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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 AUGUST 28, 1999 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-65,467,375 as of October 1, 1999.

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HILLENBRAND INDUSTRIES, INC.

INDEX TO FORM 10-Q

Page

PART I - FINANCIAL INFORMATION

Item 1 - Financial Statements (Unaudited)

Consolidated Income for the Three Months 3
And Nine Months Ended 8/28/99 and 8/29/98

Consolidated Balance Sheets at 4
8/28/99 and 11/28/98

Consolidated Cash Flows for the Nine Months 5
Ended 8/28/99 and 8/29/98

Notes to Consolidated Financial Statements 6-11

Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 12-19

PART II - OTHER INFORMATION

Item 5 - Other Information 20

Item 6 - Exhibits and Reports on Form 8-K 20

SIGNATURES 21

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

Hillenbrand Industries, Inc. and Subsidiaries

Consolidated Income

Three Months Ended Nine Months Ended
--------------------- ----------------------
08/28/99 08/29/98 08/28/99 08/29/98
-------- -------- -------- --------
(In Millions Except Per Share Data)

Net revenues:
Health Care sales . . . . . . . . . . . $ 178 $ 181 $ 547 $ 524
Health Care rentals . . . . . . . . . . 76 98 256 310
Funeral Services sales. . . . . . . . . 137 124 455 406
Insurance revenues . . . . . . . . . . 90 80 263 230
-------- -------- -------- --------
Total revenues . . . . . . . . . . . . 481 483 1,521 1,470

Cost of revenues:
Health Care cost of goods sold . . . . . 108 107 323 305
Health Care rental expenses . . . . . . 60 61 181 185
Funeral Services cost of goods sold . . 73 66 235 212
Insurance cost of revenues . . . . . . . 61 53 187 163
-------- -------- -------- --------
Total cost of revenues . . . . . . . . . 302 287 926 865

Other operating expenses . . . . . . . . . . 137 128 410 391

Unusual charges . . . . . . . . . . . . . . . -- 73 9 73
-------- -------- -------- --------

Operating profit (loss) . . . . . . . . . . . 42 (5) 176 141

Interest expense . . . . . . . . . . . . . . (7) (6) (20) (20)

Investment income . . . . . . . . . . . . . . 3 5 10 13

Other income (expense), net . . . . . . . . . (1) 73 (3) 74
-------- -------- -------- --------

Income before income taxes . . . . . . . . . 37 67 163 208

Income taxes . . . . . . . . . . . . . . . . 14 25 60 78
-------- -------- -------- --------

Net income . . . . . . . . . . . . . . . . . $ 23 $ 42 $ 103 $ 130
======== ======== ======== ========

Basic and diluted earnings
per common share (Note 3) . . . . . . . . . $ .35 $ .63 $ 1.55 $ 1.93
======== ======== ======== ========

Dividends per common share . . . . . . . . . $ .195 $ .180 $ .585 $ .54
======== ======== ======== ========

Average shares outstanding (thousands) . . . 66,395 67,465 66,616 67,508
======== ======== ======== ========

See Notes to Consolidated Financial Statements

Hillenbrand Industries, Inc. and Subsidiaries

Consolidated Balance Sheets

ASSETS 08/28/99 11/28/98
-------- --------
(In Millions)

Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . $ 198 $ 297
Trade receivables . . . . . . . . . . . . . . . . . . . . 388 392
Inventories . . . . . . . . . . . . . . . . . . . . . . . . 117 105
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 64
------- -------
Total current assets . . . . . . . . . . . . . . . . . . . 767 858

Equipment leased to others, net . . . . . . . . . . . . . . . 76 81
Property, net . . . . . . . . . . . . . . . . . . . . . . . . 211 221

Other assets:
Intangible assets, net . . . . . . . . . . . . . . . . . . 200 198
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . 140 89
------- -------
Total other assets . . . . . . . . . . . . . . . . . . . . 340 287
Insurance assets:
Investments . . . . . . . . . . . . . . . . . . . . . . . . 2,284 2,204
Deferred policy acquisition costs . . . . . . . . . . . . . 570 536
Deferred income taxes . . . . . . . . . . . . . . . . . . . 80 34
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . 80 59
------- -------
Total insurance assets . . . . . . . . . . . . . . . . . . 3,014 2,833
------- -------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . $ 4,408 $ 4,280
======= =======

