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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED MARCH 3, 2001 COMMISSION FILE NO. 1-6651

HILLENBRAND INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)

INDIANA 35-1160484
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

700 STATE ROUTE 46 EAST
BATESVILLE, INDIANA 47006-8835
(Address of principal executive offices) (Zip Code)

(812) 934-7000
(Registrant's telephone number, including area code)

NOT APPLICABLE
(Former name, former address and former
fiscal year, if changed since last report)

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 X No
------- -------

INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES
OF COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE.

Common Stock, without par value - 62,471,282 as of April 5, 2001.

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HILLENBRAND INDUSTRIES, INC.

INDEX TO FORM 10-Q

Page
----

PART I - FINANCIAL INFORMATION

Item 1 - Financial Statements (Unaudited)

Statements of Consolidated Income 3
for the Three Months
Ended 3/03/01 and 2/26/00

Condensed Consolidated Balance Sheets at 4
3/03/01 and 12/02/00

Condensed Statements of Consolidated Cash Flows 5
for the Three Months Ended 3/03/01 and 2/26/00

Notes to Condensed Consolidated Financial Statements 6-11

Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 12-17

PART II - OTHER INFORMATION

Item 6 - Exhibits and Reports on Form 8-K 17

SIGNATURES 18

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

Hillenbrand Industries, Inc. and Subsidiaries

Statements of Consolidated Income

Three Months Ended
------------------------
03/03/01 02/26/00
-------- --------
(In Millions Except Per Share Data)

Net revenues:
Health Care sales ........................... $ 179 $ 173
Health Care rentals ......................... 86 84
Funeral Services sales ...................... 163 168
Insurance revenues .......................... 97 89
-------- --------
Total revenues .............................. 525 514

Cost of revenues:
Health Care cost of goods sold .............. 101 98
Health Care rental expenses ................. 56 57
Funeral Services cost of goods sold ......... 80 86
Insurance cost of revenues .................. 84 78
-------- --------
Total cost of revenues ...................... 321 319

Gross profit ................................... 204 195

Other operating expenses ....................... 141 138

Unusual charges (expense), net ................. (20) 2
-------- --------

Operating profit ............................... 43 59

Interest expense ............................... (6) (7)

Investment income .............................. 3 4

Other income (expense), net .................... (1) 1
-------- --------

Income before income taxes ..................... 39 57

Income taxes ................................... 14 21
-------- --------

Net income ..................................... $ 25 $ 36
======== ========

Basic and diluted earnings
per common share (Note 3) ..................... $ .40 $ .58
======== ========

Dividends per common share ..................... $ .21 $ .20
======== ========

Average shares outstanding (thousands) ......... 62,682 63,250
======== ========

See Notes to Condensed Consolidated Financial Statements

Hillenbrand Industries, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets

ASSETS 03/03/01 12/02/00
-------- --------
(In Millions)
Current assets:
Cash, cash equivalents and short-term investments ........ $ 145 $ 132
Trade receivables ........................................ 373 407
Inventories .............................................. 120 112
Other .................................................... 85 73
------- -------
Total current assets .................................... 723 724

Equipment leased to others, net ............................ 66 67
Property, net .............................................. 213 205

Other assets:
Intangible assets, net ................................... 174 181
Other .................................................... 101 106
------- -------
Total other assets ...................................... 275 287

Insurance assets:
Investments .............................................. 2,604 2,465
Deferred policy acquisition costs ........................ 643 636
Deferred income taxes .................................... 71 100
Other .................................................... 116 113
------- -------
Total insurance assets .................................. 3,434 3,314
------- -------
Total assets ............................................... $ 4,711 $ 4,597
======= =======

LIABILITIES

Current liabilities:
Trade accounts payable ................................... $ 59 $ 68
Other .................................................... 201 214
------- -------
Total current liabilities ............................... 260 282
Other liabilities:
Long-term debt ........................................... 302 302
Other long-term liabilities .............................. 98 85
Deferred income taxes .................................... 2 3
------- -------
Total other liabilities ................................. 402 390
Insurance liabilities:
Benefit reserves ......................................... 2,310 2,276
Unearned revenue ......................................... 768 758
Other .................................................... 60 60
------- -------
Total insurance liabilities ............................. 3,138 3,094
------- -------
Total liabilities .......................................... 3,800 3,766
------- -------
Commitments and contingencies (Note 5)
SHAREHOLDERS' EQUITY
Common stock ............................................. 4 4
Additional paid-in capital ............................... 25 24
Retained earnings ........................................ 1,408 1,397
Accumulated other comprehensive income (loss) (Note 4) ... (42) (108)
Treasury stock ........................................... (484) (486)
------- -------
Total shareholders' equity ................................. 911 831
------- -------
Total liabilities and
shareholders' equity ...................................... $ 4,711 $ 4,597
======= =======

