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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED FEBRUARY 26, 1994 COMMISSION FILE NO. 1-6651
HILLENBRAND INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
INDIANA 35-1160484
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
700 STATE ROUTE 46 EAST
BATESVILLE, INDIANA 47006-8835
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (812) 934-7000
NOT APPLICABLE
(Former name, former address and former
fiscal year, if changes since last report)
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS.
Yes X No
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INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES OF
COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE.
Common Stock, without par value - 71,426,161 as of March 31, 1994.
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1
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HILLENBRAND INDUSTRIES, INC.
INDEX TO FORM 10-Q
Page
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PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Consolidated Balance Sheet, Exhibit 1
2/26/94 and 11/27/93
Consolidated Income for the Three Months Exhibit 1
Ended 2/26/94 and 2/27/93
Consolidated Cash Flows for the Three Months Exhibit 1
Ended 2/26/94 and 2/27/93
Supplementary Financial Information 3-4
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 4-7
PART II - OTHER INFORMATION
Item 6 - Exhibits and Reports of Form 8-K 7
SIGNATURES 8
2
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The following unaudited, condensed consolidated financial statements appear in
Exhibit 1 to this quarterly report on Form 10-Q which financial statements are
attached hereto and incorporated herein by reference:
Consolidated Balance Sheet, 2/26/94 and 11/27/93
Consolidated Income for the Three Months
Ended 2/26/94 and 2/27/93
Consolidated Cash Flows for the Three Months
Ended 2/26/94 and 2/27/93
The unaudited, condensed consolidated financial statements appearing in
Exhibit 1 to this quarterly report on Form 10-Q, which are incorporated herein
by reference, should be read in conjunction with the financial statements and
notes thereto included in the Company's latest annual report. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted. The statements herein have been prepared in accordance
with the Company's understanding of the instructions to Form 10-Q. In the
opinion of management, such financial statements include all adjustments
necessary to present fairly the financial position, results of operations, and
cash flows, for the interim periods.
Filed as part of this report:
Supplementary Balance Sheet Information
(Pertaining to non-insurance assets and consolidated shareholders' equity)
<TABLE>
<CAPTION>
(Dollars in Thousands)
----------------------
2/26/94 11/27/93
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<S> <C> <C>
Allowance for possible losses and
discounts on trade receivables.......... $ 10,340 $ 11,271
Accumulated depreciation of equipment
leased to others and property........... 482,421 460,443
Accumulated amortization of intangible
assets.................................. 120,244 119,258
</TABLE>
3
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<TABLE>
<CAPTION>
2/26/94 11/27/93
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<S> <C> <C>
Capital Stock:
Preferred stock, without par value:
Authorized 1,000,000 shares;
Shares issued........................ None None
Common stock, without par value:
Authorized 199,000,000 shares;
Shares issued...................... 80,323,912 80,323,912
</TABLE>
Supplementary Income Statement Information
Earnings per common share were computed by dividing net income by the average
number of common shares, including restricted shares issued to employees,
outstanding during each period (71,378,272 for the three months of 1994 and
71,567,480 for the three months of 1993). Under a program begun in 1983, the
Company has acquired to date 10,228,272 shares of common stock of which
1,479,621 shares have been reissued for general corporate purposes. The
remaining treasury stock has been excluded in determining the average number of
shares outstanding during each period. Common share equivalents arising from
shares awarded under the Senior Executive Compensation Program which was
initiated in fiscal year 1978 have also been excluded from the computation
because of their insignificant dilutive effect.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FINANCIAL CONDITION
FIRST QUARTER 1994 COMPARED TO YEAR END 1993
LIQUIDITY:
Net cash generated from operating activities and selected borrowings represent
the Company's primary sources of funds for growth of the business, including
capital expenditures and acquisitions. Cash and cash equivalents (excluding
investments of the insurance operation) grew from $210.2 million at the end of
fiscal 1993 to $282.2 million at the end of the first quarter of 1994, an
increase of $72.0 million.
