Amended Quarterly Report
Table of Contents
of the Securities Exchange Act of 1934
| 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) |
(Registrant’s telephone number, including area code)
(Former name, former address and former
fiscal year, if changed since last report)
| Yes þ | No o |
| Yes þ | No o |
| Yes o | No þ |
1
Table of Contents
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(Dollars in millions except per share data)
| Quarterly | Year-To-Date | |||||||||||||||
| Period Ended | Period Ended | |||||||||||||||
| (As Restated, | (As Restated, | |||||||||||||||
| See Note 14) | See Note 14) | |||||||||||||||
| 6/30/05 | 6/30/04 | 6/30/05 | 6/30/04 | |||||||||||||
|
Net Revenues
|
||||||||||||||||
|
Health Care sales
|
$ | 190.3 | $ | 187.1 | $ | 583.2 | $ | 528.6 | ||||||||
|
Health Care rentals
|
115.4 | 121.3 | 356.9 | 333.2 | ||||||||||||
|
Funeral Services sales
|
160.3 | 153.1 | 501.4 | 493.4 | ||||||||||||
|
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|
Total revenues
|
466.0 | 461.5 | 1,441.5 | 1,355.2 | ||||||||||||
|
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Cost of Revenues
|
||||||||||||||||
|
Health Care cost of goods sold
|
106.9 | 99.1 | 321.9 | 276.5 | ||||||||||||
|
Health Care rental expenses
|
71.9 | 69.9 | 217.8 | 177.8 | ||||||||||||
|
Funeral Services cost of goods sold
|
76.3 | 70.5 | 234.5 | 220.5 | ||||||||||||
|
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|
Total cost of revenues
|
255.1 | 239.5 | 774.2 | 674.8 | ||||||||||||
|
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|
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Gross Profit
|
210.9 | 222.0 | 667.3 | 680.4 | ||||||||||||
|
|
||||||||||||||||
|
Other operating expenses
|
145.8 | 145.0 | 450.5 | 428.9 | ||||||||||||
|
Special charges (credits)
|
5.6 | (1.4 | ) | 5.5 | (1.4 | ) | ||||||||||
|
|
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Operating Profit
|
59.5 | 78.4 | 211.3 | 252.9 | ||||||||||||
|
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|
Other income (expense), net:
|
||||||||||||||||
|
Interest expense
|
(4.3 | ) | (4.5 | ) | (12.7 | ) | (11.5 | ) | ||||||||
|
Investment income
|
6.3 | 1.3 | 18.5 | 3.7 | ||||||||||||
|
Loss on extinguishment of debt
|
— | (6.4 | ) | — | (6.4 | ) | ||||||||||
|
Other
|
(1.7 | ) | 4.5 | (3.1 | ) | 0.5 | ||||||||||
|
|
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Income from Continuing Operations Before Income Taxes
|
59.8 | 73.3 | 214.0 | 239.2 | ||||||||||||
|
|
||||||||||||||||
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Income tax expense (Note 11)
|
22.1 | 28.6 | 79.2 | 97.0 | ||||||||||||
|
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||||||||||||||||
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Income from Continuing Operations
|
37.7 | 44.7 | 134.8 | 142.2 | ||||||||||||
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Discontinued Operations (Note 4):
|
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Income (loss) from discontinued operations before income taxes
(including (gain) loss on impairment/divestiture of discontinued operations of $0, $(9.8), ($0.1) and $116.8) |
0.5 | 9.7 | 1.3 | (84.4 | ) | |||||||||||
|
Income tax expense (benefit)
|
0.2 | 0.5 | 0.5 | (23.5 | ) | |||||||||||
|
|
||||||||||||||||
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|
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Income (loss) from discontinued operations
|
0.3 | 9.2 | 0.8 | (60.9 | ) | |||||||||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
Net Income
|
$ | 38.0 | $ | 53.9 | $ | 135.6 | $ | 81.3 | ||||||||
|
|
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|
|
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|
Income per common share from continuing operations
— Basic (Note 5)
|
$ | 0.61 | $ | 0.72 | $ | 2.18 | $ | 2.29 | ||||||||
|
Income (loss) per common share from discontinued operations
— Basic (Note 5)
|
0.00 | 0.15 | 0.01 | (0.98 | ) | |||||||||||
|
|
||||||||||||||||
|
Net Income per Common Share — Basic
|
$ | 0.62 | $ | 0.87 | $ | 2.19 | $ | 1.31 | ||||||||
|
|
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|
Income per common share from continuing operations
— Diluted (Note 5)
|
$ | 0.61 | $ | 0.71 | $ | 2.17 | $ | 2.27 | ||||||||
|
Income (loss) per common share from discontinued operations
— Diluted (Note 5)
|
0.00 | 0.15 | 0.01 | (0.97 | ) | |||||||||||
|
|
||||||||||||||||
|
Net Income per Common Share — Diluted
|
$ | 0.61 | $ | 0.86 | $ | 2.18 | $ | 1.30 | ||||||||
|
|
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|
|
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|
Dividends per Common Share
|
$ | 0.28 | $ | 0.27 | $ | 0.84 | $ | 0.81 | ||||||||
|
|
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|
Average Common Shares Outstanding — Basic (thousands)
|
61,526 | 62,303 | 61,852 | 62,248 | ||||||||||||
|
|
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|
|
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|
Average Common Shares Outstanding — Diluted (thousands)
|
61,896 | 62,637 | 62,253 | 62,603 | ||||||||||||
|
|
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See Notes to Condensed Consolidated Financial Statements
4
Table of Contents
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
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42
43
44
45
46
47
48
49
50
51
52
53
(Dollars in millions)
As
Restated — See Note 14
6/30/05
9/30/04
$
75.5
$
127.7
76.5
52.5
401.3
416.7
129.4
121.5
26.2
12.2
22.1
15.5
731.0
746.1
160.8
150.7
210.4
221.5
80.6
79.5
426.9
429.3
181.2
190.1
113.2
105.2
15.4
—
36.2
49.0
772.9
773.6
105.8
98.3
$
2,061.5
$
2,069.7
$
92.4
$
93.6
6.8
11.0
69.4
86.6
15.8
18.6
85.6
99.1
270.0
308.9
354.1
359.9
102.6
124.7
32.4
4.7
98.3
91.6
857.4
889.8
4.4
4.4
62.6
62.1
1,742.9
1,658.9
2.5
6.0
(608.3
)
(551.5
)
1,204.1
1,179.9
$
2,061.5
$
2,069.7
Table of Contents
(Dollars in millions)
Year-to-Date Period Ended
(As Restated,
See Note 14)
6/30/05
6/30/04
$
135.6
$
81.3
86.8
76.1
(10.4
)
—
—
(9.7
)
19.6
(21.5
)
—
81.8
4.4
7.4
—
6.4
(76.7
)
(7.4
)
(9.1
)
(42.7
)
—
56.6
—
34.7
25.4
(1.7
)
175.6
261.3
(82.0
)
(79.7
)
—
39.6
(9.5
)
(429.4
)
(121.5
)
(27.3
)
101.3
59.7
—
(616.0
)
—
93.9
—
416.8
(111.7
)
(542.4
)
(4.1
)
5.2
—
534.9
—
(294.9
)
—
(1.7
)
(51.6
)
(50.5
)
11.5
21.4
(71.4
)
(26.5
)
—
228.1
—
(221.6
)
(115.6
)
194.4
(0.5
)
0.5
(52.2
)
(86.2
)
127.7
154.9
$
75.5
$
68.7
Table of Contents
(Dollars in millions except per share data)
1.
Summary of Significant Accounting Policies
Basis of Presentation
The unaudited, condensed consolidated financial statements appearing in this quarterly
report on Form 10-Q/A should be read in conjunction with the financial statements and notes
thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended
September 30, 2004 as amended and filed with the U.S. Securities and Exchange Commission.
Unless the context otherwise requires, the terms “Hillenbrand”, “the Company”, “we”, “our”
and “us” refer to Hillenbrand Industries, Inc. and its consolidated subsidiaries, and the
terms “Hill-Rom Company”, “Batesville Casket Company”, and derivations thereof, refer to
one or more of the subsidiary companies of Hillenbrand that comprise those respective
business units. Prior to July 1, 2004, Forethought Financial Services (“Forethought”) was
our third operating company. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. In the opinion of management, the financial
statements herein include all adjustments, consisting only of normal recurring adjustments,
necessary to state fairly the financial position, results of operations, and cash flows for
the interim periods presented. Quarterly results are not necessarily indicative of annual
results.
We divested the piped-medical gas and infant care businesses of Hill-Rom and Forethought in
the first, third and fourth quarters, respectively, of fiscal 2004 as further described in
Note 4 below. These operations were presented as discontinued operations within our
Condensed Consolidated Statements of Income for all periods up to the disposal date. Under
this presentation, the revenues and variable costs associated with the businesses have been
removed from the individual line items comprising the Condensed Consolidated Statements of
Income and are presented in a separate section entitled, “Discontinued Operations”. In
addition, fixed costs related to the businesses eliminated with the divestitures have also
been included as a component of discontinued operations. The results of discontinued
operations are not necessarily indicative of the results of the businesses if they had been
operated on a stand-alone basis. On the Condensed Consolidated Balance Sheets, the assets
and liabilities of the discontinued operations are also presented separately beginning in
the period in which the businesses were discontinued. On the Condensed Consolidated
Statements of Cash Flows, proceeds from the sale of discontinued operations are classified
as an investing cash inflow and any losses are presented as a reconciling item in the
reconciliation of net income to net cash provided from operations. Year-to-date operating,
investing and financing activities of the discontinued operations are reflected within the
respective captions of the Condensed Consolidated Statements of Cash Flows up to the
disposal date, consistent with previous periods. As of and for the three- and nine-month
periods ended June 30, 2005, the condensed consolidated financial statements included as a
discontinued operation the results of Forethought Federal Savings Bank, whose divestiture
is expected to close by the end of 2005.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its wholly
owned subsidiaries. Material intercompany accounts and transactions have been eliminated in
consolidation.
