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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 MAY 30, 1998 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
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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 - 67,514,217 as of June 24, 1998.
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1
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 Six Months Ended 5/30/98 and 5/31/97
Consolidated Balance Sheets at 4
5/30/98 and 11/29/97
Consolidated Cash Flows for the Six Months 5
Ended 5/30/98 and 5/31/97
Notes to Consolidated Financial Statements 6-8
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-12
PART II - OTHER INFORMATION
Item 4 Submission of Matters to a
Vote of Security Holders 12
Item 5 - Other Information 12
Item 6 - Exhibits and Reports on Form 8-K 13
SIGNATURES 13
2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
Hillenbrand Industries, Inc. and Subsidiaries
Consolidated Income
Three Months Ended Six Months Ended
--------------------- -----------------------
05/30/98 05/31/97 05/30/98 05/31/97
-------- -------- -------- --------
(In Millions Except Per Share Data)
Net revenues:
Health Care sales . . . . . . . . . . . . . . . . $ 197 $ 133 $ 343 $ 272
Health Care rentals . . . . . . . . . . . . . . . 104 93 212 189
Funeral Service sales . . . . . . . . . . . . . 134 135 282 282
Insurance revenues. . . . . . . . . . . . . . . . 73 65 150 129
-------- -------- -------- --------
Total revenues. . . . . . . . . . . . . . . . . . 508 426 987 872
Cost of revenues:
Health Care cost of goods sold. . . . . . . . . . 112 76 198 154
Health Care rental expenses . . . . . . . . . . . 62 55 124 116
Funeral Service cost of goods sold. . . . . . . . 69 70 146 146
Insurance cost of revenues. . . . . . . . . . . . 53 48 110 95
-------- -------- -------- --------
Total cost of revenues. . . . . . . . . . . . . . 296 249 578 511
Other operating expenses . . . . . . . . . . . . . . 138 114 263 232
-------- -------- -------- --------
Operating profit . . . . . . . . . . . . . . . . . . 74 63 146 129
Interest expense . . . . . . . . . . . . . . . . . . (7) (5) (14) (11)
Investment income. . . . . . . . . . . . . . . . . . 3 5 8 9
Other income (expense), net. . . . . . . . . . . . . 2 (2) 1 (2)
-------- -------- -------- --------
Income before income taxes . . . . . . . . . . . . . 72 61 141 125
Income taxes . . . . . . . . . . . . . . . . . . . . 27 24 53 49
-------- -------- -------- --------
Net income . . . . . . . . . . . . . . . . . . . . . $ 45 $ 37 $ 88 $ 76
-------- -------- -------- --------
-------- -------- -------- --------
Basic and diluted net income
per common share . . . . . . . . . . . . . . . . . $ .66 $ .54 $ 1 .30 $ 1.10
-------- -------- -------- --------
-------- -------- -------- --------
Dividends per common share . . . . . . . . . . . . . $ .180 $ .165 $ .36 $ .33
-------- -------- -------- --------
-------- -------- -------- --------
Average shares outstanding (thousands) . . . . . . . 67,525 68,797 67,530 68,795
-------- -------- -------- --------
-------- -------- -------- --------
See Notes to Consolidated Financial Statements
3
Hillenbrand Industries, Inc. and Subsidiaries
Consolidated Balance Sheets
ASSETS 05/30/98 11/29/97
-------- --------
(In Millions)
Current assets:
Cash and cash equivalents. . . . . . . . . . . . . . . . . . . . $ 234 $ 364
Trade receivables. . . . . . . . . . . . . . . . . . . . . . . . 364 333
Inventories. . . . . . . . . . . . . . . . . . . . . . . . . . . 116 79
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 45
------- -------
Total current assets. . . . . . . . . . . . . . . . . . . . . . 765 821
Equipment leased to others, net. . . . . . . . . . . . . . . . . . 92 91
Property, net. . . . . . . . . . . . . . . . . . . . . . . . . . . 242 238
Other assets:
Intangible assets, net . . . . . . . . . . . . . . . . . . . . . 250 126
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84 51
------- -------
Total other assets. . . . . . . . . . . . . . . . . . . . . . . 334 177
Insurance assets:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . 2,054 1,934
Deferred policy acquisition costs. . . . . . . . . . . . . . . . 505 473
Deferred income taxes. . . . . . . . . . . . . . . . . . . . . . 38 43