See Notes to Condensed Consolidated Financial Statements

Hillenbrand Industries, Inc. and Subsidiaries

Condensed Statements of Consolidated Cash Flows

Three Months Ended
------------------
03/03/01 02/26/00
-------- --------
(In Millions)

Net income .......................................... $ 25 $ 36
Adjustments to reconcile net income
to net cash flows from operating activities:
Depreciation, amortization and write-down
of intangibles .................................. 29 23
Change in noncurrent deferred income taxes ........ (3) 2
Change in net working capital excluding cash
and current debt ................................ (8) -
Change in insurance items:
Deferred policy acquisition costs ................ (7) (12)
Unearned revenue ................................. 10 8
Other insurance items, net ....................... 11 16
Other, net ........................................ 29 -
----- -----
Net cash provided by operating activities ............. 86 73
----- -----

Investing activities:
Capital expenditures ................................ (19) (16)
Proceeds on disposal of fixed assets and
equipment leased to others ........................ - 6
Other investments ................................... - (1)
Insurance investments:
Purchases ......................................... (404) (182)
Proceeds on maturities ............................ 98 133
Proceeds on sales ................................. 246 20
----- -----
Net cash used in investing activities ................. (79) (40)
----- -----

Financing activities:
Payment of cash dividends ........................... (13) (13)
Treasury stock acquisitions ......................... - (30)
Insurance deposits received ......................... 90 89
Insurance benefits paid ............................. (72) (73)
----- -----
Net cash provided by (used in) financing activities ... 5 (27)
----- -----

Effect of exchange rate changes on cash ............... 1 (2)
----- -----

Total cash flows ...................................... 13 4

Cash, cash equivalents and short-term investments:
At beginning of period ............................... 132 170
----- -----
At end of period ..................................... $ 145 $ 174
===== =====

See Notes to Condensed Consolidated Financial Statements

Hillenbrand Industries, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Dollars in millions except per share data)

1. Basis of Presentation

The unaudited, condensed consolidated financial statements appearing in
this quarterly report on Form 10-Q should be read in conjunction with the
financial statements and notes thereto included in the Company's latest
annual report. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted. The
statements herein have been prepared in accordance with the Company's
understanding of the instructions to Form 10-Q. In the opinion of
management, such financial statements include all adjustments, consisting
only of normal recurring adjustments, necessary to present fairly the
financial position, results of operations, and cash flows, for the interim
periods.

Certain prior year amounts have been reclassified to conform to the current
year's presentation.

2. Supplementary Balance Sheet Information

The following information pertains to non-insurance assets and consolidated
shareholders' equity:

03/03/01 12/02/00
-------- --------
Allowance for possible losses and
discounts on trade receivables ...... $ 59 $ 61

Inventories
Finished Products ................... $ 77 $ 73
Work in Process ..................... 29 26
Raw Materials ....................... 14 13
---- ----
Total Inventory ................... $120 $112
==== ====

Accumulated depreciation of equipment
leased to others and property ....... $595 $589

Accumulated amortization of intangible
assets .............................. $111 $108

Capital Stock:
Preferred stock, without par value:
Authorized 1,000,000 shares;
Shares issued ............... None None
Common stock, without par value:
Authorized 199,000,000 shares;
Shares issued ............... 80,323,912 80,323,912

3. Earnings per Common Share

Basic earnings per common share were computed by dividing net income by the
average number of common shares outstanding including the effect of
deferred vested shares under the Company's Senior Executive Compensation
Program. Diluted earnings per common share were computed consistent with
the basic earnings per share calculation including the effect of dilutive
potential common shares. Potential common shares arising from shares
awarded under the Company's various stock-based compensation plans,
including the 1996 Stock Option Plan, did not have a material effect on
diluted earnings per common share in any of the periods presented.
Cumulative treasury stock acquired, less cumulative shares reissued, have
been excluded in determining the average number of shares outstanding.