Reclassification
Certain prior year amounts have been reclassified to conform to the current year’s
presentation, including the reclassification of financial statement items not separately
stated in the prior year.
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Revision in the Classification of Certain Securities
During the first quarter of fiscal 2005, we concluded that it was appropriate to classify
our auction rate municipal bonds as current investments. Previously, such investments had
been classified as cash and cash equivalents. Accordingly, we have revised the
classification to report these securities as current investments in a separate line item on
our Condensed Consolidated Balance Sheet as of September 30, 2004. We have also made
corresponding adjustments to our Condensed Consolidated Statement of Cash Flows for the
period ended June 30, 2004, to reflect the gross purchases and sales of these securities as
investing activities rather than as a component of cash and cash equivalents. This change
in classification does not affect previously reported cash flows from operations or from
financing activities in our previously reported Consolidated Statements of Cash Flows, or
our previously reported Consolidated Statements of Income for any period.
As of September 30, 2003, $33.4 million of these current investments were classified as cash
and cash equivalents on our Consolidated Balance Sheet.
For the fiscal years ended September 30, 2004 and 2003 and for the ten months ended
September 30, 2002, net cash provided by (used in) investing activities related to these
current investments of ($19.1) million, $169.5 million and $1.8 million, respectively, were
included in cash and cash equivalents in our Consolidated Statements of Cash Flows.
Current Investments
At June 30, 2005 and September 30, 2004, we held $76.5 million and $52.5 million,
respectively, of current investments, which consist of auction rate municipal bonds
classified as available-for-sale securities. Our investments in these securities are
recorded at cost, which approximates fair market value due to their variable interest rates,
which typically reset every 7 to 35 days, and, despite the long-term nature of their stated
contractual maturities, we have the ability to quickly liquidate these securities. As a
result, we had no cumulative gross unrealized holding gains (losses) or gross realized gains
(losses) from our current investments. All income generated from these current investments
was recorded as Investment income.
Investments
We use the equity method of accounting for certain private equity limited partnership
investments, with earnings or losses reported within Investment income in the Condensed
Consolidated Statements of Income. Other minority investments are accounted for on either a
cost or equity basis, dependent upon our level of influence over the investee.
Stock-Based Compensation
We apply the provisions of Accounting Principles Board (APB) Opinion No. 25, “Accounting for
Stock Issued to Employees”, in accounting for stock-based compensation. As a result, no
compensation expense is recognized for stock options granted with exercise prices equivalent
to the fair market value of stock on date of grant. Compensation expense is recognized on
other forms of stock-based compensation, including stock and performance-based awards and
units.
The following table illustrates the effect on net income and earnings per share if we had
applied the fair value recognition provisions of Statement of Financial Accounting Standards
(SFAS) No. 123, “Accounting for Stock-Based Compensation”, to all stock-based employee
compensation for the periods covered in this report. The fair values of stock option grants
are estimated on the date of grant. Prior to fiscal year 2005 we used the Black-Scholes
option-pricing model, but all stock options granted in fiscal year 2005 are valued with the
Binomial option-pricing model for pro forma expense purposes only. Our Binomial model
incorporates the possibility of early exercise of options into the valuation, as well as our
historical exercise and termination experience to determine the option value. For these
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reasons, we believe the Binomial model provides a fair value that is more representative of
actual historical experience than the value calculated under the Black-Scholes model.
The weighted average fair value of options granted in the first nine months of fiscal 2005
was $13.19 under the Binomial model using the following assumptions: (i) risk-free interest
rates of 2.64-4.09 percent; (ii) expected dividend yields of 1.70-2.08 percent; (iii)
expected volatility factors of 0.2023-0.2592; and (iv) expected term of 6.8 years.
New Accounting Pronouncements
In December 2004, the Financial Accounting Standards Board (FASB) issued SFAS No. 123(R),
“Share-Based Payment.” This Statement requires companies to measure and recognize
compensation expense for all stock options and share-based compensation transactions using a
fair-value-based method. SFAS No. 123(R) thereby eliminates the use of the intrinsic value
method of accounting in APB No. 25, “Accounting for Stock Issued to Employees”, which was
permitted under SFAS No. 123, as long as the footnotes to the financial statements disclosed
pro forma net income as if the fair-value-based method had been used. In April 2005, the
effective date of SFAS No. 123(R) was delayed to the annual periods beginning after June 15,
2005, and thus will become effective for us in the first quarter of fiscal 2006. We are
currently evaluating the adoption methods available and the impact of this pronouncement to
our consolidated financial statements and results of operations.
In November 2004, the FASB issued SFAS No. 151, “Inventory Costs”, to amend Accounting
Research Bulletin (ARB) No. 43, Chapter 4, “Inventory Pricing”. SFAS No. 151 clarifies the
accounting for abnormal amounts of idle facility expense, freight, handling costs, and
wasted material by requiring these items to be recognized as current-period charges.
Additionally, the Statement requires that allocation of fixed production overheads to the
costs of conversion be based on normal capacity of the production facilities. The adoption
of SFAS No. 151 is required for fiscal years beginning after June 15, 2005. We adopted SFAS
No. 151 in the second quarter of fiscal 2005 without an impact on our consolidated financial
statements and results of operations.
In December 2004, the FASB issued SFAS No. 153, “Exchanges of Nonmonetary Assets, an
amendment of APB Opinion No. 29, Accounting for Nonmonetary Assets”. SFAS No. 153 requires
that exchanges of nonmonetary assets be measured based on the fair value of the
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assets
exchanged. Further, it expands the exception for nonmonetary exchanges of similar
productive assets to nonmonetary assets that do not have commercial substance. The
provisions of the Statement are effective for nonmonetary asset exchanges occurring in
fiscal periods beginning after June 15, 2005. The adoption of the provisions of SFAS No.
153 is not expected to have a material impact on our consolidated financial statements or
results of operations.
In May 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections — a
Replacement of APB Opinion No. 20 and FASB Statement No. 3”. SFAS No. 154 provides guidance
on the accounting for and reporting of accounting changes and error corrections. It
establishes, unless impracticable, retrospective application as the required method for
reporting a change in accounting principle. This Statement also provides guidance for
determining whether retrospective application of a change in accounting principle is
impracticable and for reporting a change when retrospective application is impracticable.
The reporting of a correction of an error by restating previously issued financial
statements is also addressed by this Statement. SFAS No. 154 is effective for accounting
changes and corrections of errors made in fiscal years beginning after December 15, 2005.
We are required to adopt the provisions of SFAS No. 154, as applicable, beginning in fiscal
year 2007.
In March 2005, the FASB issued FASB Interpretation No. 47, “Accounting for Conditional Asset
Retirement Obligations — an Interpretation of FASB Statement No. 143” (FIN 47). FIN 47
provides guidance relating to the identification of and financial reporting for legal
obligations to perform an asset retirement activity. FIN 47 clarifies a conditional asset
retirement obligation, as used in SFAS 143, “Accounting for Asset Retirement Obligations,”
as a legal obligation to perform an asset retirement activity in which the timing and/or
method of settlement are conditional on a future event that may or may not be within the
control of the entity. Accordingly, an entity is required to recognize a liability for the
fair value of a conditional asset retirement obligation if the fair value of the liability
can be reasonably estimated. The fair value of a liability for the conditional asset
retirement obligation should be recognized when incurred, generally upon acquisition,
construction or development and/or through the normal operation of the asset. Uncertainty
about the timing and/or method of settlement of the conditional asset retirement obligation
should be factored into the measurement of the liability when sufficient information exists.
The provisions of FIN 47 are required to be applied no later than the end of fiscal years
ending after December 15, 2005. As such, we are required to adopt FIN 47 by September 30,
2006. We do not expect the adoption of FIN 47 to have a material impact on our consolidated
financial statements or results of operations.
At its November 2004 meeting, the FASB ratified the consensus reached by the Emerging Issues
Task Force (EITF) regarding Issue No. 03-13, “Applying the Conditions in Paragraph 42 of
SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, in Determining
Whether to Report Discontinued Operations.” The Issue provides a model to assist in
evaluating (a) which cash flows should be considered in the determination of whether cash of
the discontinued operation have been, or will be, eliminated from ongoing operations and (b)
the types of continuing involvement that constitute significant continuing involvement. The
Issue should be applied to a component of an enterprise that is either disposed of or
classified as held for sale in fiscal periods beginning after December 15, 2004. In
analyzing the model included in this Issue, we determined that, although we receive
continuing cash flows from a transition agreement with the previously disposed Forethought
business, these cash flows are not significant, they are indirect cash flows and we do not
have significant continuing involvement in the operations of their business. Therefore, the
classification of Forethought as a discontinued operation under SFAS No. 144 is appropriate.