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 51
------- -------
Total insurance assets. . . . . . . . . . . . . . . . . . . . . 2,648 2,501
------- -------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,081 $ 3,828
------- -------
------- -------
LIABILITIES
Current liabilities:
Short-term debt. . . . . . . . . . . . . . . . . . . . . . . . . $ 55 $ 60
Current portion of long-term debt. . . . . . . . . . . . . . . . - 1
Trade accounts payable . . . . . . . . . . . . . . . . . . . . . 69 71
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 213 227
------- -------
Total current liabilities . . . . . . . . . . . . . . . . . . . 337 359
Other liabilities:
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . 306 203
Other long-term liabilities. . . . . . . . . . . . . . . . . . . 91 75
Deferred income taxes. . . . . . . . . . . . . . . . . . . . . . 2 7
------- -------
Total other liabilities . . . . . . . . . . . . . . . . . . . . 399 285
Insurance liabilities:
Benefit reserves . . . . . . . . . . . . . . . . . . . . . . . . 1,759 1,667
Unearned revenue . . . . . . . . . . . . . . . . . . . . . . . . 644 605
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 26
------- -------
Total insurance liabilities . . . . . . . . . . . . . . . . . . 2,437 2,298
------- -------
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . 3,173 2,942
------- -------
Commitments and contingencies (Note 4)
SHAREHOLDERS' EQUITY
Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . 4 4
Additional paid-in capital . . . . . . . . . . . . . . . . . . . 14 14
Retained earnings. . . . . . . . . . . . . . . . . . . . . . . . 1,148 1,085
Accumulated unrealized gain on investments . . . . . . . . . . . 46 34
Foreign currency translation adjustment. . . . . . . . . . . . . (14) (3)
Treasury stock . . . . . . . . . . . . . . . . . . . . . . . . . (290) (248)
------- -------
Total shareholders' equity. . . . . . . . . . . . . . . . . . . 908 886
------- -------
Total liabilities and shareholders' equity . . . . . . . . . . . . $ 4,081 $ 3,828
------- -------
------- -------
See Notes to Consolidated Financial Statements
4
Hillenbrand Industries, Inc. and Subsidiaries
Consolidated Cash Flows
Six Months Ended
---------------------
05/30/98 05/31/97
-------- --------
(In Millions)
Operating activities:
Net income. . . . . . . . . . . . . . . . . . . . . $ 88 $ 76
Adjustments to reconcile net income
to net cash flows from operating activities:
Depreciation and amortization . . . . . . . . . . 51 54
Change in noncurrent deferred income taxes. . . . (6) (4)
Change in net working capital
excluding cash, current debt and acquisitions . (78) (18)
Change in insurance items:
Deferred policy acquisition costs. . . . . . . . (32) (35)
Other insurance items, net . . . . . . . . . . . 33 18
Other, net. . . . . . . . . . . . . . . . . . . . (19) 9
----- -----
Net cash provided by operating activities . . . . . . 37 100
----- -----
Investing activities:
Capital expenditures, net . . . . . . . . . . . . . (38) (38)
Acquisitions of businesses. . . . . . . . . . . . . (164) -
Other investments . . . . . . . . . . . . . . . . . - (5)
Insurance investments:
Purchases . . . . . . . . . . . . . . . . . . . . (371) (424)
Proceeds on maturities . . . . . . . . . . . . . 63 64
Proceeds on sales prior to maturity . . . . . . . 207 246
----- -----
Net cash used in investing activities . . . . . . . . (303) (157)
----- -----
Financing activities:
Additions (reductions) to debt, net . . . . . . . . 98 (6)
Payment of cash dividends . . . . . . . . . . . . . (25) (23)
Treasury stock acquisitions . . . . . . . . . . . . (43) -
Insurance premiums received . . . . . . . . . . . . 255 267
Insurance benefits paid . . . . . . . . . . . . . . (148) (134)
----- -----
Net cash provided by financing activities . . . . . . 137 104
----- -----
Effect of exchange rate changes on cash . . . . . . . (1) (1)
----- -----
Total cash flows. . . . . . . . . . . . . . . . . . . (130) 46
Cash and cash equivalents:
At beginning of period . . . . . . . . . . . . . . . 364 266
----- -----
At end of period . . . . . . . . . . . . . . . . . . $234 $312
----- -----
----- -----
See Notes to Consolidated Financial Statements
5
Hillenbrand Industries, Inc. and Subsidiaries
Notes to 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.
