.

Operating expenses increased $1.4 (2%decreased $4.9 (11%) to $63.6,$38.4 and operating expenses as a percentage of net revenue increased 60improved 80 basis points to 15.3%14.4%, primarily due to wageproductivity initiatives and benefit inflation, an increasea decrease in variable compensation, and an increase in restructuring and restructuring related charges, partially offset by current year productivity improvements.compensation.

Operating expenses included $0.2$0.5 of restructuring and restructuring related charges in fiscal 2019 and $0.2 in fiscal 2018. Excluding these charges, adjusted operating expenses increased $1.2 (2%decreased $5.1 (12%), and adjusted operating expenses as a percentage of net revenue increased 60improved 80 basis points to 15.3%14.3% in 2018.fiscal 2019.

REVIEW OF CORPORATE EXPENSES
 
Three Months Ended June 30, Nine Months Ended June 30,Three Months Ended March 31, Six Months Ended March 31,
2018 2017 2018 20172019 2018 2019 2018
Amount % of Net Revenue Amount % of Net Revenue Amount 
% of
Net Revenue
 Amount 
% of
Net Revenue
Amount % of Net Revenue Amount % of Net Revenue Amount % of Net Revenue Amount % of Net Revenue
Core operating expenses$12.9
 2.9 $10.7
 2.7 $34.4
 2.7 $29.0
 2.5$12.7
 2.7 $12.7
 2.8 $21.9
 2.5 $21.2
 2.5
Business acquisition, development, and integration costs0.1
 — 0.1
 — 2.6
 0.2 0.5
 0.10.4
 0.1 0.2
 0.1 0.7
 0.1 2.5
 0.3
Restructuring and restructuring related charges—
 — 0.1
 — 0.8
 — 2.4
 0.2—
 — 0.6
 0.1 —
 — 0.8
 0.1
Operating expenses$13.0
 2.9 $10.9
 2.7 $37.8
 2.9 $31.9
 2.8$13.1
 2.8 $13.5
 3.0 $22.6
 2.6 $24.5
 2.9
 
Core operating expenses primarily represent operating expenses excluding restructuring and restructuring related charges and costs related to business acquisition, development, and integration, which we incur as a result of our strategy to grow through selective acquisitions.

Business acquisition, development, and integration costs include legal, tax, accounting, and other advisory fees and due diligence costs associated with investigating opportunities (including acquisition and disposition) and integrating completed acquisitions.
 
Three Months Ended June 30, 2018March 31, 2019 Compared to Three Months Ended June 30, 2017March 31, 2018
 
Operating expenses increased $2.1 (19%decreased $0.4 (3%), primarily due to an increase in growth investments and cost inflation, partially offset by a decrease in restructuring and restructuring related charges. These expenses as a percentage of net revenue were 2.9%2.8%, an increasea decrease of 20 basis points from 2017.the prior year.

Core operating expenses increased $2.2 (21%). These expenses as a percentage of net revenue were 2.9%, an increase of 20 basis points from 2017.

Nine Months Ended June 30, 2018 Comparedflat compared to Nine Months Ended June 30, 2017

Operating expenses increased $5.9 (18%), primarily due to an increase in business acquisition, development, and integration costs, variable compensation, and growth investments, partially offset by a decrease in restructuring and restructuring related charges. These expenses as a percentage of net revenue were 2.9%, an increase of 10 basis points from 2017.

Core operating expenses increased $5.4 (19%).the prior year.  These expenses as a percentage of net revenue were 2.7%, an increasea decrease of 2010 basis points from 2017.

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the prior year.


Six Months Ended March 31, 2019 Compared to Six Months Ended March 31, 2018

Operating expenses decreased $1.9 (8%), primarily due to a decrease in business acquisition, development, and integration costs, as well as a decrease in restructuring and restructuring related charges, partially offset by an increase in variable compensation. These expenses as a percentage of net revenue were 2.6%, a decrease of 30 basis points from the prior year.

Core operating expenses increased $0.7 (3%), primarily due to an increase in variable compensation.  These expenses as a percentage of net revenue were flat compared to 2018.

