<PAGE>
HILLENBRAND INDUSTRIES
NOTICE OF ANNUAL MEETING
TO BE HELD APRIL 9, 1996
The annual meeting of shareholders of Hillenbrand Industries, Inc., an
Indiana corporation, 700 State Route 46 East, Batesville, Indiana 47006-8835,
will be held at the Sherman House in Batesville, Indiana, on Tuesday, April 9,
1996, at 10:00 o'clock a.m., local time, for the following purposes:
(1) To elect four members to the Board of Directors;
(2) To ratify the appointment of Price Waterhouse LLP as
independent auditors of Hillenbrand Industries, Inc.; and
(3) To transact such other business as may properly come before
the meeting and any adjournment of the meeting.
The Board of Directors has fixed the close of business on February 9, 1996,
as the record date for determining which shareholders are entitled to notice of
and to vote at the meeting.
By Order of the Board of Directors
Mark R. Lindenmeyer
Secretary
March 1, 1996
<PAGE>
CONTENTS
PAGE
----
VOTING 1
ELECTION OF DIRECTORS 2
ABOUT THE BOARD OF DIRECTORS (INCLUDING DIRECTOR COMPENSATION) 7
RATIFICATION OF APPOINTMENT OF AUDITORS 9
EXECUTIVE COMPENSATION
-SUMMARY COMPENSATION TABLE 10
-LONG TERM INCENTIVE PLANS - AWARDS IN LAST FISCAL YEAR 11
-COMPENSATION COMMITTEES' REPORT 12
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION 17
COMPANY STOCK PERFORMANCE 18
RETIREMENT PLANS 19
COST OF SOLICITATION 20
SHAREHOLDER PROPOSALS 20
INCORPORATION BY REFERENCE 21
<PAGE>
HILLENBRAND INDUSTRIES
PROXY STATEMENT
The enclosed proxy is solicited by the Board of Directors of Hillenbrand
Industries, Inc. (the "Company"), 700 State Route 46 East, Batesville,
Indiana 47006-8835 [telephone (812) 934-7000], for use at the annual meeting
of its shareholders to be held at the Sherman House in Batesville, Indiana,
on April 9, 1996, at 10:00 a.m., local time, and at any adjournments of the
meeting, and was mailed initially to shareholders on or about March 1, 1996.
All shares represented by these proxies will be voted at this meeting in
accordance with instructions given by shareholders. Where no instructions
are given the shares will be voted (1) in favor of the election of the Board
of Directors' nominees for four directors; (2) in favor of the ratification
of the appointment of Price Waterhouse LLP as independent auditors of the
Company; and (3) in the discretion of the proxy holder upon such other
business as may properly come before the meeting.
The purpose of the annual meeting is to vote upon the matters set forth
above. The Board of Directors is not aware of any other business which may come
before the meeting. A shareholder executing and delivering the enclosed proxy
may revoke it by giving a later proxy, notifying the Secretary of the Company in
writing, or voting in person at the annual meeting.
VOTING
The close of business on February 9, 1996, has been fixed as the record
date for determining which shareholders are entitled to notice of and to vote at
the annual meeting. On February 9, 1996, there were 70,066,380 shares of the
Company's common stock issued and outstanding. Each share of common stock is
entitled to one vote with respect to every matter submitted to a vote at the
meeting. Votes cast by proxy or in person at the annual meeting will be
tabulated by the election inspectors appointed for the meeting.
VOTES NECESSARY TO ADOPT PROPOSALS. A plurality of the votes cast is
required for election of Directors. Directors are elected by a plurality of the
votes cast by shareholders entitled to vote at a meeting at which a quorum is
present. The affirmative vote of the holders of a majority of the votes cast is
required for the ratification of the appointment of the auditors.
A majority of the shares issued and outstanding constitutes a quorum.
Under Indiana law, once a share is represented for any purpose at a meeting it
is deemed present for quorum purposes for the remainder of the meeting.
Abstentions, broker non-votes and instructions on a proxy to withhold authority
to vote for one or more of the director nominees will result in fewer votes
being cast with respect to a particular issue or nominee.
ELECTION OF DIRECTORS
The Articles of Incorporation and the Code of By-laws of the Company
provide that members of the Board of Directors shall be classified with respect
to the terms which they shall serve by dividing them into three classes. Each
class consists of three or four members. At the upcoming annual meeting, four
members of the Board of Directors in Class III shall be elected for three year
terms expiring at the 1999 annual meeting, or until their successors are duly
elected and qualified. The four directors in Class
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I and three members in Class II were each previously elected to three year terms
expiring at the 1997 and 1998 annual meetings, respectively.
The enclosed proxy, unless authority is withheld, will be voted in favor of
electing as directors the nominees listed for the terms indicated. If any one
or more of these nominees should be unable to serve, the enclosed proxy may be
voted for a substitute nominee selected by the Board of Directors or the Board
of Directors may amend the Code of By-laws of the Company to reduce the number
of directors.
