| Acquisitions | Acquisitions Acquisition of Schenck Process Food and Performance Materials Business On September 1, 2023, the Company completed its acquisition of FPM for total aggregate consideration of approximately $748.7, net of certain customary post-closing adjustments, and including cash acquired. The Company used available borrowings under its multi-currency revolving credit facility (the “Facility”) to fund this acquisition. Headquartered in Kansas City, Missouri, FPM specializes in the design, manufacturing, and service of feeding, filtration, baking, and material handling technologies and systems that are highly complementary to the equipment and solutions offered in our Advanced Process Solutions reportable operating segment. The results of FPM since the date of the acquisition are included in the Advanced Process Solutions reportable operating segment. Preliminary purchase price allocation and other items The Company utilized the services of an independent valuation consultant, along with estimates and assumptions determined by management, to estimate the fair value of the assets acquired and liabilities assumed. Given the timing of the acquisition, the valuation of property, plant, and equipment and leases is still in process of being valued by an independent valuation consultant. The preliminary allocation of the purchase price was based on an evaluation of the appropriate fair values and represents management’s best estimate based on available data. The purchase price allocation of the assets acquired and liabilities assumed is preliminary until the contractual post-closing adjustments are finalized, the final independent valuation consultant report is issued, and the measurement period allowed for under ASC 805 has closed. The final determination of the fair value of assets acquired and liabilities assumed will be completed within the one-year measurement period as allowed by ASC 805. Changes during the measurement period could be material. Based on the timing of this acquisition, there were no measurement period adjustments during the year ended September 30, 2023. Based on current fair value estimates, the preliminary purchase price for FPM has been allocated to individual assets acquired and liabilities assumed as of the acquisition date: September 1, 2023 Assets acquired: Cash and cash equivalents $ 17.3 Trade receivables 65.2 Receivables from long-term manufacturing contracts 22.4 Inventories 64.8 Prepaid expenses and other current assets 10.3 Property, plant, and equipment 27.3 Operating lease right-of-use assets 11.0 Intangible assets 338.0 Goodwill 476.5 Other non-current assets 2.7 Total assets acquired 1,035.5 Liabilities assumed: Trade accounts payable 59.4 Liabilities from long-term manufacturing contracts 86.6 Accrued compensation 13.5 Other current liabilities 45.7 Operating lease liabilities 9.5 Deferred income taxes 69.0 Other non-current liabilities 3.1 Total liabilities assumed 286.8 Net assets acquired $ 748.7 Intangible assets identified The preliminary purchase price allocation included $338.0 of acquired identifiable intangible assets. Intangible assets consist of FPM’s technology and customer relationships and will be amortized on a straight-line basis over the respective estimated periods for which the intangible assets will provide economic benefit to the Company. The determination of the useful lives is based upon various industry studies, historical acquisition experience, degree of stability in the current FPM customer base, economic factors, and expected future cash flows of the Company following the acquisition of FPM. The technology was valued using the relief-from-royalty method of the income approach. Customer relationships were valued using the multi-period excess earnings method of the income approach. Significant assumptions used in the valuations included FPM’s future cash flow projections, which were based on estimates used to price the FPM acquisition, discount rates that were benchmarked with reference to the implied rate of return to the Company’s pricing model, and the applicable weighted-average cost of capital (12%). The preliminary amounts allocated to intangible assets are as follows: Gross Carrying Amount Weighted-Average Useful Life Customer relationships $ 290.0 15 years Technology 48.0 12 years Total intangible assets $ 338.0 Goodwill was calculated as the excess of the consideration transferred over the net assets recognized and represents the estimated future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. The factors contributing to the recognition of goodwill were based on strategic benefits that are expected to be realized from the acquisition. None of the goodwill is expected to be deductible for income tax purposes. The working capital assets and liabilities were valued using Level 2 inputs, which included data points that are observable, such