<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 3, 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
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Title of Each Class Name of Each Exchange on Which Registered
- - ------------------------------------ -------------------------------------------
COMMON STOCK, WITHOUT PAR VALUE NEW YORK STOCK EXCHANGE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
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 TWELVE 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 BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM
405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE
BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENTS
INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO THIS
FORM 10-K. / /
STATE THE AGGREGATE MARKET VALUE OF THE VOTING STOCK HELD BY NON-AFFILIATES
OF THE REGISTRANT.
Common Stock, without par value - $1,404,208,000 as of February 10,
1995 (excluding stock held by persons deemed affiliates).
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE REGISTRANT'S
CLASSES OF COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE.
Common Stock, without par value - 70,806,267 as of February 10, 1995.
DOCUMENTS INCORPORATED BY REFERENCE.
Portions of the 1995 Proxy Statement furnished to Shareholders - Parts
I and III.
Portions of the 1992 Proxy Statement furnished to Shareholders - Part
IV.
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<PAGE>
HILLENBRAND INDUSTRIES, INC.
ANNUAL REPORT ON FORM 10-K
DECEMBER 3, 1994
TABLE OF CONTENTS
PAGE
PART I
Item 1. Business 1
Item 2. Properties 7
Item 3. Legal Proceedings 7
Item 4. Submission of Matters to a Vote
of Security Holders 8
PART II
Item 5. Market for Registrant's Common
Equity and Related Stockholder
Matters 8
Item 6. Selected Financial Data 9
Item 7. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 9
Item 8. Financial Statements and Supplementary
Data 18
Item 9. Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure 37
PART III
Item 10. Directors and Executive Officers
of the Registrant 38
Item 11. Executive Compensation 38
Item 12. Security Ownership of Certain
Beneficial Owners and Management 38
Item 13. Certain Relationships and Related
Transactions 38
PART IV
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K 38
SIGNATURES 41
<PAGE>
PART I
ITEM 1. BUSINESS
Hillenbrand Industries, Inc., an Indiana corporation headquartered in
Batesville, Indiana, is a diversified, public holding company and the owner of
100% of the capital stock of its five major operating companies. Unless the
context otherwise requires, the terms "Hillenbrand" and the "Company" refer to
Hillenbrand Industries, Inc. and its consolidated subsidiaries. Hillenbrand is
organized into two business segments: Funeral Services and Health Care. The
Funeral Services segment consists of Batesville Casket Company, Inc., a
manufacturer of caskets and products for the cremation market, and Forecorp,
Inc., a provider of funeral planning insurance products. The Health Care
segment consists of Hill-Rom, Inc., a manufacturer of equipment for hospitals
and provider of wound care, pulmonary/trauma and incontinence management
services; Block Medical, Inc., a provider of home infusion therapy products;
and Medeco Security Locks, Inc., a manufacturer of high security locks and
access control products for commercial and residential use. (Medeco does not
directly serve the health care industry but is included in the Health Care
segment due to its relative size.)
FUNERAL SERVICES
Batesville Casket Company, Inc. ("Batesville"), an Indiana corporation
headquartered in Batesville, Indiana, was founded in 1884 and acquired by the
Hillenbrand family in 1906. Batesville manufactures and sells several types of
steel, copper, bronze and hardwood caskets, including caskets for the cremation
market. In addition to caskets, Batesville manufactures and sells a line of
urns used in cremations. All Batesville metal caskets are protective caskets
which are electrically welded and made resistant to the entry of air, water and
gravesite substances through the use of rubber gaskets and a locking bar
mechanism.
Batesville Monoseal-REGISTRATION MARK- steel caskets also employ a
magnesium alloy bar to cathodically protect the casket from rust and corrosion.
The Company believes that this system of Cathodic Protection is featured only on
Batesville caskets.
Batesville hardwood caskets are made from walnut, mahogany, cherry, maple,
pine, oak and poplar. Except for a limited line of hardwood caskets with a
protective copper liner, the majority of hardwood caskets are not protective.
Batesville caskets are marketed by Batesville's direct sales force to
licensed funeral directors operating licensed funeral homes throughout the
United States, Australia, Canada and Puerto Rico. Batesville maintains an
inventory of caskets at 68 company-operated Customer Service Centers in North
America. Batesville caskets are delivered in specially equipped vehicles owned
by Batesville.
In December 1993, Batesville acquired Industrias Arga, S.A. de C.V., a
casket manufacturer in Mexico.
Forecorp, Inc., which was founded in 1985, and its subsidiaries,
Forethought Life Insurance Company and The Forethought Group, Inc., are
headquartered in Batesville, Indiana. These companies serve the country's
largest network of funeral planning professionals with marketing support for
Forethought-REGISTRATION MARK- funeral plans funded by life insurance policies.
This specialized funeral planning product is offered through licensed funeral
homes. Customers choose the funeral home, type of service and merchandise they
want. The selected funeral home contracts to provide the funeral services and
merchandise when needed. With funds provided by a life insurance policy from
Forethought Life Insurance Company, the Forethought program offers inflation
protection by enabling the funeral home to guarantee that the planned funeral
will be available as specified.
Certificates of authority to sell life insurance have been obtained in
forty-eight (48) states, Puerto Rico and the District of Columbia. Forethought
Life Insurance products are available through a network of over 4,000
independent funeral homes in forty-three (43) of these jurisdictions.
-1-
<PAGE>
HEALTH CARE
In fiscal 1994, Hill-Rom Company, Inc. and SSI Medical Services, Inc.
("SSI") were combined to form Hill-Rom, Inc. ("Hill-Rom"), an Indiana
corporation headquartered in Batesville, Indiana. Hill-Rom is a leading
producer of mechanically, electrically and hydraulically controlled adjustable
hospital beds, hospital procedural stretchers, hospital patient room furniture
and architectural systems specifically designed to meet the needs of medical-
surgical, critical care and perinatal providers. It has been in the hospital
equipment business since 1929. Hill-Rom (as SSI) has been engaged in the
manufacture of therapy beds and support surfaces and the rental of these
products in the wound care, pulmonary/trauma and incontinence management markets
since SSI was acquired by Hillenbrand in 1985.
The Hill-Rom line of electrically and manually adjustable hospital beds
includes models which, through sideguard controls, can be raised and lowered,
retracted and adjusted to varied orthopedic and therapeutic contours and
positions. Hill-Rom also produces beds for special departments such as
intensive care, emergency, recovery rooms and labor and delivery rooms. Other
Hill-Rom products include sideguard communications, wood finished bedside
cabinets, adjustable height overbed tables, mattresses and wood upholstered
chairs. Its architectural products include customized, prefabricated modules,
either wall-mounted or on freestanding columns, enabling medical gases,
communications and electrical services to be distributed in patient rooms.
Hill-Rom also remanufactures hospital beds. Its process includes disassembly,
washing, sanding, painting and reassembly with new components.
Hill-Rom products are sold directly to hospitals throughout the United
States and Canada by Hill-Rom account executives. Most Hill-Rom products sold
in the United States are delivered by trucks owned by Hill-Rom. Hill-Rom also
operates a Canadian division which distributes Hill-Rom products, principally in
Canada, and a German subsidiary which distributes Hill-Rom products throughout
Europe. Hill-Rom also sells its domestically produced products through
distributorships throughout the world.
In 1991, Hill-Rom acquired Le Couviour, a French company which manufactures
a variety of mechanically, hydraulically and electrically controlled beds and
patient room furniture. Its products are sold directly to hospitals and nursing
homes throughout Europe.
In February 1994, Hill-Rom completed the acquisition of L. & C. Arnold
A.G., of Schorndorf/Kempen in western Germany. Arnold is one of the oldest and
largest manufacturers of hospital beds in Germany.
Clinical support for Hill-Rom's wound care, pulmonary/trauma and
incontinence management products is provided by a sales force composed of nurses
and physician assistants. Technical support is made available by technicians
and service personnel who provide maintenance and technical assistance from
Hill-Rom Service Centers.
Within the wound care market, CLINITRON-REGISTRATION MARK- Air Fluidized
Therapy is provided as a therapeutic adjunct in the treatment of advanced
pressure sores, flaps, grafts and burns. The CLINITRON unit achieves its
support characteristics from the fluid effect created by forcing air up and
through medical-grade ceramic microspheres contained in the unit's fluidization
chamber.
Hill-Rom also offers low airloss therapy through its EFICA CC-TM- and
FLEXICAIR-REGISTRATION MARK- units. FLEXICAIR low airloss therapy is provided
for pressure sore prevention and wound treatment when ambulation is a priority
or continuous head elevation is desired. The FLEXICAIR unit regulates air
pressure in five zones corresponding to patient body areas. EFICA CC-TM Dynamic
Air Therapy-REGISTRATION MARK, which was introduced in 1994, offers several
modes of operation, including lateral rotation, percussion and vibration, while
maintaining optimal low airloss pressure relief. This is the state-of-the-art
therapy bed for the pulmonary/trauma market.
-2-
<PAGE>
The CLENSICAIR-REGISTRATION MARK- Incontinence Management System combines
pressure-relieving low airloss therapy with a breakthrough design for managing
incontinence.
Other wound care products include the ACUCAIR-REGISTRATION MARK- Continuous
Air Flow System and the CLINISERT-REGISTRATION MARK Pressure Relief System.
Both are offered as more effective alternatives to conventional overlays and
mattresses.
Hill-Rom therapy systems are made available to hospitals, long-term care
facilities and the home environment on a rental basis through over 150 Service
Centers located in the United States, Canada and Western Europe.
Block Medical, Inc. ("Block"), a Delaware corporation, is headquartered in
Carlsbad, California, and was acquired by Hillenbrand in 1991. Certain of its
manufacturing operations were moved to Mexico during fiscal 1994. Block is a
manufacturer of home infusion products for antibiotic, nutritional, chemotherapy
and other drug therapies, including HOMEPUMP-TM-, a disposable infusion pump,
and VERIFUSE-TM, an ambulatory electronic infusion pump. HOMEPUMP, which can be
carried in a pocket or specially designed pouch, provides a simple and
convenient way for patients to administer their medication with minimum
disruption of their lives. VERIFUSE is a computerized electronic infusion pump
that is designed to handle more complex infusion medications while enabling the
patient to be ambulatory. It is programmed through the use of a built-in bar-
code scanner and is capable of delivering four infusion therapies.
Block's products are sold to homecare providers throughout the United
States and internationally by a direct sales force and through distributors.
Medeco Security Locks, Inc. ("Medeco"), founded in 1968, was purchased by
Hillenbrand in 1984. Medeco manufactures and sells a wide variety of deadbolts,
padlocks, switch locks, camlocks, electro-mechanical and other special purpose
locks for the high security market. Medeco's double locking mechanism provides
a higher level of security than is achievable by more common, single locking
devices. Medeco locks are primarily constructed of brass and hardened steel and
are manufactured in its Salem, Virginia, plant.
In 1991, Medeco created the Medeco Security Electronics (MSE) division and
entered the electronic high security market with two innovative products.
INSITE VLS-TM- replaces the thousands of mechanical keys used in pay telephone
and vending machine collection. The INSITE SITEKEY-TM provides the state-of-
the-art in electronic door security.
Medeco products are sold domestically and internationally by its sales
organization to locksmith supply distributors, original equipment manufacturers
and government agencies. Original equipment applications include vending
machines, pay telephones, safe and lock boxes, computer equipment, coin-operated
laundry machines and communications security devices.
Hill-Rom generates the predominant share of the Health Care segment's
revenues and operating profit. Medeco and Block had an immaterial effect on the
operating results of this segment in 1992, 1993 and 1994.
BUSINESS SEGMENT INFORMATION
The amounts of net revenues, operating profit and identifiable assets
attributable to each of the industry segments of the Company are set forth in
tables relating to operations by business segment in Note 6 to Consolidated
Financial Statements, which statements are included under Item 8.
-3-
<PAGE>
RAW MATERIALS
FUNERAL SERVICES
Batesville employs carbon and stainless steel, copper and bronze sheet,
wood, fabrics, finishing materials, rubber gaskets, zinc and magnesium alloy in
the manufacture of its caskets. These materials are available from several
sources.
HEALTH CARE
Principal materials used in Hill-Rom products include steel, aluminum,
stainless steel, wood, high pressure laminates, fabrics, silicone-coated soda-
lime glass beads and other materials, substantially all of which are available
from several sources. Motors for electrically operated beds and certain other
components are purchased from one or more manufacturers. Block uses thermo-
plastic materials, elastomeric membranes, electronic components, miniature
electric motors, machined metal parts and other materials, substantially all of
which are available from multiple sources.
Medeco uses brass, hardened steel, other metals and electronic components,
substantially all of which are available from several sources.
COMPETITION
FUNERAL SERVICES
Batesville believes its dollar volume of sales of finished caskets is the
largest in the United States. Batesville competes on the basis of product
quality, service to its customers and price, and believes that there are
approximately two (2) other companies that also manufacture and/or sell caskets
over a wide geographic area. There are, however, throughout the United States
many enterprises that manufacture, assemble, or distribute caskets for sale
within a limited geographic area.
Forecorp, Inc. competes on the basis of service to its customers and
products offered. Forethought Life sells its products in competition with local
and state trusts for pre-need funeral planning as well as other life insurance
companies. Forethought Life believes it is the leading provider of insurance
funded pre-arranged funerals in the United States.
HEALTH CARE
Hill-Rom believes it is the U.S. market share leader in the sale of
electrically operated hospital beds, competing with approximately ten (10) other
manufacturers, some of which have larger financial resources and sell a broader
line of products. In Europe, Hill-Rom competes with several other manufacturers
and believes that it is a market leader. In both the U.S. and Europe there are
other companies which provide low airloss and other methods of patient support
and patient relief.
Block competes on the basis of product innovation and quality coupled with
attention to customer service. Block believes it is the market leader in
providing new innovations to the alternative site health care market, even
though several competitors have larger financial resources.
Medeco competes on the basis of product quality and performance, and
service to its customers. Medeco believes it is the market share leader in the
mechanical high security lock market; however, other lock manufacturers produce
a broader product line and have larger financial resources. Medeco believes
that its patents and channels of distribution are important to its business.
-4-
<PAGE>
RESEARCH
Each of the Company's operating subsidiaries devotes research efforts to
develop and improve its products as well as its manufacturing and production
methods. All research and development expenses are Company sponsored and, for
new products, amounted to approximately $25,767,000 in 1994, $22,270,000 in
1993, and $20,321,000 in 1992. Additionally, $9,245,000 was spent in 1994,
$8,089,000 in 1993, and $7,689,000 in 1992 on research and development
pertaining to the improvement of existing products. The above amounts exclude
expenditures relative to discontinued operations.
PATENTS AND TRADEMARKS
The Company owns a number of patents on its products and manufacturing
processes which are of importance to it, but it does not believe that any single
patent or related group of patents are of material significance to the business
of the Company as a whole.
The Company also owns a number of trademarks and service marks relating to
its products and product services which are of importance to it, but it does not
believe that any single trademark or service mark is of material significance to
the business of the Company as a whole.
EMPLOYEES
As of January 20, 1995, the Company employed approximately 10,000 persons
in its operations in North America and Europe.
ENVIRONMENTAL PROTECTION
Hillenbrand Industries, Inc. is committed to operating all of its
businesses in a way that protects the environment. The Company has voluntarily
entered into remediation agreements with environmental authorities, and has been
issued Notices of Violation alleging violations of certain permit conditions.
Accordingly, the Company is in the process of implementing plans of abatement in
compliance with agreements and regulations. The Company has also been notified
as a potentially responsible party in investigations of certain offsite disposal
facilities. The cost of all plans of abatement and waste site cleanups in which
the Company is currently involved is not expected to exceed $10.0 million. The
Company has provided adequate reserves in its financial statements for these
matters. Compliance with other current governmental provisions relating to
protection of the environment also does not materially affect the Company's
capital expenditures, earnings or competitive position. Recent changes in
environmental law might affect the Company's future operations, capital
expenditures and earnings. The cost of complying with these provisions is not
known.
FOREIGN OPERATIONS AND EXPORT SALES
Information about the Company's foreign operations is set forth in tables
relating to geographic information in Note 6 to Consolidated Financial
Statements, which statements are included under Item 8.
The Company's export revenues constituted less than 10% of consolidated
revenues in 1994 and prior years.
ORDER BACKLOG
Order backlogs are immaterial to the Company and there was no material
change in backlogs during 1994.
-5-
<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the Company are elected each year by the Board of
Directors at its first meeting following the Annual Meeting of Shareholders to
serve during the ensuing year and until their respective successors are elected
and qualify. There are no family relationships between any of the executive
officers of the Company.
W August Hillenbrand, 54, was elected Chief Executive Officer of the
Company on April 11, 1989 and has been President since October 21, 1981. Prior
to that he had been a Vice President of the Company since 1972 and has been
employed by the Company throughout his business career.
Lonnie M. Smith, 50, was elected Senior Executive Vice President, effective
January 1, 1982. From 1978 through 1981, he held the position of Executive Vice
President of American Tourister, Inc. From 1976 to 1978, he was Senior Vice
President of Strategic Planning for the Company. Prior to that he was employed
by the Boston Consulting Group, business consultants.
Tom E. Brewer, 56, has been employed by the Company since May 16, 1983, and
was elected Senior Vice President and Chief Financial Officer on May 23, 1983
and Treasurer on September 6, 1991. He had been employed by the Firestone Tire
and Rubber Company for the prior 22 years, where he served as Corporate Vice
President and Treasurer.
George E. Brinkmoeller, 59, was elected Vice President, Corporate Services
on December 2, 1979, had been Director of Corporate Services since January 1,
1975, and had been Manager of Affiliated Operations since January 1, 1971.
Michael L. Buettner, 37, has been employed by the Company since January 9,
1995, and was elected Vice President, Corporate Development on January 9, 1995.
Prior to joining the Company, he was employed by Bausch & Lomb Incorporated for
10 years in various corporate development and finance roles, most recently as
Staff Vice President, Corporate Development. He has also served in various
finance and marketing positions with Moog Automotive, Inc. and Carboline
Company.
Mark E. Craft, 40, has been employed by the Company since February 26,
1990, and was elected Vice President, Public Affairs on May 1, 1994. Prior to
that he was Director, Public Affairs. Prior to joining the Company, he was
Manager, Public Relations, for Melvin Simon & Associates, Inc., in Indianapolis,
Indiana.
Mark R. Lindenmeyer, M.D., 48, was elected Vice President, General Counsel
and Secretary of the Company on October 7, 1991. He has been employed by the
Company since August 18, 1986 as Litigation Counsel. Prior to joining the
Company, Dr. Lindenmeyer served in the U.S. Army as a military trial attorney
and judge and was a partner in a Batesville, Indiana law firm. He has been a
practicing physician since 1986 and a licensed attorney since 1972.
Bradley K. Reedstrom, 33, was elected Vice President, Corporate Planning on
December 1, 1991. He has been employed by the Company since June 13, 1985,
serving in various capacities in the Corporate Planning department, most
recently as Director.
James G. Thorne, 53, has been employed by the Company since June 14, 1993
and was elected Vice President, Human Resources on April 5, 1994. Prior to
joining the Company, he was employed by Monsanto Company for 27 years where he
served as Vice President, Human Resources for Fisher Controls International,
Inc.
James D. Van De Velde, 48, was elected Vice President, Controller on May
13, 1991. He joined the Company on September 1, 1980 as Director, Taxes. Prior
to that he was employed by the public accounting firm of Price Waterhouse.
Robyn P. Washburn, 39, was elected Vice President, Continuous Improvement
on April 9, 1991. Prior to that, he served as Vice President, Corporate
Planning, and has been employed by the Company since May 10, 1982.
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<PAGE>
ITEM 2. PROPERTIES
The principal properties of the Company and its subsidiaries are listed
below, and are owned by the Company or its subsidiaries subject to no material
encumbrances except for those facilities (*) which were constructed with funds
obtained through Government Issued Bonds (see Note 3 to the Consolidated
Financial Statements). The Company intends to improve the efficiency of certain
facilities in Germany during 1995 and 1996. Otherwise, all facilities are
suitable for their intended purpose, are being efficiently utilized and are
believed to provide adequate capacity to meet demand for the next several years.