2. Supplementary Balance Sheet Information
The following information pertains to non-insurance assets and consolidated
shareholders' equity:
05/30/98 11/29/97
------------ ------------
Allowance for possible losses and
discounts on trade receivables.......... $ 26 $ 25
Accumulated depreciation of equipment
leased to others and property........... $620 $602
Accumulated amortization of intangible
assets.................................. $164 $156
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
The Company adopted Statement of Financial Accounting Standards No. 128,
"Earnings per Share," effective November 30, 1997 (the beginning of fiscal
year 1998). This standard requires disclosure of basic earnings per share
and diluted earnings per share. Basic earnings per share is defined as
income available to common shareholders divided by the weighted-average
number of
6
common shares outstanding during the applicable period. Diluted earnings
per share gives effect to the dilutive potential common shares that were
outstanding during the period. 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 dilutive
effect on earnings per share in the second quarter of 1998 and all prior
periods. Cumulative treasury stock acquired of 14,309,067 shares, less
cumulative shares reissued of 1,582,569, have been excluded in determining
the average number of shares outstanding during each period.
Earnings per share is calculated as follows:
Three Months Ended Six Months Ended
---------------------- ----------------------
05/30/98 05/31/97 05/30/98 05/31/97
---------- ---------- ---------- ----------
Net income (in thousands) $44,706 $36,953 $87,614 $75,457
Average shares outstanding 67,524,650 68,796,966 67,529,891 68,794,808
Basic and diluted earnings
per common share $.66 $.54 $1.30 $1.10
4. Contingencies
As discussed under Item 3 of the Company's Annual Report on Form 10-K for
the fiscal year ended November 29, 1997, Hillenbrand Industries, Inc., and
its subsidiary Hill-Rom Company, Inc., are the subject of an antitrust suit
brought by a competitor 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 May 30, 1998.
On November 20, 1996, the Company filed a Counterclaim to the above action
against Kinetic Concepts, Inc. (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 May 30, 1998.
7
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 $10
million. The Company has provided adequate reserves in its financial
statements for these matters. 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.
5. Acquisitions
On December 18, 1997, the Company's subsidiary, Hill-Rom, acquired the
stock of Air-Shields, Inc., a manufacturer and supplier of infant
incubators and warmers, and certain other businesses of Vickers PLC for a
cash payment of $102 million and the assumption of certain liabilities
totaling $34 million, which includes costs of acquisition. On February 9,
1998, Hill-Rom acquired the stock of MEDAES Holdings, Inc., a manufacturer
of medical architectural systems, for a cash payment of $62 million and the
assumption of certain liabilities totaling $15 million, including costs of
acquisition. These acquisitions have been accounted for as purchases and,
accordingly, their results are included in the Company's consolidated
financial statements since the dates of acquisition. The excess of the
purchase price over the fair value of the assets acquired, totaling $135
million, has been recorded as goodwill and is being amortized over 20
years. The purchase price allocations are preliminary pending the
completion of certain contractual commitments. These acquisitions,
singularly and combined, will not have a significant effect on the
Company's results of operations. The pro forma impact of these
acquisitions on prior periods would also not be material.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
SECOND QUARTER 1998 COMPARED WITH SECOND QUARTER 1997
Consolidated revenues of $508 million were up $82 million or 19%. Health Care
sales grew $64 million, or 48%, due primarily to the acquisition of Air-Shields
and MEDAES in the first quarter. Excluding the effect of these acquisitions,
Health Care sales increased 20% due to higher electric bed, frames, furniture
and architectural product shipments in
8
the acute care and long term care markets and increased shipments of
communications products. In Europe, sales growth in the United Kingdom was
partially offset by lower sales in France and unfavorable currency
adjustments. At Medeco Security Locks, shipments were up in both the route
management and door security markets. Health Care rental revenue increased
$11 million or 12%. In North America, higher units in use in the acute care,
long term care and home care markets were partially offset by pricing
pressures and mix down in product utilization. Rental revenue in Europe was
up marginally. Funeral Service sales were down $1 million, or 1%, due
primarily to lower product mix and higher discounting, partially offset by
increased unit volume of caskets and cremation products. Insurance revenues
grew $8 million or 12%. Higher investment income reflected the larger
investment portfolio, partially offset by marginally lower yields. Earned
premium revenue was up due to the increase in insurance in-force year over
year. Net gains on the sale of investments of $2 million compares with
$1 million in the second quarter of 1997.
