UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

ýQuarterly Report Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

For the quarterly period ended March 31, ~~2018~~2019

oTransition Report Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

For the transition period from _____ to _____

Commission File ~~No.~~Number. 001-33794

HILLENBRAND, INC.

(Exact name of registrant as specified in its charter)



Indiana (State of incorporation)		26-1342272 (I.R.S. Employer Identification No.)

One Batesville Boulevard
Batesville, IN		47006
(Address of principal executive offices)		(Zip Code)

(812) 934-7500

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate website, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes ý No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer	ý	Accelerated filer		o	~~Accelerated filer~~Emerging growth company	o
Non-accelerated filer	o	~~(Do not check if a smaller reporting company)~~	Smaller reporting company		o
					~~Emerging growth company~~	o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell ~~Company~~company (as defined in Rule 12b-2 of the Exchange Act). Yes o No ý

The registrant had ~~62,512,606~~62,621,870 shares of common stock, no par value per share, outstanding as of April ~~27, 2018.~~26, 2019.

Table of Contents

HILLENBRAND, INC.

INDEX TO FORM 10-Q



		Page
	PART I — FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)

	Consolidated Statements of Income for the Three and Six Months Ended March 31, ~~2018~~2019 and ~~2017~~2018	2

	Consolidated Statements of Comprehensive Income for the Three and Six Months Ended March 31, ~~2018~~2019 and ~~2017~~2018	3

	Consolidated Balance Sheets at March 31, ~~2018,~~2019, and September 30, ~~2017~~2018	4

	Consolidated Statements of Cash Flow for the Six Months Ended March 31, ~~2018~~2019 and ~~2017~~2018	5

	Consolidated Statements of Shareholders’ Equity for the Three and Six Months Ended March 31, 2019 and 2018	6

	Condensed Notes to Consolidated Financial Statements	68

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2830

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4142

Item 4.	Controls and Procedures	4142

	PART II — OTHER INFORMATION

Item 1.	Legal Proceedings	4142

Item 1A.	Risk Factors	41

~~Item 2.~~	~~Unregistered Sales of Equity Securities and Use of Proceeds~~	42

Item 6.	Exhibits	4243

SIGNATURES

Table of Contents

PART I — FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

Hillenbrand, Inc.

Consolidated Statements of Income (Unaudited)

(in millions, except per share data)


	Three Months Ended March 31,						Six Months Ended March 31,						Three Months Ended March 31,					Six Months Ended March 31,
	2018			2017			2018			2017			2019		2018			2019		2018
Net revenue	$	452.2		$	395.3		$	849.4		$	751.4		$	464.6	$	452.2		$	874.9	$	849.4
Cost of goods sold	283.5			246.7			534.4			476.8			303.7		283.6			567.0		534.6
Gross profit	168.7			148.6			315.0			274.6			160.9		168.6			307.9		314.8
Operating expenses	98.3			85.6			187.5			168.4			93.7		98.3			184.4		187.4
Amortization expense	7.5			7.2			15.1			14.4			8.6		7.5			16.4		15.1
Impairment charge	63.4			—			63.4			—			—		63.4			—		63.4
Interest expense	6.0			6.3			12.3			12.4			5.4		6.0			10.9		12.3
Other (expense) income, net	(1.2		)	(0.6		)	(1.6		)	(1.9		)
(Loss) income before income taxes	(7.7		)	48.9			35.1			77.5
Other income (expense), net													0.1		(1.1		)	0.6		(1.5		)
Income (loss) before income taxes													53.3		(7.7		)	96.8		35.1
Income tax expense	13.6			14.9			37.3			21.6			13.8		13.6			28.3		37.3
Consolidated net (loss) income	(21.3		)	34.0			(2.2		)	55.9
Consolidated net income (loss)													39.5		(21.3		)	68.5		(2.2		)
Less: Net income attributable to noncontrolling interests	0.6			0.6			1.6			0.8			1.5		0.6			2.2		1.6
Net (loss) income (1)	$	(21.9	)	$	33.4		$	(3.8	)	$	55.1
Net income (loss) (1)													$	38.0	$	(21.9	)	$	66.3	$	(3.8	)