LIABILITIES

Current liabilities:
Short-term debt . . . . . . . . . . . . . . . . . . . . . . $ 58 $ 60
Current portion of long-term debt . . . . . . . . . . . . . -- 1
Trade accounts payable . . . . . . . . . . . . . . . . . . 64 69
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . 210 245
------- -------
Total current liabilities . . . . . . . . . . . . . . . . 332 375
Other liabilities:
Long-term debt . . . . . . . . . . . . . . . . . . . . . . 302 303
Other long-term liabilities . . . . . . . . . . . . . . . . 74 86
Deferred income taxes . . . . . . . . . . . . . . . . . . . -- 4
------- -------
Total other liabilities . . . . . . . . . . . . . . . . . 376 393
Insurance liabilities:
Benefit reserves . . . . . . . . . . . . . . . . . . . . . 2,039 1,856
Unearned revenue . . . . . . . . . . . . . . . . . . . . . 709 674
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 30
------- -------
Total insurance liabilities . . . . . . . . . . . . . . . 2,813 2,560
------- -------
Total liabilities . . . . . . . . . . . . . . . . . . . . . . 3,521 3,328
------- -------
Commitments and contingencies (Note 5)
SHAREHOLDERS' EQUITY
Common stock . . . . . . . . . . . . . . . . . . . . . . . 4 4
Additional paid-in capital . . . . . . . . . . . . . . . . 16 15
Retained earnings . . . . . . . . . . . . . . . . . . . . . 1,285 1,221
Accumulated other comprehensive (loss)income (Note 4) . . . (40) 45
Treasury stock . . . . . . . . . . . . . . . . . . . . . . (378) (333)
------- -------
Total shareholders' equity . . . . . . . . . . . . . . . . 887 952
------- -------
Total liabilities and
shareholders' equity . . . . . . . . . . . . . . . . . . . . $ 4,408 $ 4,280
======= =======

See Notes to Consolidated Financial Statements

Hillenbrand Industries, Inc. and Subsidiaries

Consolidated Cash Flows Nine Months Ended
08/28/99 08/29/98
-------- --------
(In Millions)

Operating activities:
Net income ....................................................... $ 103 $ 130
Adjustments to reconcile net income
to net cash flows from operating activities:
Depreciation, amortization and write-down
of goodwill .................................................. 71 119
Change in noncurrent deferred
income taxes ................................................. (3) (7)
Gain on sale of business before income taxes ................... -- (75)
Change in net working capital,
excluding cash, current debt and
acquisitions ................................................. (44) (70)
Change in insurance items:
Deferred policy acquisition costs ............................. (34) (47)
Other insurance items, net .................................... 63 49
Other, net ..................................................... (40) (24)
----- -----
Net cash provided by operating activities .......................... 116 75
----- -----

Investing activities:
Capital expenditures ............................................. (66) (56)
Proceeds on disposal of fixed assets and
equipment leased to others ..................................... 1 4
Acquisitions of businesses, net of cash
acquired ....................................................... (54) (171)
Proceeds on sale of business ..................................... -- 64
Other investments ................................................ (4) (11)
Insurance investments:
Purchases ...................................................... (662) (557)
Proceeds on maturities ......................................... 144 120
Proceeds on sales .............................................. 386 263
----- -----
Net cash used in investing activities .............................. (255) (344)
----- -----

Financing activities:
Additions to debt, net ........................................... 3 126
Payment of cash dividends ........................................ (39) (36)
Treasury stock acquisitions ...................................... (47) (64)
Insurance premiums received ...................................... 359 377
Insurance benefits paid .......................................... (235) (214)
----- -----
Net cash provided by financing activities .......................... 41 189
----- -----

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

Total cash flows ................................................... (99) (81)

Cash and cash equivalents:
At beginning of period ............................................ 297 364
----- -----
At end of period .................................................. $ 198 $ 283
===== =====

See Notes to Consolidated Financial Statements
5

Hillenbrand Industries, Inc. and Subsidiaries

Notes to Consolidated Financial Statements
(Dollars in millions except per share data or where otherwise noted)

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:

08/28/99 11/28/98
-------- --------

Allowance for possible losses and
discounts on trade receivables ....... $ 29 $ 27

Inventories
Finished products ................... $ 68 $ 58
Work in process ..................... 34 32
Raw materials ....................... 15 15
---- ----
Total inventory ................ $117 $105

Accumulated depreciation of equipment
leased to others and property ....... $659 $648

Accumulated amortization of intangible
assets .............................. $155 $150

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 of 16,404,791
shares, less cumulative shares reissued of 1,647,667, have been
excluded in determining the average number of shares outstanding.