4
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Net cash flow from operating activities in the first quarter of $47.6 million
was $22.1 million higher than in the first quarter of 1993 due to improved
earnings and a smaller increase in net working capital. Excluding working
capital acquired, accounts receivable declined $9.6 million in the first quarter
compared to a $2.4 million increase in 1993. Inventories increased $2.0 million
in 1994 versus $6.7 million in 1993. These items were partially offset by a
decrease in accrued expenses.
The decline in accounts receivable (excluding acquisitions) from year-end was
due to lower sales at Hill-Rom, partially offset by higher revenues at SSI.
Days sales outstanding (including the effect of acquisitions) was 68 at the
end of the first quarter compared with 70 at year-end.
Annualized inventory turns on revenues was 12.8 at quarter-end, down from 14.7
at year-end due to inventories relative to acquisitions occurring near the end
of the quarter.
Accounts payable and accrued expenses were below year-end levels due to
incentive compensation payments throughout the Company and lower shipments
and production at Hill-Rom in the first quarter, partially offset by
liabilities assumed in acquisitions.
Capital spending of $20.5 million was $2.8 million lower than in the first
quarter of 1993 due primarily to the production of fewer therapy units at SSI.
Acquisition payments of $45.5 million in the first quarter consisted primarily
of the purchase of L. & C. Arnold AG, a German manufacturer of hospital and
nursing home beds. In addition, Batesville Casket acquired Industrias Arga,
S.A. de C.V., a Mexican casket manufacturer and distributor, and Lincoln Casket
Company, a casket distributor based in Detroit, Michigan.
Forethought generates adequate cash to fund all statutory reserves.
CAPITAL RESOURCES:
On February 23, 1994, the Company issued $100.0 million of its 7% Debentures
due February 15, 2024, the proceeds of which are to be used for general
corporate purposes. This brought the long-term debt-to-equity ratio up to
31.1% at the end of the first quarter compared with 16.9% at the end of 1993.
The Company intends to prepay without penalty a $75.0 million unsecured
promissory note (classified as current debt) in the second quarter of this
year. Additional debt capacity affords the Company considerable flexibility
in the funding of internal and external growth.
5
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RESULTS OF OPERATIONS
FIRST QUARTER 1994 COMPARED TO FIRST QUARTER 1993
Net revenues of $377.4 million were up $29.0 million or 8.3%. In the Funeral
Services segment, Batesville Casket's sales growth was driven by higher unit
volume, sales of new products (including cremation products and services) and a
moderate price increase. Earned premium revenue was higher at Forethought due
to increased insurance in force. Investment income increased on the strength of
a larger invested asset base, partially offset by lower yields. Revenue growth
in the Health Care segment was generated by SSI which reported increased units
in use across all product lines and market segments. Hill-Rom's sales were
negatively impacted by lower volume in Europe due to continued recessionary
pressures within the European Community. Sales at Block Medical were down
compared with an unusually strong first quarter last year. Medeco Security
Lock's sales were essentially unchanged from last year as higher export sales
were offset by lower activity in the northeast due to unfavorable weather
conditions.
Gross profit of $178.2 million was up $11.8 million or 7.1%. Batesville
Casket's profitability was favorably affected by increased sales of higher
margin products, control of fixed costs and improved operating efficiencies.
While gross profit grew at Forethought, it did not match the growth in
revenues due to unfavorable claim experience. The increase in gross profit in
the Health Care segment was consistent with revenue growth.
Administrative, distribution and selling expenses (including unassigned
corporate overhead) increased $5.4 million, or 5.0%, from the first quarter of
1993. As a percentage of revenues, these expenses declined to 30.0% from
30.9% due to increasing revenues without a proportional increase in fixed
expenses. Additionally, depreciation expense relative to the SSI acquisition
continues to decline.
Interest expense was 13.4% lower than in the first quarter of 1993 due to a
decrease in debt associated with the acquisition of LeCouviour.
Other income, net, consisting of investment income and miscellaneous income and
expense, was $1.0 million lower than in 1993. Investment income was up due to
higher average levels of interest-earning assets, partially offset by lower
yields. This was offset by unfavorable foreign currency transaction
adjustments and lower death benefits associated with the Company's
corporate-owned life insurance program.