On October 22, 2004, the President signed the American Jobs Creation Act of 2004 (the
“Act”). The Act provides a deduction for income from qualified domestic production
activities, which will be phased in from 2005 — 2010. In return, the Act also provides for
a two-year phase-out of the existing extra-territorial income exclusion (ETI) for foreign
sales that was viewed to be inconsistent with international trade protocols by the European
Union. We expect the net effect of the phase out of the ETI and the phase in of this new
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deduction to result in a minimal impact in the effective tax rate for 2005 based on current
earnings levels. In the long-term, we expect the new deduction will result in a decrease in
the annual effective tax rate by at least one percent based on current earnings levels.
The Act has significantly changed the tax rules for nonqualified deferred compensation plans
including the Company’s plans and executive and key employee contracts that have deferral or
other delayed payment features. As of January 1, 2005, we believe we have been in
operational compliance with legal and regulatory requirements. Pending issuance of final
rules from the U.S. Department of the Treasury, we will make appropriate amendments to Board
plans, executive plans and executive contracts as required before the current December 31,
2005 deadline.
Under the guidance in FASB Staff Position (FSP) No. FAS 109-1, Application of FASB Statement
No. 109, “Accounting for Income Taxes”, to the Tax Deduction on Qualified Production
Activities Provided by The American Jobs Creation Act of 2004, the deduction will be treated
as a “special deduction” as described in FASB Statement 109. As such, the special deduction
has no effect on deferred tax assets and liabilities existing at the enactment date.
Rather, the impact of this deduction will be reported in the period in which the deduction
is claimed on our tax return.
In December 2004, the FASB also issued FSP No. FAS 109-2, Accounting and Disclosure Guidance
for the Foreign Earnings Repatriation Provision within the American Jobs Creation Act of
2004. The Act created a temporary incentive for U.S. corporations to repatriate accumulated
income earned abroad by providing an 85 percent dividends received deduction for certain
dividends from controlled foreign corporations. It is not anticipated that we will benefit
from this provision of the Act.
2.
Supplementary Balance Sheet Information
The following information pertains to assets and consolidated shareholders’ equity:
3.
Acquisitions
During fiscal 2004, Hill-Rom completed the acquisitions of Advanced Respiratory, Inc.
(“ARI”), Mediq, Incorporated (“Mediq”) and NaviCare Systems, Inc. (“NaviCare”). The results
of these businesses have been included in the Condensed Consolidated Financial Statements
since each acquisition’s date of close.
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On October 17, 2003, Hill-Rom acquired ARI, a manufacturer and distributor of non-invasive
airway clearance products and systems, for approximately $103.0 million, plus an additional
$2.2 million of acquisition costs incurred in relation to the transaction. This purchase
price included a first quarter 2005 payment of $8.2 million resulting from net revenues
achieved in fiscal 2004. An additional deferred payment of $5.7 million is outstanding and
payable no later than the end of calendar 2005 and is accrued in the Condensed Consolidated
Balance Sheets as of June 30, 2005 and September 30, 2004. An additional contingent
payment, which could also be payable by the end of calendar 2005, is dependent upon ARI
achieving certain net revenue targets during fiscal 2005. Any such contingent payment would
increase goodwill associated with the acquisition, however, at this time no additional
payment is anticipated.
On January 30, 2004, Hill-Rom acquired Mediq, a company in the medical equipment outsourcing
and asset management business, for approximately $328.8 million, plus an additional $5.9
million of acquisition costs incurred in relation to the transaction. This purchase price
included $23 million deposited in an escrow account, of which $20 million remained at June
30, 2005 related to potential adjustments resulting primarily from the funded status of
Mediq’s defined benefit pension plan as of the end of fiscal 2005, along with the occurrence
of any issues associated with seller representations, warranties and other matters. The
escrow amount has been included in the allocation of purchase price outlined below. We
currently estimate that any adjustment related to Mediq’s pension plan will be favorable to
us. Final resolution of the remaining amount in escrow is expected to occur in the first
half of fiscal 2006. If any adjustment differs in amount from the current escrow balance,
the reported purchase price would be decreased by the amount of any valid claims against the
escrow amounts, and the reported amount of goodwill associated with the Mediq acquisition
would be adjusted accordingly.
On January 30, 2004, we completed the acquisition of the remaining 84 percent of the equity
of NaviCare that we did not already own for approximately $14.1 million.
The following table summarizes the estimated fair values of the assets acquired and
liabilities assumed at their dates of acquisition. During the first nine months of fiscal
2005, we reduced goodwill by approximately $3.4 million to reflect the true-up of deferred
taxes for opening balance sheet adjustments on ARI and NaviCare and a reduction to the
previously accrued contingent payment made to ARI in the first quarter of 2005. The
purchase prices remain subject to adjustment for the contingent payments outlined above;
thus, the allocation of the purchase prices is subject to refinement.
4.
Discontinued Operations
On July 1, 2004, we closed the sale of Forethought Financial Services, Inc. to FFS Holdings,
Inc., an acquisition vehicle formed by the Devlin Group, LLC, which acquired all the common
stock of Forethought and its subsidiaries for a combination of cash, seller financing,
certain retained assets of Forethought and stock warrants. Total nominal consideration for
the transaction was approximately $295.1 million, which included the value of the
partnership assets transferred to us. This consideration excluded a dividend received by us
in December 2003 from Forethought in the amount of approximately $28.6
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million made in
anticipation of the transaction. Hillenbrand received cash proceeds in the transaction of
approximately $104.9 million. An additional cash payment of approximately $6.4 million is
due upon the regulatory approval of the sale of Forethought Federal Savings Bank, which is
expected to occur by the end of 2005.
In October 2003, Hill-Rom sold its piped-medical gas business to Beacon Medical
Products LLC, for $13 million, after final purchase price adjustments.
In August 2004, Hill-Rom completed the sale of its Air-Shields infant care business to a
subsidiary of Dräger Medical AG & Co. KGaA for approximately $31 million.
These businesses have been treated as discontinued operations for all periods presented
within the Condensed Consolidated Statements of Income in accordance with the provisions of
SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”.
Operating results for the discontinued operations were as follows for the quarterly and
nine-month periods ended June 30, 2005 and 2004:
The assets and liabilities of Forethought Federal Savings Bank are included in the assets
and liabilities of discontinued operations which are presented on separate line items within
the Condensed Consolidated Balance Sheets as of June 30, 2005 and September 30, 2004.
Components of assets and liabilities of discontinued operations were as follows:
6/30/05
9/30/04
$
105.3
$
97.1
0.5
1.2
105.8
98.3
98.3
91.6
$
7.5
$
6.7
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5.
Earnings per Common Share
Basic earnings per share were calculated based upon the weighted average number of
outstanding common shares for the period, plus the effect of deferred vested shares.
Diluted earnings per share were calculated consistent with the basic earnings per share
calculation including the effect of dilutive unissued common shares related to stock-based
employee compensation programs. For all periods presented, anti-dilutive stock options were
excluded in the calculation of diluted earnings per share. Excluded shares were 1,230,766
and 1,150,576 for the three- and nine-month periods ended June 30, 2005 and 56,824 and
54,270 for the comparable periods of 2004. 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:
Note: Certain per share amounts may not accurately add due to rounding.
6.
Comprehensive Income
SFAS No. 130, “Reporting Comprehensive Income”, requires unrealized gains or losses on
available-for-sale securities, foreign currency translation adjustments and minimum pension
liability adjustments to be included in accumulated other comprehensive income.
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The components of comprehensive income (loss) are as follows:
The composition of accumulated other comprehensive income at June 30, 2005 and September 30,
2004 was the cumulative adjustment for unrealized gains on available-for-sale securities of
$7.6 million and $10.4 million, respectively, foreign currency translation adjustments of
($2.5) million and ($2.6) million, respectively, and a minimum pension liability adjustment
of ($2.6) million and ($1.8) million, respectively.
7.
Retirement Plans
Hillenbrand and its subsidiaries have several defined benefit retirement plans covering the
majority of employees, including certain employees in foreign countries. We contribute
funds to trusts as necessary to provide for current service and for any unfunded projected
future benefit obligation over a reasonable period. The benefits for these plans are based
primarily on years of service and the employee’s level of compensation during specific
periods of employment. We also sponsor nonqualified, unfunded defined benefit pension plans
for certain members of management.
The components of net pension expense for defined benefit retirement plans in the United
States for the quarterly and nine-month periods ended June 30, 2005 and 2004 were as
follows:
The 2005 periods presented above include the net pension expense associated with our
nonqualified supplemental pension plan offered to certain members of management. The
comparable 2004 fiscal year presentation does not include these costs, as the amounts were
immaterial to the total net periodic pension cost for all defined benefit retirement plans
for those periods.
As of June 30, 2005 we have made contributions of approximately $76.7 million to our defined
benefit retirement plans during fiscal 2005. In June 2005, we fully funded our master
defined benefit retirement plan by contributing approximately $75.5 million. As a
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result,
future funding requirements associated with this plan will be reduced. We do not anticipate
contributing any additional funds during fiscal year 2005.