as definitive sales agreements, appraisals or established market values of comparable assets (market approach). Goodwill and identifiable intangible assets were valued using Level 3 inputs, which are unobservable by nature, and included internal estimates of future cash flows (income approach). Significant increases (decreases) in any of those unobservable inputs in isolation would result in a significantly lower (higher) fair value measurement. Management used a third-party valuation firm to assist in the determination of the preliminary purchase accounting fair values, specifically those considered Level 3 measurements. Management ultimately oversees the third-party valuation firm to ensure that the transaction-specific assumptions are appropriate for the Company. Impact on results of operations The results of FPM’s operations have been included in Hillenbrand’s Consolidated Financial Statements since the September 1, 2023, acquisition date. The following table provides the results of operations for FPM included in Hillenbrand’s Consolidated Statement of Operations: Year Ended Net revenue $ 43.3 Income from continuing operations before income taxes 3.4 During the year ended September 30, 2023, the Company incurred $16.2 in acquisition expenses related to the FPM acquisition, which are included in operating expenses in the Consolidated Statement of Operations. Acquisition of Peerless Food Equipment On December 1, 2022, the Company completed the acquisition of Peerless for a purchase price of $59.2, net of certain customary post-closing adjustments and including cash acquired, using available borrowings under the Facility. Headquartered in Sidney, Ohio, Peerless is a premier supplier of industrial food processing equipment. The acquisition of Peerless increased the Company’s scale in the food end market, and combining Peerless’ highly complementary equipment and solutions with other Advanced Process Solutions reportable operating segment technologies now allows the Company to deliver more comprehensive solutions to its customers. The results of Peerless since the date of acquisition are included in the Advanced Process Solutions reportable operating segment. Preliminary purchase price allocation and other items The Company utilized the services of an independent valuation consultant, along with estimates and assumptions determined by management, to estimate the fair value of the assets acquired and liabilities assumed. The preliminary allocation of the purchase price was based on an evaluation of the appropriate fair values and represents management’s best estimate based on available data. The purchase price allocation of the assets acquired and liabilities assumed is preliminary until the contractual post-closing adjustments are finalized, the final independent valuation consultant report is issued, and the measurement period allowed for under ASC 805 has closed. The final determination of the fair value of assets acquired and liabilities assumed will be completed within the one-year measurement period as allowed by ASC 805. Changes during the measurement period could be material. Based on current fair value estimates, the preliminary purchase price for Peerless has been allocated to individual assets acquired and liabilities assumed as of the acquisition date: December 1, 2022 (as initially reported) Measurement Period Adjustments December 1, 2022 (as adjusted) Assets acquired: Current assets $ 16.2 $ 1.3 $ 17.5 Property, plant, and equipment 2.3 — 2.3 Intangible assets — 25.3 25.3 Goodwill 50.9 (27.3) 23.6 Total assets acquired 69.4 (0.7) 68.7 Liabilities assumed: Current liabilities 9.5 — 9.5 Total liabilities assumed 9.5 — 9.5 Net assets acquired $ 59.9 $ (0.7) $ 59.2 Measurement period adjustments The preliminary purchase price allocation was based upon a preliminary valuation, and the Company’s estimates and assumptions are subject to change within the measurement period (defined as one year following the acquisition date). As a result of further refining its estimates and assumptions since the date of the acquisition, the Company recorded measurement period adjustments to the initial opening balance sheet as shown in the table above. Adjustments were primarily made to intangible assets and goodwill. There were no measurement period adjustments materially impacting earnings that would have been recorded in previous reporting periods if the adjustments had been recognized as of the acquisition date. Intangible assets identified The preliminary purchase price allocation included $25.3 of acquired identifiable intangible assets. Intangible assets consist of Peerless’ trade name and customer relationships, and will be amortized on a straight-line basis over the respective estimated periods for which the intangible assets will provide economic benefit to the Company. The determination of the useful lives