<TABLE>
<CAPTION>
LOCATION DESCRIPTION PRIMARY USE
-------- ----------- -----------
<S> <C> <C>
HEALTH CARE AND OTHER:
Batesville, IN Manufacturing plant and Manufacture of hospital
distribution facility equipment
Office facilities Administration
Charleston, SC Office facility and Administration and
assembly plant assembly of therapy units
Kempen and Schorndorf, Manufacturing plants and Manufacture of hospital and
Germany office facilities nursing home equipment
Pluvigner, France Manufacturing plant and Manufacture of hospital
office facility equipment
Salem, VA Manufacturing plant and Manufacture of mechanical
office facility and electronic locks
FUNERAL SERVICES:
Batesville, IN Manufacturing plants Manufacture of metal caskets
Office facilities Administration
Manchester, TN Manufacturing plants Manufacture of metal caskets
Campbellsville, KY Manufacturing plant Manufacture of metal caskets
Vicksburg, MS Kiln drying and lumber Drying and dimensioning
cutting plant lumber
* Batesville, MS Manufacturing plant Manufacture of hardwood
caskets
Nashua, NH Manufacturing plant Manufacture of hardwood
caskets
</TABLE>
In addition to the foregoing, the Company leases or owns a number of
warehouse distribution centers, service centers and sales offices throughout the
United States and Europe.
ITEM 3. LEGAL PROCEEDINGS
In 1993, Hill-Rom was notified that it is part of an investigation into the
hospital bed industry by the Antitrust Division of the Department of Justice
(the "DOJ"). As a result, the Company was issued a Civil Investigation Demand
by the DOJ and served with a subpoena to allow review of internal Hill-Rom files
and business practices to determine any irregularities. The Company is
cooperating with the DOJ in its investigation. Although the Company believes
that it is not in violation of any antitrust law or statute and expects no
material, adverse financial effect, it is impossible to predict with certainty
when the investigation will be concluded, what the outcome of the investigation
will be and what effect, if any, the outcome might have on the Company's
financial condition, results of operations and cash flows.
-7-
<PAGE>
On September 19, 1994, subsequent to trial on the issues, the Company
settled a patent infringement suit brought by Kinetic Concepts, Inc. ("KCI")
against Support Systems International, Inc. and SSI Medical Services, Inc.,
wholly owned subsidiaries of the Company, for a cash payment of $84.8 million
(KINETIC CONCEPTS, INC. V. SUPPORT SYSTEMS INTERNATIONAL, INC. AND SSI MEDICAL
SERVICES, INC., U.S. District Court, Western District of Texas, originally filed
September 6, 1991). The settlement amount was reflected in third quarter
results as an unusual charge and payment was made in the fourth quarter. KCI
alleged that SSI's RESTCUE and RESTCUE CC therapy units infringed certain
patents owned by KCI. KCI sought an award of actual damages and sought to
enjoin SSI from marketing the RESTCUE units. Before the trial, the RESTCUE
products had been replaced by a next generation therapy product. From the date
of the initial claim until the trial commencing August 29, 1994, the Company
believed that the outcome of a trial or any settlement of the matter would not
have a significant effect on the Company's financial condition or results of
operations. The settlement of the patent infringement suit will not affect
future operating results.
There is no other pending litigation of a material nature in which the
Company or its subsidiaries are involved.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the
quarter ended December 3, 1994.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
MARKET INFORMATION
Hillenbrand Industries' common stock is traded on the New York Stock
Exchange under the ticker symbol "HB". The following table reflects the range
of high and low selling prices of the Company's common stock by quarter for 1994
and 1993.
<TABLE>
<CAPTION>
1994 1993
---------------- ----------------
High Low High Low
---- --- ---- ---
<S> <C> <C> <C> <C>
First Quarter $43 5/8 $39 1/2 $43 1/2 $38 1/2
Second Quarter $42 1/4 $35 1/4 $48 5/8 $41 7/8
Third Quarter $36 1/2 $26 5/8 $45 1/2 $38 1/4
Fourth Quarter $35 7/8 $29 1/8 $41 7/8 $36 1/2
</TABLE>
HOLDERS
On February 10, 1995, there were approximately 29,000 holders of the
Company's common stock.
DIVIDENDS
The Company has paid cash dividends on its common stock every quarter since
its first public offering in 1971, and those dividends have increased each year
since 1972. Dividends are paid near the end of February, May, August and
November to shareholders of record near the end of January, April, July and
October. Cash dividends of $.57 ($.1425 per quarter) in 1994 and $.45 ($.1125
per quarter) in 1993 were paid on each share of common stock outstanding. Cash
dividends will be $.60 ($.15 per quarter) in 1995.
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<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The following table presents selected consolidated financial data of
Hillenbrand Industries, Inc. for fiscal years 1990 through 1994.
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Net revenues $1,577,034 $1,447,913 $1,303,062 $1,084,487 $ 981,928
Income from continuing
operations (a) $ 89,462 $ 132,486 $ 111,165 $ 89,985 $ 72,081
Income from continuing
operations per share (a) $ 1.26 $ 1.86 $ 1.55 $ 1.23 $ .97
Total assets $2,693,817 $2,270,747 $1,935,207 $1,532,160 $1,268,885
Long-term debt $ 208,729 $ 107,887 $ 185,081 $ 103,589 $ 108,119
Cash dividends per share $ .57 $ .45 $ .35 $ .29 $ .28
<FN>
(a) Results in 1994 reflect an unusual charge of $52,545 ($.74 per share), after
income taxes, for settlement of a patent infringement suit.
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
Company's consolidated financial statements and accompanying notes.
Hillenbrand's five major operating companies are organized into two business
segments. The Funeral Services segment consists of Batesville Casket Company
and The Forethought Group. The Health Care segment consists of Hill-Rom, Inc.,
Block Medical and Medeco Security Locks (included in this segment due
to Medeco's relatively small size). In 1994, Hill-Rom and Support Systems
International (SSI) were integrated to form a single company. The discussion of
results for Hill-Rom includes the operating results of SSI. Results for
American Tourister, Inc., which was sold in 1993, have been reported separately
as a discontinued operation in the income statement.
RESULTS OF OPERATIONS
1994 COMPARED WITH 1993
SUMMARY
Net revenues increased $129.1 million, or 8.9%, to $1.6 billion in 1994.
Approximately $30.0 million of this increase can be attributed to the 53rd week
in fiscal 1994. Fiscal 1993 was, and fiscal 1995 will be, 52 week years.
Operating profit of $159.0 million was down 32.1% and income from continuing
operations declined 32.5% to $89.5 million.
On September 19, 1994, subsequent to trial on the issues, the Company
settled a patent infringement suit brought by Kinetic Concepts, Inc. against the
Company, for a cash payment of $84.8 million. The settlement amount was
reflected in third quarter results as an unusual charge to operations of $84.8
million ($52.5 million, or $.74 per share, after tax) and payment was made in
-9-
<PAGE>
the fourth quarter. From the date of the initial claim until the trial
commencing August 29, 1994, the Company believed that the outcome of the trial
or any settlement of the matter would not have a significant effect on the
Company's financial condition or results of operations. The settlement of the
patent infringement suit will not affect future operating results. In 1993, the
Company wrote down goodwill relative to the acquisition of Block Medical in the
amount of $14.0 million. Excluding these non-recurring items, operating profit
was down 1.8% and income from continuing operations fell 3.1%.
NET REVENUES
Net revenues in the Health Care segment increased $48.4 million, or 5.5%, to
$924.1 million in 1994. This increase was due primarily to the acquisition of
L. & C. Arnold AG (Arnold) by Hill-Rom in February 1994 and increased therapy
rental beds in use in the long-term care and home care markets. Revenue growth
was also realized in the remanufactured bed market. Offsetting these gains was
a drop in electric bed shipments, especially in the U.S. acute care market.
Additionally, there was a shift toward lower priced products in the U.S. acute
care therapy rental bed market. In Europe, therapy rental bed revenue was up
marginally and capital product shipments, excluding sales for Arnold, were
essentially flat. At Block Medical, shipments of both disposable infusion pumps
and ambulatory electronic pumps were down. Shipments of disposable pumps were
up in the fourth quarter compared with the fourth quarter of 1993. Sales in
Medeco's door security, gaming industry, electronic pay telephone and automated
teller channels were all higher in 1994. Demand in these markets grew and
Medeco's product offerings received strong acceptance. Block and Medeco do not
contribute significantly to the overall revenues of the Health Care segment.
Net revenues in the Funeral Services segment increased $80.7 million, or
14.1%, to $652.9 million in 1994. Despite an essentially flat market for
casketed deaths, casket unit volume was up at Batesville Casket due to the
additional week in fiscal 1994, acquisitions and new product introductions.
Revenues were also favorably impacted by price increases, improved product mix
and increased sales of products for the cremation market. Forethought's revenue
growth reflected higher investment income due to a larger invested asset base,
partially offset by lower yields. Yields began falling in 1993 and continued to
decline through mid-1994, from which point they have improved steadily. These
trends, while consistent with those of the financial markets overall during this
time period, generally lag the market by several months. Earned premium revenue
was higher due to increased policies in force, year over year.
COST OF REVENUES
Cost of revenues as a percentage of revenues increased from 51.6% in 1993 to
53.8% in 1994. This was due to higher costs associated with the manufacturing
operations at Arnold (which was acquired in 1994), the shift to lower priced
products in the acute care therapy rental bed market and the unfavorable impact
of lower acute care electric bed shipments. In the Funeral Services segment,
Forethought increased the crediting rate on policies in force for competitive
reasons in the fourth quarter. These items offset lower depreciation expense
associated with the acquisition of SSI in 1985 and ongoing improvements in
manufacturing efficiency and material costs throughout the Company.
ADMINISTRATIVE, DISTRIBUTION AND SELLING EXPENSES
These expenses (excluding the litigation settlement of $84.8 million) increased
4.1% in 1994. Excluding the $14.0 million write-down of Block goodwill in 1993,
they rose 7.4%, and as a percentage of net revenues, were down from 31.2% in
1993 to 30.8% in 1994. The inclusion of expenses associated with the operations
of Arnold and other acquisitions and growth in base businesses were offset by
improved efficiency, economies of scale and lower incentive compensation
expense.
-10-
<PAGE>
OPERATING PROFIT
Operating profit in the Health Care segment, excluding the litigation settlement
in 1994 and write-down of Block goodwill in 1993, was down $16.2 million, or
11.1%. Softness in the U.S. acute care capital market, price pressure in the
U.S. acute care rental market, losses from certain European operations and
expenses associated with the integration of Hill-Rom and SSI were partially
offset by increased therapy rental beds in use and lower expenses associated
with the acquisition of SSI.
In the Funeral Services segment, operating profit was up $8.2 million, or
7.2%. Higher casket unit volume (including the effect of the extra week) and
improved price, mix and operating efficiencies generated growth at Batesville
Casket. Higher earned premium revenue and investment income were offset by the
discretionary increase in the crediting rate on policies in force at
Forethought.
OTHER INCOME AND EXPENSE
Interest expense increased $2.2 million, or 10.1%, due to increased lines of
credit and other debt associated with Hill-Rom's European operations and the
issuance of $100.0 million of debentures in February 1994, partially offset by
the retirement of a $75.0 million promissory note in May. Investment income was
up $4.4 million, or 49.7%, due to higher rates of return and a higher average
level of interest earning assets. Other expense, net, of $4.1 million was
higher than in 1993 due primarily to increased net expenses associated with the
Company's corporate-owned life insurance program and lower foreign currency
transaction net gains.
INCOME TAXES
The effective income tax rate on income from continuing operations decreased
from 40.2% in 1993 to 38.2% in 1994. The decrease was primarily attributable to
two items. The write-down of Block goodwill of $14.0 million in 1993 was not
deductible for tax purposes, resulting in an increase in the 1993 effective
rate. This item did not reoccur in 1994. Secondly, the state effective rate
was reduced in 1994 as a result of certain tax planning strategies. These
decreases were partially offset by an increase in the effective foreign income
tax rate. This increase was attributable to operating losses in certain
European countries, resulting in foreign loss carryforwards for which there is
no associated income tax benefit recognized in the current year.
1993 COMPARED WITH 1992
SUMMARY
Net revenues increased $144.9 million, or 11.1%, to $1.4 billion. Operating
profit of $234.3 million was up 19.0% and income from continuing operations
increased 19.2% to $132.5 million. Excluding the write-down of Block goodwill
of $14.0 million in 1993, operating profit grew 26.2% and income from continuing
operations grew 31.8%.
NET REVENUES
Net revenues in the Health Care segment increased $84.7 million, or 10.7%, to
$875.7 million in 1993. Growth at Hill-Rom was driven by increased sales of
electric beds in the acute care market, birthing beds and refurbished hospital
equipment. Capital sales were also higher in Europe and Canada. Therapy rental
bed revenue was up due to increased units in use in the acute care, long-term
care and home care markets. Rental revenue was down in Europe, despite growth
in units in use, due to strong price competition. The acquisition of The
Mediscus Group in May 1993 contributed marginally to Hill-Rom's overall revenue
growth in 1993. At Block Medical, sales of electronic pumps and disposable
administration sets increased modestly in 1993. Sales of disposable infusion
pumps were down slightly but improved during the second half of the year. At
Medeco, sales of mechanical and electronic telephone locks and door security
products increased due to market acceptance of new products and positive
consumer spending.
-11-
<PAGE>
Net revenues in the Funeral Services segment increased $60.2 million, or
11.8%, to $572.2 million in 1993. Net sales at Batesville Casket were higher
due to increased unit shipments (including the marginal effect of acquired
distributors), successful new product introductions (including cremation
products), improved product mix and a moderate price increase. Forethought's
revenue continued its growth pattern in 1993 although, as anticipated, at a rate
slightly lower than in prior years. Investment income was up due to a larger
invested asset base, partially offset by lower yields. Earned premium revenue
was higher due to increased policies in force, year over year.
COST OF REVENUES
Cost of revenues as a percentage of revenues improved slightly from 51.8% in
1992 to 51.6% in 1993. Increased therapy unit utilization, lower depreciation
associated with the acquisition of SSI in 1985, improved product mix at
Batesville Casket and increased manufacturing efficiency throughout the Company
were offset by revenue growth in lower margin European and refurbished equipment
markets at Hill-Rom.
ADMINISTRATIVE, DISTRIBUTION AND SELLING EXPENSES
Excluding the write-down of Block goodwill of $14.0 million, these expenses
increased 4.7% in 1993 and, as a percentage of revenues, declined from 33.1% to
31.2%. This decrease was due to improved operating efficiency, leveraging of
fixed expenses and lower incentive compensation expense throughout the Company.
Compensation earned under provisions of the performance compensation plan in
1992 and 1993, based on the performance of certain subsidiaries and the Company
in those years, was accrued primarily in 1992. These positive factors were
partially offset by the growth of European operations, which have higher
expenses relative to revenues.
OPERATING PROFIT
Operating profit in the Health Care segment, excluding the write-down of Block
goodwill, was up $30.3 million, or 26.0%, compared with revenue growth of 10.7%.
Increased bed sales in the acute care market, higher therapy rental bed revenue
in the acute care, long-term care and home care markets, improved operating
efficiencies and lower acquisition expenses were partially offset by revenue
growth in lower margin European operations.
In the Funeral Services segment, operating profit was up $16.5 million, or
16.9%, compared with revenue growth of 11.8%. This reflected improved
manufacturing, distribution and administrative efficiencies and improved product
mix at Batesville Casket and higher investment income, insurance in force and
leveraging of fixed expenses at Forethought.
OTHER INCOME AND EXPENSE
Other expense, net, of $276 thousand was $6.0 million less than in 1992 due to
favorable foreign currency transaction experience in 1993 relative to 1992 and
lower net expenses associated with the Company's corporate-owned life insurance
program.
INCOME TAXES
The effective income tax rate on income from continuing operations increased
from 37.5% in 1992 to 40.2% in 1993 primarily as a result of a corporate income
tax rate increase enacted retroactive to January 1, 1993 as a part of the 1993
tax legislation and the write-down of Block goodwill, which cannot be deducted
for tax purposes. This increase was partially offset by decreases in both the
state and foreign effective income tax rates.
INFLATION
Inflation and changing prices had a negligible effect on results of operations
in 1994, 1993 and 1992. Improvements in manufacturing and administrative
efficiencies continue to minimize the effect of price increases.
-12-
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
CASH FLOWS
Net cash flows from operating activities and selected borrowings represent the
Company's primary sources of funds for growth of the business, including capital
expenditures and acquisitions. Cash and cash equivalents (excluding the
investments of insurance operations) fell from $210.2 million at the end of 1993
to $120.4 million at the end of 1994.
OPERATING ACTIVITIES
Net cash flows from operating activities of $92.0 million in 1994 were
significantly lower than the $219.1 million and $201.0 million generated in 1993
and 1992, respectively. The decline in 1994 was due to the litigation payment
of $52.5 million after income taxes, lower operating results in the Health Care
segment and increased funding of working capital, partially offset by improved
operating results in the Funeral Services segment.
The $36.7 million increase in accounts receivable and growth in days sales
outstanding (DSO) from 70 to 78 reflected strong fourth quarter shipments and
lower prepayments in the Health Care segment. The increase in receivables in
1993 was also due to higher fourth quarter shipments in the Health Care segment.
DSO at year-end 1993 was up versus 1992 due primarily to the sale of American
Tourister, which had DSO considerably below that of the Company as a whole. The
decline in accrued expenses in 1994 was due primarily to lower current income
taxes payable (resulting from lower earnings) and incentive compensation
payments in the first quarter of 1994. The change in other non-cash adjustments
to net income was attributable to the liability associated with mortgage-backed
dollar roll contracts purchased by Forethought in 1993, the cash flow effect of
which was offset in the investments line, and to changes in other non-current
items offset in net working capital.
INVESTING ACTIVITIES
The Company invested $145.5 million in property, plant, equipment, acquisitions
and other investments in 1994 compared with $128.8 million in 1993, excluding
proceeds of $55.3 million on the sale of American Tourister.
Capital expenditures in 1994 of $99.5 million were $13.2 million lower than
in 1993 and essentially equal to the $98.3 million in 1992. The production of
therapy units at Hill-Rom increased from $17.4 million in 1992 to $31.8 million
in 1993 and $43.1 million in 1994. Capital spending in 1993 included the
construction of Batesville Casket's Business Center and new central offices and
investments in various processes and facilities in the Health Care segment.
Acquisition payments in 1994 were primarily for 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. Payments in 1993 and 1992 were
primarily for The Mediscus Group and Le Couviour, respectively. The contingent
earn-out payments in 1992 represented the final payments relative to the
acquisition of SSI in 1985.
The Company invested $15.7 million in certain limited partnerships in 1994.
FINANCING ACTIVITIES
The Company's long-term debt-to-equity ratio was 30.1% at year-end 1994 compared
with 16.9% at year-end 1993. In the first quarter of 1994, the Company issued
$100.0 million of unsecured debentures and, in the second quarter, prepaid
(without penalty) an unsecured promissory note in the amount of $75.0 million
which was due in annual installments in 1994, 1995 and 1996. Additions and
reductions to short-term debt in 1992 and 1993 were relative to Hill-Rom's
European operations and acquisitions. The Company also issued $100.0 million of
debentures in 1992. In the
-13-
<PAGE>
fourth quarter of 1993, the Company filed a registration statement with the
Securities and Exchange Commission for the future issuance of up to $200.0
million of debentures. With the issuance of $100.0 million in 1994, $100.0
million remains available, which, when combined with additional debt capacity,
existing cash and other working capital, affords the Company considerable
flexibility in the funding of internal and external growth.
Quarterly cash dividends per share were 8.75 cents in 1992, 11.25 cents in
1993 and 14.25 cents in 1994. An additional increase to 15 cents per share was
announced in January 1995. The Company expects to continue to share its growth
with its shareholders.
In 1994, Hillenbrand repurchased 610,300 shares of the Company's common
stock at a cost of $19.8 million, which compares with purchases of $14.7 million
in 1993 and $38.3 million in 1992.
INSURANCE ASSETS AND LIABILITIES
Insurance assets of $1,556.6 million grew 28.4% over the past year. Cash and
invested assets of $1,198.5 million constitute 77.0% of the assets. The
investments are concentrated in high grade, Federal Government, Federal
agency and corporate bond securities. The invested assets are more than
adequate to fund the insurance reserves and other liabilities of $1,074.6
million. Statutory reserves represent 64% of the face value of insurance in
force. The statutory capital and surplus as a percent of statutory liabilities
of the life insurance subsidiary of Forethought was 9.1% at December 31, 1994,
up from 8.6% on December 31, 1993. The long-term deferred tax benefit relative
to insurance operations results from differences in recognition of insurance
policy revenues and expenses for financial accounting and tax reporting
purposes. Financial accounting rules require ratable recognition of insurance
product revenues over the lives of the respective policies. These revenues are
recognized in the year of policy issue for tax purposes. This results in a
deferred future tax benefit. Insurance policy acquisition expenses must be
capitalized and amortized for both financial accounting and tax purposes.
Financial accounting rules require a greater amount to be capitalized and
amortized than for tax reporting. This results in a deferred future tax cost,
which partially offsets the deferred future tax benefit. The net deferred
future tax benefit increased $9.4 million in 1994, compared to $11.0 million in
1993. The reduction in the year to year net increase is attributable to
favorable final regulations issued by the Department of the Treasury which
reduced the amount of policy acquisition expenses required to be capitalized for
tax purposes.