NOMINEES: CLASS III
To be elected to serve three year terms expiring at the 1999 annual meeting:
<TABLE>
<CAPTION>
SERVED AS SHARES(12)
A BENEFICIALLY OWNED PERCENT OF TOTAL
DIRECTOR AS OF FEBRUARY 9, SHARES
NAME AGE PRINCIPAL OCCUPATION SINCE 1996 OUTSTANDING
- ---- --- -------------------- ---------- ------------------- -----------------
<S> <C> <C> <C> <C> <C>
JOHN C. HANCOCK 66 CONSULTANT 1980 13,000(11) (1)
GEORGE M. HILLENBRAND II 56 PERSONAL INVESTMENTS 1986 6,033,673(2)(10) 8.6%
JOHN A. HILLENBRAND II 64 PERSONAL INVESTMENTS 1981(3) 4,071,232(4)(10) 5.8%
LONNIE M. SMITH 51 SENIOR EXECUTIVE VICE 1981 128,173(5) (1)
PRESIDENT OF THE COMPANY
</TABLE>
DIRECTORS:
CLASS I
Serving three year terms expiring at the 1997 annual meeting:
<TABLE>
<CAPTION>
SERVED AS SHARES(12)
A BENEFICIALLY OWNED PERCENT OF TOTAL
DIRECTOR AS OF FEBRUARY 9, SHARES
NAME AGE PRINCIPAL OCCUPATION SINCE 1996 OUTSTANDING
- ---- --- -------------------- -------- ------------------ ----------------
<S> <C> <C> <C> <C> <C>
PETER F. COFFARO 67 CHAIRMAN OF THE BOARD PABCO 1987 48,936 (1)
FLUID POWER CO., OHIO VALLEY
FLOORING, AND ANCHOR FLANGE
COMPANY
EDWARD S. DAVIS 64 PARTNER; HUGHES HUBBARD 1974 4,000(11) (1)
& REED, ATTORNEYS
LEONARD GRANOFF 69 PRESIDENT OF KOFFLER CORPORATION 1978 25,000 (1)
W AUGUST HILLENBRAND 55 PRESIDENT AND CHIEF EXECUTIVE 1972 4,570,171(6) 6.5%
OFFICER OF THE COMPANY (10)(11)
</TABLE>
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<PAGE>
CLASS II
Serving three year terms expiring at the 1998 annual meeting:
<TABLE>
<CAPTION>
SERVED AS SHARES(12)
A BENEFICIALLY OWNED PERCENT OF TOTAL
DIRECTOR AS OF FEBRUARY 9, SHARES
NAME AGE PRINCIPAL OCCUPATION SINCE 1996 OUTSTANDING
- ---- --- --------------------- --------- ------------------- ------------------
<S> <C> <C> <C> <C> <C>
LAWRENCE R. BURTSCHY 59 CHAIRMAN OF L.R. 1970 6,018,072(7)(10) 8.6%
BURTSCHY & COMPANY
DANIEL A. HILLENBRAND 72 CHAIRMAN OF THE BOARD 1969 1,993,797(8)(10) 2.8%
OF THE COMPANY
RAY J. HILLENBRAND 61 PERSONAL INVESTMENTS 1970 2,515,380(9)(10) 3.6%
</TABLE>
STOCK OWNERSHIP OF OTHER NAMED EXECUTIVE OFFICERS:
<TABLE>
<CAPTION>
SHARES(12)
BENEFICIALLY OWNED PERCENT OF TOTAL
AS OF FEBRUARY 9, SHARES
NAME AGE PRINCIPAL OCCUPATION 1996 OUTSTANDING
- ---- --- --------------------- ------------------- ------------------
<S> <C> <C> <C> <C>
TOM E. BREWER 57 SENIOR VICE PRESIDENT 41,340 (1)
& CHIEF FINANCIAL
OFFICER
MARK R. LINDENMEYER 49 VICE PRESIDENT, 2,386 (1)
GENERAL COUNSEL &
SECRETARY
JAMES G. THORNE 54 VICE PRESIDENT- 1,511 (1)
HUMAN RESOURCES
ALL DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY 20,605,997(2)(4)(5) 29.4%
AS A GROUP, INCLUDING THOSE LISTED ABOVE, CONSISTING (6)(7)(8)
OF 21 PERSONS. (9)(11)
</TABLE>
(1) Ownership of less than one percent (1%) of the total shares outstanding.
(2) Includes 4,844,920 shares owned of record by trusts, of which George M.
Hillenbrand II is co-trustee, for the benefit of Mr. Hillenbrand and other
members of his immediate family. Mr. Hillenbrand disclaims beneficial
ownership of these shares.
(3) John A. Hillenbrand II previously served as a Director of the Company from
1972 to 1979.
(4) Includes 2,064 shares held of record by John A. Hillenbrand II as custodian
under the Uniform Gifts to Minors Act; 16,240 shares held of record by his
wife, Joan L. Hillenbrand; 586,096 shares held of record by trusts for the
benefit of his children and grandchildren; and 2,528,392 shares held of
record by a family partnership for the benefit of other members of his
immediate family. Mr. Hillenbrand disclaims beneficial ownership of these
shares.
(5) Includes 7,200 shares held of record by a family partnership. Mr. Smith
disclaims beneficial ownership of these shares except to the extent of his
pecuniary interest therein.
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<PAGE>
(6) Includes 3,086,563 shares owned of record by trusts, of which W August
Hillenbrand is trustee or co-trustee; and 688,716 shares owned of record
by a family partnership for the benefit of members of his family (Mr.
Hillenbrand disclaims beneficial ownership of these shares except to the
extent of his pecuniary interest therein). Also includes 217,174 shares
owned of record and beneficially by his wife, Nancy K. Hillenbrand; 60,376
shares held of record by a charitable trust, of which Mr. Hillenbrand is a
co-trustee; and 251,075 shares held by a limited partnership, of which Mr.
Hillenbrand is a limited partner. Mr. Hillenbrand disclaims beneficial
ownership of these shares.
(7) Includes 4,844,920 shares owned of record by trusts, of which Lawrence R.
Burtschy is co-trustee, for the benefit of certain members of the Daniel
A. Hillenbrand and George C. Hillenbrand families; and 958,407 shares
owned of record and beneficially by his wife, Elisabeth H. Burtschy. Mr.
Burtschy disclaims beneficial ownership of these shares.
(8) Includes 72,400 shares held of record and beneficially owned by Daniel A.
Hillenbrand's wife, Mary H. Hillenbrand. Mr. Hillenbrand disclaims
beneficial ownership of these shares.
(9) Includes 800,000 shares held of record by a trust, of which Ray J.
Hillenbrand is trustee; 15,975 shares held of record by a charitable
foundation, of which Mr. Hillenbrand is a trustee; and 1,530,120 shares
held of record by family partnerships for the benefit of other members
of his immediate family. Mr. Hillenbrand disclaims beneficial ownership
of these shares.
(10) John A. Hillenbrand II and Ray J. Hillenbrand are brothers. John A., Ray
J., W August and George M. Hillenbrand II are nephews of Daniel A.