Earnings per share is calculated as follows:

Three Months Ended Nine Months Ended
08/28/99 08/29/98 08/28/99 08/29/98
-------- -------- -------- --------

Net income (in thousands) $ 23,258 $ 42,512 $ 103,061 $ 130,126
Average shares outstanding 66,395,139 67,464,938 66,616,353 67,508,240
Basic and diluted earnings
per common share $ .35 $ .63 $ 1.55 $ 1.93

4. Comprehensive Income

As of November 29, 1998, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 130, "Reporting Comprehensive Income".
The adoption of this Standard did not affect the Company's financial
position or results of operations. SFAS No. 130 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 other
comprehensive income. Due to this change, certain balance sheet
reclassifications have been made in order for previously reported
amounts to conform to SFAS No. 130.

The components of comprehensive income are as follows:

Three Months Ended Nine Months Ended
08/28/99 08/29/98 08/28/99 08/29/98
-------- -------- -------- --------

Net income $ 23 $ 42 $ 103 $ 130

Net change in unrealized gain
(loss) on available-for-sale
securities (17) (1) (84) 11

Foreign currency translation
adjustment (6) (4) (1) (15)
----- ----- ----- -----

Comprehensive income $ -- $ 37 $ 18 $ 126
===== ===== ===== =====

The composition of accumulated other comprehensive (loss) income at
August 28, 1999 and November 28, 1998 is the cumulative adjustment for
unrealized gains or losses on available-for-sale securities of ($32)
and $52 million, respectively, and the foreign currency translation
adjustment of ($8) and ($7) million, respectively.

5. Contingencies

As discussed under Item 3 of the Company's Annual Report on Form 10-K
for the fiscal year ended November 28, 1998, Hillenbrand Industries,
Inc., and its subsidiary Hill-Rom Company, Inc., are the subject of an
antitrust suit brought by Kinetic Concepts, Inc. (KCI) in the health
care equipment market. The plaintiff seeks 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. There was no material change in the status of this
litigation during the quarter ended August 28, 1999.

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 that KCI has attempted to monopolize the
therapeutic bed market and to interfere with the Company's and
Hill-Rom's business relationships by conducting a campaign of
anticompetitive conduct. It further alleges that KCI abused the legal
process for its own advantage, interfered with existing Hill-Rom
contractual relationships, interfered with Hill-Rom's prospective
contractual and business relationships, commercially disparaged the
Company and Hill-Rom by uttering and publishing false statements to
customers and prospective customers not to do business with the Company
and Hill-Rom, and committed libel and slander in statements made both
orally and published by KCI that the Company and Hill-Rom were
providing illegal discounts. The Company alleges that KCI's intent is
to eliminate legal competitive marketplace activity. There was no
material change in the status of this litigation during the quarter
ended August 28, 1999.

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 is not known.

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, safety, health, taxes,
environmental and other matters. Management believes 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.

6. Acquisitions

On July 30, 1999, Hill-Rom, a wholly owned subsidiary, purchased the
assets of AMATECH Corporation, a manufacturer and distributor of
surgical table accessories and patient positioning devices for the
operating room, for approximately $28 million, including costs of
acquisition and the assumption of certain liabilities totaling
approximately $1 million. If the purchased entity achieves certain
financial milestones by the end of January 2003, the Company could make
additional payments. This acquisition has been accounted for as a
purchase, and the results of operations have been included in the
consolidated financial statements since the acquisition date. The
excess of the purchase price over the fair value of net assets
acquired, based on the Company's preliminary purchase price allocation,
was approximately $23 million and has been recorded as goodwill which
is being amortized on a straight-line basis over 20 years.

On December 31, 1998, Forethought Life Insurance Company, a wholly
owned subsidiary of Forethought Financial Services, Inc., acquired the
stock of Arkansas National Life Insurance Company for approximately $31
million, including costs of acquisition. This acquisition has been
accounted for as a purchase, and the results of operations of the
acquired business have been included in the consolidated financial
statements since the acquisition date. The excess of the purchase price
over the fair value of net assets acquired was approximately $3 million
which is being amortized on a straight-line basis over 20 years.