SHAREHOLDERS' EQUITY
Cumulative treasury stock acquired increased to 10,823,572 shares in 1994, up
from 10,213,272 shares in 1993. The Company currently has Board of Directors'
authorization to repurchase up to a total of 14,000,000 shares. Repurchased
shares are used for general business purposes. From the cumulative shares
acquired, 316,274 shares, net of shares converted to cash to pay withholding
taxes, were reissued in 1994 to individuals under the provisions of the
Company's various stock compensation plans. In addition, a total of 45,648
deferred restricted shares were returned to treasury stock for payment at a
future date.
Under the restricted stock plan approved by the shareholders of the Company
on April 14, 1987, 324,600 shares have been awarded, 268,132 shares have been
distributed and/or deferred, and 56,468 shares have been forfeited to date. No
additional awards are contemplated at this time.
Under the performance compensation plan approved by the shareholders of the
Company on April 7, 1992, 386,096 shares were earned in 1993 based on each
subsidiary's and the Company's performance in 1992 and 1993.
-14-
<PAGE>
OTHER ISSUES
ACCOUNTING CHANGES
In 1994, the Company adopted Statement of Financial Accounting Standards (SFAS)
No. 112, "Employers' Accounting for Post Employment Benefits," which establishes
standards of financial accounting and reporting for the estimated cost of
benefits which will be provided by an employer to former or inactive employees
after employment but before retirement. Adoption of this standard did not have
a material effect on the Company's financial condition, results of operations or
cash flows.
SFAS No. 115, "Accounting for Certain Investments in Debt and Equity
Securities," was issued in May 1993. SFAS 115 requires that investments in debt
and equity securities be accounted for and classified as follows: debt
securities that the Company has the positive intent and ability to hold to
maturity are classified as "held-to-maturity" and reported at amortized cost;
debt and equity securities that are bought and held principally for resale in
the near term are classified as "trading securities" and reported at fair value,
with unrealized gains and losses included in earnings; and debt and equity
securities not classified as either of the above are classified as "available-
for-sale" and reported at fair value, with unrealized gains and losses charged
or credited directly to a separate component of shareholders' equity. This
statement will primarily affect the carrying value and presentation of
Forethought's investment assets and will be adopted by the Company in the first
quarter of 1995. The predominant share of Forethought's investment assets will
be classified as "available-for-sale." Adoption of this statement is expected
to result in a reduction in insurance investments of approximately $80.0 million
to report these investments at their estimated fair value. Insurance deferred
taxes will be increased approximately $28.0 million to reflect the income tax
effect and shareholders' equity will be decreased to record the unrealized net
loss of approximately $52.0 million. The effect on results of operations and
cash flows is not expected to be material.
In October 1994, the Financial Accounting Standards Board issued SFAS No.
119, "Disclosure about Derivative Financial Instruments and Fair Value of
Financial Instruments." This statement requires disclosures about the amounts,
nature, and terms of certain derivative financial instruments, and requires that
a distinction be made between those held or issued for trading purposes and
those held or issued for purposes other than trading. The Company's holdings in
such instruments is minimal. This statement will be adopted in fiscal year
1995.
ENVIRONMENTAL MATTERS
Hillenbrand Industries is committed to operating all of its businesses in a way
that protects the environment. The Company has voluntarily entered into
remediation agreements with environmental authorities, and has been issued
Notices of Violation alleging violations of certain permit conditions.
Accordingly, the Company is in the process of implementing plans of abatement in
compliance with agreements and regulations. The Company has also been notified
as a potentially responsible party in investigations of certain offsite disposal
facilities. The cost of all plans of abatement and waste site cleanups in which
the Company is currently involved is not expected to exceed $10.0 million. The
Company has provided adequate reserves in its financial statements for these
matters. Recent changes in environmental law might affect the Company's future
operations, capital expenditures and earnings. The cost of complying with these
provisions is not known.
-15-
<PAGE>
FACTORS THAT MAY AFFECT FUTURE RESULTS
Self-reform of the health care industry, both in the U.S. and in Europe, will
continue over the next several years. The most significant impact on
Hillenbrand Industries has been, and will continue to be, the change in demand
for capital goods in the acute care market as evidenced by the decline in
revenues and operating profit at Hill-Rom in 1994. Although it is difficult to
predict the ultimate outcome of this reform, the Company believes that
investments in innovative products and services and process improvements will
enable it to compete effectively in this changing market. Hill-Rom's European
companies are leaders in the markets they serve. However, the lower
profitability of these operations is expected to continue to negatively affect
the Company's overall profit margins in 1995. Modernization of Arnold's
production facilities and processes will occur during 1995 and 1996. The
investigation of Hill-Rom by the Antitrust Division of the Department of Justice
(DOJ) has been underway since the third quarter of 1993. The Company is
cooperating with the DOJ in its investigation. Although the Company believes
that it is not in violation of any antitrust law or statute and expects no
material, adverse financial effect, it is impossible to predict with certainty
when the investigation will be concluded, what the outcome of the investigation
will be and what effect, if any, the outcome might have on the Company's
financial condition, results of operations or cash flows.
The market for casketed deaths is essentially flat and Batesville Casket's
future success in this market will depend largely on its ability to continue
providing its customers with innovative products and services. With the
introduction of the Options-TM- cremation program in 1993, and the growth
realized in 1994, Batesville believes it is well positioned to compete
effectively in the growing cremation market.
As anticipated, Forethought's revenue growth has slowed somewhat over the
past two years as entry into targeted states and other jurisdictions winds down.
Forethought's products faced increased competition from trusts in 1994 as yields
on those investments improved. Forethought increased the crediting rate on its
policies in response to this competition. A solid, conservative investment
portfolio, innovative products and services and continued process improvements
will allow Forethought to contribute to the future growth of the Funeral
Services segment.
The Company's investment in operations in Canada and Mexico are minimal.
While its presence in Europe is growing, exchange rate fluctuations are not
material to the Company's financial position and results of operations.
-16-
<PAGE>
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------------------------------------------------
KEY FINANCIAL DATA (a)
- - ----------------------------------------------------------------------------------------------------------------------------------
1994 1993 1992 1991 1990
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT
- - ----------------------------------------------------------------------------------------------------------------------------------
% Pretax, preinterest expense,
income to revenues 10.7 16.8 15.3 14.8 13.9
% Net income to revenues 5.7 10.1 8.9 8.2 7.7
% Income taxes to pretax income 38.2 40.2 37.5 38.7 40.1
- - ----------------------------------------------------------------------------------------------------------------------------------
BALANCE SHEET
- - ----------------------------------------------------------------------------------------------------------------------------------
% Long-term debt to total capital 23.1 14.4 25.3 17.4 19.9
% Total debt to total capital 26.1 26.5 31.9 25.0 21.6
Current assets/current liabilities (b) 2.3 2.0 2.1 1.7 2.2
Working capital turnover (b) 4.6 4.7 5.1 7.6 5.6
- - ----------------------------------------------------------------------------------------------------------------------------------
PROFITABILITY
- - ----------------------------------------------------------------------------------------------------------------------------------
% Return on total capital 9.9 19.5 15.9 15.0 13.9
% Return on average shareholders' equity 13.4 25.2 23.1 19.7 18.2
- - ----------------------------------------------------------------------------------------------------------------------------------
Revenues/inventories (b) 13.7 14.7 14.1 11.3 12.2
Revenues/receivables (b) 4.7 5.2 5.3 5.4 5.7
- - ----------------------------------------------------------------------------------------------------------------------------------
STOCK MARKET
- - ----------------------------------------------------------------------------------------------------------------------------------
Year-end price/earnings (P/E) 23.2 20.4 25.5 24.4 17.9
Year-end price/book value 3.0 4.6 5.4 4.4 3.1
- - ----------------------------------------------------------------------------------------------------------------------------------
<FN>
(a) RESTATED, WHERE APPLICABLE, TO EXCLUDE THE RESULTS OF THE DISCONTINUED OPERATION.
(b) EXCLUDES INSURANCE OPERATIONS.
- - ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------------------------------------------------
CONSOLIDATED INCOME STATEMENT COMPARISON
- - ----------------------------------------------------------------------------------------------------------------------------------
Fiscal Year Percent Change
- - ----------------------------------------------------------------------------------------------------------------------------------
(DOLLARS IN MILLIONS) 1994 1993 1992 1994/93 1993/92 1992/91
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net revenues $1,577.0 $1,447.9 $1,303.1 8.9% 11.1% 20.2%
Cost of revenues 847.9 747.5 674.4 13.4% 10.8% 17.8%
- - ----------------------------------------------------------------------------------------------------------------------------------
Gross profit 729.1 700.4 628.7 4.1% 11.4% 22.7%
Administrative, distribution and
selling expenses 485.3 466.1 431.9 4.1% 7.9% 22.3%
Unusual charge 84.8 - - N/A N/A N/A
- - ----------------------------------------------------------------------------------------------------------------------------------
Operating profit 159.0 234.3 196.8 (32.1%) 19.0% 23.7%
Other expense, net (14.2) (12.7) (19.0) 12.2% (33.1%) 56.2%
- - ----------------------------------------------------------------------------------------------------------------------------------
Income from continuing operations
before income taxes 144.8 221.6 177.8 (34.7%) 24.6% 21.0%
Income taxes 55.3 89.1 66.6 (37.9%) 33.8% 17.0%
- - ----------------------------------------------------------------------------------------------------------------------------------
Income from continuing operations 89.5 132.5 111.2 (32.5%) 19.2% 23.5%
Income (loss) from discontinued
operation net of income taxes - 1.8 (5.7) N/A 131.5% (607.0%)
Gain on disposal of discontinued
operation net of income taxes - 11.5 - N/A N/A N/A
- - ----------------------------------------------------------------------------------------------------------------------------------
Income before cumulative effect of a change
in accounting principle 89.5 145.8 105.5 (38.6%) 38.2% 18.3%
Cumulative effect of change in method
of accounting for income taxes - - 10.8 N/A N/A N/A
- - ----------------------------------------------------------------------------------------------------------------------------------
Net income $ 89.5 $ 145.8 $ 116.3 (38.6%) 25.4% 30.4%
- - ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE
Financial Statements:
Report of Independent Accountants 19
Statements of Consolidated Income for the three years ended
December 3, 1994 20
Statements of Consolidated Shareholders' Equity for the three
years ended December 3, 1994 21
Statements of Consolidated Cash Flows for the three years ended
December 3, 1994 22
Consolidated Balance Sheets at December 3, 1994 and
November 27, 1993 23
Notes to Consolidated Financial Statements 25
Financial Statement Schedules for the three years ended
December 3, 1994: Schedule II-Valuation and Qualifying Accounts 40
All other schedules are omitted because they are not
applicable or the required information is shown in the
financial statements or the notes thereto.
-18-
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and
Board of Directors of
Hillenbrand Industries, Inc.
In our opinion, the consolidated financial statements listed in the accompanying
index present fairly, in all material respects, the financial position of
Hillenbrand Industries, Inc. and its subsidiaries at December 3, 1994 and
November 27, 1993, and the results of their operations and their cash flows for
each of the three years in the period ended December 3, 1994, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
As discussed in Note 1 to the financial statements, the Company changed its
method of accounting for income taxes in 1992.
PRICE WATERHOUSE LLP
Indianapolis, Indiana
January 16, 1995
-19-
<PAGE>
STATEMENT OF CONSOLIDATED INCOME
HILLENBRAND INDUSTRIES, INC. AND SUBSIDIARIES
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------------------
DECEMBER 3, November 27, November 28,
Year Ended 1994 1993 1992
- - ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net revenues $ 1,577,034 $ 1,447,913 $ 1,303,062
Cost of revenues 847,870 747,519 674,377
Administrative, distribution and selling expenses 485,369 466,116 431,892
Unusual charge (Note 12) 84,750 - -
- - ------------------------------------------------------------------------------------------------
Operating profit 159,045 234,278 196,793
Other income (expense), net:
Interest expense (23,489) (21,325) (21,233)
Investment income, net 13,282 8,872 8,434
Other (4,078) (276) (6,241)
- - ------------------------------------------------------------------------------------------------
Income from continuing operations
before income taxes 144,760 221,549 177,753
Income taxes 55,298 89,063 66,588
- - ------------------------------------------------------------------------------------------------
Income from continuing operations 89,462 132,486 111,165
Income (loss) from discontinued
operation net of income taxes - 1,778 (5,642)
Gain on disposal of discontinued
operation net of income taxes - 11,554 -
- - ------------------------------------------------------------------------------------------------
Income before cumulative effect of a
change in accounting principle 89,462 145,818 105,523
Cumulative effect of change in method
of accounting for income taxes - - 10,747
- - ------------------------------------------------------------------------------------------------
Net income $ 89,462 $ 145,818 $ 116,270
- - ------------------------------------------------------------------------------------------------
Earnings per common share:
Income from continuing operations $ 1.26 $ 1.86 $ 1.55
Income (loss) from discontinued operation
net of income taxes - .02 (.08)
Gain on disposal of discontinued
operation net of income taxes - .16 -
Cumulative effect of change in method
of accounting for income taxes - - .15
- - ------------------------------------------------------------------------------------------------
Net income per common share $ 1.26 $ 2.04 $ 1.62
- - ------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------
Dividends per common share $ .57 $ .45 $ .35
- - ------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------
Average number of common shares outstanding 71,278,213 71,406,998 71,915,336
- - ------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-20-
<PAGE>
STATEMENT OF CONSOLIDATED SHAREHOLDERS' EQUITY
HILLENBRAND INDUSTRIES, INC. AND SUBSIDIARIES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------------------
DECEMBER 3, November 27, November 28,
Year Ended 1994 1993 1992
- - ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common stock $ 4,442 $ 4,442 $ 4,442
- - ------------------------------------------------------------------------------------------------
Additional paid-in capital-Beginning of year 3,900 3,228 2,880
Excess of fair market value over cost on
reissuance of treasury shares 1994 - 270,626;
1993 - 23,587; 1992 - 8,358 7,669 666 255
Other 18 6 93
- - ------------------------------------------------------------------------------------------------
End of year 11,587 3,900 3,228
- - ------------------------------------------------------------------------------------------------
Retained earnings-Beginning of year 779,923 666,241 575,098
Net income 89,462 145,818 116,270
Dividends (40,641) (32,136) (25,127)
- - ------------------------------------------------------------------------------------------------
End of year 828,744 779,923 666,241
- - ------------------------------------------------------------------------------------------------
Unearned restricted stock compensation - - (206)
- - ------------------------------------------------------------------------------------------------
Foreign currency translation adjustment 10,478 (1,643) 6,462
- - ------------------------------------------------------------------------------------------------
Treasury stock-Beginning of year (146,690) (132,423) (94,261)
Shares acquired in 1994 - 610,300;
1993 - 340,826; 1992 - 1,088,000 (19,803) (14,662) (38,300)
Reissued 4,733 395 138
- - ------------------------------------------------------------------------------------------------
End of year (161,760) (146,690) (132,423)
- - ------------------------------------------------------------------------------------------------
Total Shareholders' Equity $ 693,491 $ 639,932 $ 547,744
- - ------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-21-
<PAGE>
STATEMENT OF CONSOLIDATED CASH FLOWS
HILLENBRAND INDUSTRIES, INC. AND SUBSIDIARIES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------------------
DECEMBER 3, November 27, November 28,
Year Ended 1994 1993 1992
- - ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 89,462 $ 145,818 $ 116,270
Adjustments to reconcile net income to
net cash flows from operating activities:
Depreciation, amortization and write-down
of goodwill 97,506 112,743 117,588
Change in noncurrent deferred income taxes (10,542) (15,780) (27,863)
Cumulative effect of change in accounting
for income taxes - - (10,747)
Gain on disposal of discontinued operation - (16,306) -
Current income taxes on gain - 4,752 -
Change in working capital excluding cash, current
debt, earn-out accruals, acquisitions
and dispositions:
Trade accounts receivable (36,650) (19,617) (50,552)
Inventories (444) (2,698) 16
Other current assets (1,734) 5,652 (3,365)
Trade accounts payable 1,181 2,368 4,626
Accrued expenses and other liabilities (27,361) 520 49,182
Change in insurance items:
Benefit reserves 232,169 190,254 169,957
Unearned revenue 88,007 83,107 72,823
Deferred acquisition costs (63,386) (52,313) (43,415)
Investments, net (252,884) (231,368) (197,476)
Other, net (23,358) 11,975 3,919
- - ------------------------------------------------------------------------------------------------
Net Cash Flows From Operating Activities 91,966 219,107 200,963
- - ------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (99,512) (112,735) (98,277)
Retirements, net 9,535 5,697 2,846
- - ------------------------------------------------------------------------------------------------
Net capital expenditures (89,977) (107,038) (95,431)
Contingent earn-out payments - - (30,257)
Acquisitions of businesses, net of cash acquired (39,868) (21,736) (28,900)
Other investments (15,664) - -
Proceeds from disposal of discontinued operation - 55,285 -
- - ------------------------------------------------------------------------------------------------
Net Cash Flows From Investing Activities (145,509) (73,489) (154,588)
- - ------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Additions to short-term debt 4,287 7,052 36,780
Reductions to short-term debt (2,760) (37,794) (6,429)
Additions to long-term debt 100,000 21 102,269
Reductions to long-term debt (77,338) (7,931) (20,479)
Payment of cash dividends (40,641) (32,136) (25,127)
Treasury stock acquired (19,803) (14,662) (38,300)
- - ------------------------------------------------------------------------------------------------
Net Cash Flows From Financing Activities (36,255) (85,450) 48,714
- - ------------------------------------------------------------------------------------------------
TOTAL CASH FLOWS (89,798) 60,168 95,089
CASH AND CASH EQUIVALENTS:
At Beginning of Year 210,157 149,989 54,900
- - ------------------------------------------------------------------------------------------------
At End of Year $ 120,359 $ 210,157 $ 149,989
- - ------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-22-
<PAGE>
CONSOLIDATED BALANCE SHEET
HILLENBRAND INDUSTRIES, INC. AND SUBSIDIARIES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------------------------
DECEMBER 3, November 27,
1994 1993
- - --------------------------------------------------------------------------------------------------
<S> <C> <C>
- - --------------------------------------------------------------------------------------------------
ASSETS
- - --------------------------------------------------------------------------------------------------
CURRENT ASSETS:
Cash and cash equivalents $ 120,359 $ 210,157
Trade accounts receivable, less allowances of
$13,982 in 1994 and $11,271 in 1993 299,598 253,818
Inventories 104,229 90,900
Other current assets 21,939 19,151
- - --------------------------------------------------------------------------------------------------
Total current assets 546,125 574,026
- - --------------------------------------------------------------------------------------------------
EQUIPMENT LEASED TO OTHERS 222,470 229,934
Less accumulated depreciation 146,348 171,529
- - --------------------------------------------------------------------------------------------------
Equipment leased to others, net 76,122 58,405
- - --------------------------------------------------------------------------------------------------
PROPERTY 613,756 557,297
Less accumulated depreciation 331,286 288,914
- - --------------------------------------------------------------------------------------------------
Property, net 282,470 268,383
- - --------------------------------------------------------------------------------------------------
OTHER ASSETS:
Intangible assets at amortized cost:
Patents and trademarks 40,036 51,155
Excess of cost over net asset values of
acquired companies 138,038 82,547
Other 10,194 4,682
Deferred charges and other assets 44,254 19,116
- - --------------------------------------------------------------------------------------------------
Total other assets 232,522 157,500
- - --------------------------------------------------------------------------------------------------
INSURANCE ASSETS (NOTE 9):
Investments 1,198,539 934,029
Deferred acquisition costs 281,189 217,803
Deferred income taxes 43,051 33,649
Other 33,799 26,952
- - --------------------------------------------------------------------------------------------------
TOTAL INSURANCE ASSETS 1,556,578 1,212,433
- - --------------------------------------------------------------------------------------------------
TOTAL ASSETS $2,693,817 $2,270,747
- - --------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-23-
<PAGE>
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------------------------
DECEMBER 3, November 27,
1994 1993
- - -------------------------------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES
- - -------------------------------------------------------------------------------------------------
CURRENT LIABILITIES:
Short-term debt (Note 3) $ 25,206 $ 12,708
Current portion of long-term debt (Note 3) 1,805 77,318
Trade accounts payable 52,427 47,768
Income taxes (Note 7):
Payable 7,872 25,664
Deferred (20,336) (20,641)
Accrued compensation 60,874 61,814
Other liabilities (Note 12) 111,005 85,397
- - -------------------------------------------------------------------------------------------------
Total current liabilities 238,853 290,028
- - -------------------------------------------------------------------------------------------------
LONG-TERM DEBT (NOTE 3) 208,729 107,887
- - -------------------------------------------------------------------------------------------------
OTHER LONG-TERM LIABILITIES (NOTES 4 AND 12) 78,045 72,780
- - -------------------------------------------------------------------------------------------------
DEFERRED INCOME TAXES (NOTES 1 AND 7) 19,470 20,633
- - -------------------------------------------------------------------------------------------------
INSURANCE LIABILITIES (NOTE 9):
Benefit reserves 1,059,984 827,815
Unearned revenues 380,593 292,586
General liabilities 14,652 19,086
- - -------------------------------------------------------------------------------------------------
TOTAL INSURANCE LIABILITIES 1,455,229 1,139,487
- - -------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 2,000,326 1,630,815
- - -------------------------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY (NOTE 4)
- - -------------------------------------------------------------------------------------------------
Common stock - without par value:
Authorized - 199,000,000 shares
Issued - 80,323,912 shares in 1994 and 1993 4,442 4,442
Additional paid-in capital 11,587 3,900
Retained earnings (Note 3) 828,744 779,923
Foreign currency translation adjustment 10,478 (1,643)
Treasury stock, at cost: 1994 - 9,401,065 shares;
1993 - 9,061,391 shares (161,760) (146,690)
- - -------------------------------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 693,491 639,932
- - -------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $2,693,817 $2,270,747
- - -------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-24-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Accounting policies specific to insurance operations are summarized in Note 9.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiaries, except for several small subsidiaries which
provide ancillary services to the Company and the public. These subsidiaries
are not consolidated because of their materiality and are accounted for by the
equity method. Their results of operations appear in the income statement, net
of income taxes, under the caption "Other income (expense), net." Operating
results for American Tourister, which was sold on August 30, 1993, are reported
separately as a discontinued operation, net of income taxes, in the income
statement. Material intercompany accounts and transactions have been eliminated
in consolidation.