Earnings per share is calculated as follows:

Three Months Ended
03/03/01 02/26/00
-------- --------

Net income (in thousands) $ 25,235 $ 36,517
Average shares outstanding 62,682,170 63,250,318
Basic and diluted earnings per
common share $ .40 $ .58

4. Comprehensive Income (Loss)

Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting
Comprehensive Income", requires unrealized gains or losses on the Company's
available-for-sale securities and foreign currency translation adjustments,
which prior to adoption were reported separately in shareholders' equity,
to be included in accumulated other comprehensive income (loss).

The components of comprehensive income (loss) are as follows (in millions):

Three Months Ended
03/03/01 02/26/00
-------- --------

Net income $ 25 $ 36

Net change in unrealized gain
(loss) on available-for-sale
securities 56 (46)

Foreign currency translation
adjustment 10 (2)
---- ----

Comprehensive income (loss) $ 91 $(12)
==== ====

The composition of accumulated other comprehensive income (loss) at March
3, 2001 and December 2, 2000 is the cumulative adjustment for unrealized
losses on available-for-sale securities of ($24) and ($80) million,
respectively, and the foreign currency translation adjustment of ($18) and
($28) million, respectively.

5. Contingencies

On August 16, 1995, Kinetic Concepts, Inc. (KCI), and Medical Retro Design,
Inc. (collectively, the "plaintiffs"), filed suit against Hillenbrand
Industries, Inc., and its subsidiary Hill-Rom Company, Inc., in the United
States District Court for the Western District of Texas, San Antonio
Division. The plaintiffs allege violation of various antitrust laws,
including illegal bundling of products, predatory pricing, refusal to deal
and attempting to monopolize the hospital bed industry. They seek monetary
damages totaling in excess of $269 million, trebling of any damages that
may be allowed by the court, and injunctions to prevent further alleged
unlawful activities. The Company believes that the claims are without merit
and is aggressively defending itself against all allegations. Accordingly,
it has not recorded any loss provision relative to damages sought by the
plaintiffs.

On November 20, 1996, the Company filed a Counterclaim to the above action
against KCI in the U.S. District Court in San Antonio, Texas. The
Counterclaim alleges, among other things, that KCI has attempted to
monopolize the therapeutic bed market, interfere with the Company's and
Hill-Rom's business relationships by conducting a campaign of
anticompetitive conduct, and abused the legal process for its own
advantage.

The original claims by the plaintiffs against Hillenbrand Industries and
the counterclaims by the Company against KCI are currently scheduled to go
to trial in late 2001.

The Company is subject to various other claims and contingencies arising
out of the normal course of business, including those relating to
commercial transactions, product liability, employee related matters,
safety, health, taxes, environmental and other matters. Litigation is
subject to many uncertainties, and the outcome of individual litigated
matters is not predictable with assurance. It is reasonably possible that
some litigation matters for which reserves have not been established could
be decided unfavorably to the Company. Management believes, however, that
the ultimate liability, if any, in excess of amounts already provided or
covered by insurance, is not likely to have a material adverse effect on
the Company's financial condition, results of operations or cash flows.

The Company's healthcare businesses manufacture medical devices that are
regulated by the U.S. Food and Drug Administration ("FDA"). The Company
continuously improves its quality systems in response to evolving federal
regulations and customer information, and the FDA routinely inspects the
Company's manufacturing facilities to ensure compliance with those
regulations. The Company has responded to previous inspection findings by
further strengthening its quality system and hiring additional qualified
staff and will continue to work with the FDA to address any findings where
further improvement is required.

The Company has voluntarily entered into remediation agreements with
environmental authorities, and has been issued Notices of Violation
alleging violations of certain permit conditions. Accordingly, the Company
is in the process of implementing plans of abatement in compliance with
agreements and regulations. The Company has also been notified as a
potentially responsible party in investigations of certain offsite disposal
facilities. The cost of all plans of abatement and waste-site cleanups in
which the Company is currently involved is not expected to exceed $5
million. The Company has provided adequate reserves in its financial
statements for these matters. These reserves have been determined without
consideration of possible loss recoveries from third parties. Changes in
environmental law might affect the Company's future operations, capital
expenditures and earnings. The cost of complying with these provisions, if
any, is not known.