Gross profit on Health Care sales of $85 million was up $28 million, or 49%,
and as a percentage of sales was 43.1% compared with 42.9% in the second
quarter of 1997. This growth reflected acquisitions and higher shipments of
existing products as discussed above. The improvement in margins on a
percentage basis was due to strong shipments of domestic products combined
with sales of European products at lower margins constituting a smaller
percentage of total sales, mostly offset by the inclusion of lower margin
Air-Shields products. Gross profit on rental revenues was up $4 million, or
11%, and as a percentage of revenues was 40.4% versus 40.9% in 1997.
Improvements in service cost were offset by the aforementioned lower rates.
Gross profit on Funeral Service sales was unchanged at $65 million, and as a
percentage of sales, was up marginally from 48.1% to 48.5%.
Insurance operating profit of $10 million increased $1 million, or 11%, from the
second quarter of 1997 due to the revenue factors discussed above and continued
control of administrative expenses.
Other operating expenses (including insurance operations) increased $24 million,
or 21%, and as a percentage of revenues were 27.2% versus 26.8% in last year's
second quarter. Costs associated with recent acquisitions were mostly offset by
ongoing operational improvements.
Interest expense was up $2 million due to the issuance of $100 million of
debentures in the first quarter. Investment income was down $2 million due
to lower levels of cash and lower interest rates.
The consolidated effective income tax rate was 37.5% in the second quarter of
1998 versus 39.3% in the comparable period of 1997 due primarily to lower
operating losses in Europe.
SIX MONTHS ENDED MAY 30, 1998 COMPARED WITH SIX MONTHS ENDED MAY 31, 1997
Except as noted below, the factors affecting second quarter comparisons also
affected year to date comparisons.
9
Consolidated revenues of $987 million were up $115 million or 13%. Health
Care sales grew $71 million or 26%. The first quarter acquisitions accounted
for 18% growth and increased shipments of electric beds, frames, furniture,
architectural products and communications products accounted for a combined
8% growth. In Europe, sales growth in the United Kingdom and the Netherlands
was mostly offset by unfavorable currency adjustments. Excluding the
currency effect, sales in France and Germany were essentially unchanged year
over year. Door security and route management shipments were up at Medeco
Security Locks. Health Care rental revenue increased $23 million or 12%. In
North America, higher units in use in all markets was partially offset by
pricing pressures and mix down in product utilization. Increased rental
revenue in Europe was mostly offset by unfavorable currency adjustments.
Funeral Service sales were unchanged year over year. Casket unit volume
increases and higher options sales in both quarters were offset by higher
discounting and lower product mix. Insurance revenues grew $21 million or
16%, as earned premiums, investment income and capital gains all increased at
double digit rates.
Gross profit on Health Care sales of $145 million was up $27 million, or 23%,
and as a percentage of sales was 42.3%, down from 43.4% in 1997. The growth
from acquisitions negatively affected margins on a percentage basis,
offsetting the improvement realized by increased base business shipments in
the second quarter. Gross profit on rental revenues was up $15 million, or
21%, and as a percentage of revenues was 41.5% versus 38.6% in 1997. Service
cost improvements exceeded the effect of lower prices and mix. Gross profit
on Funeral Service sales of $136 million, or 48.2% of sales, was equal to the
comparable period of 1997.
Insurance operating profit of $20 million increased $4 million or 25%.
Other operating expenses (including insurance operations) increased $31 million,
or 13%, and as a percentage of revenues were 26.6% in both years. Acquisition
related costs and higher incentive compensation were partially offset by lower
legal expenses and various operational improvements.
Interest expense increased $3 million due to the debentures issued in the first
quarter. The $1 million decrease in investment income reflected lower cash and
interest rates, primarily in the second quarter.
The consolidated effective income tax rate declined from 39.2% in 1997 to 37.6%
in 1998 due to reduced operating losses in Europe.
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 the
investments of insurance operations) at May 30, 1998 of $234 million were down
$130 million from November 29, 1997. Cash provided by operating activities of
$37million in the first six months was $63 million lower than the comparable
period of 1997. Excluding the effect of acquisitions, net working capital
increased $78 million from year end. The inventory increase of $11
10
million primarily reflected inventory associated with Hill-Rom's TotalCare bed,
which was introduced in late 1997. The decline in accounts payable and accrued
expenses totaling $65 million was due to first and second quarter payments on
various items accrued at year end, including a $13 million treasury stock
purchase, 1997 incentive compensation and other operating expenses driven by
high fourth quarter production levels.