The Company's fiscal year is the 52 or 53 week period ending the Saturday
nearest November 30.
CASH AND CASH EQUIVALENTS
The Company considers investments in marketable securities and other highly
liquid instruments with a maturity of three months or less to be cash
equivalents.
INVENTORIES
Inventories are valued at the lower of cost, principally on a last-in, first-out
(LIFO) basis, or market. The LIFO reserve, which approximates the excess of the
current cost of inventories over the stated LIFO values, declined from $9.3
million at year-end 1992 to $8.2 million at year-end 1993 due to the sale of
American Tourister in 1993. Excluding the effect of the sale, the LIFO reserve
increased $1.6 million in 1993. The reserve increased to $9.3 million at year-
end 1994. Separate accounts for raw materials, work-in-process and finished
goods are not maintained.
EQUIPMENT LEASED TO OTHERS
Equipment leased to others represents therapy rental units, which are recorded
at cost and depreciated on a straight-line basis over their average economic
life. These units are leased on a day-to-day basis.
PROPERTY
Property is recorded at cost and depreciated over the estimated useful life of
the assets using principally the straight-line method for financial reporting
purposes. Generally, when property is retired from service or otherwise
disposed of, the cost and related amount of depreciation or amortization are
eliminated from the asset and reserve accounts, respectively. The difference,
if any, between the net asset value and the proceeds is charged or credited to
income. The major components of property at the end of 1994 and 1993 were:
<TABLE>
<CAPTION>
- - ---------------------------------------------------------------------------
1994 1993
- - ---------------------------------------------------------------------------
<S> <C> <C>
Land $ 26,973 $ 13,200
Buildings and building equipment 141,789 136,370
Machinery and equipment 444,994 407,727
- - ---------------------------------------------------------------------------
Total $613,756 $557,297
- - ---------------------------------------------------------------------------
</TABLE>
-25-
<PAGE>
INTANGIBLE ASSETS
Intangible assets are stated at cost and are amortized on a straight-line basis
over periods ranging from 3 to 40 years. In the fourth quarter of 1993, the
Company recorded a $14.0 million charge to reduce the carrying value of the
goodwill related to the Block acquisition based on management's expectations for
Block's future earnings and discounted cash flows. Accumulated amortization of
intangible assets was $133,181 and $119,258 as of December 3, 1994 and November
27, 1993, respectively.
EARNINGS PER COMMON SHARE
Earnings per common share are computed by dividing net income by the average
number of shares outstanding during each year, including restricted shares
issued to employees. Common equivalent shares arising from shares awarded under
the Senior Executive Compensation Program, which was initiated in fiscal year
1978, have been excluded from the computation because of their insignificant
dilutive effect.
RETIREMENT PLANS
The Company and its subsidiaries have several defined benefit retirement plans
covering the majority of employees, including certain employees in foreign
countries. The Company contributes 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.
The weighted average discount rate and rate of increase in future
compensation levels used in determining the actuarial present value of the
projected benefit obligation were 8.0% and 6.0%, respectively, for 1994, 7.5%
and 6.0%, respectively, for 1993, and 8.0% and 6.5%, respectively, for 1992.
The expected long-term rate of return on assets was 8.0% for 1994, 1993 and
1992.
Net pension expense includes the following components:
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------------------
1994 1993 1992
- - --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service expense-benefits earned during the year $ 5,310 $ 4,640 $ 4,253
Interest expense on projected benefit obligation 6,952 6,447 5,798
Actual loss (return) on plan assets 6,893 (6,717) (10,465)
Net amortization and deferral (13,555) 566 5,017
- - --------------------------------------------------------------------------------------------
Net pension expense $ 5,600 $ 4,936 $ 4,603
- - --------------------------------------------------------------------------------------------
</TABLE>
-26-
<PAGE>
The funded status of the plans is shown in the table below:
<TABLE>
<CAPTION>
- - ---------------------------------------------------------------------------------------------
1994 1993
- - ---------------------------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including vested
benefits of $57,805 in 1994 and $55,932 in 1993 ($61,753) ($59,998)
- - ---------------------------------------------------------------------------------------------
Projected benefit obligation for service rendered to date ($94,817) ($95,601)
Plan assets at fair value, primarily U.S. Government
obligations, corporate bonds and notes, and common
stock issued by the Company. The value of this common
stock at date of acquisition by the plans was $2,613
and the current market value was $13,743 in 1994 and
$19,148 in 1993. 83,315 85,221
- - ---------------------------------------------------------------------------------------------
Plan assets less than projected benefit obligation (11,502) (10,380)
Unrecognized net gain from past experience different
from that assumed (16,405) (20,491)
Unrecognized prior service cost 2,853 4,341
Unrecognized net asset at year-end being recognized
over 14 to 22 years from the initial compliance date
of December 1, 1985 (1,290) (1,426)
- - ---------------------------------------------------------------------------------------------
Unfunded accrued expenses included in liabilities ($26,344) ($27,956)
- - ---------------------------------------------------------------------------------------------
</TABLE>
In addition to the above plans, the Company assumed the unfunded
liabilities of a defined benefit plan in the acquisition of Arnold in 1994. On
December 3, 1994, the unfunded accumulated benefit obligation of this plan,
included in accrued expenses, was approximately $13,000. Pension expense in
1994 was approximately $1,000.
The Company also sponsors several defined contribution plans covering
certain of its employees. Employer contributions are made to these plans based
on a percentage of employee compensation. The cost of these defined
contribution plans was $7,170 in 1994, $5,928 in 1993, and $5,388 in 1992.
INCOME TAXES
The Company adopted Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" (SFAS 109), in 1992. SFAS 109 is an asset and
liability method of accounting for income taxes. The asset and liability method
requires the recognition of deferred tax assets and liabilities based upon
expected future tax consequences of temporary differences between tax bases and
financial reporting bases of assets and liabilities.
Net assets as of December 1, 1991 were increased by $10,747 as a result of
adopting SFAS 109. For years prior to 1992, income taxes were computed based on
Accounting Principles Board Opinion No. 11.
FOREIGN CURRENCY TRANSLATION
Assets and liabilities of foreign operations are translated into U.S. dollars at
year-end rates of exchange and the income statements are translated at the
average rates of exchange prevailing during the year. Adjustments resulting
from translation of the financial statements of foreign operations into U.S.
dollars are excluded from the determination of net income and included as a
separate caption in shareholders' equity. Foreign currency gains and losses
resulting from transactions are included in results of operations and are not
material.
-27-
<PAGE>
2. ACQUISITIONS
Effective February 7, 1994, the Company's subsidiary, Hill-Rom, Inc., completed
the acquisition of L. & C. Arnold AG, a German manufacturer of hospital and
nursing home beds. The Company's subsidiary, Batesville Casket Company, Inc.,
acquired Industrias Arga, S.A. de C.V., a Mexican casket manufacturer and
distributor, effective December 9, 1993, and Lincoln Casket Company, a casket
distributor based in Detroit, Michigan, effective December 10, 1993.
These acquisitions have been accounted for as purchases and the operations
of the businesses acquired have been included in the Company's consolidated
financial statements from their respective dates of acquisition. The combined
purchase price of these companies (the predominant share of which relates to the
acquisition of L. & C. Arnold AG) consisted of cash in the amount of $39.9
million and the assumption of net liabilities (including the establishment of
reserves to reflect the cost of rationalizing certain acquired operations) of
$6.4 million. The resulting goodwill of $46.3 million is being amortized on a
straight-line basis, primarily over 40 years.
3. FINANCING AGREEMENTS
The Company's various financing agreements contain no provisions or conditions
relating to dividend payments, working capital and additional indebtedness.
Long-term debt consists of the following:
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------------
DECEMBER 3, November 27,
1994 1993
- - ------------------------------------------------------------------------------------------
<S> <C> <C>
Unsecured 8 1/2% debentures due on December 1, 2011 $100,000 $100,000
Unsecured 7% debentures due on February 15, 2024 100,000 -
Unsecured 9 1/4% promissory note payable to an
insurance company - 75,000
Unsecured non-interest bearing promissory note - 1,750
Government sponsored bonds, interest rates ranging from
5.0% to 8.9% as of December 3, 1994, with maturities
to 2008 3,080 4,300
Other 7,454 4,155
- - ------------------------------------------------------------------------------------------
Total 210,534 185,205
Less current portion 1,805 77,318
- - ------------------------------------------------------------------------------------------
Total long-term debt $208,729 $107,887
- - ------------------------------------------------------------------------------------------
</TABLE>
The scheduled payments of the remaining long-term debt as of December 3,
1994 are: $1,805 in 1995; $2,101 in 1996; $1,028 in 1997; $848 in 1998 and $762
in 1999.
Short-term debt consists of a non-interest bearing promissory note in the
amount of $1,750 payable in 1995 and use of various lines of credit maintained
for foreign subsidiaries totaling $23,456. The weighted average interest rate
on all short-term borrowings outstanding as of December 3, 1994 and November 27,
1993 was 7% and 8%, respectively.
-28-
<PAGE>
4. SHAREHOLDERS' EQUITY
One million shares of preferred stock, without par value, have been authorized
and none have been issued.
The Company's Senior Executive Compensation Program, initiated in fiscal
year 1978, provides long-term performance share compensation which contemplates
annual payments of common stock of
the Company to participants contingent on their continued employment and upon
achievement of pre-established financial objectives of the Company over
succeeding three-year periods. A total of 1,160,825 shares of common stock of
the Company remain reserved for issuance under the program. Total tentative
performance shares payable through December 3, 1994, were 16,131. In addition,
the Senior Executive Compensation Program provides for participants to defer
payment of long-term performance share and other compensation earned in prior
years. A total of 203,015 deferred shares are payable as of December 3, 1994.
Accruals for payments under these programs are included in "Other Long-Term
Liabilities."
Members of the Board of Directors may elect to defer fees earned as
reinvested in common stock of the Company. A total of 3,615 deferred shares are
payable as of December 3, 1994 under this program.
On April 7, 1992, the shareholders of the Company approved the adoption of
a performance compensation plan whereby key employees will be awarded tentative
performance shares based upon achievement of performance targets. A total of
1,296,899 shares of common stock remain reserved for issuance under this plan as
of December 3, 1994. In 1993, 386,096 shares were earned based on the Company's
performance. A total of 7,721 deferred shares are payable as of December 3,
1994 under this plan. The plan will terminate on November 30, 2001.
The Board of Directors has authorized the repurchase, from time to time, of
up to 14,000,000 shares of the Company's stock in the open market. The
purchased shares will be used for general corporate purposes. As of December 3,
1994, a total of 10,823,572 shares had been purchased.
On April 14, 1987, the shareholders of the Company approved the adoption of
a restricted stock plan whereby key employees may be granted restricted shares
of the Company's stock. The restrictions lapse after six years; or earlier if
certain financial goals are exceeded. 2,000,000 shares of common stock were
designated for this plan. Remaining authorized restricted shares may be awarded
up to April 15, 1997 and the vesting periods begin when the shares are awarded.
324,600 shares have been awarded, 268,132 shares have been distributed and/or
deferred, and 56,468 shares have been forfeited as of December 3, 1994. No
additional awards are contemplated at this time.
5. DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments (other than Insurance investments which are
described in Note 9) for which it is practicable to estimate that value:
The carrying amounts of cash and cash equivalents, trade accounts
receivable, other current assets, trade accounts payable, and accrued expenses
approximate fair value because of the short maturity of those instruments.
The fair value of the Company's debt is estimated based on the quoted
market prices for the same or similar issues or on the current rates offered to
the Company for debt of the same remaining maturities. The estimated fair
values of the Company's debt instruments are as follows:
<TABLE>
<CAPTION>
- - -------------------------------------------------------------
December 3, 1994
- - -------------------------------------------------------------
Carrying Fair
Amount Value
- - -------------------------------------------------------------
<S> <C> <C>
Short-term debt $ 25,206 $ 25,206
Long-term debt $210,534 $192,174
- - -------------------------------------------------------------
</TABLE>
-29-
<PAGE>
6. SEGMENT INFORMATION
INDUSTRY INFORMATION
The Health Care segment consists of Hill-Rom, Inc. and Block Medical. Results
for Medeco Security Locks are included in this segment due to its relative size.
Hill-Rom produces and sells electric hospital beds, patient room furniture and
patient handling equipment designed to meet the needs of acute care and
perinatal providers. It also provides rental therapy units to health care
facilities for wound therapy, the management of pulmonary complications
associated with critically ill patients, and incontinence management. Block
manufactures and sells home infusion therapy products including disposable
infusion pumps and ambulatory electronic infusion pumps for antibiotic,
nutritional, chemotherapy and other drug therapies. Medeco produces and sells
high-security mechanical locks and lock cylinders and electronic security
systems for commercial, residential and government applications.
The Funeral Services segment consists of Batesville Casket Company and
Forecorp. Batesville manufactures and sells a variety of metal and hardwood
caskets and a line of urns and caskets used in cremation. Batesville's products
are sold to licensed funeral directors operating licensed funeral homes.
Forecorp's subsidiaries, Forethought Life Insurance Company and The Forethought
Group, provide funeral planning professionals with marketing support for
Forethought-Registered Trademark- funeral plans funded by life insurance
policies. Note 9 contains additional information regarding insurance
operations.
-30-
<PAGE>
Financial information regarding the Company's industry segments is
presented below:
<TABLE>
<CAPTION>
- - ---------------------------------------------------------------------------------------------------------
Health Funeral Corporate
Care Services and Other (a) Consolidated
- - ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1994:
Net revenues $924,090 $ 652,944 $ - $1,577,034
- - ---------------------------------------------------------------------------------------------------------
Operating profit (c) $ 45,739 $ 122,873 $ (9,567) $ 159,045
Interest expense (23,489)
Investment income 13,282
Other expense, net (4,078)
- - ---------------------------------------------------------------------------------------------------------
Income from continuing
operations before income taxes $ 144,760
- - ---------------------------------------------------------------------------------------------------------
Identifiable assets $701,292 $1,825,928 $166,597 $2,693,817
- - ---------------------------------------------------------------------------------------------------------
Capital expenditures (b) $ 74,748 $ 22,803 $ 1,961 $99,512
- - ---------------------------------------------------------------------------------------------------------
Depreciation and amortization $ 69,300 $ 24,078 $ 4,128 $97,506
- - ---------------------------------------------------------------------------------------------------------
1993:
Net revenues $875,697 $ 572,216 $ - $1,447,913
- - ---------------------------------------------------------------------------------------------------------
Operating profit $132,732 $ 114,641 $(13,095) $ 234,278
- - ---------------------------------------------------------------------------------------------------------
Interest expense (21,325)
Investment income 8,872
Other expense, net (276)
- - ---------------------------------------------------------------------------------------------------------
Income from continuing
operations before income taxes $ 221,549
- - ---------------------------------------------------------------------------------------------------------
Identifiable assets $568,398 $1,468,111 $234,238 $2,270,747
- - ---------------------------------------------------------------------------------------------------------
Capital expenditures (b) $ 78,063 $ 31,758 $ 2,914 $ 112,735
- - ---------------------------------------------------------------------------------------------------------
Depreciation and amortization $ 69,667 $ 22,549 $ 6,527 $ 98,743
- - ---------------------------------------------------------------------------------------------------------
1992:
Net revenues $791,042 $ 512,020 $ - $1,303,062
- - ---------------------------------------------------------------------------------------------------------
Operating profit $116,429 $ 98,092 $(17,728) $ 196,793
Interest expense (21,233)
Investment income 8,434
Other expense, net (6,241)
- - ---------------------------------------------------------------------------------------------------------
Income from continuing
operations before income taxes $ 177,753
- - ---------------------------------------------------------------------------------------------------------
Identifiable assets $551,780 $1,143,552 $181,662 $1,876,994
Assets of discontinued operation 58,213
- - ---------------------------------------------------------------------------------------------------------
Consolidated assets $1,935,207
- - ---------------------------------------------------------------------------------------------------------
Capital expenditures (b) $ 55,506 $ 26,439 $ 16,332 $ 98,277
- - ---------------------------------------------------------------------------------------------------------
Depreciation and amortization $ 85,214 $ 21,370 $ 11,004 $ 117,588
- - ---------------------------------------------------------------------------------------------------------
<FN>
(a) INCLUDES CAPITAL EXPENDITURES, DEPRECIATION AND AMORTIZATION OF
DISCONTINUED OPERATION.
(b) EXCLUDES ACQUISITIONS OF BUSINESSES.
(c) RESULTS FOR THE HEALTH CARE SEGMENT REFLECT AN UNUSUAL CHARGE OF $84.8
MILLION FOR SETTLEMENT OF A PATENT INFRINGEMENT SUIT.
</TABLE>
-31-
<PAGE>
GEOGRAPHIC INFORMATION
Sales between geographic area are at transfer prices, which are equivalent to
market value.
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------------------------------------------
United Other Corporate
States (b) Europe International and Other (a) Eliminations Consolidated
- - -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1994:
Net revenues:
To unaffiliated customers $1,349,877 $176,408 $ 50,749 $ - $ - $1,577,034
Transfers to other geographic areas 39,157 - 4 - (39,161) -
- - -----------------------------------------------------------------------------------------------------------------------------------
Total net revenues $1,389,034 $176,408 $ 50,753 $ - $(39,161) $1,577,034
- - -----------------------------------------------------------------------------------------------------------------------------------
Operating profit (loss) $ 181,025 $ (9,034) $ (3,966) $ (9,567) $ 587 $ 159,045
- - -----------------------------------------------------------------------------------------------------------------------------------
Identifiable assets $2,363,726 $214,953 $ 25,510 $166,597 $(76,969) $2,693,817
- - -----------------------------------------------------------------------------------------------------------------------------------
1993:
Net revenues:
To unaffiliated customers $1,279,141 $121,798 $ 46,974 $ - $ - $1,447,913
Transfers to other geographic areas 38,108 - 17 - (38,125) -
- - -----------------------------------------------------------------------------------------------------------------------------------
Total net revenues $1,317,249 $121,798 $ 46,991 $ - $(38,125) $1,447,913
- - -----------------------------------------------------------------------------------------------------------------------------------
Operating profit (loss) $ 248,517 $ (1,270) $ 122 $(13,095) $ 4 $ 234,278
- - -----------------------------------------------------------------------------------------------------------------------------------
Identifiable assets $1,968,689 $143,431 $ 19,492 $234,238 $(95,103) $2,270,747
- - -----------------------------------------------------------------------------------------------------------------------------------
1992:
Net revenues:
To unaffiliated customers $1,140,280 $122,855 $ 39,927 $ - $ - $1,303,062
Transfers to other geographic areas 31,134 - - - (31,134) -
- - -----------------------------------------------------------------------------------------------------------------------------------
Total net revenues $1,171,414 $122,855 $ 39,927 $ - $(31,134) $1,303,062
- - -----------------------------------------------------------------------------------------------------------------------------------
Operating profit (loss) $ 211,481 $ 3,379 $ (339) $(17,728) $ - $ 196,793
- - -----------------------------------------------------------------------------------------------------------------------------------
Identifiable assets $1,623,067 $146,589 $ 12,239 $239,876 $(86,564) $1,935,207
- - -----------------------------------------------------------------------------------------------------------------------------------
<FN>
(a) IDENTIFIABLE ASSETS IN 1992 INCLUDE ASSETS OF THE DISCONTINUED OPERATION
AT NOVEMBER 28, 1992.