Assuming the two fiscal 1999 acquisitions had occurred November 30,
1997, unaudited 1998 and 1999 proforma revenue, net income and earnings
per share would not have been materially different from reported
amounts herein.

In the second quarter of 1999, Hill-Rom, finalized the purchase price
for its fiscal 1998 acquisition of Air-Shields, Inc. As a result of
this settlement, goodwill related to the acquisition was reduced by $5
million.

7. Restructuring Charges and Impairment of Assets

In March 1999, Batesville Casket Company, a wholly owned subsidiary,
announced the planned closing of its Campbellsville, Kentucky casket
manufacturing plant. Approximately 200 production and administrative
employees were affected. Future production of Campbellsville casket
units was transferred to existing plants located in Batesville, Indiana
and Manchester, Tennessee.

The plan to close the Campbellsville manufacturing plant necessitated a
$9 million charge in the second quarter. The non-cash component
consisted of a $5 million write-down of property, plant and equipment
which was determined based upon independent assessments, market
appraisals and management estimates of losses to be incurred upon the
disposition of the Campbellsville facility and surplus equipment.
Property, plant and equipment to be disposed of have an adjusted fair
market value of approximately $5 million, not including costs of
disposal. Additional charges in the plan included $3 million for
severance and employee benefit costs and $1 million of other estimated
plant closing costs. In addition to costs accrued under the plan,
additional costs of approximately $2 million were incurred to relocate
certain manufacturing and business processes to Batesville and
Manchester. These costs were expensed as incurred as required by
generally accepted accounting principles.

As of August 28, 1999, manufacturing operations had been discontinued
at the plant. Nearly $2 million in severance and employee benefit costs
and almost all of the estimated plant closing costs have been incurred
to date. Substantially all employee related costs are expected to be
paid in the next three months. No adjustments were made to reserves
through the third quarter. The disposition of property, plant and
equipment is targeted to be completed within the next nine months, but
could take longer.

In August 1998, the Board of Directors of the Company approved a plan
to restructure Hill-Rom's direct and support operations in Germany and
Austria to permit the Company to more efficiently meet the needs of its
customers and improve profitability. Under the plan, the Company is
reducing fixed costs and aligning manufacturing, distribution, sales
and administrative functions with anticipated demand. The alignment
resulted in the closure of manufacturing facilities in Germany and
Austria and the relocation of certain manufacturing and business
processes to other European locations.

The restructuring plan necessitated the provision of a $70 million
asset impairment and restructuring charge in 1998. The non-cash
component of the charge included a $43 million write-off of German
subsidiary goodwill, $7 million for the write-down of property, plant
and equipment held for sale and $3 million for obsolete inventory
resulting from the realignment of operations. The plan also included
additional charges for severance and employee benefit costs of $10
million and other estimated plant closing costs of $7 million.

As of August 28, 1999, manufacturing operations have been discontinued
in Germany and Austria. Nearly all of the severance and employee
benefit costs and $4 million in other plant closing costs were incurred
through the third quarter of 1999. No adjustments were made to reserves
through the third quarter.

The disposition of property, plant and equipment, along with excess and
discontinued inventories, is targeted to be completed within the next
three months; however, the sale of the properties could take longer.

The remaining reserve balances as of August 28, 1999 for the above
restructuring plans are as follows:

(in millions)

Inventory $1
Severance and employee
benefit costs $1
Other plant closing
costs $3

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

RESULTS OF OPERATIONS

THIRD QUARTER 1999 COMPARED WITH THIRD QUARTER 1998

Consolidated revenues of $481 million decreased $2 million compared to the third
quarter of 1998. Excluding sales from Medeco, which was sold in the third
quarter of 1998, consolidated revenues increased $2 million. Health Care sales
of $178 million decreased $3 million, or 2%. Excluding prior year sales from
Medeco, Health Care sales are up approximately $1 million. The Health Care sales
business continues to have strong sales from the TotalCare(R) bed which
partially offset lower revenues in some Acute Care businesses. Declines in North
American sales are attributable to some shipment delays by our Acute Care
customers as they respond to uncertainty and cuts in Medicare revenues in their
operations. North American sales decreased approximately 2% in the third quarter
while European Health Care sales increased approximately 14%. Health Care rental
revenues decreased $22 million, or 22%, to $76 million in the third quarter.
This decrease is mainly due to the change in Medicare Part A patient
reimbursement practices in the U.S. long term care market. The U.S. Long-Term
Care business continues to experience unfavorable changes in product mix and
volume. U.S. Acute Care and Home Care and European rental revenues were
essentially flat compared to the third quarter of 1998. Funeral Services sales
were up $13 million, or 10%, to $137 million in the third quarter due to
increased unit volume and market penetration of traditional caskets and
cremation products. Funeral Services insurance revenues increased 13%, or $10
million. Higher investment income reflected the larger investment portfolio
while increased earned premium revenue was up due to the increase in policies
in-force year over year.