is based upon various industry studies, historical acquisition experience, stability in the current Peerless customer base, economic factors, and future expected cash flows of the Company following the acquisition of Peerless. The trade name was valued using the relief-from-royalty method of the income approach. Customer relationships were valued using the multi-period excess earnings method of the income approach. Significant assumptions used in the valuations included Peerless’ future cash flow projections, which were based on estimates used to price the Peerless acquisition, discount rates that were benchmarked with reference to the implied rate of return to the Company’s pricing model, and the applicable weighted-average cost of capital (13%). The preliminary amounts allocated to intangible assets are as follows: Gross Carrying Amount Weighted-Average Useful Life Customer relationships $ 22.0 13 years Trade name 3.3 10 years Total intangible assets $ 25.3 Goodwill was calculated as the excess of the consideration transferred over the net assets recognized and represents the estimated future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. The factors contributing to the recognition of goodwill were based on strategic benefits that are expected to be realized from the acquisition. Goodwill is expected to be deductible for tax purposes. The working capital assets and liabilities, as well as the property, plant, and equipment acquired, were valued using Level 2 inputs, which included data points that are observable, such as definitive sales agreements, appraisals or established market values of comparable assets (market approach). Goodwill and identifiable intangible assets were valued using Level 3 inputs, which are unobservable by nature, and included internal estimates of future cash flows (income approach). Significant increases (decreases) in any of those unobservable inputs in isolation would result in a significantly lower (higher) fair value measurement. Management used a third-party valuation firm to assist in the determination of the preliminary purchase accounting fair values, specifically those considered Level 3 measurements. Management ultimately oversees the third-party valuation firm to ensure that the transaction-specific assumptions are appropriate for the Company. Impact on results of operations The results of Peerless’ operations have been included in Hillenbrand’s Consolidated Financial Statements since the December 1, 2022, acquisition date. The following table provides the results of operations for Peerless included in Hillenbrand’s Consolidated Statement of Operations: Year Ended Net revenue $ 32.1 Income from continuing operations before income taxes 2.6 During the year ended September 30, 2023, the Company incurred $0.5 in acquisition expenses related to the Peerless acquisition, which are included in operating expenses in the Consolidated Statement of Operations. Acquisition of LINXIS Group SAS On October 6, 2022, the Company completed the acquisition of Linxis from IBERIS INTERNATIONAL S.À R.L, an affiliate of IK Partners, and additional sellers (collectively, the “Sellers”). As a result of the acquisition, the Company acquired from the Sellers all of the issued and outstanding securities of Linxis, and Linxis became a wholly owned subsidiary of the Company for total aggregate consideration of $590.8 (€596.2) in cash, reflecting an approximate enterprise value of $566.8 (€572.0) plus cash acquired at closing, subject to certain customary post-closing adjustments. The Company used available borrowings under the Facility to fund this acquisition. With a global manufacturing, sales and service footprint, Linxis specializes in design, manufacturing, and service of dosing, kneading, mixing, granulating, drying, and coating technologies. The results of Linxis since the date of acquisition are included in the Advanced Process Solutions reportable operating segment. Purchase price allocation and other items The Company utilized the services of an independent valuation consultant, along with estimates and assumptions determined by management, to estimate the fair value of the assets acquired and liabilities assumed. The allocation of the purchase price was based on an evaluation of the appropriate fair values and represents management’s best estimate based on available data. The following table summarizes the final fair values of the assets acquired and liabilities assumed as of the acquisition date: October 6, 2022 (as initially reported) Measurement Period Adjustments October 6, 2022 (as adjusted) Assets acquired: Cash and cash equivalents $ 22.9 $ — $ 22.9 Trade receivables 31.5 (1.1) 30.4 Receivables from long-term manufacturing contracts 12.1 1.0 13.1 Inventories 80.1 (5.3) 74.8 Prepaid expenses and other current assets 11.7 (0.4) 11.3 Property, plant, and equipment 36.7 1.1 37.8 Operating