Hillenbrand. Lawrence R. Burtschy is a son-in-law of George C.
Hillenbrand, deceased, brother of Daniel A. Hillenbrand.
(11) Does not include deferred compensation in the form of deferred shares of
common stock held on the books and records of the Company in the following
amounts: Edward S. Davis - 3,507 shares; John C. Hancock - 3,017 shares;
W August Hillenbrand - 136,157 shares; and other executive officers -
12,765 shares.
(12) The Company's only class of equity securities outstanding is Common Stock
without par value. The Company is not aware of any person, other than
members of the Hillenbrand family as indicated herein, beneficially
owning more than 5 percent of the Company's Common Stock.
Daniel A. Hillenbrand has been Chairman of the Board since 1972. Mr.
Hillenbrand served as President of the Company from 1972 through October 20,
1981, and as Chief Executive Officer from 1972 through April 11, 1989. Mr.
Hillenbrand had been employed by the Company throughout his business career
until his retirement on April 30, 1989.
W August Hillenbrand has been President of the Company since October 21,
1981 and was elected Chief Executive Officer of the Company on April 11,
1989. Mr. Hillenbrand has been employed by the Company throughout his
business career. He is also a director of DPL, Inc. of Dayton, Ohio.
George M. Hillenbrand II has devoted his business career to the
management of personal and family investments.
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<PAGE>
John A. Hillenbrand II has managed personal and family investments since
1979. He is also a director of PSI Energy of Plainfield, Indiana, CINergy
Corp. of Cincinnati, Ohio and National City Bank, of Indianapolis, Indiana.
Mr. Hillenbrand was employed by and active in the management of the Company
prior to his resignation as an officer in 1979. He is also chairman, vice
chairman, or a director of several privately owned companies.
Ray J. Hillenbrand has been engaged in the management of personal and
family investments for much of his career. Mr. Hillenbrand was employed by
and active in the management of the Company prior to his resignation as an
officer in 1977.
Mr. Burtschy is Chairman of L.R. Burtschy & Company, an investment
management company, and has been so engaged since 1969. Mr. Burtschy is also
a director of Skyline Chili, Inc. of Cincinnati, Ohio, and a director or
partner of several privately owned companies.
Mr. Coffaro, a mechanical engineer, has devoted his career to the
development of a number of manufacturing and distribution businesses. He is
a director of several privately owned companies located in Cincinnati, Ohio.
Mr. Davis, a partner in Hughes Hubbard & Reed, a New York law firm, has
practiced law during his entire professional career. He is also a director
of Cognitronics Corporation of Danbury, Connecticut.
Mr. Granoff is President and director of Koffler Corporation, a
privately owned investment company in Providence, Rhode Island.
Dr. Hancock, who holds a Ph.D. in Electrical Engineering, is a
consultant. Until 1988, he was Executive Vice President for Corporate
Development and Technology of United Telecommunications, Inc. (Sprint).
Mr. Smith has been Senior Executive Vice President since 1982 and has
been employed by the Company or its subsidiaries in various offices since
1976.
Under Section 16(a) of the Securities Exchange Act of 1934, the
Company's directors, its executive officers and any person holding more than
ten percent of the Company's common stock are required to file reports of
ownership and any changes in ownership with the Securities and Exchange
Commission and the New York Stock Exchange. The Company is required to
report in this proxy statement any failure to file or late filing occurring
during 1995. Based solely on reports and other information from reporting
persons, the Company believes that all of these filing requirements were
satisfied by its directors, executive officers and ten percent beneficial
owners, except that two reports were filed late regarding the creation of
three trusts, three distributions from trusts, and two transfers into trusts,
each concerning shares indirectly beneficially owned by W August Hillenbrand
and one report was filed late regarding a gift by George M. Hillenbrand II.
ABOUT THE BOARD OF DIRECTORS
(INCLUDING DIRECTOR COMPENSATION)
The Board of Directors has the following standing committees: an
Executive Committee, a Finance Committee, an Audit Committee, a Compensation
Committee and a Performance
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<PAGE>
Compensation Committee. The Company does not have a nominating committee.
During 1995, the Board of Directors of the Company held four meetings.
The Executive Committee of the Board of Directors consists of Messrs.
Lawrence R. Burtschy, Daniel A. Hillenbrand (Chairman), George M. Hillenbrand
II, John A. Hillenbrand II, Ray J. Hillenbrand, W August Hillenbrand and
Lonnie M. Smith. The Executive Committee advises the Chief Executive Officer
on business decisions of significant impact and on the business in general.
Subject to limitations provided by law or the Code of By-laws, the Executive
Committee exercises the power and authority of the Board of Directors as may
be necessary during the intervals between meetings of the Board. The
Executive Committee met five times during 1995.
The Finance Committee of the Board of Directors consists of Messrs.
Lawrence R. Burtschy, Daniel A. Hillenbrand (Chairman), George M. Hillenbrand
II, John A. Hillenbrand II, Ray J. Hillenbrand and W August Hillenbrand. The
Finance Committee reviews financial policies and procedures of the Company.
It also makes recommendations to the Board of Directors on dividend policy,
issuance and sale or repurchase of Company securities, and the investment of
Company funds, including pension and thrift plans. The Finance Committee
also advises on proposed acquisitions and divestments. During 1995, the
Finance Committee held five meetings.
The Audit Committee of the Board of Directors consists of Messrs. Peter
F. Coffaro, Edward S. Davis (Chairman) and Daniel A. Hillenbrand. The Audit
Committee annually recommends to the Board of Directors of the Company
independent accountants for appointment by the Board of Directors as auditors
of the books, records and accounts of the Company and its subsidiaries. The
Audit Committee reviews the services to be performed by the independent
accountants; makes a determination regarding the possible effect of the
performance of such services on the independence of the principal independent
accountants; receives and reviews the reports submitted by the principal
independent accountants of the Company; and takes such action with respect to
such reports as it deems appropriate. In addition, the Audit Committee
determines the duties and responsibilities of the internal auditing staff;
reviews the annual program for the internal audit of the operational
procedures of the Company; receives and reviews reports submitted by the
internal auditing staff; and takes such action as it deems appropriate to
assure that the interests of the Company are adequately protected, including
the maintenance of accounting controls and standards. During 1995, the Audit
Committee held four meetings.