6. Unusual Charges

2001 Actions

In the first quarter of 2001, Hill-Rom announced realignment efforts in its
home care and long term care businesses along with an organizational
streamlining effort to capture efficiencies, enhance productivity and
better serve customers. Hill-Rom also wrote-down certain assets associated
with an underperforming, non-core Hill-Rom product line. The total
estimated cost of these actions was $20 million, which is recorded as an
unusual charge in the Statement of Consolidated Income. The cash component
of this charge will approximate $12 million.

Included in the realignment and streamlining plan was the reduction of
approximately 400 employees in the United States and Europe with an
estimated cost of $12 million. The unusual charge also included $8 million
related to the write-down of certain assets associated with an
underperforming, non-core product line and a small amount of assets related
to the realignment plan.

As of March 3, 2001, $1 million of the employee reduction costs have been
incurred. The Company expects substantially all employee reduction costs to
be incurred by the end of fiscal 2001.

2000 Actions

In October 2000, the Company announced the retirement of W August
Hillenbrand, Chief Executive Officer. In relation to Mr. Hillenbrand's
retirement, the Company incurred a charge of $8 million related to future
payments and other compensation related items under the terms of his
retirement agreement.

In November 2000, Forethought announced a realignment of certain
operations, incurring an unusual charge of $1 million.

1999 Actions

In November 1999, the Company announced a plan to reduce the operating cost
structure at Hill-Rom, to write-down the value of certain impaired assets
and to recognize a liability associated with the estimated cost of a field
corrective action for a previously acquired product line. The estimated
cost of these actions necessitated an unusual charge of $29 million. The
cash component of this charge was $19 million.

Included in the cost-cutting actions was the reduction of 350 employees in
the United States and Europe and the closure of select manufacturing and
other facilities in the United States and Europe. Estimated costs for the
work force and facility closure actions were $8 million and $3 million,
respectively. The unusual charge also included $10 million relative to
asset impairments for a Hill-Rom investment that has since been liquidated
and the write-off of other strategic investments which have discontinued
operations. The remaining component of the 1999 unusual charge related to
an $8 million field corrective action taken relative to a previously
acquired product line.

As of March 3, 2001, all work force reduction and facility closure costs
and $6 million related to the field corrective action have been incurred.
The field corrective action is expected to be completed by the end of the
third quarter of 2001.

During the fourth quarter of 2000, approximately $2 million of the original
provision was reversed to income within the Unusual charges line of the
Statement of Consolidated Income as actual costs incurred were favorable to
those originally expected.

Other

Dispositions of idled facilities under prior actions were completed in
December 1999 and November 2000, resulting in gains of $2 million and $1
million, respectively. These gains were reflected within the Unusual
charges line of the Statement of Consolidated Income.

The reserve balances for the above plans included in other current
liabilities approximated $15 million and $8 million as of March 3, 2001 and
December 2, 2000, respectively. The reserve balance included in other
long-term liabilities for the retirement of the Company's CEO is
approximately $6 million as of March 3, 2001.

7. Segment Reporting

Statement of Financial Accounting Standards (SFAS) No. 131, "Disclosures
about Segments of an Enterprise and Related Information", requires
reporting of segment information that is consistent with the way in which
management operates and views the Company. In the first quarter of 2001,
the Company changed its method of analyzing segment performance. Whereas
prior methods of segment evaluation were based upon pretax measures, the
Company will now also utilize net income before unusual charges to evaluate
segment performance. Prior period information has been restated to conform
to the current year's presentation.

Based on criteria established in SFAS No. 131, the Company's reporting
segments are Health Care (Hill-Rom), Funeral Services Products (Batesville
Casket Company - Batesville) and Funeral Services Insurance (Forethought
Financial Services - Forethought). Corporate, while not a segment, is
presented separately to aid in the reconciliation of segment information to
that reported in the Statements of Consolidated Income.

Financial information regarding the Company's reportable segments is
presented below:

-----------------------------------------------------------------------------------------------
Funeral Services Corporate
Health ---------------- and Other
Care Products Insurance Expense Consolidated
-----------------------------------------------------------------------------------------------

THREE MONTHS ENDED
MARCH 3, 2001
-----------------------------------------------------------------------------------------------
Net revenues $ 265 $ 163 $ 97 $ - $ 525
Income before income taxes
and unusual items $ 27 $ 43 $ 5 $ (16) $ 59
Net income before unusual items $ 17 $ 28 $ 3 $ (10) $ 38
Unusual items (after taxes) (a) $ (13)
-----------
Net income $ 25
-----------------------------------------------------------------------------------------------
THREE MONTHS ENDED
FEBRUARY 26, 2000
-----------------------------------------------------------------------------------------------
Net revenues $ 257 $ 168 $ 89 $ - $ 514
Income before income taxes
and unusual items $ 22 $ 42 $ 2 $ (11) $ 55
Net income before unusual items $ 14 $ 27 $ 1 $ (7) $ 35
Unusual items (after taxes) (b) $ 1
-----------
Net income $ 36
-----------------------------------------------------------------------------------------------