(b) OPERATING PROFIT IN 1994 REFLECTS AN UNUSUAL CHARGE OF $84.8 MILLION FOR
SETTLEMENT OF A PATENT INFRINGEMENT SUIT.
</TABLE>
7. INCOME TAXES
In 1992, the Company adopted SFAS 109 "Accounting for Income Taxes." Under SFAS
109, the deferred tax provision is determined using the liability method. This
method recognizes deferred tax assets and liabilities measured on differences
between financial statement and tax bases of assets and liabilities using
presently enacted tax rates.
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------
1994 1993 1992
- - --------------------------------------------------------------------------------
<S> <C> <C> <C>
Provision for Income Taxes:
- - --------------------------------------------------------------------------------
Current items:
Federal $ 57,552 $ 91,590 $ 83,445
State 8,452 14,075 12,617
Foreign (445) 172 5,266
- - --------------------------------------------------------------------------------
Total current items 65,559 105,837 101,328
- - --------------------------------------------------------------------------------
Deferred items:
Federal (9,552) (16,549) (33,628)
State (325) (224) (1,369)
Foreign (384) (1) 257
- - --------------------------------------------------------------------------------
Total deferred items (10,261) (16,774) (34,740)
- - --------------------------------------------------------------------------------
Provision for income taxes $ 55,298 $ 89,063 $ 66,588
- - --------------------------------------------------------------------------------
</TABLE>
-32-
<PAGE>
The fiscal year differences between the amounts recorded for income taxes
on income from continuing operations for financial statement purposes and the
amounts computed by applying the Federal statutory tax rate to income from
continuing operations before taxes are explained as follows:
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------------------------------
1994 1993 1992
- - ------------------------------------------------------------------------------------------------------------
% OF % of % of
PRETAX Pretax Pretax
AMOUNT INCOME Amount Income Amount Income
- - ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Federal income
tax (a) $50,666 35.0 $77,321 34.9 $60,436 34.0
State income
tax (b) 5,283 3.6 9,017 4.1 7,424 4.2
Foreign income
tax (c) 5,395 3.7 1,960 0.9 3,910 2.2
Goodwill write-down (a) - - 4,886 2.2 - -
Other, net (6,046) (4.1) (4,121) (1.9) (5,182) (2.9)
- - ------------------------------------------------------------------------------------------------------------
Provision for
income taxes $55,298 38.2 $89,063 40.2 $66,588 37.5
- - ------------------------------------------------------------------------------------------------------------
<FN>
(a) AT STATUTORY RATE.
(b) NET OF FEDERAL BENEFIT.
(c) FEDERAL TAX RATE DIFFERENTIAL.
</TABLE>
The tax effect of temporary differences that give rise to significant
portions of the deferred tax balance sheet accounts were as follows:
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------------------------------
1994 1993
- - -------------------------------------------------------------------------------------------------------
NON-INSURANCE INSURANCE Non-insurance Insurance
- - -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Deferred tax assets:
Current:
Inventories $ 3,379 $ - $ 4,034 $ -
Employee benefit accruals 3,877 - 2,587 -
Self insurance accruals 6,417 - 4,984 -
Litigation accruals 1,828 - 2,804 -
Other, net 8,376 - 9,799 -
Long-term:
Employee benefit accruals 16,287 483 17,220 -
Deferred policy revenues - 133,208 - 102,405
Tax loss carryforwards 16,400 - 3,600 -
Other, net 8,019 63 6,680 529
- - -------------------------------------------------------------------------------------------------------
Subtotal 64,583 133,754 51,708 102,934
Less valuation allowance for
foreign loss carryforwards (16,400) - (3,600) -
- - -------------------------------------------------------------------------------------------------------
Total assets $ 48,183 $133,754 $48,108 $102,934
- - -------------------------------------------------------------------------------------------------------
Deferred tax liabilities:
Current:
Inventories $ 1,937 $ - $ 1,969 $ -
Other, net 1,604 - 1,598 -
Long-term:
Depreciation 36,938 - 33,980 -
Amortization 2,505 - 5,834 -
Benefit reserves - 7,685 - 5,951
Deferred acquisition costs - 79,779 - 61,163
Other, net 4,333 3,239 4,719 2,171
- - -------------------------------------------------------------------------------------------------------
Total liabilities $ 47,317 $ 90,703 $48,100 $ 69,285
- - -------------------------------------------------------------------------------------------------------
</TABLE>
Remaining unutilized foreign loss carryforwards were approximately $39.0
million and $8.0 million on December 3, 1994 and November 27, 1993,
respectively. A valuation allowance is provided since realization of the tax
benefits is not assured.
-33-
<PAGE>
8. SUPPLEMENTARY INFORMATION
The following amounts were (charged) or credited to income in the year
indicated:
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------
1994 1993 1992
- - ----------------------------------------------------------------------
<S> <C> <C> <C>
Rental expense (a) ($20,040) ($19,037) ($18,630)
Research and
development costs (a) ($35,012) ($30,359) ($28,010)
Interest income (a) (b) $13,282 $ 8,872 $ 8,434
- - ----------------------------------------------------------------------
<FN>
(a) FROM CONTINUING OPERATIONS ONLY.
(b) EXCLUDES INSURANCE OPERATIONS.
</TABLE>
The table below indicates the minimum annual rental commitments (excluding
renewable periods) aggregating $52,396, primarily for warehouses, under
noncancellable operating leases.
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------
<S> <C>
1995 $14,614
1996 $10,888
1997 $ 8,067
1998 $ 5,774
1999 $ 4,049
2000 and beyond $ 9,004
</TABLE>
- - --------------------------------------------------------------------------------
The table below provides supplemental cash flow information.
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------
1994 1993 1992
- - --------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash paid for:
Income taxes $84,605 $116,043 $97,581
Interest $26,099 $ 21,322 $23,119
Non-cash investing and
financing activities:
Liabilities assumed from/incurred
for the acquisition of businesses $50,422 $ 5,307 $ -
Treasury stock issued under
stock compensation plans $12,402 $ 1,061 $ 393
- - --------------------------------------------------------------------------------
</TABLE>
9. INSURANCE OPERATIONS
Forecorp, Inc., through its two subsidiaries, The Forethought Life Insurance
Company and The Forethought Group, Inc., serves funeral planning professionals
with life insurance policies and marketing support for FORETHOUGHT funeral
planning, a "pre-need" insurance program.
-34-
<PAGE>
Investments are predominantly U.S. Government, Federal agency and corporate
debt securities with fixed maturities and are carried on the balance sheet at
amortized cost. It is management's intent that these investments be held to
maturity. Cash (unrestricted as to use) is held for future investment.
The amortized cost and fair values of investments in debt securities at
December 3, 1994 are as follows:
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
- - -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies $ 496,985 $1,607 $32,904 $ 465,688
Obligations of states and
political subdivisions 255 14 - 269
Corporate securities 681,110 44 47,267 633,887
- - -------------------------------------------------------------------------------------------------
Total (a) $1,178,350 $1,665 $80,171 $1,099,844
- - -------------------------------------------------------------------------------------------------
<FN>
(a) DOES NOT INCLUDE THE AMORTIZED COST OF OTHER INVESTMENTS (PRIMARILY
SHORT-TERM) CARRIED ON THE BALANCE SHEET IN THE AMOUNT OF $20,189, THE CARRYING
VALUE OF WHICH APPROXIMATES FAIR VALUE.
</TABLE>
The amortized cost and fair value of debt securities at December 3, 1994,
by contractual maturity, are shown below. Expected maturities will differ from
contractual maturities because borrowers may have the right to call or repay
obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------
Amortized Fair
Cost Value
- - --------------------------------------------------------------------------------
<S> <C> <C>
Due in one year or less $ 41 $ 41
Due after 1 year through 5 years 427,128 401,682
Due after 5 years through 10 years 293,895 266,378
Due after ten years 52,784 49,496
Mortgage-backed securities 404,502 382,247
- - --------------------------------------------------------------------------------
Total $1,178,350 $1,099,844
- - --------------------------------------------------------------------------------
</TABLE>
Proceeds and realized gains and losses from the sale of investments in debt
securities were as follows:
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------
1994 1993 1992
- - --------------------------------------------------------------------------------
<S> <C> <C> <C>
Proceeds $63,775 $92,035 $88,318
Realized gross gains $ 1,076 $ 1,809 $ 3,579
Realized gross losses $ 936 $ 212 $ 1,001
- - --------------------------------------------------------------------------------
</TABLE>
Premiums received are recorded as an increase to benefit reserves or as
unearned revenue. Unearned revenues are recognized over the actuarial life of
the contract.
Policy acquisition costs, consisting of commissions, policy issue expense
and premium taxes, are deferred and amortized consistently with unearned
revenues.
Benefit reserves are equal to the net cash surrender value available to
policyholders. Cash surrender values are determined using Commissioner's
Standard Ordinary tables with interest rates from 4.0% to 5.5%.
In the first quarter of 1995, the Company will adopt SFAS No. 115,
"Accounting for Certain Investments in Debt and Equity Securities." This
statement requires that certain investments in debt and equity securities be
classified as either "trading," available-for-sale" or "held-to-maturity." The
predominant share of Forethought's investments will be classified as
"available-for-sale." Adoption of this statement is expected to result in a
reduction in insurance investments of approximately $80.0 million to report
these investments at their estimated fair value. Insurance deferred taxes will
be increased approximately $28.0 million to reflect the income tax effect and
shareholders' equity will be decreased to record the unrealized net loss of
approximately $52.0 million. The effect on results of operations and cash flows
is not expected to be material.
-35-
<PAGE>
Summarized financial information of insurance operations included in the
consolidated financial statements is as follows:
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------
1994 1993 1992
- - -----------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment income $ 72,998 $ 62,538 $ 49,300
Earned premium revenue 81,340 51,856 33,884
Net gain on sale of investments 140 1,597 2,578
Other, net (300) (55) (157)
- - -----------------------------------------------------------------------------------
Total net revenues 154,178 115,936 85,605
Benefits paid 41,977 31,065 21,589
Credited interest 70,037 48,985 35,333
Deferred acquisition costs amortized 20,222 14,358 10,302
Other operating expenses 13,404 11,421 11,813
- - -----------------------------------------------------------------------------------
Income before income taxes $ 8,538 $ 10,107 $ 6,568
- - -----------------------------------------------------------------------------------
</TABLE>
Statutory data at December 31 includes:
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------
1994 1993 1992
- - -----------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income $ 27,946 $29,752 $24,667
Capital and surplus $104,378 $78,208 $51,297
- - -----------------------------------------------------------------------------------
</TABLE>
10. UNAUDITED QUARTERLY FINANCIAL INFORMATION
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------------------------------
QUARTER ENDED TOTAL
1994: 2/26/94 5/28/94 8/27/94 12/03/94 YEAR
- - ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net revenues $377,406 $382,705 $377,815 $439,108 $1,577,034
- - ------------------------------------------------------------------------------------------------------------
Gross profit $178,184 $178,931 $170,618 $201,431 $ 729,164
- - ------------------------------------------------------------------------------------------------------------
Net income (a) $ 37,691 $ 32,758 $(21,540) $ 40,553 $ 89,462
- - ------------------------------------------------------------------------------------------------------------
Net income per common share (a) $ .53 $ .46 $ (.30) $ .57 $ 1.26
- - ------------------------------------------------------------------------------------------------------------
<FN>
(a) RESULTS FOR THE QUARTER ENDED 8/27/94 REFLECT AN UNUSUAL CHARGE OF
$84,750, OR $52,545 ($.74 PER SHARE) AFTER INCOME TAXES, FOR SETTLEMENT OF
A PATENT INFRINGEMENT SUIT.
</TABLE>
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------------------
QUARTER ENDED TOTAL
1993: 2/27/93 5/29/93 8/28/93 11/27/93 YEAR
- - -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net revenues $348,432 $365,398 $340,599 $393,484 $1,447,913
- - -----------------------------------------------------------------------------------------------------------
Gross profit $166,426 $175,461 $161,370 $197,137 $ 700,394
- - -----------------------------------------------------------------------------------------------------------
Income from continuing operations $ 34,073 $ 36,294 $ 28,776 $ 33,343 $ 132,486
Income (loss) from discontinued
operation (514) 1,093 1,199 - 1,778
Gain on disposal of discontinued
operation - - - 11,554 11,554
- - -----------------------------------------------------------------------------------------------------------
Net income $ 33,559 $ 37,387 $ 29,975 $ 44,897 $ 145,818
- - -----------------------------------------------------------------------------------------------------------
Earnings per common share:
Income from continuing operations $ .48 $ .50 $ .41 $ .47 $ 1.86
Income (loss) from discontinued
operation (.01) .02 .01 - .02
Gain on disposal of discontinued
operation - - - .16 .16
- - -----------------------------------------------------------------------------------------------------------
Net income per common share $ .47 $ .52 $. 42 $ .63 $ 2.04
- - -----------------------------------------------------------------------------------------------------------
</TABLE>
-36-
<PAGE>
11. DISCONTINUED OPERATION
On August 30, 1993, the Company sold its luggage business, American Tourister,
Inc., for a cash payment of $63.8 million. Net proceeds (after disposition
costs) were $55.3 million. The gain on the sale of $11.6 million is net of
income taxes of $4.7 million. The results of American Tourister, Inc. have been
reported separately as a discontinued operation in the Statement of Consolidated
Income for the two year period ended November 27, 1993. The income (loss) from
discontinued operations is net of income tax provisions (benefits) of $1,091 and
($782) in 1993 and 1992 respectively.
12. CONTINGENCIES
In 1993, the Company's subsidiary, Hill-Rom, Inc., was notified that it is part
of an investigation into the hospital bed industry by the Antitrust Division of
the Department of Justice (the "DOJ"). As a result, the Company was issued a
Civil Investigation Demand by the DOJ and served with a subpoena to allow review
of internal Hill-Rom files and business practices to determine any
irregularities. The Company is cooperating with the DOJ in its investigation.
Although the Company believes that it is not in violation of any antitrust law
or statute and expects no material, adverse financial effect, it is impossible
to predict with certainty when the investigation will be concluded, what the
outcome of the investigation will be and what effect, if any, the outcome might
have on the Company's financial condition, results of operations or cash flows.
The Company has voluntarily entered into remediation agreements with
environmental authorities, and has been issued Notices of Violation alleging
violations of certain permit conditions. Accordingly, the Company is in the
process of implementing plans of abatement in compliance with agreements and
regulations. The Company has also been notified as a potentially responsible
party in investigations of certain offsite disposal facilities. The cost of all
plans of abatement and waste site cleanups in which the Company is currently
involved is not expected to exceed $10.0 million. The Company has provided
adequate reserves in its financial statements for these matters. Changes in
environmental law might affect the Company's future operations, capital
expenditures and earnings. The cost of complying with these provisions is not
known.
On September 19, 1994, subsequent to trial on the issues, the Company
settled a patent infringement suit brought by Kinetic Concepts, Inc. against
Support Systems International, Inc. and SSI Medical Services, Inc., wholly owned
subsidiaries of the Company, for a cash payment of $84.8 million. The
settlement amount was reflected in third quarter results as an unusual charge to
operations of $84.8 million ($52.5 million, or $.74 per share, after tax) and
payment was made in the fourth quarter. From the date of the initial claim
until the trial commencing August 29, 1994, the Company believed that the
outcome of the trial or any settlement of the matter would not have a
significant effect on the Company's financial condition or results of
operations. The settlement of the patent infringement suit will not affect
future operating results.
The Company is subject to various other claims and contingencies arising
out of the normal course of business, including those relating to commercial
transactions, product liability, safety, health, taxes, environmental and other
matters. Management believes that the ultimate liability, if any, in excess of
amounts already provided or covered by insurance, is not likely to have a
material adverse effect on the Company's financial condition, results of
operations or cash flows.
ITEM 9. DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There were no disagreements with the independent accountants.
-37-
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information relating to executive officers is included in this report as
the last section of Item 1 under the caption "Executive Officers of the
Registrant." Information relating to the directors will appear in the section
entitled "Election of Directors" in the definitive Proxy Statement to be dated
March 2, 1995, and to be filed with the Commission relating to the Company's
1995 Annual Meeting of Shareholders, which section is incorporated herein by
reference.
ITEM 11. EXECUTIVE COMPENSATION
The section entitled "Executive Compensation" in the definitive Proxy
Statement dated March 2, 1995, and to be filed with the Commission relating to
the Company's 1995 Annual Meeting of Shareholders, is incorporated herein by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The section entitled "Election of Directors" in the definitive Proxy
Statement to be dated March 2, 1995, and to be filed with the Commission
relating to the Company's 1995 Annual Meeting of Shareholders, is incorporated
herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The sections entitled "About the Board of Directors" and "Compensation
Committee Interlocks and Insider Participation" in the definitive Proxy
Statement to be dated March 2, 1995, and to be filed with the Commission
relating to the Company's 1995 Annual Meeting of Shareholders, are incorporated
herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K
(a) The following documents have been filed as a part of this report or,
where noted, incorporated by reference:
(1) Financial Statements
The financial statements of the Company and its consolidated
subsidiaries listed on the index to Consolidated Financial Statements
on page 18.
(2) Financial Statement Schedules
The financial statement schedules filed in response to Item 8 and Item
14(d) of Form 10-K are listed on the index to Consolidated Financial
Statements on page 18.
-38-
<PAGE>
(3) Exhibits
The following exhibits have been filed as part of this report in
response to Item 14(c) of Form 10-K.
3 (i) Form of Restated Certificate of Incorporation of the
Registrant (Incorporated herein by reference to Exhibit 3
filed with Form 10-K for the year ended November 28, 1992)
3 (ii) Form of Amended Bylaws of the Registrant
The following management contracts or compensatory plans or
arrangements are required to be filed as exhibits to this form
pursuant to Item 14 (c) of this report:
10 (i) Hillenbrand Industries, Inc. Senior Executive Compensation
Program
10 (ii) Hillenbrand Industries, Inc. Performance Compensation Plan
(Incorporated herein by reference to the definitive Proxy
Statement dated February 28, 1992, and filed with the
Commission relative to the Company's 1992 Annual Meeting of
Shareholders)
21 Subsidiaries of the Registrant
27 Financial Data Schedule
(b) There were no reports on Form 8-K filed during the quarter ended
December 3, 1994.
-39-
<PAGE>
SCHEDULE II
HILLENBRAND INDUSTRIES, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 3, 1994, NOVEMBER 27, 1993, AND NOVEMBER 28, 1992
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS
--------------------------
BALANCE AT CHARGED TO CHARGED TO DEDUCTIONS BALANCE
BEGINNING COSTS AND OTHER NET OF AT END
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS (a) RECOVERIES (b) OF PERIOD
- - ------------------------------ --------- -------- ------------ -------------- ---------
<S> <C> <C> <C> <C> <C>
Reserves deducted from assets
to which they apply:
Allowance for possible losses
and discounts
- accounts receivable:
Year Ended:
December 3, 1994 $ 11,271 $ 2,741 $ 3,226 $ 3,256 $ 13,982
----------- ---------- ---------- ----------- -----------
November 27, 1993 $ 15,574 $ 3,761 $ 3,392 $ 11,456 $ 11,271
------------ ---------- ---------- ----------- -----------
November 28, 1992 $ 15,168 $ 6,721 $ 2,325 $ 8,640 $ 15,574
----------- ---------- ---------- ------------ -----------
<FN>
(a) REDUCTION OF GROSS REVENUES FOR CASH DISCOUNTS, CO-OPERATIVE ADVERTISING
ALLOWANCES AND OTHER ADJUSTMENTS IN DETERMINING NET REVENUE. ALSO INCLUDES
THE EFFECT OF ACQUISITION OF BUSINESSES.
(b) INCLUDES THE SALE OF DISCONTINUED OPERATION IN 1993.
</TABLE>
-40-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) 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.
By: /S/ W August Hillenbrand
-----------------------------------
W August Hillenbrand
Dated: January 25, 1995 President and Chief Executive
Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the date indicated.