Gross profit on Health Care sales of $70 million decreased $4 million or 5%. As
a percentage of sales, gross profit was 39.3% compared to 40.9% in the third
quarter of 1998. Gross profit in the third quarter was affected by increased
warranty costs, product mix, increased provisions for inventory and other items.
Health Care rental revenue gross profit decreased $21 million, or 57%, to $16
million and as a percentage of revenues was 21.1% compared to 37.8% in the prior
year primarily due to the change in Medicare reimbursement practices described
above. Gross profit on Funeral Services sales was $64 million compared to $58
million in 1998, a 10% increase. As a percentage of sales, gross profit was
46.7% compared to 46.8% last year. Excluding certain additional expenses
incurred related to the Campbellsville plant shutdown, including costs to move
equipment and employees which were not part of the restructuring charge, gross
profit as a percent of sales would have been higher in the third quarter of 1999
compared to last year. Gross profit margins on Funeral Services sales continue
to be favorable compared to last year due to increased volume and good cost
control.

Funeral Services insurance operating profit of $15 million was slightly below
last year's operating profit of $16 million. This decrease is due to a lower
average interest rate earned on investments and an increase in operating
expenses due to increased business development.

Other operating expenses (including insurance operations) increased $9 million
or 7% to $137 million and as a percentage of sales were 28.5% versus 26.5% in
the third quarter of 1998. Operating expenses increased as a percentage of sales
in the third quarter of this year due to funding of new business developments
and certain increased provisions.

1998 other income, net reflects the pre-tax gain on the sale of Medeco.
Investment income decreased $2 million compared to the third quarter of 1998 due
to a decrease in the average cash balance in 1999.

NINE MONTHS 1999 COMPARED WITH NINE MONTHS 1998

Except as noted below, the factors affecting the third quarter comparisons also
affected the year to date comparisons.

Consolidated revenues of $1,521 million increased $51 million or 3%. Health Care
sales were up 4%, or $23 million, to $547 million. Excluding Medeco, which was
sold in the third quarter of 1998, health care sales increased approximately $50
million, or 10%, compared to 1998 primarily due to increased sales of the
TotalCare(R) bed and increased shipments of Long Term Care capital products,
partially offset by decreased sales in Europe. Health Care rental revenue
declined $54 million, or 17%, to $256 million. This decrease is primarily due to
the change in Medicare Part A reimbursement practices in the U.S. long-term care
market. Excluding Long Term Care rental revenues, overall rental revenues are up
approximately 3% over last year. Acute Care, Home Care and European rental
revenues have all increased compared to 1998. Funeral Services sales increased
12%, or $49 million, to $455 million compared to last year due to increased unit
volume and greater market penetration. Funeral Services insurance revenues of
$263 million increased $33 million, or 14%. Investment income and earned
premiums increased at double-digit rates. Capital gains are approximately $9
million greater than last year.

Consolidated gross profit decreased $10 million, or 2%, to $595 million. Health
Care sales gross profit increased $5 million, or 2%, and as a percentage of
sales was 41.0% compared to 41.8% in 1998. Health Care rental gross profit
decreased 40%, or $50 million, to $75 million. As a percentage of sales Health
Care rental gross profit was 29.3% versus 40.3% last year. This decrease in
gross profit is due to changes in Medicare Part A reimbursement practices
described above. Gross profit on Funeral Services sales was $220 million, an
increase of $26 million, or 13%. As a percentage of sales Funeral Services gross
profit was 48.4% compared to 47.8% in 1998. This increase is primarily due to
increased unit volume and good cost control.

Insurance operating profit of $36 million is comparable to last year. Operating
profit has not increased at a comparable rate to revenue due to increased
expenses related to new business development and other items.

Other operating expenses (including insurance operations) of $410 million were
up $19 million, or 5%, compared to last year and as a percentage of revenues
were 27.0% compared to 26.6% in 1998.