lease right-of-use assets 15.0 — 15.0 Intangible assets 243.8 — 243.8 Goodwill 332.0 (7.8) 324.2 Other non-current assets 1.0 2.0 3.0 Total assets acquired 786.8 (10.5) 776.3 Liabilities assumed: Trade accounts payable 18.9 — 18.9 Liabilities from long-term manufacturing contracts 52.0 — 52.0 Accrued compensation 10.3 — 10.3 Other current liabilities 19.6 1.1 20.7 Accrued pension and postretirement healthcare 3.9 — 3.9 Operating lease liabilities 9.4 — 9.4 Deferred income taxes 77.0 (10.0) 67.0 Other non-current liabilities 0.3 — 0.3 Total liabilities assumed 191.4 (8.9) 182.5 Net assets acquired 595.4 (1.6) 593.8 Less: Fair value of Linxis noncontrolling interest (1) (4.6) 1.6 (3.0) Purchase price consideration $ 590.8 $ — $ 590.8 (1) While the Company acquired all issued and outstanding securities of Linxis in the acquisition, there remain certain noncontrolling interests in two subsidiaries of Linxis that existed as of the acquisition date. Measurement period adjustments The preliminary purchase price allocation was based upon a preliminary valuation, and the Company’s estimates and assumptions are subject to change within the measurement period (defined as one year following the acquisition date). As a result of further refining its estimates and assumptions since the date of the acquisition, the Company recorded measurement period adjustments to the initial opening balance sheet as shown in the table above. Adjustments were primarily made to inventories, other non-current assets, intangible assets and goodwill. There were no measurement period adjustments materially impacting earnings that would have been recorded in previous reporting periods if the adjustments had been recognized as of the acquisition date. During the year ended September 30, 2023, the purchase price allocation for the acquisition was finalized. Intangible assets identified The purchase price allocation included $243.8 of acquired identifiable intangible assets. Intangible assets consist of Linxis’s trade name portfolio and customer relationships and will be amortized on a straight-line basis over the respective estimated periods for which the intangible assets will provide economic benefit to the Company. The determination of the useful lives is based upon various industry studies, historical acquisition experience, degree of stability in the current Linxis customer base, economic factors, and expected future cash flows of the Company following the acquisition of Linxis. The trade name portfolio was valued using the relief-from-royalty method of the income approach. Customer relationships were valued using the multi-period excess earnings method of the income approach. Significant assumptions used in the valuations included Linxis’ cash flow projections, which were based on estimates used to price the Linxis acquisition, discount rates that were benchmarked with reference to the implied rate of return to the Company’s pricing model, and the applicable weighted-average cost of capital (12%). The amounts allocated to intangible assets are as follows: Gross Carrying Amount Weighted-Average Useful Life Customer relationships $ 211.1 13 years Trade name 32.7 10 years Total intangible assets $ 243.8 Goodwill was calculated as the excess of the consideration transferred over the net assets recognized and represents the estimated future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. The factors contributing to the recognition of goodwill were based on strategic benefits that are expected to be realized from the acquisition. None of the goodwill is expected to be deductible for income tax purposes. The working capital assets and liabilities, as well as the property, plant and equipment acquired, were valued using Level 2 inputs, which included data points that are observable, such as definitive sales agreements, appraisals or established market values of comparable assets (market approach). Goodwill and identifiable intangible assets were valued using Level 3 inputs, which are unobservable by nature, and included internal estimates of future cash flows (income approach). Significant increases (decreases) in any of those unobservable inputs in isolation would result in a significantly lower (higher) fair value measurement. Management used a third-party valuation firm to assist in the determination of the preliminary purchase accounting fair values, specifically those considered Level 3 measurements. Management ultimately oversees the third-party valuation firm to ensure that the transaction-specific assumptions are appropriate for the Company. Impact on results of operations The results of Linxis’ operations have been included in Hillenbrand’s Consolidated Financial Statements since the October 6, 2022, acquisition date. The following table provides the results of operations for Linxis included in Hillenbrand’s Consolidated Statement of