/S/ Daniel A. Hillenbrand /S/ John C. Hancock
- - ----------------------------------- -----------------------------------
Daniel A. Hillenbrand John C. Hancock
Chairman of the Board Director
/S/ Tom E. Brewer /S/ W August Hillenbrand
- - ----------------------------------- -----------------------------------
Tom E. Brewer W August Hillenbrand
Senior Vice President and Director
Chief Financial Officer
/S/ James D. Van De Velde /S/ George M. Hillenbrand II
- - ----------------------------------- -----------------------------------
James D. Van De Velde George M. Hillenbrand II
Vice President, Controller Director
/S/ Lawrence R. Burtschy /S/ John A. Hillenbrand II
- - ----------------------------------- -----------------------------------
Lawrence R. Burtschy John A. Hillenbrand II
Director Director
/S/ Peter F. Coffaro /S/ Ray J. Hillenbrand
- - ----------------------------------- -----------------------------------
Peter F. Coffaro Ray J. Hillenbrand
Director Director
/S/ Edward S. Davis /S/ Lonnie M. Smith
- - ----------------------------------- -----------------------------------
Edward S. Davis Lonnie M. Smith
Director Director
/S/ Leonard Granoff
- - -----------------------------------
Leonard Granoff
Director
Dated: January 25, 1995
-41-
<PAGE>
HILLENBRAND INDUSTRIES, INC.
INDEX TO EXHIBITS
3 (i) Form of Restated Certificate of Incorporation of the Registrant
(Incorporated herein by reference to Exhibit 3 filed with Form
10-K for the year ended November 28, 1992)
3 (ii) Form of Amended Bylaws of the Registrant
10 (i) Hillenbrand Industries, Inc. Senior Executive Compensation
Program
10 (ii) Hillenbrand Industries, Inc. Performance Compensation Plan
(Incorporated herein by reference to the definitive Proxy
Statement dated February 28, 1992, and filed with the Commission
relative to the Company's 1992 Annual Meeting of Shareholders)
21 Subsidiaries of the Registrant
27 Financial Data Schedule
-42-
<PAGE>
CODE OF BY-LAWS
OF
HILLENBRAND INDUSTRIES, INC.
ARTICLE 1
DEFINITION OF CERTAIN TERMS
SECTION 1.01. CORPORATION. The term "Corporation," as used in this Code
of By-laws, shall mean and refer to Hillenbrand Industries, Inc., a corporation
duly organized and existing under and pursuant to the provisions of The Indiana
General Corporation Act, as amended.
SECTION 1.02. COMMON STOCK. The term "Common Stock," as used in this Code
of By-laws, shall mean and refer to the shares of Common Stock, without par
value, which the Corporation is authorized to issue under and pursuant to the
provisions of the Amended Articles of Incorporation of the Corporation.
SECTION 1.03. SHAREHOLDERS. The term "Shareholders," as used in this Code
of By-laws, shall mean and refer to the persons shown by the records of the
Corporation to be the holders of the duly authorized, issued and outstanding
shares of Common Stock.
SECTION 1.04. BOARD OF DIRECTORS. The term "Board of Directors," as used
in this Code of By-laws, shall mean and refer to the Board of Directors of the
Corporation.
SECTION 1.05. EXECUTIVE COMMITTEE. The term "Executive Committee," as
used in this Code of By-laws, shall mean and refer to the Executive Committee of
the Corporation.
SECTION 1.06. OFFICERS. The terms "President," "Vice-President,"
"Secretary," "Assistant Secretary," "Treasurer" and "Assistant Treasurer," as
used in this Code of By-laws, shall mean and refer, respectively, to the
individuals holding those offices of the Corporation in their capacities as
such.
SECTION 1.07. ACT. The term "Act," as used in this Code of By-laws, shall
mean and refer to The Indiana General Corporation Act, as now in force or
hereafter amended.
- 1 -
<PAGE>
ARTICLE 2
SHARES OF THE CORPORATION
SECTION 2.01. FORM OF CERTIFICATES. The share of the Corporation shall be
represented by certificates which shall be in such form as is prescribed by law
and approved by the Board of Directors.
SECTION 2.02. TRANSFER OF SHARES. Shares of the Corporation may be
transferred on the books thereof only by the holder of such shares or by his
duly authorized representative, upon the surrender to the Corporation or its
transfer agent of the certificate for such share properly endorse.
SECTION 2.03. LOST, DESTROYED OR STOLEN STOCK CERTIFICATES. No share
certificates shall be issued in place of any certificate alleged to have been
lost, destroyed or stolen unless the Board of Directors is, or such officer or
officers as may be designated by the Board of Directors are, satisfied as to
such loss, destruction or theft and unless an indemnity bond acceptable to the
Board or such officers has been furnished by the owner of such lost, destroyed
or stolen certificate, or his legal representative.
SECTION 2.04. REGULATIONS RELATING TO THE TRANSFER AGENTS AND REGISTRARS
OF THE CORPORATION. The provisions governing the appointment of the Transfer
Agents, Registrars and Dividend Disbursing Agent of the Corporation, conferring
upon them their respective powers, rights, duties and obligations in their
capacities as such, allocating and delimiting their power to make original issue
and transfer of the shares of Common Stock, specifying to whom the Shareholders
shall give notice of changes of their addresses, allocating and imposing the
duty of maintaining the original stock ledgers or transfer books, or both, of
the Corporation and of disclosing the names of the Shareholders, the number of
shares of Common Stock held by each and the address of each Shareholder as it
appears upon the records of the Corporation, and dealing with other related
matters are contained in the "Regulations Relating to the Transfer Agents and
Registrars of Hillenbrand Industries, Inc." duly adopted by the Board of
Directors, certified copies of which are on file with, and may be inspected at
the office of:
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Harris Trust and Savings Bank
111 West Monroe Street
Chicago, Illinois 60690
the Registrar and Transfer Agents of the Corporation.
ARTICLE 3
THE SHAREHOLDERS
SECTION 3.01. ANNUAL MEETING. The Shareholders shall hold their annual
meeting during the month of April of each year for the purposes of electing
individuals to each position upon the Board of Directors, acting upon such other
questions or matters as are proposed to be submitted to a vote at the meeting
and acting upon such further questions or matters as may properly come before
the meeting. The annual meeting shall be called by the Board of Directors.
SECTION 3.02. SPECIAL MEETING. The Shareholders may hold a special
meeting at any time for the purposes of electing individuals to vacant positions
upon the Board of Directors, acting upon such other questions or matters as are
proposed to be submitted to a vote at the meeting and acting upon such further
questions or matters as may properly come before the meeting. A special meeting
of the Shareholders may be called by the Board of Directors, by the President or
by Shareholders holding not less than one-fourth (1/4) of the duly authorized,
issued and outstanding shares of Common Stock (determined as of the date upon
which the special meeting is called).
SECTION 3.03. PLACE OF MEETINGS. Meetings of the Shareholders may be held
at the Principal Office of the Corporation or any other place, within or without
the State of Indiana.
SECTION 3.04. PROCEDURE FOR CALLING MEETINGS. Any meeting of the
Shareholders which is called by the Board of Directors shall be deemed duly to
have been called upon the adoption of a resolution by the Board of Directors,
not less than ten (10) days before the date of the meeting, setting forth the
time, date and place of the meeting and containing a concise statement of the
questions or matters proposed to be submitted to a vote at the meeting. Any
special meeting of the Shareholders which is called by the President shall be
deemed duly to have been called upon delivery to the Secretary, not less than
ten (10) days before the
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date of the meeting, of a written instrument, executed by the President, setting
forth the time, date and place of the meeting and containing a concise statement
of the questions or matters proposed to be submitted to a vote at the meeting.
Any special meeting of the Shareholders which is called by the Shareholders
shall be deemed duly to have been called upon delivery to the Secretary, not
less than fifty (50) days before the date of the meeting, of a written
instrument, executed by each of the Shareholders calling the meeting, setting
forth the time, date and place of the meeting and containing a concise statement
of the questions or matters proposed to be submitted to a vote at the meeting.
SECTION 3.05. RECORD DATE. For the purpose of determining the
Shareholders entitled to notice of, or to vote at, any meeting of the
Shareholders, for the purpose of determining the Shareholders entitled to
receive payment of any dividend or other distribution, or in order to make a
determination of the Shareholders for any other corporate purpose, the Board of
Directors may fix in advance a date as the record date for that determination of
the Shareholders, that date, in any case, to be not more than seventy (70) days
and, in case of a meeting of the Shareholders, not less than ten (10) days,
before the date upon which the particular action, requiring that determination
of the Shareholders, is to be taken. If no record date is fixed for the
determination of the Shareholders entitled to notice of, or to vote at, a
meeting of the Shareholders, then the date ten (10) days before the date of the
meeting shall be the record date for the meeting. If no record date is fixed
for the determination of the Shareholders entitled to receive payment of a
dividend or other distribution, then the date upon which the resolution of the
Board of Directors declaring the dividend or other distribution is adopted shall
be the record date for the determination of the Shareholders. When a
determination of the Shareholders entitled to notice of, or to vote at, a
meeting of the Shareholders has been made, the determination shall apply to any
adjournment of the meeting. The Shareholders upon any record date shall be the
Shareholders as of the close of business on that record date.
SECTION 3.06. NOTICE OF MEETINGS. Notice of any meeting of the
Shareholders shall be deemed duly to have been given if, at least ten (10) days
before the date of the meeting, a written notice stating the date, time and
place of meeting, and containing a concise statement of the questions or matters
proposed to be submitted to a vote at the meeting, is delivered
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by the Secretary to each Shareholder entitled to notice of, and to vote at, the
meeting. The written notice shall be deemed duly to have been delivered by the
Secretary to a Shareholder at the date upon which:
(1) it is delivered personally to the Shareholders;
(2) it is deposited in the United States First Class Mail, postage
prepaid, addressed to the address of the Shareholder set forth upon the
records of the Corporation; or
(3) it is deposited with a telegraph company, transmission charges
prepaid, addressed to the address of the Shareholder set forth upon the
records of the Corporation.
Written notice of the meeting shall be deemed duly to have been waived by any
Shareholder present, in person or by proxy, at the meeting. Written notice of
the meeting may be waived by any Shareholder not present, in person or by proxy,
at the meeting, either before or after the meeting, by written instrument,
executed by the Shareholder, delivered to the Secretary.
SECTION 3.07. VOTING LISTS. The Secretary shall, not less than five (5)
days before the date of each meeting of the Shareholders, prepare, or cause to
be prepared, a complete list of the Shareholders entitled to notice of, and to
vote at, the meeting. The voting list shall disclose the names and addresses of
those Shareholders, arranged in alphabetical order, and the number of duly
authorized, issued and outstanding shares of Common Stock held by each of those
Shareholders (determined as of the record date for the meeting). The Secretary
shall cause the voting list to be produced and kept open at the Principal Office
of the Corporation where it shall be subject to inspection by any Shareholder
during the five (5) days before the meeting. The Secretary shall also cause the
voting list to be produced and kept open at the time and place of the meeting
where it shall be subject to inspection by any Shareholder during the course of
the meeting.
SECTION 3.08. QUORUM AT MEETINGS. At any meeting of the Shareholders the
presence, in person or by proxy, of Shareholders holding a majority of the duly
authorized, issued and outstanding shares of Common Stock (determined as of the
record date for the meeting) shall constitute a quorum.
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SECTION 3.09. VOTING AT MEETINGS. Any action required or permitted to be
taken at any meeting of the Shareholders with respect to any question or matter
shall be taken pursuant to the affirmative vote of a majority of the duly
authorized, issued and outstanding shares of Common Stock (determined as of the
record date for the meeting) present at the meeting, in person or by proxy,
unless a greater number is required by the provisions of the Act, in which event
the action shall be taken only pursuant to the affirmative vote of the greater
number.
SECTION 3.10. VOTING BY PROXY. A shareholder may vote at any meeting of
the Shareholders, either in person or by proxy. Each proxy shall be in the form
of a written instrument executed by the Shareholder or a duly authorized agent
of the Shareholder. No proxy shall be voted at any meeting unless and until it
has been filed with the Secretary.
SECTION 3.11. NOTICE OF SHAREHOLDER BUSINESS. At any meeting of the
shareholders, only such business may be conducted as shall have been properly
brought before the meeting, and as shall have been determined to be lawful and
appropriate for consideration by Shareholders at the meeting. To be properly
brought before a meeting business must be (a) specified in the notice of
meeting given in accordance with Section 3.06 of this Article 3, (b) otherwise
properly brought before the meeting by or at the direction of the Board of
Directors or the Chairman of the Board or the Chief Executive Officer, or (c)
otherwise properly brought before the meeting by a Shareholder. For business to
be properly brought before a meeting by a Shareholder pursuant to clause (c)
above, the Shareholder must have given timely notice thereof in writing to the
Secretary of the Corporation at the principal place of business of the
Corporation. To be timely, a Shareholder's notice must be delivered to or
mailed and received by the Secretary not later than 100 days prior to the
anniversary of the date of the immediately preceding annual meeting which was
specified in the initial formal notice of such meeting (but if the date of the
forthcoming annual meeting is more than 30 days after such anniversary date,
such written notice will also be timely if received by the Secretary by the
later of 100 days prior to the forthcoming meeting date and the close of
business 10 days following the date on which the Company first makes public
disclosure of the meeting date). A Shareholder's notice to the Secretary shall
set forth as to each matter the Shareholder proposes to bring before the meeting
(a) a brief description of
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the business desire to be brought before the meeting, (b) the name and address
of the Shareholder proposing such business, (c) the class and number of shares
of the Corporation which are beneficially owned by the Shareholder, and (d) any
interest of the Shareholder in such business. Notwithstanding anything in these
By-laws to the contrary, no business shall be conducted at a meeting except in
accordance with the procedures set forth in this Section 3.11. The person
presiding at the meeting shall, if the facts warrant, determine and declare to
the meeting that business was not properly brought before the meeting in
accordance with the Code of By-laws, or that business was not lawful or
appropriate for consideration by Shareholders at the meeting, and if he should
so determine, he shall so declare to the meeting and any such business shall not
be transacted.
SECTION 3.12. NOTICE OF SHAREHOLDER NOMINEES. Nominations of persons for
election to the Board of Directors of the Corporation may be made at any meeting
of Shareholders by or at the direction of the Board of Directors or by any
Shareholder of the Corporation entitled to vote for the election of members of
the Board of Directors at the meeting. For nominations to be made by a
Shareholder, the Shareholder must have given timely notice thereof in writing to
the Secretary of the Corporation at the principal place of business of the
Corporation. To be timely, a Shareholder's nomination must be delivered to or
mailed and received by the Secretary not later than (i) in the case of the
annual meeting, 100 days prior to the anniversary of the date of the immediately
preceding annual meeting which was specified in the initial formal notice of
such meeting (but if the date of the forthcoming annual meeting is more than 30
days after such anniversary date, such written notice will also be timely if
received by the Secretary by the later of 100 days prior to the forthcoming
meeting date and the close of business 10 days following the date on which the
Company first makes public disclosure of the meeting date) and (ii) in the case
of a special meeting, the close of business on the tenth day following the date
on which the Corporation first makes public disclosure of the meeting date.
Each notice given by such Shareholder shall set forth: (i) the name and
address of the Shareholder who intends to make the nomination and of the person
or persons to be nominated; (ii) a representation that the Shareholder is a
holder of record, setting forth the shares so held, and intends to appear in
person or by proxy as a holder of record at the meeting to nominate the person
or persons specified in the notice; (iii) a description of all arrangements or
understandings between such Shareholder and each nominee proposed
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by the Shareholder and any other person or persons (identifying such person or
persons) pursuant to which the nomination or nominations are to be made by the
shareholders; (iv) such other information regarding each nominee proposed by
such Shareholder as would be required to be included in a proxy statement filed
pursuant to the proxy rules of the Securities and Exchange Commission; and (v)
the consent in writing of each nominee to serve as a director of the Corporation
if so elected.
If facts show that a nomination was not made in accordance with the foregoing
provisions, the Chairman of the meeting shall so determine and declare to the
meeting, whereupon the defective nomination shall be disregarded.
ARTICLE 4
THE BOARD OF DIRECTORS
SECTION 4.01. NUMBER OF MEMBERS. The Board of Directors shall consist of
eleven (11) members.
SECTION 4.02. QUALIFICATION OF MEMBERS. Each member of the Board of
Directors shall be an adult individual. Members of the Board of Directors need
not be Shareholders and need not be residents of the State of Indiana or
citizens of the United States of America.
SECTION 4.03. ELECTION OF MEMBERS. The members of the Board of Directors
shall be elected by the Shareholders at the annual meeting of the Shareholders,
at a special meeting of the Shareholders called for that purpose or by the
unanimous written consent of the Shareholders, except that a majority of the
duly elected and qualified members of the Board of Directors then occupying
office to fill any vacancy in the membership of the Board of Directors caused by
the resignation, death, or adjudication or legal incompetency of a member of the
Board of Directors, or caused by an increase in the number of the members of the
Board of Directors. The members of the Board of Directors shall be classified
with respect to the terms with respect to which they shall severally serve as
such by dividing them into three classes, each such class constituted as
follows:
Class One - Four Members
Class Two - Three Members
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Class Three - Four Members
At the annual meeting of the Shareholders to be held in 1979, the members of the
Board of Directors in Class One shall be elected for a three year term expiring
at the close of the Annual Meeting of the Shareholders to be held in 1982. The
members of the Board of Directors in Class Two shall continue to serve a two
year term expiring at the close of the annual meeting of the Shareholders to be
held in 1980. The members of the Board of Directors in Class Three shall
continue to serve a three year term expiring at the close of the annual meeting
of the Shareholders held in 1981. At the annual meetings of the Shareholders
held after 1978, the successors of the class of members of the Board of
Directors whose terms shall expire at the conclusion of that annual meeting
shall be elected to serve as such for a term of three years, so that the terms
of members of the Board of Directors of no more than one class shall expire at
the conclusion of any annual meeting. Each member of the Board of Directors
shall serve as such throughout the term for which he is elected, or until his
successor is duly elected and qualified.
SECTION 4.04. REMOVAL OF MEMBERS. Any member of the Board of Directors
may be removed at any time, with or without cause, by the Shareholders at a
special meeting called for that purpose.
SECTION 4.05. RESIGNATIONS OF MEMBERS. Any member of the Board of
Directors may resign at any time, with or without cause, by delivering written
notice of his resignation to the Board of Directors. The resignation shall take
effect at the time specified in the written notice or upon receipt by the Board
of Directors, as the case may be, and, unless otherwise specified in the written
notice, the acceptance of the resignation shall not be necessary to make it
effective.
SECTION 4.06. ANNUAL MEETING. The Board of Directors shall hold its
annual meeting immediately following the annual meeting of the Shareholders for
the purposes of electing individuals to each position upon the Executive
Committee, electing individuals to each of the offices of the Corporation and
acting upon such other questions or matters as may properly come before the
meeting.
SECTION 4.07. SPECIAL MEETINGS. The Board of Directors may hold a special
meeting at any time for the purposes of electing individuals to each vacant
position on the Board of Directors, electing individuals to each vacant position
on the Executive
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Committee, electing individuals to each vacant office of the Corporation and
acting upon such other questions and matters as may properly come before the
meeting. A special meeting of the Board of Directors may be called by any
member of the Board of Directors.
SECTION 4.08. PLACE OF MEETINGS. The annual meeting of the Board of
Directors shall be held at the same place at which the annual meeting of the
Shareholders is held. Special meeting of the Board of Directors may be held at
the Principal Office of the Corporation or at any other place, within or without
the State of Indiana.
SECTION 4.09. PROCEDURE FOR CALLING MEETINGS. Any special meeting of the
Board of Directors shall be deemed duly to have been called by a member of the
Board of Directors upon delivery to the Secretary, not less than seven (7) days
before the date of such meeting, of a written instrument, executed by the member
of the Board of Directors calling the meeting, setting forth the time, date and
place of the meeting. The written instrument may also contain, at the option of
the member of the Board of Directors calling the meeting, a concise statement of
the questions or matters proposed to be submitted to a vote, or otherwise
considered, at the meeting. Any special meeting of the Board of Directors with
respect to which all members of the Board of Directors are either present or
duly waive written notice, either before or after the meeting, shall also be
deemed duly to have been called.
SECTION 4.10. NOTICE OF MEETINGS. No notice of the annual meeting of the
Board of Directors shall be required. Notice of any special meeting of the
Board of Directors shall be deemed duly to have been given if, at least seven
(7) days before the date of the meeting, a written notice stating the date, time
and place of the meeting and, to the extent set forth in the written instrument
by which the meeting is called, containing a concise statement of the questions
or matters proposed to be submitted to a vote, or otherwise considered, at the
meeting is delivered by the Secretary to each member of the Board of Directors.
The written notice shall be deemed duly to have been delivered by the Secretary
to a member of the Board of Directors at the date upon which:
(1) it is delivered personally to the member of the Board of Directors;
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(2) it is deposited in the United States First Class Mail, postage
prepaid, addressed to the last known address of the member of the Board of
Directors; or
(3) it is deposited with a telegraph company, transmission charges
prepaid, addressed to the last known address of the member of the Board of
Directors.
Written notice of the meeting shall be deemed duly to have been waived by any
member of the Board of Directors present at the meeting. Written notice of the
meeting may be waived by any member of the Board of Directors not present at the
meeting, either before or after the meeting, by written instrument, executed by
the member of the Board of Directors, delivered to the Secretary.