We sponsor both qualified and nonqualified defined contribution retirement plans for all
eligible employees, as defined in the plan documents. The qualified plans fall under
Section 401(k) of the Internal Revenue Code. Contributions to the qualified plans are based
on both employee and Company contributions. Our contributions to the plans were $4.1
million and $11.6 million, for the quarterly and nine-month periods ended June 30, 2005 and
$4.0 million and $9.8 million for the same periods ended June 30, 2004. We expect to
contribute an additional $2.1 million to the plans during the remainder of fiscal year 2005
for a total of $13.7 million. The nonqualified plans are unfunded and carried a liability
of less than $1 million at June 30, 2005 and September 30, 2004.
8.
Guarantees
Limited warranties are routinely granted on our products with respect to defects in material
and workmanship. The terms of these warranties are generally one year, however, certain
components and products have substantially longer warranty periods. A reserve is recognized
with respect to these obligations at the time of product sale, with subsequent warranty
claims recorded directly against the reserve. The amount of the warranty reserve is
determined based on historical trend experience for the covered products. For more
significant warranty-related matters which might require a broad-based correction, separate
reserves are established when such events are identified and the cost of correction can be
reasonably estimated. A reconciliation of changes in the warranty reserve for the periods
covered in this report is as follows:
In the normal course of business we enter into various other guarantees and indemnities in
our relationships with suppliers, service providers, customers, business partners and
others. Examples of these arrangements would include guarantees of product performance,
indemnifications to service providers and indemnifications of our actions to business
partners. These guarantees and indemnifications would not materially impact our financial
condition or results of operations, although indemnifications associated with our actions
generally have no dollar limitations.
In conjunction with our acquisition and divestiture activities, we have entered into select
guarantees and indemnifications of performance with respect to the fulfillment of
commitments under applicable purchase and sale agreements. The arrangements generally
indemnify the buyer or seller for damages associated with breach of contract, inaccuracies
in representations and warranties surviving the closing date and satisfaction of liabilities
and commitments retained under the applicable agreement. For those representations and
warranties that survive closing, they generally survive for periods up to five years or the
expiration of the applicable statutes of limitations. Potential losses under the
indemnifications are generally limited to a portion of the original transaction price, or to
other lesser specific dollar amounts for select provisions. With respect to sale
transactions, we also routinely enter into non-competition agreements for varying periods
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of time. Guarantees and indemnifications with respect to acquisitions and divestiture
activities would not materially impact our financial condition or results of operations.
9.
Commitments and Contingencies
On June 30, 2003, Spartanburg Regional Healthcare System (the “Plaintiff”) filed an
antitrust suit against Hillenbrand and its Hill-Rom subsidiary, in the United States
District Court for the District of South Carolina, as described in the Annual Report on Form
10-K for the period ended September 30, 2004. Plaintiff alleges violations of the federal
antitrust laws, including attempted monopolization and tying claims. Discovery is underway.
The trial is currently scheduled to occur on or after April 28, 2006. The hearing on class
certification is anticipated to occur by the end of October 2005.
On May 6, 2005, the Court granted Plaintiff’s Motion for Leave to File a Second Amended
Complaint with the effects of adding new theories of recovery, significantly enlarging the
potential class and significantly extending the class period. Specifically, among other
things, the period for which Plaintiff seeks damages has been extended from 1990 through the
present, and a new allegation of monopoly maintenance of an alleged standard hospital bed
market has been added. The proposed class definition has also been broadened so that
Plaintiff is seeking certification of a class of all purchasers of Hill-Rom
Ò
standard
and/or specialty hospital beds, and/ or architectural and in-room products from 1990 to the
present where there have been contracts between Hill-Rom and such purchasers, either on
behalf of themselves or through purchasing organizations, where those contracts conditioned
discounts on Hill-Rom
Ò
hospital beds and other architectural and in-room products on
commitments to rent or purchase a very high percentage (e.g. ninety percent) of specialty
beds from Hill-Rom. Plaintiff claims that it and the alleged class sustained injury caused
by the Hill-Rom package discount, because of an alleged harm to competition resulting in
higher prices for standard and/or specialty hospital beds and/or architectural and in-room
products.
Plaintiff seeks actual monetary damages on behalf of the purported class in excess of $100
million, trebling of any such damages that may be awarded, recovery of attorney’s fees and
injunctive relief. If a class is certified and if Plaintiffs prevail at trial, potential
trebled damages awarded the Plaintiffs could be substantially in excess of $100 million and
have a significant material adverse effect on our results of operations, financial
condition, and liquidity. Therefore, we are aggressively defending against Plaintiff’s
allegations and will assert what we believe to be meritorious defenses to class
certification and Plaintiff’s allegations and damage theories.
On May 2, 2005, a non-profit entity called Funeral Consumers Alliance, Inc. and several
individual consumers filed a purported class action antitrust lawsuit (“FCA Action”) against
Hillenbrand, its Batesville Casket Company, Inc. subsidiary (“Batesville”), and three of
Batesville’s national funeral home customers, Service Corporation International (“SCI”),
Alderwoods Group, Inc. (“Alderwoods”), and Stewart Enterprises, Inc. (“Stewart”) in the
United States District Court for the Northern District of California ( “Court”). This
lawsuit alleges a conspiracy to suppress competition in an alleged market for the sale of
caskets through a group boycott of so-called “independent casket discounters”; a campaign of
disparagement against these independent casket discounters; and concerted efforts to
restrict casket price competition and to coordinate and fix casket pricing, all in violation
of federal antitrust law and California’s Unfair Competition Law. The lawsuit claims, among
other things, that Batesville’s maintenance and enforcement of, and alleged modifications
to, its long-standing policy of selling caskets only to licensed funeral homes were the
product of a conspiracy among Batesville and the other defendants to exclude “independent
casket discounters,” that is, casket retailers who are not licensed funeral homes and who do
not offer funeral services, and this alleged conspiracy, combined with other alleged
matters, suppressed competition in the alleged market for caskets and led consumers to pay
higher than competitive prices for caskets. The Complaint also alleges that SCI,
Alderwoods, Stewart and other unnamed co-conspirators conspired to monopolize the alleged
market for the sale of caskets in the United States.
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Since that case was filed, several more purported class action lawsuits on behalf of
consumers have been filed in the Court based on essentially the same factual allegations and
alleging violations of federal antitrust law and related state law claims. Two similar
cases filed in other districts were voluntarily dismissed by the plaintiffs. We anticipate
that they will be refiled with the Court. Though the purported classes vary slightly, all
of these actions purport to represent classes that include purchasers of Batesville caskets.
It is not unusual to have multiple copycat class action suits filed after an initial
filing, and it is possible that additional suits based on the same or similar allegations
will be brought against Hillenbrand and Batesville. Some of these cases have been
consolidated in the Court, and we anticipate that any others will also be consolidated with
the Court, subject to the motion to transfer venue discussed below.
Plaintiffs are seeking certification of various classes, including, among others, all United
States consumers who purchased Batesville caskets from the co-defendants at any time from
January 1, 1994 until the present. Plaintiffs generally seek actual unspecified monetary
damages on behalf of the purported classes, trebling of any such damages that may be
awarded, recovery of attorneys’ fees and costs and injunctive relief.
In order to transfer the litigation to a venue that is more convenient for all parties, the
defendants have jointly moved to transfer these cases to the United States District Court
for the Southern District of Texas. All the plaintiffs oppose this motion. In addition,
Batesville, Hillenbrand, and the other defendants have moved to dismiss the FCA Action on
the grounds that it fails to state a claim upon which relief can be granted. Batesville and
Hillenbrand intend to move to dismiss the other cases at the appropriate time. The motion
to transfer and the motion to dismiss are scheduled to be heard by the Court on September 8,
2005.
The Court held a case management conference on August 4, 2005. At the conference, the Court
ordered discovery to commence immediately, set a hearing for class certification of the FCA
plaintiffs’ proposed class for January 24, 2006, and set a trial date of December 4, 2006.
If the motion to transfer is granted, it is likely, but not certain, that the new court to
which the case is assigned would set its own case management schedule.
In addition to the consumer lawsuits, Pioneer Valley Casket Co. (“Pioneer Valley”), a casket
store and Internet retailer, has filed another class action lawsuit against Batesville,
Hillenbrand, Alderwoods, SCI, and Stewart in the Court purportedly on behalf of the class of
“independent casket distributors,” alleging violations of state and federal antitrust law
and state unfair and deceptive practices laws based on essentially the same factual
allegations as in the consumer cases. Pioneer Valley alleges that it and other independent
casket distributors were injured by the defendants’ alleged conspiracy to boycott and
suppress competition in the alleged market for caskets, and by a conspiracy among SCI,
Alderwoods, Stewart and other unnamed co-conspirators to monopolize the alleged market for
funeral caskets. The defendants anticipate that they will move to transfer this action to
the Southern District of Texas, as well, and move to dismiss at the appropriate time.
Plaintiff Pioneer Valley seeks certification of a class of all independent casket
distributors who are now in business or have been in business since July 8, 2001. Pioneer
Valley generally seeks actual unspecified monetary damages on behalf of the purported class,
trebling of any such damages that may be awarded, recovery of attorneys’ fees and costs and
injunctive relief.
If a class is certified in any of the antitrust cases filed against Hillenbrand and
Batesville and if plaintiffs in any such case prevail at trial, potential trebled damages
awarded to the plaintiffs could have a significant material adverse effect on our results of
operations, financial condition, and/or liquidity. Accordingly, we intend to aggressively
defend against the allegations made in all of these cases and intend to assert what we
believe to be meritorious defenses to class certification and to plaintiffs’ allegations and
damage theories.