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 June 30, Nine Months Ended June 30,Three Months Ended March 31, Six Months Ended March 31,
2018 2017 2018 20172019 2018 2019 2018
Consolidated net income$36.2
 $34.6
 $34.0
 $90.5
Consolidated net income (loss)$39.5
 $(21.3) $68.5
 $(2.2)
Interest income(0.3) (0.2) (1.1) (0.5)(0.2) (0.3) (0.4) (0.8)
Interest expense5.5
 6.5
 17.8
 18.9
5.4
 6.0
 10.9
 12.3
Income tax expense15.2
 16.6
 52.5
 38.2
13.8
 13.6
 28.3
 37.3
Depreciation and amortization14.2
 13.5
 42.0
 42.1
15.1
 14.0
 29.2
 27.8
EBITDA$70.8
 $71.0
 $145.2
 $189.2
$73.6
 $12.0
 $136.5
 $74.4
Impairment charge—
 —
 63.4
 —
—
 63.4
 —
 63.4
Business acquisition, development, and integration0.1
 0.4
 2.6
 1.0
0.5
 0.2
 1.1
 2.5
Restructuring and restructuring related0.5
 0.9
 1.7
 8.8
0.7
 0.7
 1.2
 1.2
Inventory step-up0.1
 —
 0.2
 —
Adjusted EBITDA$71.4
 $72.3
 $212.9
 $199.0
$74.9
 $76.3
 $139.0
 $141.5
 
Three Months Ended March 31, 2019 Compared to Three Months Ended March 31, 2018

Consolidated net income increased $1.6 (5%)$60.8 for the three months ended June 30, 2018,March 31, 2019, compared to the same period in fiscal 2017. The increase was primarily due to higher volume in the Process Equipment Group, as well as pricing and productivity improvements, favorable impact of the Tax Act on the effective tax rate, and a decrease in interest expense driven by lower average borrowings. This increase was partially offset by cost inflation, increased proportion of large plastics projects with lower margins, and the impact of a multi-year contract renewal with a key customer at Batesville that included an upfront incentive. Foreign currency impact increased consolidated net income by 3%.

Consolidated adjusted EBITDA decreased $0.9 (1%) for the three months ended June 30, 2018 compared to the same period in fiscal 2017. The decrease was primarily driven by cost inflation, increased proportion of large plastics projects with lower margins, and the impact of a multi-year contract renewal with a key customer at Batesville that included an upfront incentive. This decrease was partially offset by higher volume in the Process Equipment Group, as well as pricing and productivity improvements. Foreign currency impact increased adjusted EBITDA by 2%.

Consolidated net income decreased $56.5 (62%) for the nine months ended June 30, 2018, compared to the same period in fiscal 2017. The decrease was primarily due to the impairment charges recorded in the Process Equipment Group segment in 2018, of $63.4. In addition, net income was negatively impacted by cost inflation,higher volume from increased proportion ofdemand for large systems in plastics, projects with lower margins, anand pricing and productivity improvements. This increase in variable compensation, an increase in business acquisition, development, and integration costs, and the unfavorable impact of the Tax Act on the effective tax rate. This decrease in consolidated net income was partially offset by cost inflation, a decrease in volume at Batesville, and unfavorable product mix resulting from an increased proportion of lower margin, large systems sales in plastics. Foreign currency impact decreased consolidated net income by $2.1.

Consolidated adjusted EBITDA decreased $1.4 (2%) for the three months ended March 31, 2019, compared to the same period in fiscal 2018, primarily due to cost inflation, a decrease in volume at Batesville, and unfavorable product mix resulting from an increased proportion of lower margin, large systems sales in plastics. This decrease in consolidated adjusted EBITDA was partially offset by higher volume from increased demand for large systems in plastics, and pricing and productivity improvements. Foreign currency impact decreased adjusted EBITDA by $2.9.