The Company's effective income tax rate was 38.2% in the first quarter of 1994
compared with 38.0% in the same period last year. An increase in the Federal
statutory rate was mostly offset by a decrease in the state effective rate.
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Results for the remainder of the year will be affected by the death rate
(Batesville Casket) and the demand for capital goods by Hill-Rom's customers.
Management is cautiously optimistic about the prospects for continued growth.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits
The unaudited, condensed consolidated financial statements for
the first quarter ended February 26, 1994 are attached hereto as
Exhibit 1.
B. Reports on Form 8-K
There were no reports filed on Form 8-K during the first quarter
ended February 26, 1994.
7
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HILLENBRAND INDUSTRIES, INC.
DATE: April 11, 1994 BY: /S/ Tom E. Brewer
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Tom E. Brewer
Senior Vice President
and Chief Financial Officer
DATE: April 11, 1994 BY: /S/ James D. Van De Velde
--------------------------------
James D. Van De Velde
Vice President - Controller
8
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HILLENBRAND INDUSTRIES, INC. AND SUBSIDIARIES EXHIBIT I
FINANCIAL STATEMENTS (Unaudited)
Consolidated Cash Flows
<TABLE>
<CAPTION>
(In Thousands)
Three Months Ended
02/26/94 02/27/93
<S> <C> <C>
Cash flows from operating activities:
Net income . . . . . . . . . . . . . . . . . . . .$ 37,691 $ 33,559
Adjustments to reconcile net income
to net cash flows from operating
activities:
Depreciation and amortization . . . . . . . . . 23,298 23,704
Change in noncurrent deferred
income taxes . . . . . . . . . . . . . . . . . (4,312) (3,548)
Change in net working capital
excluding cash, current debt
and acquisitions . . . . . . . . . . . . . . . (13,442) (31,784)
Change in insurance items:
Benefit reserves . . . . . . . . . . . . . . . 42,614 37,128
Unearned revenue . . . . . . . . . . . . . . . 17,250 16,358
Deferred acquisition costs . . . . . . . . . . (12,712) (9,740)
Investments, net . . . . . . . . . . . . . . . (36,621) (39,864)
Other, net . . . . . . . . . . . . . . . . . . . (6,205) (386)
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Net cash flows from operating
activities . . . . . . . . . . . . . . . . . . . . 47,561 25,427
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Cash flows from investing activities:
Capital expenditures, net . . . . . . . . . . . . (20,451) (23,284)
Acquisition of businesses. . . . . . . . . . . . . (45,531) -
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Net cash flows from investing
activities . . . . . . . . . . . . . . . . . . . . (65,982) (23,284)
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Cash flows from financing activities:
Additions to debt, net . . . . . . . . . . . . . . 101,278 40
Payment of cash dividends . . . . . . . . . . . . (10,191) (8,049)
Treasury stock acquisitions. . . . . . . . . . . . (637) (2,415)
Other . . . . . . . . . . . . . . . . . . . . . . - 55
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Net cash flows from financing
activities . . . . . . . . . . . . . . . . . . . . 90,450 (10,369)
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Total cash flows . . . . . . . . . . . . . . . . . . 72,029 (8,226)
Cash and cash equivalents:
At beginning of period . . . . . . . . . . . . . . 210,157 149,989
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At end of period . . . . . . . . . . . . . . . . . 282,186 141,763
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</TABLE>
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Consolidated Income
<TABLE>
<CAPTION>
(In Thousands Except
Per Share Data)
Three Months Ended
02/26/94 02/27/93
<S> <C> <C>
Net revenues . . . . . . . . . . . . . . . . . . . $377,406 $348,432
Cost of revenues . . . . . . . . . . . . . . . . . 199,222 182,006
Administrative, dist. and selling expenses . . . . 113,092 107,658
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Operating profit . . . . . . . . . . . . . . . . . 65,092 58,768
Interest expense . . . . . . . . . . . . . . . . . (4,870) (5,621)
Other income, net . . . . . . . . . . . . . . . . . 766 1,815
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Income from continuing operations before