(a) Reflects a $13 million (after tax) charge for business realignment and
work force reduction activities and certain asset impairments.
(b) Reflects a gain on the sale of an idled facility, which was closed as
part of a prior unusual charge.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

Hillenbrand Industries is organized into two business groups. The Health Care
Group, which is considered one reporting segment, consists of Hill-Rom. The
Funeral Services Group consists of two reporting segments, Funeral Services
Products (Batesville Casket Company - Batesville) and Funeral Services Insurance
(Forethought Financial Services - Forethought).

FIRST QUARTER 2001 COMPARED TO FIRST QUARTER 2000

Consolidated revenues of $525 million increased $11 million, or 2%, compared to
the first quarter of 2000. Operating profit decreased 27%, or $16 million, to
$43 million. Net income of $25 million decreased 31%, or $11 million, compared
to $36 million for the first quarter of 2000, and earnings per share decreased
31% to $.40 compared to $.58 in 2000.

First quarter 2001 results include a $20 million charge related to the
realignment of home care and long-term care businesses and an organizational
streamlining effort at Hill-Rom. 2000 results include a $2 million gain on the
sale of an idled facility which was closed as part of a prior unusual charge.
The 2001 charge and 2000 gain are included in the Unusual charges line of the
Statement of Consolidated Income. Excluding the unusual items mentioned above,
2001 operating profit increased 11%, net income increased approximately 9% and
earnings per share increased 11% from 2000 levels.

Health Care sales increased $6 million, or 3%, to $179 million despite a $4
million negative currency impact. Excluding this negative currency impact, sales
would have increased nearly 6%. The $6 million increase is primarily due to
increased shipments in the U.S. acute care and long-term care markets and U.S.
export markets. Health Care rental revenues of $86 million increased $2 million.
Growth in rental revenues is mainly due to higher units in use in the acute care
and home care markets combined with higher rates in acute care, partially offset
by slightly lower revenue in Europe and unfavorable mix in the home care market.
Overall, acute care rental revenues increased 9%. Funeral Services sales
decreased $5 million, or 3%, to $163 million in the first quarter of 2001
compared to 2000. The Company believes that a mild flu season resulted in lower
death rates, which negatively impacted volume. The decrease in volume was
partially offset by an increase in mix and rates. Insurance revenues of $97
million increased $8 million, or 9%, compared to $89 million in the first
quarter of 2000. Earned premiums increased due to increased policies in-force
year over year. Investment income continued to grow at a double-digit rate due
to the increased size of the investment portfolio. Insurance capital gains were
relatively consistent with prior year.

Gross profit on Health Care sales of $78 million was up $3 million, or 4%, over
the first quarter of 2000. As a percentage of sales, Health Care sales gross
profit increased slightly to 43.6%. This increase was due to increased
production efficiencies partially offset by unfavorable product mix. Gross
profit on rental revenues increased $3 million, or 11%, to $30 million compared
to 2000 and as a percentage of sales improved from 32.1% to 34.9%. This increase
was due to higher volume in acute care and home care and higher rates in acute
care, partially offset by unfavorable mix in the home care market. Funeral
Services sales gross profit was up $1 million, or 1%, to $83 million. As a
percentage of sales, Funeral Services gross profit was 50.9% compared to 48.8%
in the first quarter of 2000 mainly due to continued good cost control and
production efficiencies.

Funeral Services insurance operating profit increased $3 million to $5 million
compared to the first quarter of 2000 primarily due to increased investment
income and earned premiums along with a decrease in operating expenses resulting
from the realignment of certain operations in the fourth quarter of 2000.

Other operating expenses (including insurance operations) increased 2%, or $3
million, to $141 million and were essentially flat as a percentage of revenues.
Increased investments in new business development were partially offset by
realized savings associated with prior year streamlining activities.

Interest expense decreased $1 million compared to the first quarter of 2000 due
to the repayment of $56 million in short-term debt in the fourth quarter of
2000. Investment income decreased $1 million due to decreased cash-on-hand
combined with lower rates.