Net (loss) income (1) — per share of common stock:
Net income (loss) (1) — per share of common stock:
Basic earnings per share	$	(0.34	)	$	0.52		$	(0.06	)	$	0.86		$	0.60	$	(0.34	)	$	1.05	$	(0.06	)
Diluted earnings per share	$	(0.34	)	$	0.52		$	(0.06	)	$	0.86		$	0.60	$	(0.34	)	$	1.05	$	(0.06	)
Weighted average shares outstanding (basic)	63.3			63.9			63.5			63.8			62.9		63.3			62.9		63.5
Weighted average shares outstanding (diluted)	63.3			64.4			63.5			64.3			63.4		63.3			63.4		63.5

Cash dividends declared per share	$	0.2075		$	0.2050		$	0.4150		$	0.4100

(1) Net income (loss) ~~income~~ attributable to Hillenbrand

See Condensed Notes to Consolidated Financial Statements

Table of Contents

Hillenbrand, Inc.

Consolidated Statements of Comprehensive Income (Unaudited)

(in millions)

Three Months Ended
March 31, Six Months Ended
March 31,
2018 2017 2018 2017
Consolidated net (loss) income $ (21.3 ) $ 34.0
$ (2.2 ) $ 55.9
Changes in other comprehensive income (loss), net of tax
Currency translation adjustment 14.7
7.5
21.0
(13.4 )
Pension and postretirement (net of quarter-to-date tax of $0.4 and $2.5 and year-to-date tax of $0.7 and $5.0) 0.7
4.5
1.4
8.9
Change in net unrealized gain on derivative instruments (net of quarter-to-date tax of $0.1 and $0.5 and year-to-date tax of $0.1 and $0.8) 0.5
1.1
0.3
1.5
Total changes in other comprehensive income (loss), net of tax 15.9
13.1
22.7
(3.0 )
Consolidated comprehensive (loss) income (5.4 ) 47.1
20.5
52.9
Less: Comprehensive income attributable to noncontrolling interests 0.5
0.9
1.6
1.0
Comprehensive (loss) income (2) $ (5.9 ) $ 46.2
$ 18.9
$ 51.9



	Three Months Ended March 31,						Six Months Ended March 31,
	2019			2018			2019			2018
Consolidated net income (loss)	$	39.5		$	(21.3	)	$	68.5		$	(2.2	)
Changes in other comprehensive (loss) income, net of tax
Currency translation adjustment	(4.6		)	14.7			(9.5		)	21.0
Pension and postretirement (net of tax of quarter-to-date tax of $0.1 and $0.4 and year-to-date tax of $0.2 and $0.7)	0.3			0.7			0.5			1.4
Change in net unrealized gain (loss) on derivative instruments (net of quarter-to-date tax of $0.9 and $0.1 and year-to-date tax of $2.6 and $0.1)	(3.2		)	0.5			(8.4		)	0.3
Total changes in other comprehensive (loss) income, net of tax	(7.5		)	15.9			(17.4		)	22.7
Consolidated comprehensive income (loss)	32.0			(5.4		)	51.1			20.5
Less: Comprehensive income attributable to noncontrolling interests	1.5			0.5			2.4			1.6
Comprehensive income (loss) (2)	$	30.5		$	(5.9	)	$	48.7		$	18.9

(2) Comprehensive income (loss) ~~income~~ attributable to Hillenbrand

See Condensed Notes to Consolidated Financial Statements

Table of Contents

Hillenbrand, Inc.

Consolidated Balance Sheets (Unaudited)

(in millions)


	March 31, 2018			September 30, 2017			March 31, 2019			September 30, 2018
ASSETS
Current Assets
Cash and cash equivalents	$	68.5		$	66.0		$	58.6		$	56.0
Trade receivables, net	194.8			206.1			199.5			218.5
Receivables from long-term manufacturing contracts	179.3			125.2			164.8			120.3
Inventories	180.6			151.6			183.0			172.5
Prepaid expenses	34.3			28.2			24.1			25.2
Other current assets	23.2			16.5			20.4			18.1
Total current assets	680.7			593.6			650.4			610.6
Property, plant, and equipment, net	146.1			150.4			137.6			142.0
Intangible assets, net	517.8			523.9			477.3			487.3
Goodwill	602.6			647.5			583.0			581.9
Other assets	42.2			41.1			37.2			42.8
Total Assets	$	1,989.4		$	1,956.5		$	1,885.5		$	1,864.6