Six Months Ended March 31, 2019 Compared to Six Months Ended March 31, 2018

Consolidated net income increased $70.7 for the six months ended March 31, 2019, compared to the same period in fiscal 2018 primarily driven by the impairment charges recorded in the Process Equipment Group as well assegment in 2018, higher volume from increased demand for large systems in plastics and parts and service, pricing and productivity improvements, a decrease in interest expense driven by lower average borrowings,the effective tax rate as a result of the Tax Act, and a decrease in restructuringbusiness acquisition, development, and restructuring related charges.integration costs. This increase in consolidated net income was partially offset by cost inflation, a decrease in volume at Batesville, and unfavorable product mix resulting from an increased proportion of lower margin, large systems sales in plastics. Foreign currency impact increaseddecreased consolidated net income by 4%.$2.7.

Consolidated adjusted EBITDA increased $13.9 (7%decreased $2.5 (2%) for the ninesix months ended June 30, 2018,March 31, 2019, compared to the same period in fiscal 2017. The increase was2018, primarily driven by higherdue to cost inflation, a decrease in volume in the Process Equipment Group, as well as pricingat Batesville, and productivity improvements. This increase in adjusted EBITDA was partially offset by cost inflation,unfavorable product mix resulting from an increased proportion of lower margin, large system projectssystems sales in plastics. This decrease in consolidated adjusted EBITDA was partially

offset by higher volume from increased demand for large systems in plastics and an increase in variable compensation.parts and service, and pricing and productivity improvements. Foreign currency impact increaseddecreased adjusted EBITDA by 3%.$3.9.

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LIQUIDITY AND CAPITAL RESOURCES
 
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 ninesix months of 20182019 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 includes long-term notes and our Facility as part of our overall financing strategy. We believe we have ready access to capital markets and regularly review the optimal mix of fixed-rate and variable-rate debt. In addition to cash balances and our ability to access additional long-term financing, we had $717.1$780.2 of maximum borrowing capacity available under the Facility as of June 30, 2018,March 31, 2019, of which $698.7 of borrowing capacity is$741.6 was immediately available based on our most restrictive covenant at June 30, 2018,March 31, 2019, with additional amounts available in the event of a qualifying acquisition. The available borrowing capacity reflects a reduction of $7.3$7.2 for outstanding letters of credit issued under the Facility. The Company may request an increase of up to $450.0 in the total borrowing capacity under the Facility, subject to approval of the lenders.

In the normal course of business, the Process Equipment Group provides 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 June 30, 2018,March 31, 2019, we had guarantee arrangements totaling $250.3,$300.9, under which $208.0$210.6 was utilized, for this purpose. These arrangements include the €150.0 L/GLG Facility Agreement under which unsecured letters of credit, bank guarantees, or other surety bonds may be issued. The Company may request an increase to the total capacity under the L/GLG Facility Agreement by an additional €70.0, subject to approval of the lenders.

We have significant operations outside the U.S. ThePursuant to the Tax Act, we have reevaluated our indefinite reinvestment assertion with respect to the foreign earnings of those subsidiaries.  We continue to assert that the majority of foreign earnings is considered to be indefinitely reinvested outside of the U.S.  We have changed the permanent reinvestment assertions of certain of our lower tier subsidiaries in certain foreign jurisdictions where we foresee those earnings to no longer be permanently reinvested.  We continue to assert permanent reinvestment in certain jurisdictions where the Company has made, and intends to continue to make, substantial investments to support the ongoing development and growth of our international operations. PursuantAccordingly, pursuant to the Tax Act, weno U.S. federal and state income taxes have recognized a provisionalbeen accrued Transition Tax of $28.9 on the unrepatriated earningsportion of our foreign subsidiaries.earnings that is considered to be indefinitely reinvested outside the U.S. The cash at our internationalforeign subsidiaries totaled $64.3$52.1 at June 30, 2018. With the enactmentMarch 31, 2019. While we do not intend, nor do we foresee a need, to repatriate these funds, repatriation of the Tax Act, we are evaluating our future plansthese funds under current regulatory and tax law for deployment of this cash.use in domestic operations may expose us to additional taxes. 

12-month Outlook

We believe the 12-month outlook for our business remains positive. Although cash flow from operations in the Process Equipment Group naturally experiences substantial fluctuations driven by changes in working capital requirements at Coperion (due to the type of product and geography of customer projects in process at any point ingiven time), we believe we have significant flexibility to meet our financial commitments, including working capital needs, capital expenditures, and financing obligations.

We expect to continue to use a combination of some of our cash flows from operations 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.