The Compensation Committee of the Board of Directors consists of Messrs.
Peter F. Coffaro, Edward S. Davis (Chairman), John C. Hancock, Daniel A.
Hillenbrand and W August Hillenbrand. The Compensation Committee annually
reviews the performance contributions of the officers of the Company and
makes recommendations to the Board of Directors for adjustments to the base
salaries of those officers. The Compensation Committee also has general
oversight responsibility for other compensation programs of the Company and
reviews the structure, cost effectiveness, and competitive position of the
Company's compensation programs. During 1995, the Compensation Committee
held two meetings.
The Performance Compensation Committee of the Board of Directors
consists of Messrs. Peter F. Coffaro, Edward S. Davis, John C. Hancock and
Daniel A. Hillenbrand (Chairman) and its Sub-Committee consists of Messrs.
Peter F. Coffaro and John C. Hancock. The Performance Compensation Committee
is responsible for the administration of the Company's Performance
Compensation Plan, Restricted Stock Plan, and Senior Executive Compensation
Program, except for those responsibilities designated to the Sub-Committee
under those plans. The Performance Compensation Committee and/or
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<PAGE>
its Sub-Committee selects participants, makes awards, establishes specific
performance objectives, and assesses individual and subsidiary performance
achievements against those previously established performance objectives.
The Performance Compensation Committee held two meetings in 1995.
During the Company's fiscal year ended December 2, 1995, each Director
who was not a salaried officer or employee of the Company received an annual
fee of $20,000 and a fee of $2,500 for each Board of Directors meeting
attended. Directors who are members of the Audit, Finance, and Compensation
Committees received $1,000 for each committee meeting attended. Directors
were reimbursed for expenses incurred as a result of attendance at Board or
committee meetings. Directors of the Company may defer receipt of directors'
fees otherwise payable to them by the Company. Non-employee Directors are
also eligible to participate in the Company's group term life insurance
program in which premiums are paid by the Company. Death benefits which are
age related range from $60,000 to $150,000.
Daniel A. Hillenbrand has entered into a Consulting Agreement with the
Company under which he is to provide consulting and advisory services to the
Company, including advice on acquisitions and capital expenditures, until May
31, 1999, for which he receives an annual consulting fee of $505,289, as well
as certain pension, health care, insurance and other benefits which totaled
$105,360 during 1995. Mr. Hillenbrand has unique knowledge and extensive
experience in the industries served by the Company, in part because of his
long-term relationship with the Company, and in addition he is
well-recognized as an innovator and leader in these industries. Therefore,
consulting services from other sources would not be comparable to the
services provided by Mr. Hillenbrand. Mr. Hillenbrand retired from the
Company on April 30, 1989, but continues to serve as Chairman of the Board.
In connection with the Company's stock repurchase program, during the
past year the Company purchased 15,000 shares of common stock of the Company
from John A. Hillenbrand II at $28.75 per share.
RATIFICATION OF APPOINTMENT OF AUDITORS
Subject to shareholder ratification, the Board of Directors of the
Company has appointed the firm of Price Waterhouse LLP, certified public
accountants, as independent auditors to make an examination of the financial
statements of the Company for its fiscal year ending November 30, 1996. The
appointment was made upon the recommendation of the Audit Committee, which is
composed of members of the Board of Directors who are not officers or
otherwise employees of the Company. A representative of Price Waterhouse LLP
will be present at the annual meeting with an opportunity to make a
statement, if he so desires, and will respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE
RATIFICATION OF THE APPOINTMENT OF PRICE WATERHOUSE LLP AS INDEPENDENT
AUDITORS OF THE COMPANY.
EXECUTIVE COMPENSATION
The following tabulation and notes set forth the compensation paid or
accrued by the Company during the three fiscal years ended December 2, 1995,
December 3, 1994 and November 27, 1993 to the Chief Executive Officer and
each of the other four most highly compensated executive officers.
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<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
PAYOUTS
------------------- ------------
OTHER ALL
ANNUAL LTIP OTHER
NAME AND COMPENSATION PAYOUTS COMPENSATION
PRINCIPAL POSITION YEAR SALARY $ BONUS $ $(1) $(2) $(3)
- -------------------- ---- -------- -------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
W AUGUST HILLENBRAND 1995 $657,987 $0 $ 78,853 $0 $146,177
PRESIDENT & CHIEF 1994 $638,367 $0 $ 77,340 $0 $128,727
EXECUTIVE OFFICER 1993 $586,461 $531,000 $ 77,965 $1,414,168 $146,195
LONNIE M. SMITH 1995 $514,057 $0 $ 65,450 $0 $ 43,827
SENIOR EXECUTIVE 1994 $498,827 $0 (4) $0 $ 39,841
VICE PRESIDENT 1993 $458,231 $414,900 (4) $1,103,645 $ 37,810
TOM E. BREWER 1995 $293,423 $0 (4) $0 $ 46,557
SENIOR VICE 1994 $286,827 $0 (4) $0 $ 36,846
PRESIDENT & 1993 $266,600 $160,680 (4) $ 403,263 $ 23,234
CHIEF FINANCIAL
OFFICER
MARK R. LINDENMEYER 1995 $182,192 $0 (4) $0 $ 5,440
VICE PRESIDENT, 1994 $173,615 $0 (4) $0 $ 4,975
GENERAL COUNSEL & 1993 $161,385 $ 97,200 (4) $ 180,320 $ 3,001
SECRETARY
JAMES G. THORNE (5) 1995 $166,635 $0 (4) N/A $ 3,000
VICE PRESIDENT 1994 $148,173 $0 (4) N/A $ 1,848
HUMAN RESOURCES 1993 $ 57,192 $ 18,940 (4) N/A $ 1,250
</TABLE>
FOOTNOTES TO SUMMARY COMPENSATION TABLE
(1) Consists of the cost of perquisites and other personal benefits provided
by the Company. Included in the 1995 amounts shown for W August
Hillenbrand are $71,320 for financial planning services reimbursed.