LIABILITIES
Current Liabilities
Trade accounts payable	$	175.2		$	158.0		$	207.7		$	196.8
Liabilities from long-term manufacturing contracts and advances	165.8			132.3			125.1			125.9
Current portion of long-term debt	0.7			18.8
Accrued compensation	55.8			66.9			55.5			71.9
Other current liabilities	133.3			135.7			117.5			137.1
Total current liabilities	530.8			511.7			505.8			531.7
Long-term debt	478.4			446.9			361.7			344.6
Accrued pension and postretirement healthcare	130.0			129.6			114.6			120.5
Deferred income taxes	62.0			75.7			79.4			76.4
Other long-term liabilities	56.2			26.7			53.9			47.3
Total Liabilities	1,257.4			1,190.6			1,115.4			1,120.5

Commitments and contingencies (Note 14)

SHAREHOLDERS’ EQUITY
Common stock, no par value (63.9 and 63.8 shares issued, 62.7 and 63.1 shares outstanding)	—			—
Common stock, no par value (63.9 and 63.9 shares issued, 62.6 and 62.3 shares outstanding)							—			—
Additional paid-in capital	346.4			349.9			343.1			351.4
Retained earnings	476.9			507.1			571.1			531.0
Treasury stock (1.2 and 0.7 shares)	(48.0		)	(24.4		)
Treasury stock (1.3 and 1.6 shares)							(55.6		)	(67.1		)
Accumulated other comprehensive loss	(58.5		)	(81.2		)	(101.8		)	(84.2		)
Hillenbrand Shareholders’ Equity	716.8			751.4			756.8			731.1
Noncontrolling interests	15.2			14.5			13.3			13.0
Total Shareholders’ Equity	732.0			765.9			770.1			744.1

Total Liabilities and Equity	$	1,989.4		$	1,956.5		$	1,885.5		$	1,864.6

See Condensed Notes to Consolidated Financial Statements

Table of Contents

Hillenbrand, Inc.

Consolidated Statements of Cash ~~Flow~~Flows (Unaudited)

(in millions)



	Six Months Ended March 31,
	2019			2018
Operating Activities
Consolidated net income (loss)	$	68.5		$	(2.2	)
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization	29.2			27.8
Impairment charge	—			63.4
Deferred income taxes	8.7			(10.4		)
Share-based compensation	5.8			6.2
Trade accounts receivable and receivables from long-term manufacturing contracts	(24.8		)	(34.2		)
Inventories	(12.1		)	(25.6		)
Prepaid expenses and other current assets	(0.8		)	(10.7		)
Trade accounts payable	12.7			12.8
Accrued expenses and other current liabilities	(24.6		)	10.3
Income taxes payable	(12.8		)	26.5
Defined benefit plan and postretirement funding	(4.6		)	(5.6		)
Defined benefit plan and postretirement expense	1.7			2.3
Other, net	(0.4		)	0.9
Net cash provided by operating activities	46.5			61.5

Investing Activities
Capital expenditures	(8.3		)	(10.6		)
Acquisition of business, net of cash acquired	(26.2		)	—
Other, net	0.1			0.1
Net cash used in investing activities	(34.4		)	(10.5		)

Financing Activities
Repayments on term loan	—			(148.5		)
Proceeds from revolving credit facilities, net of financing costs	342.0			701.8
Repayments on revolving credit facilities	(323.8		)	(542.8		)
Payments of dividends on common stock	(26.2		)	(26.2		)
Repurchases of common stock	—			(38.9		)
Proceeds from stock option exercises and other	1.4			9.3
Payments for employee taxes on net settlement equity awards	(4.2		)	(4.1		)
Other, net	(0.5		)	(1.0		)
Net cash used in financing activities	(11.3		)	(50.4		)

Effect of exchange rates on cash and cash equivalents	2.1			1.7

Net cash flows	2.9			2.3

Cash, cash equivalents, and restricted cash:
At beginning of period	56.5			66.7
At end of period	$	59.4		$	69.0