The Tax Act will require the Company to pay tax on remittedunremitted earnings of its foreign subsidiaries in an estimated amount of $28.9. $25.1. During the quarter ended December 31, 2018, we elected to pay the Transition Tax in eight annual installments and made the first installment payment of $2.0. The portion of this tax we anticipate to pay in the next twelve months is $2.3,$2.0, with the remainder to be paid over the next sevensix years. In addition, we expect the lower corporate tax rate of 21% to benefit our cash flow in current and future periods; however,periods.

On December 7, 2018, we announced that our Board of Directors authorized a new share repurchase program of up to $200.0 in replacement of the amount and useCompany’s prior share repurchase program, which eliminated the balance of those benefits has not yet been determined.approximately $39.6 remaining under that prior authorization.


Our anticipated contribution to our pension plans in 20182019 is $9.9,$10, of which $8.2$4.6 was made during the ninesix months ended June 30, 2018.March 31, 2019. 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.

We currently expect to pay quarterly cash dividends in the future comparable to those we paid in 2017,2018, which will require approximately $13.0$13.1 each quarter based on our outstanding common stock at June 30, 2018.March 31, 2019. We increased our quarterly dividend in 20182019 to $0.2075$0.2100 per common share from $0.2050$0.2075 per common share paid in 2017. We are authorized by our Board of Directors to purchase up to $200.0 of our common stock in total under our existing share repurchase program, and may make such purchases, depending on market conditions and other needs for cash consistent with our growth strategy. We repurchased approximately 471,500 shares of our common stock during the third quarter of fiscal 2018, at a total cost of approximately

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$21.7. At June 30, 2018, we had approximately $40.0 remaining for share repurchases under the existing authorization by the Board of Directors.2018.

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. Based on these factors, we believe our current liquidity position is strong and will continue to meet all of our financial commitments for the foreseeable future.

Cash Flows
Nine Months Ended June 30,Six Months Ended March 31,
(in millions)2018 20172019 2018
Cash flows provided by (used in) 
  
 
  
Operating activities$156.3
 $103.7
$46.5
 $61.5
Investing activities(15.7) (12.3)(34.4) (10.5)
Financing activities(134.5) (72.5)(11.3) (50.4)
Effect of exchange rates on cash and cash equivalents(1.0) 0.6
2.1
 1.7
Increase in cash and cash equivalents$5.1
 $19.5
$2.9
 $2.3

Operating Activities
 
Operating activities provided $156.3$46.5 of cash during the first ninesix months of fiscal year 2019, and provided $61.5 of cash during the first six months of fiscal year 2018, and provided $103.7 of cash during the first nine months of fiscal year 2017, a $52.6 (51%$15.0 (24%) increase.decrease.  The increasedecrease in operating cash flow was primarily due to our $80.0 contribution to the Company’s U.S. defined benefit pension plan in 2017, partially offset by an increase in working capital requirements and an increase of $17.0$10.2 in cash paid for taxes.

Working capital requirements for the Process Equipment Group 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 $3.4$23.9 increase in cash used in investing activities in the first ninesix months of fiscal 20182019 was primarily due to an increasethe acquisition of BM&M for $26.2 in capital expenditures and decreaseNovember 2018, compared to no acquisitions in proceeds from salesfiscal 2018. See Note 4 included in Part 1, Item 1 of property, plant, and equipment.this Form 10-Q for further details on this acquisition.

Financing Activities
 
Cash used in financing activities was largely impacted by net borrowing activity.  Our general practice is to utilize our cash to pay down debt unless it is needed to fundfor an acquisition.  Daily borrowing and repayment activity under the Facility may fluctuate significantly between periods as we fulfill the capital needs of our business units.  Cash used in financing activities during the first ninesix months of 20182019 was $134.5,$11.3, including $39.2$18.2 of proceeds, net of debt repayments, net of proceeds.repayments.  Cash used in financing activities in the first ninesix months of fiscal 20172018 was $72.5.$50.4. The increasedecrease in cash used in financing activities was primarily due to an increasethe borrowings used to fund the acquisition of BM&M for $26.2 in payments on the Facility2019 and an increasea decrease in repurchases of common stock in 2018. This increase was partially offset by borrowings used to fund the $80.0 contribution to the Company’s U.S. defined benefit pension plan in 2017 that did not repeat in 2018.2019.
 