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On August 8, 2005 Batesville Casket Company was served with a Civil Investigative Demand by
the Attorney General of Maryland on behalf of a number of other undisclosed state attorneys
general who have begun an investigation of possible anticompetitive practices in the funeral
services industry relating to a range of funeral services and products, including caskets.
We are 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, antitrust, 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 possible that some litigation matters for which
reserves have not been established could be decided unfavorably to us, and that any such
unfavorable decisions could have a material adverse effect on our financial condition,
results of operations and cash flows.
10.
Special Charges
2005 Actions
In the third fiscal quarter of 2005, we announced plans to close Batesville Casket’s Nashua,
New Hampshire plant and consolidate Batesville’s solid wood casket production into its
Batesville, Mississippi plant (“Panola”). The consolidation of the two plants is expected
to result in a total pre-tax charge of approximately $4.5 million, that should be realized
through the estimated completion of the consolidation in the second quarter of fiscal 2006.
Cash components of these charges include approximately $2.3 million in employee-related
costs, including severance, pension and other termination benefits, and approximately $1.6
million in costs related to the transfer of equipment, training of employees and other
associated costs. The remaining $0.6 million consists of non-cash charges resulting from
the accelerated depreciation of equipment and amortization of software. Approximately $1.8
million of this charge was incurred in the third fiscal quarter of 2005, of which $1.5
million of severance and benefit costs was recorded as a special charge. Additionally, we
announced the retirement of Frederick Rockwood, former Chief Executive Officer. We incurred
a charge of approximately $2.4 million related to future payments and other compensation
related items under the terms of Mr. Rockwood’s retirement agreement.
On March 22, 2005, the Food and Drug Administration (FDA) and the U.S. Department of Justice
initiated a seizure at Vail Products, Inc., of Toledo, Ohio, on several models of an
enclosure bed system manufactured by Vail, and advised Vail’s customers to cease using those
beds immediately. On June 24, 2005, the FDA announced that Vail Products was permanently
ceasing the manufacture, sale, and distribution of all Vail enclosed bed systems and would
no longer be available to provide accessories, replacement parts, or retrofit kits.
Hill-Rom was a distributor of Vail products and had a number of the affected beds in its
rental fleet. In its role as a distributor, Hill-Rom responded promptly to the FDA
notification and permanently ceased all sale or rental of the affected products. As a
result, in the third quarter of fiscal 2005, we recorded a $1.7 million impairment on these
assets. We will continue to explore opportunities to salvage our costs, however
recoverability is uncertain at this time.
2004 Actions
During the fourth fiscal quarter of 2004, we announced a restructuring intended to better
align Hill-Rom’s financial and personnel resources to fully support its growth initiatives,
decrease overall costs, and improve performance in Europe. The plan included the expected
elimination of approximately 130 salaried positions in the U.S. and
approximately 100 positions in Europe and resulted in a fourth quarter charge of
approximately $7.3 million associated with severance and benefit-related costs. As of June
30, 2005, approximately 170 positions have been eliminated with 35 of the original list of
terminees being transferred to other positions or retained. As of this same date, there was
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approximately $3.2 million remaining in the reserve. All obligations associated with this
action, which is expected to be completed in 2005, will be settled in cash.
2003 Actions
During the third fiscal quarter of 2003, we announced a new business structure at Hill-Rom
to accelerate the execution of its strategy and strengthen its businesses. As a result of
this action, Hill-Rom announced it expected to eliminate approximately 300 salaried
positions globally. Hill-Rom also announced it expected to hire approximately 100 new
personnel with the skills and experience necessary to execute its business strategy. A
fiscal 2003 third quarter charge of $9.3 million was recognized with respect to this action,
essentially all related to severance and benefit-related costs. During fiscal 2004,
approximately $1.4 million of the originally recorded reserve was reversed. This action was
completed during the first quarter of fiscal 2005. We eliminated 288 salaried positions
under this action, with 65 of the original list of terminees being transferred to other
positions in line with Hill-Rom’s strategy. In addition, approximately 90 new positions
were hired under the new business structure.
11.
Income Taxes
The effective income tax rate for the third quarter and the year-to-date periods ended June
30, 2005 was 37.0 percent. The effective tax rates for the same periods ending June 30, 2004
were 39.0 percent and 40.6 percent, respectively. The higher effective tax rates for last
year reflect the establishment of a valuation allowance on foreign net operating losses of
approximately $2 million and $10 million for the three- and nine-months ended June 30, 2004.
Excluding the effect of the portion of the valuation allowance related to 2003 fiscal year
losses, the effective tax rate for the first nine months of 2004 would have approximated 38
percent compared to 37.0 percent for the first nine months of 2005. We continue to provide
a full valuation allowance for certain foreign net operating losses in the current year.
Although these loss carryforwards have no expiration date, current operating results and
economic conditions have made it difficult to predict full recoverability of these tax
assets. We will continue to pursue opportunities to reduce our effective tax rate in future
periods.
12.
Segment Reporting
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 business.
With the continued evolution of the prior year realignment of the Hill-Rom business
structure, changes were adopted in fiscal 2004 and 2005 in terms of the way in which
management views the business, including reporting to our executive management team. With
these changes, in fiscal 2004 the prior Hill-Rom reporting segment was split into
Americas/Asia Pacific and EMEA (Europe, Middle East and Africa) reporting segments,
with performance measured on a divisional income basis before special items. Divisional
income under this approach was defined as the division’s gross profit less their direct
operating costs. This measure excluded a number of functional costs which were managed on
an overall Hill-Rom basis, including finance, information technology, human resources,
legal, regulatory and strategy. In fiscal 2005, a change was made to the definition of
divisional income. Beginning in the first quarter of 2005, divisional income now includes
functional costs previously excluded from the measure. Functional costs directly related to
a specific division are now borne directly by such division based on the Hill-Rom annual
plan. For functional costs not directly tied to a specific division, the costs have been
allocated to the respective divisions on the basis of various allocation methodologies, also
based on the Hill-Rom annual plan. Management now evaluates divisional performance on this
new basis. Segment data for 2004 has been restated to conform with this new presentation.
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Intersegment sales between the Americas/Asia Pacific and EMEA are generally accounted for at
current market value or cost plus markup. Eliminations, net of allocations, while not
considered a segment, will be presented separately to aid in the reconciliation of segment
information to consolidated Hill-Rom financial information.
The reporting segment of Batesville Casket is measured on the basis of income from
continuing operations before income taxes. Intersegment sales do not occur between Hill-Rom
and Batesville Casket. Forethought results, which were previously considered a reporting
segment, are now being presented in the results from discontinued operations as further
discussed in Note 4 to the Condensed Consolidated Financial Statements. Corporate, while
not a segment, is presented separately to aid in the reconciliation of segment information
to that reported in the Condensed Consolidated Statements of Income.
As discussed in Note 13 of the Condensed Consolidated Financial Statements, in July 2005 we
announced a change in our architecture intended to simplify both the Hillenbrand corporate
and Hill-Rom organizational structures and to support Hill-Rom’s strategy to focus on its
core frames, support surfaces and services businesses. We will re-evaluate our reportable
segments as the structure of the new organization is completed.
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Financial information regarding our reportable segments is presented below:
Eliminations
Corporate
Americas/
Net of
Total
Batesville
and Other
Asia Pacific
EMEA
Allocations
Hill-Rom
Casket
Expense
Consolidated
Quarterly Period Ended
June 30, 2004 (As Restated — See Note 14)
$
260.2
$
48.2
$
—
$
308.4
$
153.1
$
—
$
461.5
$
6.6
$
2.9
$
(9.5
)
$
—
$
55.9
$
(4.8
)
$
(9.4
)
$
41.7
$
41.8
$
45.5
$
(15.4
)
$
71.9
$
(1.4
)
$
—
$
—
$
(1.4
)
$
43.2
$
45.5
$
(15.4
)
$
73.3
$
28.6
$
44.7
$
9.2
$
53.9
Eliminations
Corporate
Americas/
Net of
Total
Batesville
and Other
Asia Pacific
EMEA
Allocations
Hill-Rom
Casket
Expense
Consolidated
Year-to-Date Period Ended
June 30, 2005
$
798.3
$
141.8
$
—
$
940.1
$
501.4
$
—
$
1,441.5
$
15.1
$
14.5
$
(29.6
)
$
—
$
115.6
$
(1.9
)
$
(10.1
)
$
103.6
$
103.7
$
140.1
$
(24.3
)
$
219.5
$
1.6
$
1.5
$
2.4
$
5.5
$
102.1
$
138.6
$
(26.7
)
$
214.0
$
79.2
$
134.8
$
0.8
$
135.6
Eliminations
Corporate
Americas/
Net of
Total
Batesville
and Other
Asia Pacific
EMEA
Allocations
Hill-Rom
Casket
Expense
Consolidated
Year-to-Date Period Ended
June 30, 2004 (As Restated — See Note 14)
$
718.7
$
143.1
$
—
$
861.8
$
493.4
$
—
$
1,355.2
$
22.7
$
4.3
$
(27.0
)
$
—
$
163.1
$
(16.1
)
$
(10.8
)
$
136.2
$
136.1
$
146.0
$
(44.3
)
$
237.8
$
(1.4
)
$
—
$
—
$
(1.4
)
$
137.5
$
146.0
$
(44.3
)
$
239.2
$
97.0
$
142.2
$
(60.9
)
$
81.3
(a)
Reflects results of Forethought, including Forethought Federal Savings Bank, and the
Hill-Rom piped-medical gas and infant care businesses classified as discontinued
operations.