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the Consolidated Balance Sheets that sum to the total of the same amounts shown in the Consolidated Statements of Cash Flows:

Six Months Ended
March 31,
2018 2017
Operating Activities

Consolidated net (loss) income $ (2.2 ) $ 55.9
Adjustments to reconcile net (loss) income to cash provided by operating activities:

Depreciation and amortization 27.8
28.6
Impairment charge 63.4
—
Deferred income taxes (10.4 ) 17.3
Share-based compensation 6.2
5.7
Net gain on investments —
(1.0 )
Trade accounts receivable and receivables on long-term manufacturing contracts (34.2 ) (8.3 )
Inventories (25.6 ) 0.1
Prepaid expenses and other current assets (10.7 ) (5.5 )
Trade accounts payable 12.8
0.4
Accrued expenses and other current liabilities 10.3
11.5
Income taxes payable 26.5
(5.7 )
Defined benefit plan and postretirement funding (5.6 ) (85.3 )
Defined benefit plan and postretirement expense 2.3
3.5
Other, net 0.9
2.6
Net cash provided by operating activities 61.5
19.8

Investing Activities

Capital expenditures (10.6 ) (9.1 )
Proceeds from sales of property, plant, and equipment —
2.2
Other, net 0.3
(0.1 )
Net cash used in investing activities (10.3 ) (7.0 )

Financing Activities

Repayments on term loan (148.5 ) (6.7 )
Proceeds from revolving credit facilities, net of financing costs 701.8
551.7
Repayments on revolving credit facilities (542.8 ) (524.8 )
Payments of dividends on common stock (26.2 ) (26.0 )
Repurchases of common stock (38.9 ) (17.0 )
Net proceeds on stock plans 5.2
10.2
Other, net (1.0 ) (0.2 )
Net cash used in financing activities (50.4 ) (12.8 )

Effect of exchange rates on cash and cash equivalents 1.7
(0.6 )

Net cash flows 2.5
(0.6 )

Cash and cash equivalents:

At beginning of period 66.0
52.0
At end of period $ 68.5
$ 51.4



	March 31, 2019		March 31, 2018
Cash and cash equivalents	58.6		68.5
Short-term restricted cash included in other current assets	0.8		0.5
Total cash, cash equivalents, and restricted cash shown in the Consolidated Statements of Cash Flows	$	59.4	$	69.0

See Condensed Notes to Consolidated Financial Statements

Table of Contents

Hillenbrand, Inc.

Consolidated Statements of Shareholders' Equity (Unaudited)

(in millions)



	Three Months Ended March 31, 2019
	Shareholders of Hillenbrand, Inc.
	Common Stock		Additional Paid-in Capital			Retained Earnings			Treasury Stock					Accumulated Other Comprehensive Loss			Noncontrolling Interests			Total
	Shares		Additional Paid-in Capital			Retained Earnings			Shares		Amount			Accumulated Other Comprehensive Loss			Noncontrolling Interests			Total
Balance at December 31, 2018	63.9	—	$	341.7		$	546.3		1.4		$	(59.2	)	$	(94.3	)	$	12.9		$	747.4
Total other comprehensive income (loss), net of tax	—		—			—			—		—			(7.5		)	—			(7.5		)
Net income	—		—			38.0			—		—			—			1.5			39.5
Issuance/retirement of stock for stock awards/options	—		(2.6		)	—			(0.1	)	3.6			—			—			1.0
Share-based compensation	—		3.9			—			—		—			—			—			3.9
Dividends ($0.2100 per share)	—		0.1			(13.2		)	—		—			—			(1.1		)	(14.2		)
Balance at March 31, 2019	63.9		$	343.1		$	571.1		1.3		$	(55.6	)	$	(101.8	)	$	13.3		$	770.1