Operations: Year Ended Net revenue $ 324.4 Income from continuing operations before income taxes 14.2 During the years ended September 30, 2023 and 2022, the Company incurred $1.4 and $4.5, respectively, in acquisition expenses related to the Linxis acquisition, which are included in operating expenses in the Consolidated Statements of Operations. Acquisition of Herbold Meckesheim GmbH On August 31, 2022, the Company completed the acquisition of Herbold Meckesheim GmbH (“Herbold”) for $77.7 (€77.5) in cash, pursuant to a definitive acquisition agreement dated June 30, 2022. Based in Meckesheim, Germany, Herbold is a leader in recycling systems, specializing in key process steps such as washing, separating, drying, shredding, and pulverizing. The acquisition of Herbold advances the Company’s long-term growth strategy in the key end market of recycling. Herbold offers highly complementary technologies to Hillenbrand’s Coperion branded products and enhances the Company’s offering of complete recycling solutions. The results of Herbold since the date of acquisition are included in the Advanced Process Solutions reportable operating segment. Purchase price allocation and other items The Company utilized the services of an independent valuation consultant, along with estimates and assumptions determined by management, to estimate the fair value of the assets acquired and liabilities assumed. The allocation of the purchase price was based on an evaluation of the appropriate fair values and represents management’s best estimate based on available data. The following table summarizes the final fair values of the assets acquired and liabilities assumed as of the acquisition date: August 31, 2022 (as initially reported) Measurement Period Adjustments August 31, 2022 (as adjusted) Assets acquired: Current assets $ 38.2 $ (0.5) $ 37.7 Property, plant, and equipment 4.7 1.5 6.2 Intangible assets — 22.6 22.6 Goodwill 69.3 (4.4) 64.9 Other assets 5.3 0.4 5.7 Total assets acquired 117.5 19.6 137.1 Liabilities assumed: Current liabilities 33.9 11.4 45.3 Other long-term liabilities 5.9 8.2 14.1 Total liabilities assumed 39.8 19.6 59.4 Net assets acquired $ 77.7 $ — $ 77.7 Measurement period adjustments The preliminary purchase price allocation was based upon a preliminary valuation, and the Company’s estimates and assumptions are subject to change within the measurement period (defined as one year following the acquisition date). As a result of further refining its estimates and assumptions since the date of the acquisition, the Company recorded measurement period adjustments to the initial opening balance sheet as shown in the table above. Adjustments were primarily made to intangible assets, goodwill, current liabilities, and other long-term liabilities. There were no measurement period adjustments materially impacting earnings that would have been recorded in previous reporting periods if the adjustments had been recognized as of the acquisition date. During the year ended September 30, 2023, the purchase price allocation for the acquisition was finalized. Intangible assets identified The purchase price allocation included $22.6 of acquired identifiable intangible assets. Intangible assets consist of Herbold’s trade name, technology, and customer relationships, and will be amortized on a straight-line basis over the respective estimated periods for which the intangible assets will provide economic benefit to the Company. The determination of the useful lives is based upon various industry studies, historical acquisition experience, stability in the current Herbold customer base, economic factors, and future expected cash flows of the Company following the acquisition of Herbold. The trade name and technology were valued using the relief-from-royalty method of the income approach. Customer relationships were valued using the multi-period excess earnings method of the income approach. Significant assumptions used in the valuations included Herbold’s future cash flow projections, which were based on estimates used to price the Herbold acquisition, discount rates that were benchmarked with reference to the implied rate of return to the Company’s pricing model, and the applicable weighted-average cost of capital (20%). The amounts allocated to intangible assets are as follows: Gross Carrying Amount Weighted-Average Useful Life Customer relationships $ 10.2 15 years Trade name 8.0 10 years Technology 4.4 7 years Total intangible assets $ 22.6 Goodwill was calculated as the excess of the consideration transferred over the net assets recognized and represents the estimated future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. The factors contributing to the recognition of goodwill were based on strategic benefits that are expected to be realized from the acquisition. None of the goodwill is expected to be deductible for income tax