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13.
Subsequent Events
On July 14, 2005, we announced a change in our architecture intended to simplify both the
corporate and Hill-Rom organizational structures and to support Hill-Rom’s strategy to focus
on its core frames, support surfaces and services businesses, while remaining flexible for
future opportunities. Operationally, the change is designed to align the Hill-Rom
organization more closely with its customers to more effectively bring products and services
to the market. Hill-Rom is in the process of establishing two commercial divisions, one
focusing on North America and one focusing internationally, each consisting of capital
sales, clinical and services businesses with supporting sales, marketing and field service
organizations. Home Care and Surgical products will be run as a separate, fully integrated
division and profit center. Hill-Rom will also combine sourcing, manufacturing, and product
development under one new function. At the same time, all Hillenbrand corporate functions,
including human resources, finance, strategy, legal and information technology, have been
consolidated with those in Hill-Rom. There is now one interim Chief Executive Officer and
President, and one Chief Financial Officer, in each case, for the combined
Hillenbrand/Hill-Rom organization. The costs and benefits associated with these and other
potential related actions are not currently available, but are expected to be announced in
September 2005.
In building on our recently announced organizational changes in support of our strategic
focus on our core frames, support surfaces and services businesses, and to further
capitalize on progress we have made in our previously announced negotiations with the works
council at our Pluvigner, France facility with respect to voluntary departures, we plan to
take additional restructuring actions in the United States and Europe during the fourth
quarter of 2005. While the final details of these plans are still in development, these
actions, which were approved by the Board of Directors on August 4, 2005, will include the
elimination of salaried and hourly positions in the United States and Europe, the
outsourcing of various products and sub-assembly parts, the impairment of certain assets no
longer considered necessary to the execution of our strategy and the termination of certain
contractual obligations. We expect the cost of these actions will result in a fourth
quarter pre-tax charge of between $40 million and $45 million, broken down by component as
follows:
Range of Pre-Tax Charge
$
25 to $30
$
5 to $ 7
$
3 to $ 4
$
3 to $ 4
All of these actions are expected to be completed over the course of the next twelve to
eighteen months. All costs other than those related to the impairment of assets will be
cash charges. In addition to costs included directly in the fourth quarter charge, various
other costs related directly to the actions will be incurred in amounts yet to be
determined.
As with the actions themselves, the total cost of these initiatives will be recognized over
the next twelve to eighteen months. Upon finalization of the remaining details of the
plans, we will take a charge in the fourth quarter for all amounts that are accruable at
that point. All remaining charges will be recognized as incurred over the course of the
restructuring actions.
In conjunction with and as a result of the actions being taken in Europe, in the fourth
quarter we will also write off $16 million of deferred tax assets currently recognized on
our balance sheet. This write-off will have no impact on cash. These deferred tax assets
were originally recognized in the prior year as part of a strategy to change the structure
of our French operations, including the creation of a new French entity and operating
structure. As a result of the restructuring actions outlined above, implementation of this
tax strategy
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is no longer viable and the deferred tax assets will therefore be written off.
It should also be noted that the portion of the pre-tax restructuring charge associated with
Europe will not receive a tax benefit upon recognition.
14.
Restatement and Revised Classification of Condensed Consolidated Financial Statements
Restatement
During the fourth quarter of fiscal 2003, we entered into definitive agreements to sell
Hill-Rom’s piped-medical gas and infant care businesses and in the second quarter of fiscal
2004, we entered into a definitive agreement to sell Forethought Financial Services, Inc.
and its subsidiaries (“Forethought”). The divestitures of these businesses were all
finalized in fiscal 2004 and all were accounted for as discontinued operations in our
Condensed Consolidated Financial Statements for all periods presented herein. While
finalizing the fiscal 2004 U.S. federal and state income tax returns, and during preparation
of the subsequent tax provision to income tax return reconciliations, management identified
errors which understated the income tax benefits associated with these discontinued
operations. Further, while assessing the implications of these errors, management
determined that it had also made errors with respect to its allocation of goodwill to
Hill-Rom’s piped-medical gas and infant care businesses for purposes of determining both the
impairment loss recognized in the fourth fiscal quarter of 2003 and the effect of the
dispositions recognized upon the closure of the transactions in fiscal 2004. As a result of
the identification of these errors, the Audit Committee of the Board of Directors concluded,
after consultation with management and a review of the pertinent facts, that it was
necessary to restate (the “Restatement”) the previously issued financial statements for the
fiscal years ended September 30, 2003 and 2004 and for all interim
periods in 2004 and the Condensed Consolidated Balance Sheets for the interim periods of
2005.
As part of this Restatement, income from discontinued operations and net income in fiscal
2003 increased $51.0 million, or $0.82 per fully diluted share, and income from discontinued
operations and net income in fiscal 2004 increased $33.6 million, or $0.53 per fully diluted
share. The effects of this Restatement on the income statement impacted only discontinued
operations and had no impact on income from continuing operations or cash flows.
Hillenbrand’s balance sheets as of September 30, 2003 and all succeeding periods were also
adjusted to reflect $69.4 million of additional goodwill as a result of the Restatement.
Specifics related to the errors identified for fiscal 2003 and 2004 are further outlined
below:
Impairment Loss and Gain Recognition on Disposal of Piped-Medical Gas and Infant Care
Businesses
Statement of Financial Accounting Standards No. 142 (“SFAS 142”), Goodwill and Other
Intangible Assets, requires that all goodwill acquired in a business combination be assigned
to one or more reporting units. Upon adopting SFAS 142 in fiscal 2002, the net assets of
Hill-Rom’s piped-medical gas and infant care businesses were included in the Hill-Rom
reporting unit. When a portion of a reporting unit that constitutes a business is sold,
SFAS 142 requires that the amount of goodwill associated with that business be determined
based on the relative fair values of the business to be sold versus the portion of the
reporting unit to be retained. SFAS 142 further provides, however, that if a business to be
disposed of was never integrated into the reporting unit after its acquisition, the current
carrying amount of acquired goodwill should be included in the carrying amount of the
business to be disposed of.
When we reached definitive agreements in the fourth quarter of fiscal 2003 to sell
Hill-Rom’s piped-medical gas and infant care businesses, we incorrectly conducted a SFAS 142
impairment assessment for these businesses as if they were non-integrated, separate,
stand-alone entities for which it was concluded that the benefits of the acquired goodwill
associated with these businesses had not been realized, and would not be realized in the
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future. This impairment assessment included all the original non-amortized goodwill
associated with the acquisition of the businesses, other than a portion pertaining to a
retained business, which led to the recognition of an impairment loss of $50.0 million
($51.0 million, net-of-tax) in the fourth quarter of fiscal 2003. No impairment loss should
have been recorded based on the fair value of the entire reporting unit that included the
disposed businesses.
Had we appropriately applied the provisions of SFAS 142 and allocated goodwill to the
disposed businesses based on their relative fair values compared to the fair value of the
reporting unit, the carrying amounts of the disposed businesses would have been lower and no
impairment loss would have been recorded. Further, we would have recognized a third quarter
gain on the divestiture of the infant care business of approximately $13.0 million, and
gains on the divestitures of both businesses for the nine-month period of a combined $18.3
million, net-of-tax.
Accounting for Income Taxes
With respect to the accounting for income taxes related to discontinued operations,
including the dispositions of Hill-Rom’s piped-medical gas and infant care businesses and
the pre-need insurance business of Forethought, we made certain errors with respect to the
recognition of income tax benefits associated with these discontinued operations. These
errors related to the following:
•
Improper recognition of book and tax differences associated with discounts applied
to the seller financing provided by the Company in the disposition of Forethought. The
errors also impacted the ordinary and capital loss components of the taxable gain/loss
calculation as well as the amount of the valuation allowance required for capital loss
carryforwards. The combined effect of these items in the second quarter of fiscal 2004 was an
understatement of net deferred tax assets and the tax benefit associated with the
disposition of the business by approximately $7.6 million.
•
Failure to identify necessary corrections to the recorded deferred tax balances of
Forethought. Such adjustments should have been fully recorded with the disposition of
Forethought, therefore resulting in an understatement in the second quarter of fiscal
2004 of net deferred tax assets and the recorded income tax benefit by approximately
$0.9 million.
•
Failure to fully consider the effects of certain K-1 partnership returns on
investments held by Forethought in the determination of the income tax benefit
associated with discontinued operations in the second quarter of fiscal 2004. This
omission overstated income taxes payable by $2.1 million and understated the recorded
income tax benefit related to discontinued operations by approximately $2.1 million.
•
Improper calculation of the respective tax gain/loss associated with our
dispositions of the piped-medical gas, infant care and Forethought businesses primarily
associated with the improper treatment of certain disposition-related costs. The
effect of these errors by quarter is as follows:
•
Other minor items that resulted in an understatement of the recorded income tax
benefit associated with discontinued operations and overstatement of income taxes
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payable by approximately $0.4 million related to the Forethought disposition in the
second quarter of fiscal 2004.