	Six Months Ended March 31, 2019
	Shareholders of Hillenbrand, Inc.
	Common Stock		Additional Paid-in Capital			Retained Earnings			Treasury Stock					Accumulated Other Comprehensive Loss			Noncontrolling Interests			Total
	Shares		Additional Paid-in Capital			Retained Earnings			Shares		Amount			Accumulated Other Comprehensive Loss			Noncontrolling Interests			Total
Balance at September 30, 2018	63.9		$	351.4		$	531.0		1.6		$	(67.1	)	$	(84.2	)	$	13.0		$	744.1
Total other comprehensive income (loss), net of tax	—		—			—			—		—			(17.6		)	0.2			(17.4		)
Net income	—		—			66.3			—		—			—			2.2			68.5
Issuance/retirement of stock for stock awards/options	—		(14.3		)	—			(0.3	)	11.5			—			—			(2.8		)
Share-based compensation	—		5.8			—			—		—			—			—			5.8
Dividends ($0.4200 per share)	—		0.2			(26.4		)	—		—			—			(2.1		)	(28.3		)
Other	—		—			0.2			—		—			—			—			0.2
Balance at March 31, 2019	63.9		$	343.1		$	571.1		1.3		$	(55.6	)	$	(101.8	)	$	13.3		$	770.1

See Condensed Notes to Consolidated Financial Statements

Table of Contents

Hillenbrand, Inc.

Consolidated Statements of Shareholders' Equity (Unaudited)

(in millions)



	Three Months Ended March 31, 2018
	Shareholders of Hillenbrand, Inc.
	Common Stock	Additional Paid-in Capital			Retained Earnings			Treasury Stock					Accumulated Other Comprehensive Loss			Noncontrolling Interests			Total
	Shares	Additional Paid-in Capital			Retained Earnings			Shares		Amount			Accumulated Other Comprehensive Loss			Noncontrolling Interests			Total
Balance at December 31, 2017	63.9	$	344.1		$	512.0		0.8		$	(28.7	)	$	(74.5	)	$	15.6		$	768.5
Total other comprehensive income (loss), net of tax	—	—			—			—		—			16.0			(0.1		)	15.9
Net (loss) income	—	—			(21.9		)	—		—			—			0.6			(21.3		)
Issuance/retirement of stock for stock awards/options	—	(1.8		)	—			(0.1	)	4.4			—			—			2.6
Share-based compensation	—	3.9			—			—		—			—			—			3.9
Purchases of common stock	—	—			—			0.5		(23.7		)	—			—			(23.7		)
Dividends ($0.2075 per share)	—	0.2			(13.2		)	—		—			—			(0.9		)	(13.9		)
Balance at March 31, 2018	63.9	$	346.4		$	476.9		1.2		$	(48.0	)	$	(58.5	)	$	15.2		$	732.0

	Six Months Ended March 31, 2018
	Shareholders of Hillenbrand, Inc.
	Common Stock	Additional Paid-in Capital			Retained Earnings			Treasury Stock					Accumulated Other Comprehensive Loss			Noncontrolling Interests			Total
	Shares	Additional Paid-in Capital			Retained Earnings			Shares		Amount			Accumulated Other Comprehensive Loss			Noncontrolling Interests			Total
Balance at September 30, 2017	63.8	$	349.9		$	507.1		0.7		$	(24.4	)	$	(81.2	)	$	14.5		$	765.9
Total other comprehensive income (loss), net of tax	—	—			—			—		—			22.7			—			22.7
Net (loss) income	—	—			(3.8		)	—		—			—			1.6			(2.2		)
Issuance/retirement of stock for stock awards/options	0.1	(10.1		)	—			(0.4	)	15.3			—			—			5.2
Share-based compensation	—	6.2			—			—		—			—			—			6.2
Purchases of common stock	—	—			—			0.9		(38.9		)	—			—			(38.9		)
Dividends ($0.4150 per share)	—	0.4			(26.4		)	—		—			—			(0.9		)	(26.9		)
Balance at March 31, 2018	63.9	$	346.4		$	476.9		1.2		$	(48.0	)	$	(58.5	)	$	15.2		$	732.0

See Condensed Notes to Consolidated Financial Statements

Table of Contents

Hillenbrand, Inc.