Acquisitions (discussed in Note 5) included Air-Shields, Inc. ($102 million) and
MEDAES Holdings, Inc. ($62 million). 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.
On December 8, 1997, the Company issued the remaining $100 million of
debentures under a shelf registration statement filed with Securities and
Exchange Commission in 1993. The net proceeds of $98 million will be used
for working capital, capital expenditures and acquisitions. The $42 million
stock purchase in the first quarter represented the acquisition of 990,000
shares from a trust established by a founder of the Company. Insurance
premiums received were $12 million below the first two quarters of 1997 due
to fewer trust rollovers and lower contract volume and average funeral value.
FACTORS THAT MAY AFFECT FUTURE RESULTS
As discussed in the Company's latest annual report, legislative changes to be
phased in beginning in the third quarter will have a dampening effect on the
Company's rental revenue derived from Medicare patients in the long-term care
market.
Although losses have been reduced and revenues have improved marginally in
Hill-Rom's European operations, continued softness in most markets will
result in Europe remaining unprofitable overall for the year. The
performance of these operations have not met management's expectations since
they were acquired and are under continual review and evaluation.
Many existing computer programs use only two digits to identify years. These
programs were designed without consideration for the affect of the upcoming
change in century, and if not corrected, could fail or create erroneous
results by or at the year 2000. In order to avoid the potentially material
adverse effects to its business that could be created by "Year 2000" software
failures, the Company has developed a detailed remediation plan. Steps taken
under this plan are intended to identify, evaluate and implement changes to
computer systems and applications necessary to achieve a year 2000 date
conversion with no effect on customers or disruption to business operations.
Major areas of potential business impact have been identified and conversion
efforts are underway. The Company is communicating with suppliers, dealers,
financial institutions and others with which it does business to coordinate
Year 2000 conversion. The conversion should be essentially complete not
later than the first quarter of fiscal 1999. The total cost of achieving
Year 2000 compliance is not expected to exceed $10 million over the cost of
normal software upgrades and replacements.
11
On April 20, 1998, the Company reached an agreement in principle with Assa Abloy
AB to sell its wholly owned lock subsidiary, Medeco Security Locks, Inc. The
transaction is expected to close in the third quarter of 1998 and will result
in a gain.
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE
OF SECURITY HOLDERS
The Company held its Annual Meeting of shareholders on April 7, 1998. Matters
voted upon by proxy were: The election of three directors nominated for three
year terms expiring in 2001 and the ratification of the Board of Director's
appointment of Price Waterhouse LLP as independent accountants of the Company.
Voted Broker
For Withheld Non-Vote
---------- --------- --------
Election of directors in Class II
for terms expiring in 2001:
Lawrence R. Burtschy 61,933,871 1,848,166 0
Daniel A. Hillenbrand 62,963,557 818,480 0
Ray J. Hillenbrand 62,963,627 818,410 0
Messrs. John C. Hancock, George M. Hillenbrand II and John A. Hillenbrand II
will continue to serve as Class III directors and Messrs. Peter F. Coffaro,
Edward S. Davis, Leonard Granoff and W August Hillenbrand will continue to serve
as Class I directors.
Voted Voted Broker
For Against Abstained Non-Vote
---------- ------- --------- --------
Proposal to ratify Price
Waterhouse LLP as the
Company's independent
accountants 63,686,400 44,606 51,031 0
ITEM 5. OTHER INFORMATION
This report contains certain forward-looking statements which are based on
management's current views and assumptions regarding future events and financial
performance. These statements are qualified by reference to "Disclosure
Regarding Forward-Looking Statements" in Part II of the Company's Annual Report
on Form 10-K for the fiscal year ended November 29, 1997 which lists important
factors that could cause actual results to differ materially from those
discussed in this report.
12
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits
Exhibit 27 Financial Data Schedule
B. Reports on Form 8-K
There were no reports filed on Form 8-K during the second quarter
ended May 30, 1998.
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: June 29, 1998 BY: /S/ Donald G. Barger, Jr.
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Donald G. Barger, Jr.
Chief Financial Officer
DATE: June 29, 1998 BY: /S/ James D. Van De Velde
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James D. Van De Velde
Controller
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