The impact of all the above noted errors resulted in an overstatement of the recorded loss
from discontinued operations of $51 million in the fourth quarter of fiscal 2003 and an
overstatement of the recorded loss from discontinued operations in the first, second and
third quarters of fiscal 2004 of $5 million, $13 million and $15 million, respectively.
Further, in terms of a breakdown between divestiture transactions, $13 million of the errors
related to the disposal of Forethought, while $5 million and $15 million related to the
disposal of the Hill-Rom piped-medical gas and infant care businesses, respectively.
The Condensed Consolidated Financial Statements included herein have been adjusted to give
effect to these errors, thus resulting in a restatement of our previously issued quarterly
financial statements.
Other Items
We have also made certain other limited changes to the previously issued financial
statements to correct typographical errors made in the prior year.
The impacts of the Restatement and Other Items on our Condensed Consolidated Balance Sheets
as of June 30, 2005 and September 30, 2004, and Condensed Consolidated Statements of Income
(Loss) for the quarterly and year-to-date periods ended June 30, 2004, and our Condensed
Consolidated Statements of Cash Flows for the year-to-date period ended June 30, 2004 are
shown in the accompanying tables below. We have also updated the disclosures in Notes 1, 2,
4, 5, 6, 8, 9 and 12 within these Condensed Consolidated Financial Statements to give effect
to the Restatement and Other Items, as required. As the errors outlined above also impacted
the first and second quarters of fiscal 2004, we have previously filed amended Forms 10-Q/A
for these periods as well.
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The following table presents the effect of the Restatement on the Condensed Consolidated Statements
of Income (Loss) for the quarterly and year-to-date periods ended June 30, 2004:
(Dollars in millions except per share data)
Quarterly
Year-To-Date
Period Ended
Period Ended
6/30/04
6/30/04
6/30/04
6/30/04
(As Originally
(As Originally
(As Restated)
Reported)
(As Restated)
Reported)
$
187.1
$
187.1
$
528.6
$
528.6
121.3
121.3
333.2
333.2
153.1
153.1
493.4
493.4
461.5
461.5
1,355.2
1,355.2
99.1
99.1
276.5
276.5
69.9
69.9
177.8
177.8
70.5
70.5
220.5
220.5
239.5
239.5
674.8
674.8
222.0
222.0
680.4
680.4
145.0
145.0
428.9
428.9
(1.4
)
(1.4
)
(1.4
)
(1.4
)
78.4
78.4
252.9
252.9
(4.5
)
(4.5
)
(11.5
)
(11.5
)
1.3
1.3
3.7
3.7
(6.4
)
(6.4
)
(6.4
)
(6.4
)
4.5
4.5
0.5
0.5
73.3
73.3
239.2
239.2
28.6
28.6
97.0
97.0
44.7
44.7
142.2
142.2
(including (gain) loss on impairment/divestiture of discontinued
operations of $0, $(9.8), ($0.1) and $116.8)
9.7
(6.0
)
(84.4
)
(103.8
)
0.5
(0.3
)
(23.5
)
(9.3
)
9.2
(5.7
)
(60.9
)
(94.5
)
$
53.9
$
39.0
$
81.3
$
47.7
$
0.72
$
0.72
$
2.29
$
2.29
0.15
(0.09
)
(0.98
)
(1.52
)
$
0.87
$
0.63
$
1.31
$
0.77
$
0.71
$
0.71
$
2.27
$
2.27
0.15
(0.09
)
(0.97
)
(1.51
)
$
0.86
$
0.62
$
1.30
$
0.76
$
0.27
$
0.27
$
0.81
$
0.81
62,303
62,303
62,248
62,248
62,637
62,637
62,603
62,603
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The following table presents the effect of the Restatement on the Condensed Consolidated Balance
Sheets as of June 30, 2005 and September 30, 2004:
(Dollars in millions)
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The following table presents the effect of the Restatement on the Condensed Consolidated Statements
of Cash Flows for the year-to-date period ended June 30, 2004:
(Dollars in millions)
Year-to-Date Period Ended
6/30/04
6/30/04
(As Originally
(As Restated)
Reported)
$
81.3
$
47.7
76.1
76.1
(9.7
)
(9.7
)
(21.5
)
(21.5
)
81.8
114.4
7.4
7.4
6.4
6.4
(7.4
)
(7.4
)
(42.7
)
(42.7
)
56.6
56.6
34.7
34.7
(1.7
)
(0.7
)
261.3
261.3
(79.7
)
(79.7
)
39.6
39.6
(429.4
)
(429.4
)
(27.3
)
(27.3
)
59.7
59.7
(616.0
)
(616.0
)
93.9
93.9
416.8
416.8
(542.4
)
(542.4
)
5.2
5.2
534.9
534.9
(294.9
)
(294.9
)
(1.7
)
(1.7
)
(50.5
)
(50.5
)
21.4
21.4
(26.5
)
(26.5
)
228.1
228.1
(221.6
)
(221.6
)
194.4
194.4
0.5
0.5
(86.2
)
(86.2
)
154.9
154.9
$
68.7
$
68.7
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Three Months Ended
Nine Months Ended
June 30,
June 30,
(Dollars in millions)
2005
2004
% Change
2005
2004
% Change
$
190.3
$
187.1
1.7
$
583.2
$
528.6
10.3
115.4
121.3
(4.9
)
356.9
333.2
7.1
160.3
153.1
4.7
501.4
493.4
1.6
$
466.0
$
461.5
1.0
$
1,441.5
$
1,355.2
6.4
Three Months Ended
Three Months Ended
June 30, 2005
June 30, 2004
% of Related
% of Related
(Dollars in millions)
Revenues
Revenues
Gross Profit
$
83.4
43.8
$
88.0
47.0
43.5
37.7
51.4
42.4
84.0
52.4
82.6
54.0
$
210.9
45.3
$
222.0
48.1
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Three Months Ended
Nine Months Ended
June 30,
June 30,
(Dollars in millions)
2005
2004
% Change
2005
2004
% Change
$
145.8
$
145.0
0.6
$
450.5
$
428.9
5.0
31.3
%
31.4
%
31.3
%
31.6
%
5.6
(1.4
)
(500.0
)
5.5
(1.4
)
(492.9
)
$
(4.3
)
$
(4.5
)
(4.4
)
$
(12.7
)
$
(11.5
)
10.4
6.3
1.3
384.6
18.5
3.7
400.0
—
(6.4
)
(100.0
)
—
(6.4
)
(100.0
)
(1.7
)
4.5
(137.8
)
(3.1
)
0.5
(720.0
)
$
0.3
$
(5.1
)
(105.9
)
$
2.7
$
(13.7
)
(119.7
)
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Three Months Ended
Nine Months Ended
June 30,
June 30,
(Dollars in millions)
2005
2004
% Change
2005
2004
% Change
$
190.3
$
187.1
1.7
$
583.2
$
528.6
10.3
$
115.4
$
121.3
(4.9
)
$
356.9
$
333.2
7.1
$
106.9
$
99.1
7.9
$
321.9
$
276.5
16.4
$
71.9
$
69.9
2.9
$
217.8
$
177.8
22.5
$
83.4
$
88.0
(5.2
)
$
261.3
$
252.1
3.6
43.8
%
47.0
%
44.8
%
47.7
%
$
43.5
$
51.4
(15.4
)
$
139.1
$
155.4
(10.5
)
37.7
%
42.4
%
39.0
%
46.6
%
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Three Months Ended
Nine Months Ended
June 30,
June 30,
(Dollars in millions)
2005
2004
% Change
2005
2004
% Change
$
160.3
$
153.1
4.7
$
501.4
$
493.4
1.6
$
76.3
$
70.5
8.2
$
234.5
$
220.5
6.3
$
84.0
$
82.6
1.7
$
266.9
$
272.9
(2.2
)
52.4
%
54.0
%
53.2
%
55.3
%
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Nine Months Ended
June 30,
(Dollars in millions)
2005
2004
$
175.6
$
261.3
(111.7
)
(542.4
)
(115.6
)
194.4
(0.5
)
0.5
$
(52.2
)
$
(86.2
)
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•
Failure by us or our suppliers to comply with the Food and Drug
Administration (FDA) regulations and similar foreign regulations
applicable to the products we manufacture or distribute could
expose us to enforcement actions or other adverse consequences.
For example, during the third quarter of fiscal 2005, the FDA
announced that Vail Products was permanently ceasing the
manufacture, sale, and distribution of all Vail enclosed bed
systems. As a result, we recorded a $1.7 million impairment on
the Vail enclosure beds in our Health Care rental fleet.
•
Continued declines and fluctuations in mortality rates and
increased cremations may adversely affect, as they have in recent
years, the volume of Batesville Casket’s sales of burial caskets.
•
Future financial performance will depend in part on the successful
introduction of new products into the marketplace on a
cost-effective basis. The financial success of new products could
be adversely impacted by competitors’ products, customer
acceptance, difficulties in product development and manufacturing,
certain regulatory approvals and other factors. The introduction
of new products may cause customers to defer purchases of existing
products, which could have an adverse effect on sales.