Condensed Notes to Consolidated Financial Statements (Unaudited)

(in millions, except share and per share ~~data)~~data)


1.	Background and Basis of Presentation

Hillenbrand, Inc. (“Hillenbrand”) is a global diversified industrial company with multiple ~~market-leading~~leading brands that serve a wide variety of industries ~~across~~around the ~~globe.~~world. We strive to provide superior return for our shareholders, exceptional value for our customers, ~~and~~ great professional opportunities for our employees, and to be responsible to our communities through deployment of the Hillenbrand Operating Model (“HOM”). The HOM is a consistent and repeatable framework designed to produce sustainable and predictable results. The HOM describes our mission, vision, values, and mindset as leaders; applies our management practices in Strategy Management, Segmentation, Lean, Talent Development, and Acquisitions; and prescribes three steps (Understand, Focus, and Grow) designed to make our businesses both bigger and better. Our goal is to continue developing Hillenbrand as a world-class global diversified industrial company through the deployment of the HOM. Hillenbrand’s portfolio is composed of two business segments: the Process Equipment Group and Batesville^®. The Process Equipment Group businesses design, develop, manufacture, and service highly engineered industrial equipment around the world. Batesville is a recognized leader in the ~~North American~~ death care ~~industry.~~industry in North America. “Hillenbrand,” “the Company,” “we,” “us,” “our,” and similar words refer to Hillenbrand and its subsidiaries unless context otherwise requires.

The accompanying unaudited consolidated financial statements include the accounts of Hillenbrand and its subsidiaries. They also include two subsidiaries where the Company’s ownership percentage is less than 100%. The Company’s fiscal year ends on September 30. Unless otherwise stated, references to years relate to fiscal years.

These unaudited consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial statements and therefore do not include all information required in accordance with accounting principles generally accepted in the United States (“GAAP”). The unaudited consolidated financial statements have been prepared on the same basis as, and should be read in conjunction with, the audited consolidated financial statements and notes thereto included in our latest Annual Report on Form 10-K for the year ended September 30, ~~2017,~~2018, as filed with the SEC. The September 30, ~~2017~~2018 Consolidated Balance Sheet included in this Form 10-Q was derived from audited consolidated financial statements, but does not include all disclosures required by GAAP for a year-end balance sheet included in Form 10-K. In the opinion of management, these financial statements reflect all adjustments necessary to present a fair statement of the Company’s consolidated financial position and the consolidated results of operations and cash flow as of the dates and for the periods presented.

The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of ~~certain~~ assets and liabilities and ~~disclosures~~disclosure of contingent assets and liabilities at the date of the ~~consolidated~~ financial statements and the reported amounts of ~~revenue~~revenues and ~~expense~~expenses during the period. Actual results could differ from those estimates. Examples of such estimates include, but are not limited to, revenue recognition under the percentage-of-completion method and the establishment of reserves related to customer rebates, doubtful accounts, warranties, early-pay discounts, inventories, income taxes, litigation, self-insurance, and progress toward achievement of performance criteria under incentive compensation programs.


2.	Summary of Significant Accounting Policies

The significant accounting policies used in preparing these consolidated financial statements are consistent with the accounting policies described in our Annual Report on Form 10-K for ~~2017,~~2018, except as described below.

~~Income taxes~~

On December 22, 2017, the U.S. government enacted tax legislation referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act makes broad and complex changes to the U.S. tax code that will impact our fiscal year ended September 30, 2018 including, but not limited to (a) reducing the U.S. federal corporate tax rate, (b) requiring a one-time transition tax on certain unrepatriated earnings of foreign subsidiaries (“Transition Tax”), and (c) accelerating expensing of certain capital expenditures. The Tax Act reduced the federal corporate tax rate from 35% to 21%. The Internal Revenue Code stipulates that our fiscal year ending September 30, 2018 will have a blended corporate tax rate of 24.5%, which is based on a proration of the applicable tax rates before and after the effective date of the Tax Act. The statutory tax rate of 21% will apply to future years.

We establish deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Deferred tax assets and liabilities are determined in part based on the differences between the accounting

treatment of tax assets and liabilities under GAAP and the tax basis of assets and liabilities using statutory tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in statutory tax rates on deferred tax assets and liabilities is recognized in net income in the period that includes the enactment date. We continue to assert that the majority of the cash at our foreign subsidiaries represents earnings considered to be permanently reinvested for which deferred taxes have not been provided for in our financial statements, as we do not intend, nor do we foresee a need, to repatriate these funds. However, ~~with the enactment of the Tax Act, we are evaluating our future cash deployment and may change our permanent reinvestment assertion in future periods.~~

We have a variety of deferred income tax assets in numerous tax jurisdictions. The recoverability of these deferred income tax assets is assessed periodically and valuation allowances are recognized if it is determined that it is more likely than not that the benefits will not be realized. When performing this assessment, we consider future taxable income, the reversal of existing temporary differences, and tax planning strategies. We account for accrued interest and penalties related to unrecognized tax benefits in income tax expense.