Included in the 1995 amounts shown for Lonnie M. Smith are $23,729 and
$20,819 for financial planning services and life insurance reimbursed
respectively.
(2) The amounts appearing in this column are the values as of December 2,
1995, December 3, 1994 and November 27, 1993 of the shares earned under
the Senior Executive Compensation Program for 1993-1995, 1992-1994 and
1991-1993 performance cycles respectively. Also included are values as
of November 27, 1993 of the shares earned under the Performance
Compensation Plan for the 1992-1993 cycle.
(3) All other compensation earned or allocated in 1995 is as follows:
<TABLE>
<CAPTION>
PENSION CONTRIBUTIONS ABOVE MARKET
SUPPLEMENTAL 401(K) INTEREST EARNED TOTAL
--------------------- ------ --------------- --------
<S> <C> <C> <C> <C>
W AUGUST HILLENBRAND $131,094 $3,000 $12,083 $146,177
LONNIE M. SMITH $ 40,827 $3,000 $ 0 $ 43,827
TOM E. BREWER $ 39,540 $3,000 $ 4,017 $ 46,557
MARK R. LINDENMEYER $ 2,373 $3,000 $ 67 $ 5,440
JAMES G. THORNE $ 0 $3,000 $ 0 $ 3,000
</TABLE>
(4) Amounts do not exceed disclosure thresholds established under SEC rules.
-8-
<PAGE>
(5) James G. Thorne has served as an executive officer of the Company since
April 11, 1994. Prior to that time, Mr. Thorne served as an officer of a
subsidiary of the Company beginning on June 14, 1993.
LONG TERM INCENTIVE PLANS - AWARDS
IN LAST FISCAL YEAR
The following table gives information regarding long term incentive plan
awards made during fiscal year 1995 to each of the named executive officers.
<TABLE>
<CAPTION>
ESTIMATED FUTURE
NUMBER OF PERFORMACE OR OTHER PAYOUTS UNDER NON-STOCK PRICE-BASED PLANS
SHARES, UNITS OR PERIOD UNTIL -----------------------------------------
NAME OTHER RIGHTS (1) MATURATION OR PAYOUT THRESHOLD # TARGET # MAXIMUM #
- -------------------- ---------------- -------------------- ------------- -------- ---------
<S> <C> <C> <C> <C> <C>
W AUGUST HILLENBRAND 9,461 1995/1997 1 9,461 18,922
LONNIE M.SMITH 7,391 1995/1997 1 7,391 14,782
TOM E. BREWER 2,530 1995/1997 1 2,530 5,060
MARK R.LINDENMEYER 1,575 1995/1997 1 1,575 3,150
JAMES G. THORNE 1,441 1995/1997 1 1,441 2,882
</TABLE>
FOOTNOTES TO LONG TERM INCENTIVE PLANS - AWARDS IN LAST FISCAL YEAR
(1) Performance share award based on participation in the Senior Executive
Compensation Program. Payout of award is dependent on specified levels
of shareholder value created during a three year period. The target
amount will be earned if 100% of targeted shareholder value created is
achieved. Incremental amounts above the threshold will be earned at the
achievement of 21% of the targeted shareholder value created and the
maximum award is based on achievement of 150% of the targeted shareholder
value created.
COMPENSATION COMMITTEES' REPORT
The Compensation Committee and the Performance Compensation Committee of
the Board of Directors, under the direction of the Board of Directors, have
prepared the following report for inclusion in this proxy statement. This
report sets forth the compensation policies applicable to the Company's
executive officers and the relationship of corporate performance to executive
compensation.
COMPENSATION PHILOSOPHY
The Company's compensation programs reflect a long-standing and strongly
held belief in the principle of performance oriented compensation. The values
that are integral to the design and operation of the Company's compensation
administration and plan designs include:
- creating long term shareholder value as the cornerstone of the Company's
compensation philosophy
- linking compensation programs to the achievement of business strategies
in each subsidiary
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- having financial objectives at the subsidiary level that reflect the
performance expectations of the Company for that entity
- emphasizing variable pay rather than fixed compensation
Performance expectations reflect the Company's commitment to continuous
improvement. When expectations are met or exceeded, variable compensation
should be paid; when expectations are not met, no variable compensation
should be paid.
The compensation package for the senior executives of the Company is
comprised of base salary, an annual cash incentive, a three-year performance
opportunity, and benefits which are generally available in companies of
similar size.
COMPENSATION ELEMENTS
1. BASE SALARY
At the senior executive level, base salaries are
conservative when compared with companies of similar size
and financial performance. Emphasis in the Company's
compensation programs is placed on variable or "at
risk" compensation rather than on base salary. The
Compensation Committee reviews the base salaries of the
executive officers on an annual basis. Adjustments to
base salaries result from an assessment of the
performance contributions of each executive in
relationship to that executive's scope of responsibility.
The Compensation Committee also examines the overall
competitive position of the base salaries of its
executive officers in relation to companies of similar
size and financial performance. The Committee maintains
an appropriate position for other compensation elements,
i.e. short term incentive compensation, perquisite
compensation, long term incentive compensation, and
certain benefit programs including life insurance and
pension benefits. The Company rewards the creation of
sustainable long term shareholder value and as a result
places greater emphasis on variable compensation than on
base salary.
Effective June 25, 1995 the Board of Directors acted on
the recommendation of the Compensation Committee to
increase the compensation of W August Hillenbrand by 5%.