Investment income decreased $3 million due to a lower average cash balance
compared to 1998.

LIQUIDITY AND CAPITAL RESOURCES

Cash provided by operating activities and selected borrowings represent the
Company's primary sources of funds for growth of the business, including capital
expenditures and acquisitions. Cash and cash equivalents (excluding investments
of insurance operations) at August 28, 1999 of $198 million decreased $99
million from November 28, 1998 mainly due to business acquisitions, the purchase
of treasury stock, capital expenditures, payment of a loan related to the
Company Owned Life Insurance program and the payment of cash dividends partially
offset by cash generated from operating activities.

Net cash generated from operating activities of $116 million was an increase of
$41 million compared to 1998. The amount for depreciation and amortization in
the 1998 cash flow statement included $43 million for the write-down of German
goodwill. Working capital, excluding cash, current debt and acquisitions,
increased $44 million from year-end mainly due to an increase in inventory and
decreases in accounts payable and other current liabilities partially offset by
a decrease in trade receivables. The increase in inventory of $12 million mainly
relates to a build up of inventory to normal levels. At the end of fiscal 1998,
the Company experienced a heavy shipping period which decreased inventory levels
and increased trade receivables. The decreases in accounts payable and other
current liabilities of $40 million were due to payments made in fiscal 1999 on
various items accrued at year-end including 1998 incentive compensation and
other operating expenses driven by high fourth quarter production and sales
levels. In the second quarter, the Company paid the loan of approximately $44
million relating to its Company Owned Life Insurance (COLI) program.

Capital expenditures were $10 million more than last year. Acquisitions include
Arkansas National Life Insurance Company, which was acquired in the first
quarter by Forethought Life Insurance Company, a wholly owned subsidiary.
Included in this acquisition were investments of approximately $80 million and
approximately $54 million of benefit reserves. Hill-Rom, a wholly owned
subsidiary, purchased the assets of AMATECH in the third quarter of this year.
(See Note 6 for more information concerning current year acquisitions.) The
activity in Forethought's investment portfolio reflects the objective of
matching proceeds with expected policy benefit payments while maximizing yields
within statutory and management constraints.

In financing activities, treasury stock acquisitions of $47 million consisted of
purchases in the open market. Insurance premiums were $18 million lower than the
same period in 1998 due to lower contract volume. The decrease in policy sales
is mainly due to increased competition. Insurance benefits paid increased $21
million primarily due to adverse mortality during the second quarter of this
year.

FACTORS THAT MAY AFFECT FUTURE RESULTS

As discussed in the Company's latest annual report, legislative changes phased
in beginning July 1, 1998 have had and will continue to have a dampening effect
on the Company's rental revenue derived from Medicare patients in the long-term
care market.

Recently, a Medicare determination made by the Statistical Analysis Durable
Medical Regional Carrier (SADMERC) recoded some of the Company's Home Care
rental products resulting in reduced reimbursement rates. This decision is
currently under review by the Health Care Finance Administration (HCFA), and the
Company does not know when a final decision by HCFA will be made. Depending on
the outcome of the final decision there could be a dampening effect on the
Company's rental revenue derived from Medicare patients in the home-care market.

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 health care
sales derived from the acute-care market.

RESTRUCTURING CHARGES AND IMPAIRMENT OF ASSETS

In March 1999, Batesville Casket Company, a wholly owned subsidiary, announced
the planned closing of its Campbellsville, Kentucky casket manufacturing plant.
Approximately 200 production and administrative employees were affected. Future
production of Campbellsville casket units was transferred to existing plants
located in Batesville, Indiana and Manchester, Tennessee.

The plan to close the Campbellsville manufacturing plant necessitated a $9
million charge in the second quarter. The non-cash component consisted of a $5
million write-down of property, plant and equipment which was determined based
upon independent assessments, market appraisals and management estimates of
losses to be incurred upon the disposition of the Campbellsville facility and
surplus equipment. Property, plant and equipment to be disposed of have an
adjusted fair market value of approximately $5 million, not including costs of
disposal. Additional charges in the plan included $3 million for severance and
employee benefit costs and $1 million of other estimated plant closing costs. In
addition to costs accrued under the plan, additional costs of approximately $2
million were incurred to relocate certain manufacturing and business processes
to Batesville and Manchester. These costs were expensed as incurred as required
by generally accepted accounting principles.