The effective income tax rate was 36.0% in the first quarter of 2001 compared to
36.4% in 2000. The decrease in the tax rate was primarily due to tax initiatives
undertaken by the Company and the continued profitability of Europe.

LIQUIDITY AND CAPITAL RESOURCES

Net cash flows from operating activities and selected borrowings represent the
Company's primary sources of funds for growth of the business, including capital
expenditures and acquisitions. Cash, cash equivalents and short-term investments
(excluding investments of insurance operations) at March 3, 2001 increased $13
million to $145 million compared to December 2, 2000.

Net cash generated from operating activities of $86 million increased $13
million compared to $73 million generated in the first quarter of 2000.
Operating cash flows were positively impacted by strong collections of accounts
receivable and an increase in other long-term liabilities. Partially offsetting
these favorable impacts were a decrease in accrued liabilities, as the Company
paid out incentive compensation in the first quarter, an increase in inventory
and unfavorable changes in other items.

Net cash used in investing activities increased $39 million to $79 million
primarily due to the effects of investment activities at Forethought along with
increased capital expenditures and reduced proceeds on sales of fixed assets and
equipment leased to others.

In financing activities, net cash provided of $5 million compared to net cash
used in the first quarter of 2000 of $27 million. This change was primarily due
to the purchase of $30 million of treasury stock in the first quarter of 2000.

ACCOUNTING STANDARDS

As of December 3, 2000, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging
Activities." The adoption of this Standard did not materially affect the
Company's financial position or results of operations. SFAS No. 133, as amended,
establishes accounting and reporting standards for derivative instruments and
hedging activities and requires that all derivatives be recognized on the
balance sheet at fair value. Changes in fair values of derivatives will be
accounted for based upon their intended use and designation.

As of December 3, 2000, the Company adopted Staff Accounting Bulletin No. 101
(SAB No. 101), "Revenue Recognition in Financial Statements", issued by the
Securities and Exchange Commission. Adoption of this Staff Accounting Bulletin
did not materially affect the Company's financial position or results of
operations.

UNUSUAL CHARGES

2001 Actions

In the first quarter of 2001, Hill-Rom announced realignment efforts in its home
care and long term care businesses along with an organizational streamlining
effort to capture efficiencies, enhance productivity and better serve customers.
Hill-Rom also wrote-down certain assets associated with an underperforming,
non-core Hill-Rom product line. The total estimated cost of these actions was
$20 million, which is recorded as an unusual charge in the Statement of
Consolidated Income. The cash component of this charge will approximate $12
million.

Included in the realignment and streamlining plan was the reduction of
approximately 400 employees in the United States and Europe with an estimated
cost of $12 million. The unusual charge also included $8 million related to the
write-down of certain assets associated with an underperforming, non-core
product line and a small amount of assets related to the realignment plan.

As of March 3, 2001, $1 million of the employee reduction costs have been
incurred. The Company expects substantially all employee reduction costs to be
incurred by the end of fiscal 2001.

2000 Actions

In October 2000, the Company announced the retirement of W August Hillenbrand,
Chief Executive Officer. In relation to Mr. Hillenbrand's retirement, the
Company incurred a charge of $8 million related to future payments and other
compensation related items under the terms of his retirement agreement.

In November 2000, Forethought announced a realignment of certain operations,
incurring an unusual charge of $1 million.

1999 Actions

In November 1999, the Company announced a plan to reduce the operating cost
structure at Hill-Rom, to write-down the value of certain impaired assets and to
recognize a liability associated with the estimated cost of a field corrective
action for a previously acquired product line. The estimated cost of these
actions necessitated an unusual charge of $29 million. The cash component of
this charge was $19 million.

Included in the cost-cutting actions was the reduction of 350 employees in the
United States and Europe and the closure of select manufacturing and other
facilities in the United States and Europe. Estimated costs for the work force
and facility closure actions were $8 million and $3 million, respectively. The
unusual charge also included $10 million relative to asset impairments for a
Hill-Rom investment that has since been liquidated and the write-off of other
strategic investments which have discontinued operations. The remaining
component of the 1999 unusual charge related to an $8 million field corrective
action taken relative to a previously acquired product line.

As of March 3, 2001, all work force reduction and facility closure costs and $6
million related to the field corrective action have been incurred. The field
corrective action is expected to be completed by the end of the third quarter of
2001.