Prior to making the adjustment the Compensation Committee
reviewed the year to date performance of each of the
subsidiaries, the financial performance of the Company,
and the performance contributions of Mr. Hillenbrand in
relationship to performance objectives, such as
management of cash flow, and made an assessment of the
degree to which he was contributing to the creation of
long term shareholder value. The Compensation Committee
also reviewed competitive compensation information
provided by an independent consulting firm prior to
recommending to the Board of Directors the adjustment to
Mr. Hillenbrand's base salary. The Compensation
Committee utilized the services of an independent
compensation consulting firm to provide marketplace
competitive information regarding base salaries of
executive officers. The Company compared its officers'
base salaries with those of other diversified
manufacturing firms. The Company also examined the base
salaries of its executive officers with the base salary
practices of companies who have generated similar total
shareholder returns. Other executive officers were
granted adjustments to their base salaries at the same
time based both upon their performance contributions,
such as management of cash flow, during the preceding
twelve months and
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marketplace comparisons. Adjustments to
the base salaries of the other executive officers were
recommended by the Compensation Committee and approved by
the Board of Directors.
2. PERQUISITES
The senior executive officers are eligible for
perquisite compensation under the Company's Senior
Executive Compensation Program (the "Program"). The
annual amount of a perquisite account is limited to 10%
of each participant's base salary or such other limits as
may be imposed on participants by the Performance
Compensation Committee (in the case of participants who
are members of the Office of the President and certain
other senior executives) and by the Chief Executive
Officer of the Company (in the case of other
participants). Perquisite compensation may be used to
pay for supplemental health care, insurance benefits,
financial planning assistance, club membership fees or
Company common stock. All or a portion of perquisite
compensation may be deferred to be paid in cash at the
end of the deferral period.
3. INCENTIVE COMPENSATION
a. SHORT TERM INCENTIVE COMPENSATION
Under the terms of the Program, the Performance
Compensation Committee or its Sub-Committee establishes
specific financial and non-financial objectives for each
subsidiary and for the Company overall. Each subsidiary
is measured and rewarded based upon its performance
contributions and the performance of its strategic
business units. Short term financial performance
objectives are established annually at levels which
generally represent continuous improvement over prior
years' results. Non-financial performance objectives are
established to assure proper attention by each subsidiary
to those non-financial factors which are necessary for
long term shareholder value creation. Achievement of
financial objectives determines how much short term
incentive compensation is potentially available for
distribution in each subsidiary; achievement of both the
financial and non-financial objectives determines how
much incentive compensation will actually be paid. The
Committees established financial and non-financial
objectives to maintain the appropriate balance between
the short and long term performance expectations of
shareholders.
The amount of short term incentive compensation is
determined by first establishing a performance base
("Performance Base") and a target ("Target") for each
subsidiary. The Performance Base and Target for members
of the Office of the President and the Company's Vice
Presidents are recommended by the Chief Executive Officer
of the Company, approved by the Sub-Committee and
ratified by the Performance Compensation Committee. The
Performance Base and Target for each participant in the
Program who is a chief executive officer of a subsidiary
are approved by the Office of the President. The
Performance Base and Target for other participants who
are employees of the Company are established and approved
by the Office of the President and the Performance Base
and Target for participants who are employees of
subsidiaries of the Company are established by the chief
executive officer of such subsidiary. The Performance
Base and Target for members of the Office of the
President are directly related to the return on
shareholder equity of the Company or as otherwise
determined by the Sub-Committee and ratified by the
Performance Compensation Committee. Goals for
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other participants include both financial and
non-financial measures and may reflect the accomplishment
of tactical and strategic plans of each subsidiary.
Short term incentive compensation opportunity is equal to
60% of base salary for members of the Office of the
President; 50% of base salary in the case of a chief
executive officer of a subsidiary; 40% of base salary for
corporate or subsidiary senior executives; and 30% for
all other executive participants. Attainment of the
Performance Base results in short term incentive
compensation equal to 50% of the above scale. Short term
incentive compensation of up to 150% of the amount of the
above scale may be paid. Achievement above Performance
Base is paid according to a formula recommended by the
Office of the President and approved by the Performance
Compensation Committee.
Short term incentive compensation is calculated for each
senior executive participant at the end of each fiscal
year. Short term incentive compensation is payable in
cash after forty days, but within seventy-five days,
after the end of the fiscal year. All or a portion of
short term incentive compensation may be deferred by the
employee and invested either in cash or common stock to
be paid at the end of the deferral period.
No short term incentive compensation was earned by or
paid to the executive officers of the Company for the
1995 fiscal year because the return on shareholder equity
objectives established at the beginning of the 1995
fiscal year were not achieved.
b. LONG TERM INCENTIVE COMPENSATION
Under the terms of the Program, the Performance
Compensation Committee and its Sub-Committee review the
business plans of each of the subsidiaries and the
performance expectations of the Company overall at the
commencement of each fiscal year. The performance history
and expected performance contributions of each subsidiary
provide the appropriate foundation for the Sub-Committee
to establish performance objectives for long term
compensation programs.
The Performance Compensation Committee recommends to the
Board of Directors the establishment and administration
of the Company's long term incentive compensation. The
Performance Compensation Committee and its Sub-Committee
designate participants in the long term component of the
Program and establish the shareholder value creation
objectives for each subsidiary and for the Company for
each three-year cycle of the Program. The Committees
review a mathematically calculated analysis of a
shareholder's risk-adjusted expectation for return on his
or her investment in the Company's common stock. The
Sub-Committee establishes specific performance objectives
for each subsidiary and for the Company based upon the
shareholder value calculation. These objectives are
ratified by the Performance Compensation Committee. The
base for the three-year cycle is established by taking
the prior year's net income and dividing it by the
weighted average cost of capital for the Company. During
the three-year cycle, the positive and negative cash
flows are measured and adjusted to account for their time
value to the Company. At the end of the three-year
period, the Company's net income is again capitalized by
dividing it by the Company's weighted average cost of
capital. The result of these calculations is compared
with the present value of the base year's capitalized net
income to determine if shareholder value exceeded
calculated shareholder expectations. The sum of the
performance objectives so established for the various
subsidiaries is higher than
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calculated shareholder expectation for the Company as a
whole, as calculated under this model. The level of
performance so determined represents the minimum level of
performance which must be achieved for payment of long
term incentive compensation. The Sub-Committee further
establishes a maximum level of shareholder value creation
for which incentive compensation will be paid, and the
maximum level is ratified by the Performance Compensation
Committee. Performance above that target level creates
additional value for shareholders but does not result in
additional payments to executive officers.