As of August 28, 1999, manufacturing operations had been discontinued at the
plant. Nearly $2 million in severance and employee benefit costs and almost all
of the estimated plant closing costs have been incurred to date. Substantially
all employee related costs are expected to be paid in the next three months. No
adjustments were made to reserves through the third quarter. The disposition of
property, plant and equipment is targeted to be completed within the next nine
months, but could take longer.

In August 1998, the Board of Directors of the Company approved a plan to
restructure Hill-Rom's direct and support operations in Germany and Austria to
permit the Company to more efficiently meet the needs of its customers and
improve profitability. Under the plan, the Company will reduce fixed costs and
align manufacturing, distribution, sales and administrative functions with
anticipated demand. The alignment resulted in the closure of manufacturing
facilities in Germany and Austria and the relocation of certain manufacturing
and business processes to other European locations.

The restructuring plan necessitated the provision of a $70 million asset
impairment and restructuring charge in 1998. The non-cash component of the
charge included a $43 million write-off of German subsidiary goodwill, $7
million for the write-down of property, plant and equipment held for sale and $3
million for obsolete inventory resulting from the realignment of operations. The
plan also included additional charges for severance and employee benefit costs
of $10 million and other estimated plant closing costs of $7 million.

As of August 28, 1999, manufacturing operations have been discontinued in
Germany and Austria. Nearly all of the severance and employee benefit costs and
$4 million in other plant closing costs were incurred through the third quarter
of 1999. No adjustments were made to reserves through the third quarter.

The disposition of property, plant and equipment, along with excess and
discontinued inventories, is targeted to be completed within the next three
months; however, the sale of the properties could take longer.

The remaining reserve balances as of August 28, 1999 for the above restructuring
plans are as follows:

(in millions)

Inventory $1
Severance and employee
benefit costs $1
Other plant closing
costs $3

YEAR 2000 DATE CONVERSION

Many existing computer programs use only two digits to identify years. These
programs were designed without consideration for the effect of the upcoming
change in century, and if not corrected, could fail or create erroneous results
by or at the year 2000. Essentially all of the Company's information technology
based systems, as well as many non-information technology based systems, are
potentially affected by the Year 2000 issue. Technology based systems reside on
mainframes, servers and personal computers in the U.S. and in the foreign
countries where the Company has operations. Specific systems include accounting,
payroll, financial reporting, product development, inventory tracking and
control, business planning, tax, accounts receivable, accounts payable,
purchasing, distribution, and numerous word processing and spreadsheet
applications. The Company's financial services business utilizes life insurance,
accounting and actuarial systems that are also affected. Non-information
technology based systems include equipment and services containing embedded
microprocessors, such as building management systems, manufacturing process
control systems, clocks, security systems and products sold or leased to
customers. All of the Company's businesses have relationships with numerous
third parties, including material suppliers, utility companies, transportation
companies, insurance companies, banks and brokerage firms, that may be affected
by the Year 2000 issue.

The Company's State of Readiness

Remediation plans have been established for all major systems potentially
affected by the Year 2000 issue. The primary phases and current status of the
plans for information technology based systems are summarized as follows:

1. Identification of all applications and hardware with potential Year 2000
issues. To the best of the Company's knowledge, this phase has been
completed.
2. For each item identified, perform an assessment to determine an appropriate
action plan and timetable for remediation of each item. A plan may consist
of replacement, code remediation, upgrade or elimination of the application
and includes resource requirements. To the best of the Company's knowledge,
this phase has been completed.
3. Implementation of the specific action plan. To the best of the Company's
knowledge, nearly all specific action plans have been completed.
4. Test each application upon completion. Testing has been completed for
substantially all mission critical systems. Testing of the remaining
systems should be completed in the fiscal fourth quarter of 1999.
5. Place the new process into production. Substantially all mission critical
applications and systems have been put into production. These include
servers, personal computers and various software programs. Applications and
systems are being put into production once they have been tested. All
mission critical applications and systems should be in production in the
fiscal fourth quarter of 1999.

The Company has identified all non-Management Information System ("non-MIS")
mission critical production, design and facility systems containing embedded
information technology ("Embedded Systems"). The Company has substantially
completed its inventory, remediation and testing of Embedded Systems. All
remaining remediation and testing for mission critical Embedded Systems should
be completed during the fiscal fourth quarter of 1999.