Other

Dispositions of idled facilities under prior actions were completed in December
1999 and November 2000, resulting in gains of $2 million and $1 million,
respectively. These gains were reflected within the Unusual charges line of the
Statement of Consolidated Income.

The reserve balances for the above plans included in other current liabilities
approximated $15 million and $8 million as of March 3, 2001 and December 2,
2000, respectively. The reserve balance included in other long-term liabilities
for the retirement of the Company's CEO is approximately $6 million as of March
3, 2001.

FACTORS THAT MAY AFFECT FUTURE RESULTS

In connection with the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995 (the "Act") or by the Securities and Exchange
Commission (SEC) in its rules, regulations and releases, readers of this
document are advised that the document contains both statements of historical
facts and forward-looking statements. Forward-looking statements are subject to
certain risks and uncertainties, which could cause actual results to differ
materially from those indicated by the forward-looking statements.
Forward-looking statements can be identified by the fact that they do not relate
strictly to historical or current facts. The Company has tried, wherever
possible, to identify these forward-looking statements by using words such as
"believes," "continue," "expects," or other words of similar meaning.

Forward-looking statements give the Company's expectations or predictions of
future conditions, events or results. They are not guarantees of future
performance. By their nature, forward-looking statements are subject to risks
and uncertainties. There are a number of factors -many of which are beyond the
Company's control- that could cause actual conditions, events or results to
differ significantly from those described in the forward-looking statements.
Forward-looking statements speak only as of the date they are made. The Company
does not undertake to update forward-looking statements to reflect circumstances
or events that occur after the date the forward-looking statements are made.

Some of these factors are described below. There are other factors besides those
described or incorporated in this report and in other documents filed with the
SEC that could cause actual conditions, events or results to differ from those
in the forward-looking statements.

- - The Company's business and earnings are sensitive to general business and
economic conditions of its customers, including funeral homes, hospitals,
long-term care facilities and others, in the United States and abroad. A
downturn in health care capital spending or the market for pre-need
insurance products could adversely affect the demand for these products and
the Company's financial operations.

- - Our death care business is susceptible to changes in death rates mainly in
the United States. Death rates are difficult to predict with great
certainty for any financial period.

- - Future financial performance will depend on the successful introduction of
new products into the marketplace. The financial success of new products
could be impacted by competitor's products, customer acceptance,
difficulties in manufacturing, certain regulatory approvals and other
factors.

- - Many of Hill-Rom's acute care, long-term care and home care customers are
impacted by changes in Medicare reimbursement trends. Cuts in Medicare
funding mandated by the Balanced Budget Act of 1997 (BBA) have had, and
could continue to have, an adverse effect on the Company's healthcare sales
derived from the acute-care market. Legislative changes phased in beginning
July 1, 1998 have had, and may continue to have, a dampening effect on the
Company's rental revenue derived from Medicare patients in the long-term
care market. The Company is also experiencing, and may continue to
experience, pressure on reimbursement rates related to its home care rental
business.

- - The Company has undertaken several realignment and cost reduction
activities in the past three years to become more efficient, enhance
productivity and better serve customers. While management believes these
activities will be successful and will increase shareholder value, there is
always the possibility that these initiatives could take longer than
expected and cost reductions not materialize as anticipated.

- - Legal factors including unanticipated litigation of product liability or
other liability claims; antitrust litigation; environmental matters; and
patent disputes that could preclude introduction of products into the
market place or negatively affect the profitability of products.

- - Changes in tax laws, including laws related to the remittance of foreign
earnings or investments in foreign countries with favorable tax rates and
settlements of federal, state and foreign tax audits.

- - Compliance with the regulations and certification requirements of domestic
and foreign authorities may delay or prevent new product introductions or
affect the production and marketing of existing products.

PART II - OTHER INFORMATION

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

A. Exhibits

There were no exhibits filed with this report 10-Q for the quarter ended
March 3, 2001.

B. Reports on Form 8-K

There were no reports filed on Form 8-K during the first quarter ended
March 3, 2001.

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 INDUSTRIES, INC.

DATE: April 9, 2001 BY: /s/ Scott K. Sorensen
-------------------------
Scott K. Sorensen
Vice President and
Chief Financial Officer

DATE: April 9, 2001 BY: /s/ James D. Van De Velde
-------------------------
James D. Van De Velde
Vice President and Controller