The long term component of the Program affords executives
the opportunity to become significant shareholders in the
Company, thereby aligning the interests of shareholders
and executives. At the commencement of each three-year
cycle a performance opportunity for each participant is
established. That opportunity is equal to 50% of base
salary for members of the Office of the President; 45% of
base salary in the case of a chief executive officer of a
subsidiary; 30% of base salary for corporate or
subsidiary senior executives; and 20% of base salary for
all other executive participants. That opportunity is
divided by the preceding year's average share price of
the Company's common stock to determine the tentative
award in shares of common stock. At the conclusion of
the performance cycle the extent to which the financial
performance of the Company exceeded the calculated
expectations of shareholders is determined. To the
extent that calculated shareholder expectations were
exceeded, payouts are made under the Program, some of
which may be required to be deferred. The range of award
can be from 0 to 200% of the opportunity established for
each executive at the outset of the cycle.
Long term performance share compensation is payable at
the end of the three-year cycle (but not sooner than
forty days after the end of the cycle) in the form of
shares of common stock. Payment of long term performance
compensation is contingent upon a participant's continued
employment throughout the three-year period to which the
compensation relates. All or a portion of long term
performance compensation earned may be deferred by the
employee. All earned compensation above the 100% target
achievement at the end of each cycle must be deferred
until the later of age 62 or retirement and is subject to
forfeiture in the event the employee voluntarily
terminates employment within three years of the end of
the cycle.
During the 1993/1995 cycle the financial performance of
the Company was below the performance targets for the
Program's minimum payout; therefore no amounts were
earned or paid to the executive officers of the Company
for the 1993/1995 cycle.
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* * *
Section 162(m) of the Internal Revenue Code limits tax deductibility of
certain executive compensation in excess of $1 million per year unless
certain requirements are met. The Program is designed to meet these
requirements. The policy of the Performance Compensation Committee related
to these requirements is to maintain a compensation program which maximizes
the creation of long term shareholder value. The Committee's present
intention is to comply with the requirements of Section 162(m) except in
those limited cases where the Committee believes shareholder interests are
best served by another approach.
Respectfully submitted to the Company's shareholders by the Compensation
Committee and the Performance Compensation Committee of the Board of
Directors.
BY: COMPENSATION COMMITTEE BY: PERFORMANCE COMPENSATION COMMITTEE
Peter F. Coffaro Peter F. Coffaro
Edward S. Davis (Chairman) Edward S. Davis
John C. Hancock John C. Hancock
Daniel A. Hillenbrand Daniel A. Hillenbrand (Chairman)
W August Hillenbrand
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Peter F. Coffaro, Edward S. Davis, John C. Hancock, Daniel A.
Hillenbrand and W August Hillenbrand served on the Compensation Committee
during 1995, and Peter F. Coffaro, Edward S. Davis, John C. Hancock and
Daniel A. Hillenbrand served on the Performance Compensation Committee during
1995.
Daniel A. Hillenbrand, Chief Executive Officer of the Company until
April 11, 1989, and currently Chairman of the Board of the Company, serves on
both the Compensation Committee and the Performance Compensation Committee of
the Company. W August Hillenbrand, President and Chief Executive Officer of
the Company, serves on the Compensation Committee.
Edward S. Davis, who is Chairman of the Compensation Committee and a
member of the Performance Compensation Committee, is a partner in the law
firm of Hughes Hubbard & Reed. The Company retains Hughes Hubbard & Reed as
legal counsel.
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COMPANY STOCK PERFORMANCE
The following graph compares the cumulative total return for Hillenbrand
common shares of the Company with the S & P 500 Index and S & P Manufacturing
(Diversified Industrial) Index:
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG HILLENBRAND INDUSTRIES, S&P 500 AND
S&P MANUFACTURING (DIVERSIFIED INDUSTRIAL)
BASE = NOVEMBER 1990
Date Hillenbrand S&P 500 S&P Mfg
1990 $100 $100 $100
1991 $164 $120 $119
1992 $231 $143 $139
1993 $234 $157 $167
1994 $171 $159 $171
1995 $191 $217 $250
Assumes $100 invested in November 1990. Total return assumes that all
dividends are reinvested when received.
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RETIREMENT PLANS
SAVINGS PLAN
Under the Hillenbrand Industries, Inc., Savings Plan (the "Savings
Plan"), officers of the Company and other employees may contribute through
payroll deduction up to 15 percent of their base salary on a pre-tax basis,
subject to certain maximum amounts established by the Internal Revenue
Service, pursuant to Section 401(k) of the Internal Revenue Code, into a
choice of investment vehicles. The Company makes matching contributions of
40 percent of the first five percent of pre-tax contributions (prior to
January 1, 1992, the Company contributed 25 percent of the first four percent
of pre-tax contributions) and such amounts become fully vested after five
years of service with the Company and its subsidiaries.
PENSION PLAN
The Hillenbrand Industries, Inc. Pension Plan (the "Pension Plan")
covers officers of the Company and other employees. Directors of the Company
who are not employees of the Company or one of its subsidiaries are not
eligible to participate in the Pension Plan. Contributions to the Pension
Plan by the Company are made on an actuarial basis, and no specific
contributions are determined or set aside for any individual.