purposes. The working capital assets and liabilities, as well as the property, plant and equipment acquired, were valued using Level 2 inputs, which included data points that are observable, such as definitive sales agreements, appraisals or established market values of comparable assets (market approach). Goodwill and identifiable intangible assets were valued using Level 3 inputs, which are unobservable by nature, and included internal estimates of future cash flows (income approach). Significant increases (decreases) in any of those unobservable inputs in isolation would result in a significantly lower (higher) fair value measurement. Management used a third-party valuation firm to assist in the determination of the preliminary purchase accounting fair values, specifically those considered Level 3 measurements. Management ultimately oversees the third-party valuation firm to ensure that the transaction-specific assumptions are appropriate for the Company. Impact on results of operations The results of Herbold’s operations have been included in Hillenbrand’s Consolidated Financial Statements since the August 31, 2022, acquisition date. The following table provides the results of operations for Herbold included in Hillenbrand’s Consolidated Statement of Operations: Year Ended September 30, 2023 2022 Net revenue $ 69.9 $ 1.9 Income (loss) from continuing operations before income taxes 1.3 (1.2) During the years ended September 30, 2023 and 2022, the Company incurred $0.1 and $1.8, respectively, in acquisition expenses related to the Herbold acquisition, which are included in operating expenses in the Consolidated Statements of Operations. Acquisition of Gabler Engineering GmbH On June 30, 2022, the Company completed the acquisition of Gabler Engineering GmbH (“Gabler”) for $12.9 (€12.6) in cash. Gabler, based in Malsch, Germany, specializes in the design, engineering, manufacturing, and implementation of plants and equipment for the confectionery and pharmaceutical industries. The final determination of the fair value of assets acquired and liabilities assumed was completed during the year ended September 30, 2023. The majority of the purchase price allocation was assigned to the fair value of the acquired property, plant and equipment, working capital assets and liabilities, and residual goodwill (which was $6.2). There were no material changes in the purchase price allocation during 2023 the year ended September 30, 2023. Goodwill is not deductible for tax purposes. The results of Gabler are included in the Advanced Process Solutions reportable operating segment and are not material to the Consolidated Financial Statements for the years ended September 30, 2023 or 2022. Supplemental Pro Forma Information The supplemental pro forma financial information presented below is for illustrative purposes only and is not necessarily indicative of the financial position or results of operations that would have been realized if the Gabler, Herbold, Linxis, Peerless, and FPM acquisitions had been completed on the date indicated, do not reflect synergies that might have been achieved, and are not indicative of future results of operations or financial position. The pro forma adjustments are based upon currently available information and certain assumptions that Hillenbrand believes are reasonable under the circumstances. The supplemental pro forma financial information reflects pro forma adjustments to present the combined pro forma results of operations as if the acquisitions of Gabler, Herbold, Linxis, Peerless, and FPM had occurred on October 1, 2020, to give effect to certain events that Hillenbrand believes to be directly attributable to the acquisitions. These pro forma adjustments primarily include: • an increase to depreciation and amortization expense that would have been recognized due to acquired tangible and intangible assets; • an adjustment to interest expense to reflect the additional borrowings of Hillenbrand and the repayment of Linxis’s historical debt in conjunction with the acquisition; • an adjustment to remove business acquisition and integration costs and inventory step-up costs during the years ended September 30, 2023, 2022 and 2021, as these costs are non-recurring in nature and would not have a continuing effect on Hillenbrand’s results of operations; and • the related income tax effects of the adjustments noted above. The supplemental pro forma financial information for the periods presented is as follows: Year Ended September 30, 2023 2022 2021 Net revenue $ 3,331.3 $ 3,241.4 $ 3,070.0 Income from continuing operations attributable to Hillenbrand 137.7 111.3 125.6 Income from continuing operations attributable to Hillenbrand — per share of common stock: Basic earnings per share from continuing operations $ 1.97 $ 1.55 $ 1.68 Diluted earnings per share from continuing operations $ 1.96 $ 1.54 $ 1.67 |