We returned approximately $39.1$26.2 to shareholders during the first ninesix months of 20182019 in the form of quarterly dividends.  We increased our quarterly dividend in 20182019 to $0.2075$0.2100 per common share from $0.2050$0.2075 per common share paid during 2017. We repurchased approximately 1,377,000 shares of our common stock in 2018, at a total cost of approximately $60.6.2018.

Off-Balance Sheet Arrangements
 
There were no significant changes in off-balance sheet arrangements, as described in Management’s Discussion and Analysis of Financial Condition and Results of Operations, Liquidity and Capital Resources, in our Annual Report on Form 10-K for 2017.2018.
 

Recently Adopted and Issued Accounting Standards
 

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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 discussion of quantitative and qualitative disclosures about market risk may be found in Item 7A of our 20172018 Form 10-K filed with the SEC on November 15, 2017.13, 2018.  There have been no material changes in this information since the filing of our 20172018 Form 10-K.

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.

ThereIn 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.

In 2018, the Company established new internal controls related to our accounting policies and procedures as part of our adoption of the new revenue recognition standard. These internal controls included providing global training to our finance team and holding regular meetings with management to review and approve key decisions. Beginning October 2018, we have beenimplemented new internal controls to address risks associated with applying the new standard.

Other than as noted above, there were no changes in internal controlscontrol over financial reporting (as definedidentified in Rules 13a-15(f) and 15d-15(f) of the Exchange Act)evaluation for the period covered by this reportquarter ended March 31, 2019 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 14 to the interim consolidated 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, 2017,2018, and the revised risk factorsfactor below.

Changes in the United States political environment and global trade disruption 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.  In addition, countries that are central to our businesses have imposed and been subject to imposition and threatened imposition of retaliatory tariffs upon various raw materials and finished goods, including steel and others that are important to our businesses. 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 future changes to tax laws in global 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.

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In addition, the recently enacted Tax Act makes significant changes to the U.S. Internal Revenue Code. Such changes include a reduction in the domestic corporate tax rate, limitations on certain corporate deductions and credits, and a Transition Taxone-time transition tax on the deemed repatriationcertain unrepatriated earnings of foreign earnings.subsidiaries. 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; recognizedassumptions, and further impacts could be materially differentmay result from current estimates based on actual results in 2018 and our further analysis ofany additional regulations or guidance issued by the new law.U.S. government. 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.

Item 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The following table summarizes repurchases of common stock during the three months ended June 30, 2018.
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
         
April 275,470
 $45.91
 275,470
 $49.0
May 191,410
 $46.26
 191,410
 $40.2
June 4,643
 $46.00
 4,643
 $40.0
Total 471,523
 $46.05
 471,523
 $40.0

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 June 30, 2018, we had repurchased approximately 4,950,000 shares for approximately $160 in the aggregate. Such shares were classified as treasury stock. We repurchased approximately 471,500 shares of our common stock during the third quarter of fiscal 2018, at a total cost of approximately $21.7. At June 30, 2018, we had approximately $40.0 remaining for share repurchases under the existing authorization by the Board of Directors.

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.
 

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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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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: August 1, 2018BY:/s/ Kristina A. Cerniglia
Kristina A. Cerniglia
Senior Vice President and Chief Financial Officer
Date: August 1, 2018/s/ Megan A. Walke
Megan A. Walke
Interim 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 August 31, 2017)February 26, 2015)
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.INS Instance document
Exhibit 101.SCH Schema document
Exhibit 101.CAL Calculation linkbase document
Exhibit 101.LAB Labels linkbase document
Exhibit 101.PRE Presentation linkbase document
Exhibit 101.DEF Definition linkbase document
 
 
*                Filed herewith.


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: May 1, 2019BY:/s/ Kristina A. Cerniglia
Kristina A. Cerniglia
Senior Vice President and Chief Financial Officer
Date: May 1, 2019/s/ Timothy C. Ryan
Timothy C. Ryan
Vice President, Controller, and Chief Accounting Officer




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