Employees, including officers of the Company, who retire under the
Pension Plan receive fixed benefits calculated by means of a formula that
takes into account the highest average annual base salary earned over five
consecutive years and the employees' years of service. The following table
shows approximate representative pension benefits based on a single life
annuity calculation for the compensation and years of service indicated:
APPROXIMATE ANNUAL PENSION UPON RETIREMENT AT AGE 65
<TABLE>
<CAPTION>
HIGHEST AVERAGE BASE
SALARY FOR ANY PERIOD 5 YEARS 10 YEARS 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS 40 YEARS
OF 5 CONSECUTIVE YEARS OF SERVICE OF SERVICE OF SERVICE OF SERVICE OF SERVICE OF SERVICE OF SERVICE OF SERVICE
- ---------------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 100,000 6,000 12,000 19,000 25,000 31,000 37,000 44,000 50,000
$ 200,000 14,000 28,000 43,000 57,000 71,000 85,000 100,000 114,000
$ 300,000 22,000 44,000 67,000 89,000 111,000 133,000 156,000 178,000
$ 400,000 30,000 60,000 91,000 121,000 151,000 181,000 212,000 242,000
$ 500,000 38,000 76,000 115,000 153,000 191,000 229,000 268,000 306,000
$ 600,000 46,000 92,000 139,000 185,000 231,000 277,000 324,000 370,000
$ 700,000 54,000 108,000 163,000 217,000 271,000 325,000 380,000 434,000
$ 800,000 62,000 124,000 187,000 249,000 311,000 373,000 436,000 498,000
$ 900,000 70,000 140,000 211,000 281,000 351,000 421,000 492,000 562,000
$ 1,000,000 78,000 156,000 235,000 313,000 391,000 469,000 548,000 626,000
</TABLE>
The credited years of service under the Pension Plan and the 1995
calendar year base salaries for the officers named in the table are as
follows: W August Hillenbrand - 35 years, $659,850; Lonnie M. Smith - 19
years, $515,500; Tom E. Brewer - 13 years, $294,000; Mark R. Lindenmeyer - 9
years, $183,000; and James G. Thorne - 2 years, $167,500.
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The Internal Revenue Code limits the amount of benefits which may be
paid under a qualified pension plan, such as the Company's Pension Plan. In
order to be able to pay the full benefits which are earned as described in
the paragraph and table above, the Company has established a non-qualified,
unfunded pension plan to pay the amounts which could not otherwise be paid
because of the limitations established by the Internal Revenue Code. The
Pension Plan is not subject to deductions for Social Security or other offset
amounts.
COST OF SOLICITATION
The entire cost of solicitation of proxies by the Board of Directors
will be borne by the Company. In addition to the use of the mails, proxies
may be solicited by personal interview, facsimile, telephone and telegram by
directors, officers and employees of the Company. The Company expects to
reimburse brokers or other persons for their reasonable out-of-pocket
expenses in forwarding proxy material to beneficial owners.
SHAREHOLDER PROPOSALS
Any proposal by a shareholder which is to be presented at the annual
meeting to be held in 1997 must be received at the Company's principal
executive offices in Batesville, Indiana, not later than December 30, 1996,
in order to be included in the proxy statement and form of proxy relating to
that meeting.
Pursuant to the Code of By-laws of the Company, any proposal by a
shareholder may not be presented at the annual meeting to be held in 1997
unless it is delivered to or mailed and received by the Secretary at the
Company's principal offices in Batesville, Indiana, not later than 100 days
prior to the anniversary of the April 9, 1996 annual meeting. If the date of
the annual meeting to be held in 1997 is more than 30 days after such
anniversary date, such notice will also be timely if received by the
Secretary by the later of 100 days prior to the forthcoming 1997 annual
meeting date and the close of business 10 days following the date on which
the Company first makes public disclosure of the 1997 annual meeting date.
INCORPORATION BY REFERENCE
Notwithstanding anything to the contrary set forth in any of the
Company's previous or future filings under the Securities Act of 1933, as
amended, or the Securities Exchange Act of 1934, as amended, that
incorporates this Proxy Statement by reference, the Compensation Committees'
Report and the line graph Comparison of Five Year Cumulative Total Return
shall not be incorporated by reference into any such filings.
Mark R. Lindenmeyer
Secretary
March 1, 1996
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HILLENBRAND INDUSTRIES, INC.
Proxy for Annual Meeting Of Shareholders To Be Held April 9, 1996
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned appoints Daniel A. Hillenbrand and W August Hillenbrand, or
either of them, with full power of substitution, as proxies to vote all the
shares of the undersigned at the Annual Meeting of Shareholders of
Hillenbrand Industries, Inc. (the "Company") to be held at the Sherman
House in Batesville, Indiana 47006, on April 9, 1996 at 10:00 a.m., local
time, and at any adjournments of the meeting, on the following matters:
(1) Election of director nominees John C. Hancock, George M.
Hillenbrand II, John A. Hillenbrand II and Lonnie M. Smith to serve
three year terms as directors.
/ / FOR ALL NOMINEES / / WITHHOLD AUTHORITY
(except as marked to the contrary below)
(INSTRUCTION: To withhold authority for any individual nominee,
write that nominee's name on the line provided below.)
___________________________________
(2) Ratification of the appointment of Price Waterhouse as independent
auditors.
/ / FOR / / AGAINST / / ABSTAIN
(3) In their discretion upon such other business as may properly come
before the meeting or any adjournment thereof.
THIS PROXY MAY BE REVOKED AT ANY TIME BEFORE IT IS EXERCISED.
(continued and to be signed on reverse side)
__________________________________________________________
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED BY THE
UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS GIVEN, THE SHARES WILL BE VOTED
FOR ITEMS 1 AND 2. IF ANY DIRECTOR NOMINEE SHOULD BE UNABLE TO SERVE, THE
SHARES WILL BE VOTED FOR A SUBSTITUTE NOMINEE SELECTED BY THE BOARD OF
DIRECTORS. IF ANY OTHER BUSINESS COMES BEFORE THE MEETING, THE SHARES
REPRESENTED BY THIS PROXY WILL BE VOTED IN THE DISCRETION OF THE PROXY
HOLDERS.
_____________________________
Signature
_____________________________
Signature if held jointly
Please sign name and title exactly
as shown on label on this proxy card.
Dated:____________________, 1996
IMPORTANT: THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY IN THE ENCLOSED
ENVELOPE. WHEN SIGNING AS ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE,
PARTNER, OFFICER OR GUARDIAN, PLEASE GIVE YOUR FULL TITLE. IF SHARES ARE
HELD JOINTLY, ALL HOLDERS MUST SIGN THE PROXY. NO POSTAGE IS REQUIRED IF
MAILED IN THE UNITED STATES.