income taxes . . . . . . . . . . . . . . . . . . . 60,988 54,962
Income taxes . . . . . . . . . . . . . . . . . . . 23,297 20,889
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Income from continuing operations . . . . . . . . . 37,691 34,073
Loss from discontinued operations net of
income taxes . . . . . . . . . . . . . . . . . . . - (514)
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Net income . . . . . . . . . . . . . . . . . . . . 37,691 33,559
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Earnings/common share:
Income from continuing operations . . . . . . . . . .53 .48
Loss from discontinued operations net of
income taxes . . . . . . . . . . . . . . . . . . - (.01)
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Net income/common share . . . . . . . . . . . . . . .53 .47
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Dividends/common share . . . . . . . . . . . . . . .1425 .1125
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</TABLE>
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Consolidated Balance Sheet
<TABLE>
<CAPTION>
ASSETS (In Thousands)
02/26/94 11/27/93
<S> <C> <C>
Current assets:
Cash and cash equivalents. . . . . . . . . . . .$ 282,186 $ 210,157
Trade receivables. . . . . . . . . . . . . . . . 255,847 253,818
Inventories. . . . . . . . . . . . . . . . . . . 107,006 90,900
Other. . . . . . . . . . . . . . . . . . . . . . 18,343 19,151
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Total current assets. . . . . . . . . . . . . . 663,382 574,026
Equipment leased to others, net. . . . . . . . . . 59,246 58,405
Property, net. . . . . . . . . . . . . . . . . . . 283,902 268,383
Other assets:
Intangible assets, net . . . . . . . . . . . . . 178,032 138,384
Other assets . . . . . . . . . . . . . . . . . . 20,344 19,116
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Total other assets. . . . . . . . . . . . . . . 198,376 157,500
Insurance assets:
Investments. . . . . . . . . . . . . . . . . . . 982,183 934,029
Deferred acquisition costs . . . . . . . . . . . 230,515 217,803
Deferred income taxes. . . . . . . . . . . . . . 35,884 33,649
Other. . . . . . . . . . . . . . . . . . . . . . 26,613 26,952
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Total insurance assets. . . . . . . . . . . . . 1,275,195 1,212,433
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Total assets . . . . . . . . . . . . . . . . . . .$2,480,101 $2,270,747
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LIABILITIES (In Thousands)
02/26/94 11/27/93
Current liabilities:
Short-term debt. . . . . . . . . . . . . . . . .$ 18,736 $ 12,708
Current portion of long-term debt. . . . . . . . 76,285 77,318
Trade accounts payable . . . . . . . . . . . . . 39,392 47,768
Accrued expenses . . . . . . . . . . . . . . . . 151,151 152,234
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Total current liabilities . . . . . . . . . . . 285,564 290,028
Long-term debt . . . . . . . . . . . . . . . . . . 210,971 107,887
Other long-term liabilities. . . . . . . . . . . . 92,673 72,780
Deferred income taxes. . . . . . . . . . . . . . . 18,556 20,633
Insurance liabilities:
Benefit reserves . . . . . . . . . . . . . . . . 870,429 827,815
Unearned revenue . . . . . . . . . . . . . . . . 309,836 292,586
General liabilities. . . . . . . . . . . . . . . 12,760 19,086
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Total insurance liabilities . . . . . . . . . . 1,193,025 1,139,487
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Total liabilities. . . . . . . . . . . . . . . . . 1,800,789 1,630,815
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SHAREHOLDERS' EQUITY
Common stock . . . . . . . . . . . . . . . . . . 4,442 4,442
Additional paid-in capital . . . . . . . . . . . 11,555 3,900
Retained earnings. . . . . . . . . . . . . . . . 807,423 779,923
Foreign currency translation adjustment. . . . . (1,431) (1,643)
Treasury stock . . . . . . . . . . . . . . . . . (142,677) (146,690)
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Total shareholders' equity. . . . . . . . . . . 679,312 639,932
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Total liabilities and
shareholders' equity. . . . . . . . . . . . . . .$2,480,101 $2,270,747
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</TABLE>