SECTION 4.11. QUORUM AT MEETINGS. At any annual or special meeting of the
Board of Directors the presence of two-thirds of the then duly elected and
qualified members of the Board of Directors then occupying office shall
constitute a quorum.
SECTION 4.12. VOTING AT MEETINGS. Any action required or permitted to be
taken at any meeting of the Board of Directors with respect to any question or
matter shall be taken pursuant to the affirmative vote of a majority of the then
duly elected and qualified members of the Board of Directors present at the
meeting, unless a greater number is required by the provisions of the Act, in
which event the action shall be taken only pursuant to the affirmative vote of
that greater number.
SECTION 4.13. ACTION WITHOUT MEETING. Any action required or permitted to
be taken at any meeting of the Board of Directors with respect to any question
or matter may be taken without a meeting, if, before that action is taken, a
unanimous written consent to that action is executed by all of the then duly
elected and qualified members of the Board of Directors and the written consent
is filed with the minutes of the preceding of the Board of Directors.
SECTION 4.14. THE CHAIRMAN OF THE BOARD. The Chairman of the Board shall
be a member of the Board of Directors. The Chairman of the Board shall provide
leadership to the Board of Directors, advice and counsel to the President and
other officers of the Corporation, shall preside at all meetings of the
Shareholders and the Board of Directors, and shall, in addition, have such
further powers and perform such further duties as are
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specified in the Code of By-laws or as the Board of Directors may, from time to
time, assign or delegate to him.
ARTICLE 5
THE EXECUTIVE COMMITTEE
SECTION 5.01. ESTABLISHMENT OF EXECUTIVE COMMITTEE. During the intervals
between the meetings of the Board of Directors, the Executive Committee shall
have and may exercise all powers of the Board of Directors except for the
following powers:
(1) powers in reference to amending the Articles of Incorporation;
(2) powers in reference to adopting an agreement or plan of merger of
consolidation;
(3) powers in reference to proposing a special corporate transaction;
(4) powers in reference to recommending to the Shareholders a voluntary
dissolution of the Corporation or revocation of voluntary dissolution
proceedings; and
(5) powers in reference to the amendment of this Code of By-laws.
SECTION 5.02. NUMBER OF MEMBERS. The Executive Committee shall consist of
seven (7) members.
SECTION 5.03. QUALIFICATIONS OF MEMBERS. Each member of the Executive
Committee shall be a duly elected and qualified member of the Board of
Directors.
SECTION 5.04. ELECTION OF MEMBERS. The members of the Executive Committee
shall be elected by the Board of Directors. Each member of the Executive
Committee shall serve as such for a term coextensive with his term as a member
of the Board of Directors, except as hereinafter provided. Each member of the
Executive Committee shall be deemed to have qualified as such upon his election.
SECTION 5.05. REMOVAL OF MEMBERS. Any members of the Executive Committee
may be removed at any time, with or without cause, by the Board of Directors.
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SECTION 5.06. RESIGNATIONS OF MEMBERS. Any member of the Executive
Committee may resign at any time, with or without cause, by delivering written
notice of his resignation to the Board of Directors. The resignation shall take
effect at the time specified in the written notice or upon receipt, as the case
may be, and, unless otherwise specified in the written notice, the acceptance of
the resignation shall not be necessary to make it effective.
SECTION 5.07. FILLING OF VACANCIES. Any vacancies in the membership of
the Executive Committee because of death, adjudication of incompetency,
resignation or removal of a member of the Executive Committee, or caused by an
increase in the number of members of the Executive Committee, shall be filled
for the unexpired portion of the term of such position by the Board of
Directors.
SECTION 5.08. MEETINGS. The Executive Committee may hold meetings at any
time for the purpose of acting upon such questions and matters as may properly
come before such meeting. A meeting of the Executive Committee may be called by
any member of the Executive Committee.
SECTION 5.09. PLACE OF MEETINGS. Meetings of the Executive Committee may
be held at the Principal Office of the Corporation or at any other place, within
or without the State of Indiana.
SECTION 5.10. PROCEDURE FOR CALLING MEETINGS. Any meeting of the
Executive Committee shall be deemed duly to have been called by a member of the
Executive Committee upon delivery to the Secretary, not less than three (3) days
before the date of the meeting, of a written instrument, executed by the member
of the Executive Committee calling the meeting, setting forth the time, date and
place of such meeting. The written instrument may also contain, at the option
of the member of the Executive Committee calling the meeting, a concise
statement of the questions or matters proposed to be submitted to vote, or
discussed, at the meeting. Any meeting of the Executive Committee with respect
to which all members of the Executive Committee are either present or duly waive
written notice, either before or after the meeting, shall also be deemed duly to
have been called.
SECTION 5.11. NOTICE OF MEETINGS. Notice of any meeting of the Executive
Committee shall be deemed duly to have been given
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if, at least three (3) days before the date of the meeting, a written notice
stating the date, time and place of the meeting and, to the extent set forth in
the written instrument by which the meeting is called, containing a concise
statement of the questions or matters proposed to be submitted to a vote at the
meeting is delivered by the Secretary to each of the members of the Executive
Committee. The written notice shall be deemed duly to have been delivered by
the Secretary to a member of the Executive Committee at the date upon which:
(1) it is delivered personally to the member of the Executive Committee;
(2) it is deposited in the United States First Class Mail, postage
prepaid, addressed to the last known address of the member of the Executive
Committee; or
(3) it is deposited with a telegraph company, transmission charges
prepaid, addressed to the last known address of the member of the Executive
Committee.
Written notice of the meeting shall be deemed duly to have been waived by any
member of the Executive Committee present at the meeting. Written notice of the
meeting may be waived by any member of the Executive Committee not present at
the meeting, either before or after the meeting, by written instrument, executed
by the member of the Executive Committee, delivered to the Secretary.
SECTION 5.12. QUORUM AT MEETINGS. At any meeting of the Executive
Committee the presence of a majority of the then duly elected and qualified
members of the Executive Committee shall constitute a quorum.
SECTION 5.13. VOTING AT MEETINGS. Any action required or permitted to be
taken at any meeting of the Executive Committee with respect to any question or
matter shall be taken pursuant to a vote of a majority of the then duly elected
and qualified members of the Executive Committee present at the meeting, unless
a greater number is required by the provisions of the Act, in which event the
action shall be taken only pursuant to the vote of that greater number.
SECTION 5.14. ACTION WITHOUT MEETING. Any action required or permitted to
be taken at any meeting of the Executive Committee with respect to any question
or matter may be taken
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without a meeting, if, before that action is taken, a unanimous written consent
to that action is executed by all of the duly elected and qualified members of
the Executive Committee then occupying office and the written consent is filed
with the minutes of the proceedings of the Executive Committee.
ARTICLE 6
THE OFFICERS
SECTION 6.01. NUMBER OF OFFICERS. The officers of the Corporation shall
consist of a President, a Secretary and a Treasurer, and may, in addition,
consist of one or more Executive Vice-Presidents, Senior Vice-Presidents, Vice-
Presidents, one or more Assistant Secretaries and one or more Assistant
Treasurers. Any two or more offices may be held by the same person except that
the offices of President and Secretary shall not be held by the same person.
SECTION 6.02. QUALIFICATIONS OF OFFICERS. Each officer of the Corporation
shall be an adult individual. The officers of the Corporation need not be
Shareholders and need not be residents of the State of Indiana or citizens of
the United States of America.
SECTION 6.03. ELECTION OF OFFICERS. The officers of the Corporation shall
be elected by the Board of Directors. Each officer shall serve as such until
the next ensuing annual meeting of the Board of Directors or until his successor
shall have been duly elected and shall have qualified, except as hereinafter
provided. Each officer shall be deemed to have qualified as such upon his
election.
SECTION 6.04. REMOVAL OF OFFICERS. Any officer of the Corporation may be
removed at any time, with or without cause by the Board of Directors.
SECTION 6.05. RESIGNATION OF OFFICERS. Any officer of the Corporation may
resign at any time, with or without cause, by delivering written notice of his
resignation to the Board of Directors. The resignation shall take effect at the
time specified in the written notice, or upon receipt by the Board of Directors,
as the case may be, and, unless otherwise specified in the written notice, the
acceptance of the resignation shall not be necessary to make it effective.
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SECTION 6.06. FILLING OF VACANCIES. Any vacancies in the offices of the
Corporation because of death, adjudication of incompetency, resignation, removal
or any other cause shall be filled for the unexpired portion of the term of that
office by the Board of Directors.
SECTION 6.07. THE PRESIDENT. The President shall be the chief executive
officer of the Corporation. He shall be responsible for the active overall
direction and administration of the affairs of the Corporation, subject,
however, to the control of the Board of Directors and the Chairman of the Board.
In general, he shall have such powers and perform such duties as are incident to
the office of President and chief executive officer of a business corporation
and shall, in addition, have further powers and perform such further duties as
are specified in this Code of By-laws or as the Board of Directors may, from
time to time, assign to or delegate to him. At the request of the Chairman of
the Board, the President may, in the case of absence or inability to act as the
Chairman of the Board, temporarily act in his place.
SECTION 6.08. THE VICE-PRESIDENTS. Each Vice-President (if one or more
Vice-Presidents are elected) shall assist the Chairman of the Board and the
President in their duties and shall have such other powers and perform such
other duties as the Board of Directors, the Chairman of the Board or the
President may, from time to time, assign or delegate to him. At the request of
the President, any Vice-President may, in the case of absence or inability to
act of the President, temporarily act in his place. In the case of the death or
inability to act without having designated a Vice-President to act temporarily
in his place, the Vice-President so to perform the duties of the President shall
be designated by the Board of Directors.
SECTION 6.09. THE SECRETARY. The Secretary shall be the chief custodial
officer of the Corporation. He shall keep or cause to be kept, in minute books
provided for the purpose, the minutes of the proceedings of the Shareholders,
the Board of Directors and the Executive Committee. He shall see that all
notices are duly given in accordance with the provisions of this Code of By-laws
and as required by law. He shall be custodian of the minute books, archives,
records and the seal of the Corporation and see that the seal is affixed to all
documents, the execution of which on behalf of the Corporation under its seal is
duly authorized by the Shareholders, the Board of Directors, the Executive
Committee, the Chairman of the Board or
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the President or as required by law. In general, he shall have such powers and
perform such duties as are incident to the office of Secretary of a business
corporation and shall, in addition, have such further powers and perform such
further duties as are specified in this Code of By-laws or as the Board of
Directors, the Executive Committee, the Chairman of the Board, or the President
may, from time to time, assign or delegate to him.
SECTION 6.10. THE ASSISTANT SECRETARIES. Each Assistant Secretary (if one
or more Assistant Secretaries are elected) shall assist the Secretary in his
duties, and shall have such other powers and perform such other duties as the
Board of Directors, the Executive Committee, the Chairman of the Board, the
President or the Secretary may, from time to time, assign or delegate to him.
At the request of the Secretary, any Assistant Secretary may, in the case of the
absence or inability to act of the Secretary, temporarily act in his place. In
the case of the death or resignation of the Secretary, or in the case of his
absence or inability to act without having designated an Assistant Secretary to
act temporarily in his place, the Assistant Secretary so to perform the duties
of the Secretary shall be designated by the President.
SECTION 6.11. THE TREASURER. The Treasurer shall have such powers and
perform such duties as are incident to the office of Treasurer of a business
corporation and have such further powers and perform such further duties as the
Board of Directors, the Executive Committee, the Chairman of the Board, the
President or the Vice-President - Finance, may, from time to time, assign or
delegate to him. In the absence of the Vice-President - Finance, the Treasurer
shall be the Chief Financial Officer of the Corporation.
SECTION 6.12. THE ASSISTANT TREASURERS. Each Assistant Treasurer (if one
or more Assistant Treasurers are elected) shall assist the Treasurer in his
duties, and shall have such other powers and perform such other duties as the
Board of Directors, the Executive Committee, the Chairman of the Board, the
President or the Treasurer may, from time to time, assign or delegate to him.
At the request of the Treasurer, any Assistant Treasurer may, in the case of the
absence or inability to act of the Treasurer, temporarily act in his place. In
the case of the death or resignation of the Treasurer, or in the case of his
inability to act without having designated an Assistant Treasurer to act
temporarily in his place, the Assistant Treasurer so to
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<PAGE>
perform the duties of the Treasurer shall be designated by the President.
SECTION 6.13. FUNCTION OF OFFICES. The offices of the Corporation are
established in order to facilitate the day to day administration of the affairs
of the Corporation in the ordinary course of its business and to provide an
organization capable of executing and carrying out the decisions and directions
of the Board of Directors and the Executive Committee. The officers of the
Corporation shall have such powers and perform such duties as may be necessary
or desirable to conduct and effect all transactions in the ordinary course of
the business of the Corporation without further authorization by the Board of
Directors or the Executive Committee and such further powers as are granted by
this Code of By-laws or are otherwise granted by the Board of Directors or the
Executive Committee.
ARTICLE 7
MISCELLANEOUS MATTERS
SECTION 7.01. FISCAL YEAR. The fiscal year of the Corporation shall begin
upon the first day of December of each year and shall end upon the last day of
November next ensuing.
SECTION 7.02. NEGOTIABLE INSTRUMENTS. All checks, drafts, bills of
exchange and orders for the payment of money may, unless otherwise directed by
the Board of Directors or the Executive Committee, or unless otherwise required
by law, be executed in its name by the President, a Vice-President, the
Treasurer or an Assistant Treasurer, singly and without necessity of
countersignature. The Board of Directors of the Executive Committee may,
however, authorize any other officer or employee of the Corporation to sign
checks, drafts and orders for the payment of money, singly and without necessity
of countersignature.
SECTION 7.03. NOTES AND OBLIGATIONS. All notes and obligations of the
Corporation for the payment of money other than those to which reference is made
in Section 7.02 of this Code of By-laws, may, unless otherwise directed by the
Board of Directors of the Executive Committee, or unless otherwise required by
law, be executed in its name by the President or a Vice-President, singly and
without necessity of either attestation or affixation of the corporate seal by
the Secretary or an Assistant Secretary.
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<PAGE>
SECTION 7.04. DEEDS AND CONTRACTS. All deeds and mortgages made by the
Corporation and all other written contracts and agreements to which the
Corporation shall be a party may, unless otherwise directed by the Board of
Directors or the Executive Committee, or unless otherwise required by law, be
executed in its name by the President or a Vice-President singly and without
necessity of either attestation or affixation of the corporate seal by the
Secretary or an Assistant Secretary.
SECTION 7.05. ENDORSEMENT OF STOCK CERTIFICATES. Any certificate for
shares of stock issued by any corporation and owned by the Corporation
(including Common Stock held by the Corporation as treasury stock) may, unless
otherwise required by law, be endorsed for sale or transfer by the President or
a Vice-President, and attested by the Secretary or an Assistant Secretary; the
Secretary or an Assistant Secretary, when necessary or required, may affix the
corporate seal to the certificate.
SECTION 7.06. VOTING OF STOCK. Any shares of stock issued by any other
corporation and owned by the Corporation may be voted at any shareholders'
meeting of the other corporation by the President, if he is present, or in his
absence by a Vice-President. Whenever, in the judgment of the President, it is
desirable for the Corporation to execute a proxy or to give a shareholders'
consent with respect to any shares of stock issued by any other corporation and
owned by the Corporation, the proxy or consent may be executed in the name of
the Corporation by the President or a Vice-President singly and without
necessity of either attestation or affixation of the corporate seal by the
Secretary or an Assistant Secretary. Any person or persons designated in the
manner above stated as the proxy or proxies of the Corporation shall have full
right, power and authority to vote the share or shares of stock issued by the
other corporation and owned by the Corporation the same as the share might be
voted by the Corporation.
SECTION 7.07. CORPORATE SEAL. The corporate seal of the Corporation shall
be circular in form and mounted on a metal die, suitable for impressing the same
on paper. About the upper periphery of the seal shall appear the words
"Hillenbrand Industries, Inc.," and about the lower periphery of the seal shall
appear the word "Indiana." In the center of the seal shall appear the words
"Corporate Seal." No instrument executed by any of the officers of the
Corporation shall be invalid or
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<PAGE>
ineffective in any respect by reason of the fact that the corporate seal has not
been affixed to it.
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<PAGE>
EXHIBIT 10(i)
HILLENBRAND INDUSTRIES, INC.
SENIOR EXECUTIVE COMPENSATION PROGRAM
ARTICLE I
PURPOSE - The purpose of this Program is to reward the creation of long term
shareholder value by providing incentive, perquisite and other compensation to a
limited number of senior, key executives of Hillenbrand Industries, Inc., and
its subsidiaries, who contribute by their imagination, resourcefulness, skills
and insight to the business objectives of the Corporation.
ARTICLE II
DEFINITIONS:
1. "Program" means this Senior Executive Compensation Program which consists
of the following components:
* Short term Incentive Compensation
* Long term Performance Share Compensation
* Perquisite Compensation
* Deferred Compensation
* Supplemental Pension
2. "Corporation" means Hillenbrand Industries, Inc., an Indiana corporation,
and its subsidiaries.
3. "Corporate" means Hillenbrand Industries, Inc., as a corporate holding
company and does not include subsidiaries.
4. "Subsidiary" means an operating company unit of which a majority equity
interest is owned directly or indirectly by the Corporation.
5. "Board of Directors" or "Board" means the Board of Directors of Hillenbrand
Industries, Inc.
6. "Committee" means the Performance Compensation Committee appointed to
administer the Program. "Sub-Committee" means the sub-committee of the
Performance Compensation Committee appointed to establish and administer
the Performance Base and Target (performance goals) for Incentive
Compensation and shareholder value goals (performance goals) for
Performance Share Compensation.
7. "Office of the President" means the Office of the President of Corporate.
<PAGE>
8. "Participant" means a key employee selected for participation in the
Program pursuant to Article IV.
9. "Incentive Compensation" means the short term Incentive Compensation as
provided in Article V.
10. "Performance Share Compensation" means the long term Performance Share
Compensation as provided in Article VI.
11. "Perquisite Compensation" means the Perquisite Compensation as provided in
Article VII.
12. "Deferred Compensation" means the Deferred Compensation arrangement as
provided in Article VIII.
13. "Supplemental Pension" means Supplemental Pension as provided in Article
IX.
14. "Base Salary" means the annual calendar earnings of a Participant including
salary as reported for federal income tax purposes, but excluding all bonus
payments of any kind, commissions, incentive compensation, long term
performance compensation, perquisites and other forms of additional
compensation.
15. "Disability" means a physical or mental disability by reason of which a
Participant is determined by the Office of the President or its delegate,
to be eligible (except for the waiting period) for permanent disability
benefits under Title II of the Federal Social Security Act.
ARTICLE III
ADMINISTRATION - Full power and authority to construe, interpret, and administer
the Program, with the exception of establishing and administering performance
goals, is vested in the Committee. The Sub-Committee has full power to
establish, administer and certify performance goals related to Incentive
Compensation and Performance Share Compensation. Their decisions are final,
conclusive and binding upon all parties, including the Corporation, the
shareholders thereof, and the Participants. The Committee and the Sub-Committee
may rely upon recommendations of the Office of the President or the Chief
Executive Officer in approving financial and non-financial goals recommended to
it.
ARTICLE IV
PARTICIPATION - Selection of key employees for participation for each of the
components of compensation contemplated by the Program are set forth in Articles
V, VI, VII, and VIII.
ARTICLE V
INCENTIVE COMPENSATION - The purpose of Incentive Compensation is to provide
financial recognition to Participants, the amount of which is determined by the
attainment of annual financial and/or non-financial goals.
1. PARTICIPANTS - Participation in Incentive Compensation by members of the
Office of the President and Corporate Vice Presidents shall be determined
by the Committee. Other Participants in Incentive Compensation shall be
determined by the Office of the President pursuant to
<PAGE>
recommendation from the Chief Executive Officer of Corporate, or if an
employee of a Subsidiary, by the Chief Executive Officer thereof.
2. ESTABLISHMENT OF PERFORMANCE BASE AND TARGET - A Performance Base and
Target for members of the Office of the President and Corporate Vice
Presidents as a group shall be recommended by the Chief Executive Officer
of Corporate and approved by the Sub-Committee. The Performance Base and
Target for each Participant who is a Chief Executive Officer of a
Subsidiary shall be approved by the Office of the President. The
Performance Base and Target for other Corporate Participants and other
Subsidiary Participants shall be established and approved by the Office of
the President and the Chief Executive Officer of each Subsidiary,
respectively. The Performance Base and Target shall be established
annually for Corporate and each Subsidiary and will be communicated to each
Participant. The Performance Base and Target for members of the Office of
the President and Corporate Vice Presidents shall be directly related to
the return on shareholder equity of the Corporation or as otherwise
determined by the Sub-Committee. The Performance Base and Target for other
Participants shall include both financial and non-financial measures and
shall reflect accomplishment of tactical and strategic plans of each
Subsidiary.