•
Our health care and funeral services businesses are significantly
dependent on several major contracts with large national providers
and group purchasing organizations (“GPOs”). Our contracts with
six of the larger GPOs, which represent a significant portion of
Hill-Rom’s sales and most of which are sole-source or dual-source
contracts, will reach the end of their
current terms in calendar year 2005. Given the industry trend toward multi-source GPO
agreements and other factors, we will not be able to retain sole-source or dual-source status in
all situations where we have expiring sole-source or dual-source agreements. If we are unable to
retain current sole-source or dual-source positions in contracts with these GPOs, our results of
operations could be materially adversely affected. Additionally, Batesville Casket has
sole-source contracts with two of its large national accounts that reach the end of their
current terms in calendar year 2005. The contracts with these two national accounts represent a
material part of Batesville’s business. Batesville is currently in contract renewal
negotiations with these two national accounts. The funeral services industry is becoming even
more competitive given the excess capacity that exists in the industry, along with the
introduction of
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foreign-sourced products. The results of these negotiations could result in
some changes to our relationships with these national accounts that may include a lower product
line mix, a reduction in average wholesale price, lower volume and/or a modification in sourcing
provisions. Any combination of these items may have a materially adverse effect on our
financial condition, results of operations and cash flows.
•
Increased prices for, or unavailability of, raw materials or finished goods used in our products could adversely affect
profitability or revenues. In particular, our results of operations continue to be adversely affected by high prices
for steel, red metals, solid wood, plastic and fuel.
•
We may not be successful in achieving expected operating efficiencies and operating cost reductions associated with
announced restructuring, realignment and cost reduction activities, including the restructuring activities announced in
July and August 2005 and those of the prior year. These activities may not provide the full efficiency and cost
reduction benefits we expect from these activities. Further, such benefits may be realized later than expected, and the
costs of implementing these measures may be greater than anticipated. If these measures are not successful, we may
undertake additional realignment and cost reduction efforts, which could result in future charges. Moreover, our
ability to achieve our other strategic goals and business plans may be adversely affected if our restructuring and
realignment efforts prove ineffective.
•
During the third quarter, we implemented the final phase of our Enterprise Resource Planning System with respect to
Hill-Rom’s domestic rental business. Due to complexities and business process changes associated with this
implementation, we have encountered a number of issues related to the start-up of the system, including improper
billings to customers, customer disruptions and the loss of some business. We continue to devote additional resources
to the stabilization of our rental business system. If we are unsuccessful, our relationships with certain customers
could be adversely affected.
•
Product liability or other liability claims could expose us to adverse judgments or could affect the sales of our
products.
•
We are involved on an ongoing basis in claims and lawsuits relating to our operations, including environmental,
antitrust, patent infringement, business practices, commercial transactions, and other matters. We continue to incur
significant legal costs in the defense of antitrust litigation matters involving both Hill-Rom and Batesville Casket
and expect these increased costs to continue for the foreseeable future. Moreover, if class certification is granted
in any of these antitrust matters and the plaintiffs prevail at trial, our results of operations, financial position
and liquidity could be materially adversely affected.
•
Our funeral services business is facing increasing competition from a number of non-traditional sources, including
internet casket retailers, large retail discount stores, and caskets manufactured abroad and imported into North
America.
•
We may not be able to execute our growth strategy if we are unable to successfully acquire and integrate other
companies in the health care industry.
•
Our success depends on our ability to retain our executive officers and other key personnel. As a result of our recent
consolidation of management functions at Hillenbrand corporate and Hill-Rom and other realignment initiatives, the
potential risks to our business of our inability to retain key personnel may be magnified.
•
A substantial portion of our workforce is unionized, and we could face labor disruptions that would interfere with our
operations.
•
Volatility of our investment portfolio could negatively impact earnings.
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For a more in depth discussion of these and other factors that could cause actual results to differ
from those contained in forward-looking statements, see the discussions under the heading “Risk
Factors” in our Annual Report on Form 10-K for the fiscal year ended September 30, 2004, as
amended, filed with the U.S. Securities and Exchange Commission. We assume no obligation to update
or revise any forward-looking statements. Readers should also refer to the various disclosures
made by us in our periodic reports on Form 8-K filed with the U.S. Securities and Exchange
Commission.
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•
Changes in personnel have increased the skill and experience level of senior
financial management related to the understanding and application of generally accepted
accounting principles.
•
Continued accurate reporting unit identification and annual goodwill impairment
assessments under Statement of Financial Accounting Standards No. 142 (“SFAS 142”),
Goodwill and Other Intangible Assets, demonstrates our understanding and compliance
with appropriate authoritative literature.
•
Goodwill related to recent acquisitions has been properly accounted for and
allocated to the respective reporting units based on the requirements of SFAS 142.
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•
Another realignment in reporting structure in fiscal 2006 and the successful
integration of recently acquired businesses clearly defines the reporting unit as the
lowest level at which goodwill can be assessed in future periods.
•
The addition of a Director of Tax specializing in the accounting for income taxes in
accordance with Statement of Financial Accounting Standards No. 109, Accounting for
Income Taxes.
•
The addition of other key personnel and skill sets, including additions in specialty
and compliance areas.
•
Development of definitive procedures for the detailed documentation and
reconciliations supporting the income tax payable, deferred income tax and tax
provision balances and amounts, including the review and approval of related journal
entries by appropriate subject matter experts.
•
Improper billings to customers
•
Order fulfillment and rental asset inventory accuracy
•
Reporting of customer and management operational information
•
Customer disruption and the loss of some business
•
Establishment of dedicated, multi-functional teams to identify and resolve data
conversion and system function issues
•
Performance of incremental substantive procedures, including analytical assessments, to
validate the accuracy of key financial balances and amounts
•
Detailed testing of reports used in the substantive procedures outlined above
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•
Assessment and quantification of known, significant conversion or system function issues
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Employment Agreement between Hillenbrand Industries, Inc. and Rolf A. Classon
dated June 20, 2005. (Incorporated herein by reference to Exhibit 10.1 filed with Form
8-K/A dated May 11, 2005.)*
Stock Award between Hillenbrand Industries, Inc. and Rolf Classon dated June
20, 2005. (Incorporated herein by reference to Exhibit 10.2 filed with Form 8-K/A
dated May 11, 2005.)*
Separation and Release Agreement between Hillenbrand Industries, Inc. and
Frederick W. Rockwood dated July 12, 2005. (Incorporated herein by reference to
Exhibit 10.1 filed with Form 8-K dated July 12, 2005.)*
Executive Amended Employment Agreement between Hillenbrand Industries, Inc. and
Gregory N. Miller dated August 8, 2005, as amended.*
Executive Amended Employment Agreement between Hillenbrand Industries, Inc. and
Patrick D. de Maynadier dated August 8, 2005, as amended.*
Executive Amended Employment Agreement between Hillenbrand Industries, Inc. and
Bruce J. Bonnevier dated August 8, 2005, as amended.*
Executive Amended Employment Agreement between Hillenbrand Industries, Inc. and
Kenneth A. Camp dated August 8, 2005, as amended.*
Certification of Chief Executive Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002**
Certification of Chief Financial Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002**
Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002**
Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002**
*
Filed with original filing of the Form 10-Q for the quarterly period ended June 30, 2005.
**
Filed with this Form 10-Q/A.
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HILLENBRAND INDUSTRIES, INC.
BY:
/S/ Gregory N. Miller
Senior Vice President and
Chief Financial Officer
BY:
/S/ Richard G. Keller
Vice President, Controller
and Chief Accounting Officer
EXHIBIT 31.1
CERTIFICATIONS
Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Rolf A. Classon, certify that:
1. I have reviewed this quarterly report on Form 10-Q/A of Hillenbrand Industries, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the periods covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: January 23, 2006 /S/ Rolf A. Classon ---------------------- Rolf A. Classon Interim President and Chief Executive Officer |
EXHIBIT 31.2
CERTIFICATIONS
Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Gregory N. Miller, certify that:
1. I have reviewed this quarterly report on Form 10-Q/A of Hillenbrand Industries, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the periods covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: January 23, 2006 /S/ Gregory N. Miller ------------------------ Gregory N. Miller Senior Vice President and Chief Financial Officer |
EXHIBIT 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Hillenbrand Industries, Inc. (the "Company") on Form 10-Q/A for the period ending June 30, 2005 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Rolf A. Classon, Interim President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/S/ Rolf A. Classon -------------------- Rolf A. Classon Interim President and Chief Executive Officer January 23, 2006 |
A SIGNED ORIGINAL OF THIS WRITTEN STATEMENT REQUIRED BY SECTION 906 HAS BEEN PROVIDED TO HILLENBRAND INDUSTRIES, INC. AND WILL BE RETAINED BY HILLENBRAND INDUSTRIES, INC. AND FURNISHED TO THE SECURITIES AND EXCHANGE COMMISSION OR ITS STAFF UPON REQUEST.
EXHIBIT 32.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Hillenbrand Industries, Inc. (the "Company") on Form 10-Q/A for the period ending June 30, 2005 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Gregory N. Miller, Senior Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/S/ Gregory N. Miller --------------------- Gregory N. Miller Senior Vice President and Chief Financial Officer January 23, 2006 |
A SIGNED ORIGINAL OF THIS WRITTEN STATEMENT REQUIRED BY SECTION 906 HAS BEEN PROVIDED TO HILLENBRAND INDUSTRIES, INC. AND WILL BE RETAINED BY HILLENBRAND INDUSTRIES, INC. AND FURNISHED TO THE SECURITIES AND EXCHANGE COMMISSION OR ITS STAFF UPON REQUEST.
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