To the best of its knowledge the Company believes it has identified all products
sold or leased to customers which are affected by the Year 2000 issue.
Remediation plans have been developed, implemented and tested, if deemed
appropriate. A product listing is available to customers on the Company's
Hill-Rom web page depicting Year 2000 compliance (www.hill-rom.com). Assessment
of all affected products has been completed to the best of the Company's
knowledge, and corrective actions, if required, should be completed in the
fiscal fourth quarter of 1999.

One small subsidiary, Narco Medical Services, Inc., distributes medical devices
manufactured by third parties. Each supplier has been surveyed to determine its
readiness. Customers have been referred to manufacturers for Year 2000 readiness
information. Contingency plans have been developed to address any resulting
issues.

Identification and assessment of areas of potential third party risk is nearly
complete and, for those areas identified to date, remediation plans have been
developed and are being implemented.

The Costs Involved

The total cost to the Company of achieving Year 2000 compliance is not expected
to exceed $10 million and will consist primarily of the utilization of internal
resources. Spending to date totals approximately $8 million. Costs relating to
internal systems' Year 2000 compliance are included in the Information Systems
budget. All costs related to achieving Year 2000 compliance are based on
management's best estimates. There can be no guarantee that actual results will
not differ from estimates.

Risks and Contingency Plan

The Company is in the process of determining the risks it would face in the
event certain aspects of its Year 2000 remediation plan failed. It is finalizing
contingency plans for all mission-critical processes. Under a "worse case"
scenario, the Company's manufacturing operations would be unable to build and
deliver product due to internal system failures and/or the inability of vendors
to deliver raw materials and components. Alternative suppliers have been
identified and inventory levels of certain key components will be temporarily
increased. While virtually all internal systems can be replaced with manual
systems on a temporary basis, the failure of any mission-critical system will
have at least a short-term negative effect on operations. The failure of
national and worldwide banking information systems or the loss of essential
utilities services due to the Year 2000 issue could result in the inability of
many businesses, including the Company, to conduct business. Contingency
planning, approval and testing should be finalized in the fiscal fourth quarter.

ACCOUNTING STANDARDS

The Financial Accounting Standards Board issued SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities", in June 1998. This Statement
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts, and for
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. Since the Company's
holdings in such instruments is minimal, adoption of this Statement is not
expected to have a material effect on the financial statements. The Company is
required to adopt the Statement not later than the first quarter of fiscal 2001.

PART II - OTHER INFORMATION

ITEM 5. OTHER INFORMATION

From time to time, the Company makes oral and written statements that may
constitute "forward-looking statements" as defined in the Private Securities
Litigation Reform Act of 1995 (the "Act") or by the SEC in its rules,
regulations and releases. The Company desires to take advantage of the "safe
harbor" provisions in the Act for forward-looking statements made from time to
time, including, but not limited to, the forward-looking statements relating to
the future performance of the Company contained in Management's Discussion and
Analysis (under Item 2 Form 10-Q), and the Notes to Consolidated Financial
Statements (under Item 1 on Form 10-Q) and other statements made in this Form
10-Q and in other filings with the SEC.

The Company cautions readers that any such forward-looking statements are based
on assumptions that the Company believes are reasonable, but are subject to a
wide range of risks, and there is no assurance that actual results may not
differ materially. Important factors that could cause actual results to differ
include but are not limited to: differences in anticipated and actual product
introduction dates, the ultimate success of those products in the marketplace,
continuation of production scheduling issues, changes in Medicare reimbursement
trends, the success of cost control and restructuring efforts, the success of
Year 2000 (Y2K) remediation efforts, and the integration of acquisitions, among
other things. Realization of the Company's objectives and expected performance
can also be adversely affected by the outcome of pending litigation and rulings
by the Internal Revenue Service on certain tax positions taken by the Company.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

A. Exhibits

Exhibit 27 Financial Data Schedule

B. Reports on Form 8-K

During the quarter ended August 28, 1999, the Company filed one report
on Form 8-K. The Form 8-K dated August 9, 1999 reported under "Item 5.
Other Events" the Company's announcement that its earnings per share for
the third quarter of 1999 and for the year ended November 27, 1999 would
be lower than analysts' estimates.

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: October 5, 1999 BY: /s/ Donald G. Barger, Jr.
-------------------------------
Donald G. Barger, Jr.
Vice President and
Chief Financial Officer

DATE: October 5, 1999 BY: /s/ James D. Van De Velde
-------------------------------
James D. Van De Velde
Vice President and Controller