3. COMPUTATION OF INCENTIVE COMPENSATION - Incentive Compensation opportunity
is established as follows:
CLASS OF PARTICIPANT INCENTIVE COMPENSATION OPPORTUNITIES
Office of the President 60% of Base Salary
Chief Executive Officer of 50% of Base Salary
Subsidiary
Corporate or Subsidiary 40% of Base Salary
Senior Executive
Other Executive 30% of Base Salary
Attainment of the Performance Base shall result in Incentive Compensation
of 50% of that established by the above scale. If the Performance Target
is met or exceeded, Incentive Compensation of up to 150% of the above scale
will be paid. Achievement of results between Performance Base and Target
shall be according to a scale recommended by the Office of the President
and approved by the Sub-Committee.
4. PAYMENT OF INCENTIVE COMPENSATION - At the end of each fiscal year,
Incentive Compensation for each Participant shall be calculated pursuant to
paragraph 3 above. Attainment of financial and non-financial goals for
those Participants shall be considered in calculation of Incentive
Compensation pertaining thereto. In no event shall Incentive Compensation
be more than the value established pursuant to paragraph 3 above.
Incentive Compensation shall be due and payable in cash after forty (40)
days but within seventy-five (75) days after the end of the fiscal year;
except that all or a portion thereof may be deferred pursuant to the
Deferred Compensation arrangement set forth in Article VIII. The Sub-
Committee will certify in writing that performance goals were attained
prior to payout.
<PAGE>
5. TERMINATION - Termination of a Participant's employment for reasons other
than death, Disability or normal or early retirement shall terminate any
non-deferred Incentive Compensation. Termination because of death,
Disability or normal or early retirement shall result in a pro-ration of
Incentive Compensation based on the number of months employed out of the
fiscal year of termination.
ARTICLE VI
PERFORMANCE SHARE COMPENSATION - The purpose of Performance Share Compensation
is to reward Participants for the creation of value for the shareholders of
Corporate over continuing three-year periods.
1. PARTICIPANTS - Members of the Office of the President shall be Participants
in Performance Share Compensation as approved by the Committee. Other
Participants in Performance Share Compensation shall be determined by the
Committee, pursuant to the recommendation of the Chief Executive Officer of
Corporate, or if an employee of a Subsidiary other than the Chief Executive
Officer thereof, by the Chief Executive Officer thereof.
2. DETERMINATION OF TENTATIVE AWARD - On the first day of each fiscal year
tentative Performance Share Compensation ("Tentative Award") shall be
determined for each Participant. The Tentative Award shall be the quotient
obtained by dividing (a) the product of the Participant's Base Salary and
the salary factor set forth in the following table by (b) the Average
Annual Share Price.
CLASS OF PARTICIPANT SALARY FACTOR
Office of the President .50
Subsidiary Chief Executive Officer .45
Corporate or Subsidiary .30
Senior Executive
Other Executive .20
The Average Annual Share Price shall be determined by averaging the closing
price of the common stock of Corporate on the last trading date of each
fiscal quarter of the preceding fiscal year. The Tentative Award thus
determined shall be expressed in terms of a number of shares of common
stock of Corporate rounded to the next highest whole share.
3. PERFORMANCE SHARE PERIOD - A performance share period ("Period") shall
begin on the first day of each fiscal year and shall include the next three
(3) consecutive fiscal years.
4. DETERMINATION OF PERFORMANCE SHARE COMPENSATION - Shareholder value created
by the Corporation shall be the basis for determining payout of Performance
Share Compensation for Corporate Participants. At the beginning of each
Period the Sub-Committee, based on recommendations from the Office of the
President, shall approve goals, including a base goal, a target goal and a
200% achievement goal for the creation of shareholder value to be achieved
during the Period for the Corporation. Such goals shall be communicated to
the Corporate Participants.
<PAGE>
Shareholder value created by each Subsidiary or other goals shall be the
basis for determining Performance Share Compensation for Subsidiary
Participants. At the beginning of each Period the Sub-Committee, based on
recommendations from the Office of the President, shall approve goals,
including a base goal, a target goal and a 200% achievement goal for the
shareholder value or other goals to be achieved during the Period for each
Subsidiary. Such goals shall be communicated to the Subsidiary
Participants.
5. CALCULATION OF PERFORMANCE SHARE COMPENSATION - At the end of each Period,
Performance Share Compensation shall be calculated for each Participant.
If the shareholder value created equals or is greater than the base goal,
Performance Share Compensation shall be calculated by multiplying the
Tentative Award by a fraction, the numerator of which is the actual
shareholder value created for the Corporation less the base goal and the
denominator of which is the target goal less the base goal. If the actual
shareholder value created is greater than the target goal, but less than
the 200% achievement goal, Performance Share Compensation shall be
calculated by multiplying the Tentative Award by the sum of: (a) one (1),
and (b) the product obtained by multiplying one (1) times a fraction the
numerator of which is the actual shareholder value created less the target
goal and the denominator of which is the 200% achievement goal less the
target goal. If the actual shareholder value equals or exceeds the 200%
achievement goal, the Award shall be calculated by multiplying the
Tentative Award by two (2).
6. PAYMENT OF THE PERFORMANCE SHARE COMPENSATION - Shares of common stock of
Corporate representing Performance Share Compensation shall be delivered to
the Participant within a reasonable time after Performance Share
Compensation is determined but not sooner than forty (40) days after the
end of the Period and not later than seventy-five (75) days thereafter;
except that all or a portion thereof may be deferred pursuant to the
Deferred Compensation arrangement set forth in Article VIII. The Sub-
Committee will certify in writing that performance goals were attained
prior to payment.
7. TERMINATION - Termination of a Participant's employment for reasons other
than death, Disability or normal or early retirement shall terminate any
non-deferred Performance Share Compensation. Termination of a
Participant's employment by reason of death, Disability or normal or early
retirement shall result in a reduction of Performance Share Compensation by
multiplying Performance Share Compensation by a fraction the numerator of
which is the number of fiscal year full months occurring between the
establishment of a Tentative Award and such termination, and the
denominator of which is 36.
ARTICLE VII
PERQUISITE COMPENSATION - The purpose of Perquisite Compensation is to provide
Participants with certain benefits to aid such Participants in carrying out
their duties, to help provide for their well being, and to create the potential
for added long term financial security.
1. PARTICIPANTS - Office of the President, Chief Executive Officer of
Subsidiaries and Corporate and Subsidiary Senior Executives shall be
eligible for Perquisite Compensation.
2. PERQUISITE COMPENSATION - Perquisite Compensation shall not exceed ten
percent (10%) of the Base Salary of a Participant subject to such other
limits as may be imposed on Participants who constitute the Office of the
President and Corporate Vice Presidents by the Committee or on other
Participants by the Chief Executive Officer. A variety of perquisite
options shall be
<PAGE>
determined by the Chief Executive Officer from time to time and
communicated to the Participants, except that any perquisite option
involving the purchase of common stock of Corporate shall be subject to the
approval of the Committee.
3. CARRYOVERS - Perquisite Compensation is available during the fiscal year
during which it is earned. Balances from one fiscal year shall be carried
forward to the succeeding fiscal year only. Amounts carried forward to the
succeeding fiscal year and not spent shall be forfeited.
ARTICLE VIII
DEFERRED COMPENSATION -The purpose of Deferred Compensation is to provide
voluntary and mandatory deferral of portions of compensation paid to a
Participant by the Corporation.
1. PARTICIPANTS - Participants deferring compensation shall execute a Deferred
Compensation Agreement (the "Agreement") with Corporate outlining their
various rights, duties and obligations thereunder.
2. ELECTION TO DEFER COMPENSATION - DEFERRAL PERIOD - A Participant may elect
to defer all or any portion of Base Salary, Incentive Compensation,
Performance Share Compensation and Perquisite Compensation. A
Participant's written election to defer any compensation must be made
before the beginning of the period of service, ordinarily a fiscal year,
during which such compensation would otherwise be paid. The election must
state the duration of the deferral period, and shall be irrevocable.
3. DEFERRALS OF BASE SALARY, INCENTIVE COMPENSATION AND PERQUISITE
COMPENSATION - (a) When earned, amounts deferred from a Participant's
Base Salary, Incentive Compensation and Perquisite Compensation shall be
credited, but not paid, to an account in the name of the Participant and
shall accrue interest credited monthly at the end of each of the
Corporation's fiscal months at a rate which is equal to the monthly prime
interest rate (determined as of the first day of each month) charged by the
Corporation's principal bank. At the end of the deferral period payment
shall be made in cash. (b) In the alternative, a Participant may elect
that Incentive Compensation amounts deferred, when earned shall be
credited, but not paid, to an account in the name of the Participant which
shall be assumed to be invested in the common stock of Corporate, at the
then current market price. Dividends, stock dividends, stock splits and
other rights inuring to the common stock of Corporate which would be
normally payable thereon shall be assumed to be reinvested in the common
stock of Corporate at the market value on the date of assumed payment.
Such election shall be made prior to the period during which the amount is
earned and, once made, shall be irrevocable. At the end of the deferral
period payment shall be made in shares of common stock of Corporate.
4. DEFERRALS OF PERFORMANCE SHARE COMPENSATION - (a) When due and payable,
amounts deferred from Performance Share Compensation will be credited, but
not paid, to an account in the name of the Participant which shall be
assumed to be invested in the common stock of Corporate. Dividends, stock
dividends, stock splits and other rights inuring to the common stock of
Corporate, which would be normally payable thereon shall be assumed to be
reinvested in the common stock of Corporate at the market value on the date
of the assumed payment. At the end of the deferral period payment shall be
made in shares of common stock of Corporate. (b) Beginning with the
1995/1997 Period, all Performance Share Compensation earned above the 100%
target goal will be deferred without election by the Participant until the
Participant's death
<PAGE>
or the latter of (i) reaching age 62 or (ii) termination of employment.
Mandatory deferred shares will be subject to forfeiture in the event the
Participant voluntarily terminates his employment (except by reason of
retirement after reaching age 62) during the three years following the end
of a Period according to the following schedule: (i) termination during the
first year following the end of a Period will result in forfeiture of all
of the mandatory deferred shares relating to that Period; (ii) termination
during the second year following the end of a Period will result in
forfeiture of two-thirds of the mandatory deferred shares relating to that
Period; and (iii) termination during the third year following the end of a
Period will result in forfeiture of one-third of the mandatory deferred
shares relating to that Period.
5. FINANCIAL HARDSHIP - A withdrawal of Deferred Compensation credited to a
Participant's account prior to the termination of the deferral period shall
be permitted in the event the Participant experiences serious financial
hardship which is beyond the Participant's control and which would cause
the Participant severe hardship if such withdrawal were not permitted.
Serious financial hardship may include a disability or unexpected and
unreimbursed major expenses resulting from illness or accident or impending
bankruptcy. Any Participant desiring such withdrawal by reason of serious
financial hardship must apply to the Committee and demonstrate that the
circumstances being experienced were not under the Participant's control
and constitute a real emergency which is likely to cause great financial
hardship. The Committee shall have the authority to require such medical
or other evidence as it may need to determine the necessity for
Participant's withdrawal request.
If such application for withdrawal is permitted, the amount of such
withdrawal shall be limited to an amount of the Participant's account which
would have been payable if the Participant's employment with the
Corporation was terminated. The allowed amount of withdrawal shall be
payable in lump sum or common stock certificate promptly after notice to
the Participant of approval by the Committee. If a Participant makes a
withdrawal, the amount of the Participant's account under the Program shall
be proportionately reduced to reflect such withdrawal. The balance of the
Participant's account, if any, shall be payable according to otherwise
applicable provisions of the Program.
ARTICLE IX
SUPPLEMENTAL PENSION - The purpose of Supplemental Pension is to provide and
supplement the normal retirement benefit which may be reduced or limited due to
deferral of compensation or statutory limitation.
1. PARTICIPANTS - Office of the President, Chief Executive Officer of
Subsidiary, and Corporate or Subsidiary Senior Executive shall be eligible
for supplemental pension benefits.
2. SUPPLEMENTAL PENSION BENEFIT - In the event a Participant's pension benefit
under any qualified pension plan of the Corporation in effect at the time
of the Participant's retirement (or other event requiring the payment of a
benefit hereunder) shall be less than said benefit would have been as a
result of the deferral of any compensation, then the Corporation will pay
the difference to the Participant at such time as the amount would have
been paid under the qualified pension plan. As and for an additional
supplemental pension benefit, the Corporation shall pay to the Participant
any difference between the Participant's pension benefits actually payable
under the pension plan and the amount that would have been payable but for
any statutory limitation incorporated into the pension plan language as a
requirement of law. Such supplemental
<PAGE>
pension benefit will be paid by the Corporation at such time as the amount
would have been paid under the qualified pension plan but for the
limitation.
ARTICLE X
FINALITY OF DETERMINATION - Each determination made by the Committee and the
Office of the President shall be final, binding and conclusive for all purposes
and upon all persons and the Committee may rely conclusively on the
determinations made by the Corporation's independent public accountants or by
the Corporation's employees with respect to action of the Committee.
ARTICLE XI
LIMITATIONS - No employee of the Corporation or any other persons shall have any
claim or right (legal, equitable or other) to be granted any award hereunder,
and no director, officer or employee of the Corporation, or any other person,
shall have the authority to enter into any agreement with any person for the
making or payment of any award or to make any representation or warranty with
respect thereto.
1. No Participant for whose benefit compensation has been deferred shall have
any right in compensation other than to receive compensation at the time
and in the form elected by the Participant subject to the fulfillment of
the conditions described herein, which right may not be assigned or
transferred except by will or the laws of the descent and distribution.
2. Neither the action of the Corporation in establishing this Program nor any
action taken by the Corporation, the Committee, the Board of Directors, or
the Office of the President, nor any provision of this Program, shall be
construed as giving to any Participant or employee of the Corporation the
right to be retained in the employ of the Corporation.
ARTICLE XII
AMENDMENTS, SUSPENSION OR TERMINATION - The Committee may discontinue this
Program in whole or in part at any time and may from time to time amend or
revise the terms as permitted by applicable statute; provided, however, that no
such discontinuance, amendment, or revision shall affect adversely any right or
obligation with respect to any award theretofor made and provided further that
any amendment increasing the number of shares of common stock of Corporate
available to the Program shall be subject to the approval of the Board of
Directors. No amendment shall require shareholder approval unless such approval
is otherwise required by law.
ARTICLE XIII
RESERVATION OF SHARES - As of December 4, 1994, an aggregate of 1,160,825 shares
of common stock of Corporate are authorized and remain reserved for issuance
under this Program.
The number of shares of common stock of Corporate authorized for issuance under
this Program shall be subject to adjustment by the Committee, in its sole
discretion, to reflect any stock split, stock dividend, recapitalization,
merger, consolidation, reorganization, combination or exchange of shares or
other similar event.
<PAGE>
ARTICLE XIV
EFFECTIVE DATE - This Program was approved by the Board of Directors on October
4, 1977, became effective December 1, 1977 for the fiscal year beginning on that
date and, as amended and restated, was approved by the Board of Directors on
January 22, 1991, effective April 1, 1991, and approved April 5, 1994, effective
December 4, 1994 respectively.
ARTICLE XV
GOVERNING LAW - This Program shall be governed and construed in accordance with
the laws of the State of Indiana.
<PAGE>
EXHIBIT 21
HILLENBRAND INDUSTRIES, INC.
SUBSIDIARIES OF THE REGISTRANT
All subsidiaries of the Company are wholly-owned Indiana corporations,
unless otherwise noted.
Batesville Casket Company, Inc.
BLOCK Medical, Inc., a Delaware corporation
Hill-Rom, Inc.
Forecorp, Inc. (doing business as Forethought)
Hillenbrand Industries FSC (Barbados), Inc.,
a Barbados corporation
Hillenbrand Investment Advisory Corporation,
a Delaware corporation
Hillenbrand Properties, Inc.
Medeco Security Locks, Inc., a Virginia corporation
Sherman House Corporation
Tudor Travel, Inc.
Cutler Property, Inc.
Old Brick Property, Inc.
Memory Showcase, Inc.
Stratum Strategic Development, Inc.
Subsidiaries of Batesville Casket Company, Inc.
Batesville International Corporation
Batesville Casket de Mexico, S.A. de C.V.
Subsidiary of Batesville Casket de Mexico, S.A. de C.V.
Industrias Arga, S.A. de C.V.
Subsidiaries of Hill-Rom, Inc.
Hill-Rom Company, Inc.
PaTMark Company, Inc., a Delaware corporation
Support Systems International, Inc.
Tron Business Systems, Inc., a Nevada corporation
Jointly owned subsidiary of Hill-Rom, Inc. and Hill-Rom Company, Inc.
Hill-Rom International, Inc.
Subsidiaries of Hill-Rom International, Inc.
Support Systems International B.V., a Netherlands corporation
Hill-Rom SARL, a French corporation
(1)
<PAGE>
Subsidiaries of Support Systems International B.V.
SSI Medical Services B.V., a Netherlands corporation
Support Systems International Finance, Ltd., a United Kingdom
corporation
Hill-Rom GmbH, a German corporation
SSI Industries SARL, a French corporation
SSI Medical Services, SRL, an Italian corporation
SSI Medizintechnik, an Austrian corporation
Systems Investments B.V., a Netherlands corporation
SSI Leasing and Investment B.V., a Netherlands corporation
Subsidiaries of Support Systems International Finance, Ltd.
Support Systems International Services, Ltd., a United Kingdom
corporation
SSI Medical Services, Ltd., a United Kingdom corporation
Subsidiaries of Hill-Rom GmbH
SSI Support Systems International GmbH, a German corporation
L. & C. Arnold GmbH, a German corporation
ROWA GmbH, a German corporation
Subsidiaries of L. & C. Arnold GmbH
John Bukowansky GmbH, an Austrian corporation (81% owned)
Stendal GmbH, a German corporation
Jointly owned subsidiary of Hill-Rom, Inc. and L. & C. Arnold GmbH
L. & C. Arnold (Canada), Inc., an Ontario (Canada) corporation
Subsidiary of SSI Industries SARL
SSI Medical SARL, a French corporation
Subsidiaries of Hill-Rom SARL
Le Couviour, S.A., a French corporation
Hill-Rom B.V., a Netherlands corporation
SCI Port Mirabeau, a French corporation
SCI Le Couviour Immoblier, a French corporation
Subsidiary of Le Couviour, S.A.
Financiere Le Couviour, S.A.
Subsidiary of Hill-Rom B.V.
Hillrom, S.A., a Switzerland corporation
Subsidiaries of Forecorp, Inc.
Forethought Life Insurance Company
The Forethought Group, Inc.
Forethought Florida, Inc.
ForeLife Agency, Inc.
Foresight Association, Inc.
Subsidiary of Forethought Life Insurance Company
Forethought Properties, Inc.
Jointly owned subsidiary of Batesville Casket Company, Inc., Hill-Rom
Company, Inc.,
Hill-Rom, Inc. and Medeco Security Locks, Inc.
Hillenbrand Industries Canada, Ltd., an Ontario (Canada) corporation
(2)
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS INCLUDED UNDER ITEM 8 OF THE COMPANY'S
FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 3, 1994, AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-03-1994
<PERIOD-START> NOV-28-1993
<PERIOD-END> DEC-03-1994
<CASH> 120,359
<SECURITIES> 0
<RECEIVABLES> 313,580
<ALLOWANCES> (13,982)
<INVENTORY> 104,229
<CURRENT-ASSETS> 546,125
<PP&E> 836,226
<DEPRECIATION> (477,634)
<TOTAL-ASSETS> 2,693,817
<CURRENT-LIABILITIES> 238,853
<BONDS> 208,729
<COMMON> 4,442
0
0
<OTHER-SE> 689,049
<TOTAL-LIABILITY-AND-EQUITY> 2,693,817
<SALES> 0
<TOTAL-REVENUES> 1,577,034
<CGS> 0
<TOTAL-COSTS> (847,870)
<OTHER-EXPENSES> (567,378)<F1>
<LOSS-PROVISION> (2,741)
<INTEREST-EXPENSE> (23,489)
<INCOME-PRETAX> 144,760<F1>
<INCOME-TAX> 55,298<F1>
<INCOME-CONTINUING> 89,462<F1>
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 89,462<F1>
<EPS-PRIMARY> 1.26<F1>
<EPS-DILUTED> 1.26<F1>
<FN>
<F1>REFLECTS AN UNUSUAL CHARGE OF 84,750, OR 52,545 (.74 PER SHARE) AFTER
INCOME TAXES, FOR SETTLEMENT OF A PATENT INFRINGEMENT SUIT IN THE THIRD
QUARTER.
</FN>
</TABLE>