Recently Adopted Accounting Standards

In ~~January~~August 2017, the FASB issued ASU ~~2017-04,~~2017-12, ~~Simplifying the Test~~Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for ~~Goodwill Impairment.~~Hedging Activities. ASU ~~2017-04 eliminates Step 2 from the goodwill impairment test and modifies the concept of impairment from the condition that exists when the carrying amount of goodwill exceeds its implied fair value~~2017-12 intends to the condition that exists when the carrying amount of a reporting unit exceeds its fair value. We early adopted this standard for fiscal year 2018. See Note 5 of Part I and Item 2, Critical Accounting Estimates, of this Form 10-Q for further information on the impact this adoption had on our consolidated results of operations, financial position, and cash flows.

~~Recently Issued Accounting Standards~~

~~In May 2014, the FASB issued ASU 2014-09,~~ ~~Revenue from Contracts with Customers.~~ ~~ASU 2014-09 requires entities to recognize revenue in a way that depicts the transfer of promised goods or services to customers in~~better align an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The FASB has also issued several updates to ASU 2014-09. The new standard supersedes U.S. GAAP guidance on revenue recognition and requires the use of more estimates and judgments than the present standards. It also requires significant disclosures sufficient to enable users to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers, including qualitative and quantitative disclosures about contracts with customers, significant judgments and changes in judgments, and assets recognized from the costs to obtain or fulfill a contract. ASU 2014-09 will be effective for our fiscal year beginning October 1, 2018, including interim periods within that reporting period, and allows for either full retrospective adoption or modified retrospective adoption.

~~We continue to evaluate the impact that ASU 2014-09 will have on our consolidated financial statements~~entity's risk management activities and financial reporting ~~processes, including evaluating new disclosure requirements. Based on our initial assessment, which included a comparison~~for hedging relationships through changes to both the designation and measurement guidance for qualifying hedging relationships and the presentation of ~~our existing~~hedge results. The amendments expand and refine hedge accounting ~~policies~~for both nonfinancial and ~~practices against~~financial risk components, and align the ~~new standard~~recognition and a review of contracts active during and through the end of 2016, we believe the key areas of consideration for our financial statements include percentage-of-completion accounting, separate performance obligations, and related revenue recognized over time. Based on our initial assessment, we also expect to adopt this new standard using the modified retrospective method, which will result in a cumulative effect adjustment aspresentation of the ~~date~~effects of ~~adoption,~~the hedging instrument and ~~we currently do not expect~~ the ~~adoption of ASU 2014-09 to have a material impact on our consolidated~~hedged item in the financial statements.

In ~~February 2016,~~addition, this ASU makes certain targeted improvements to simplify the ~~FASB issued~~application of hedge accounting guidance. ASU ~~2016-02,~~ ~~Leases~~. ASU 2016-02 requires lessees to recognize a right of use asset and related lease liability for leases that have terms of more than twelve months. For income statement purposes, the FASB retained a dual model, requiring leases to be classified as either operating or finance, with the classifications based on criteria that are similar to those applied under the current lease guidance, without the explicit bright lines. ASU 2016-02 will be effective2017-12 was early adopted for our fiscal year beginning on October 1, ~~2019, with early~~2018 on a prospective basis. The adoption ~~permitted. We are currently evaluating the~~of this standard did not have a significant impact ~~that ASU 2016-02 will have~~ on our consolidated financial statements.

~~In June 2016, the FASB issued ASU 2016-13,~~ ~~Measurement of Credit Losses on Financial Statements.~~ ASU 2016-13 replaces the current incurred loss impairment model with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to determine credit loss estimates. ASU 2016-13 will be effective for our fiscal year beginning on October 1, 2020, with early adoption permitted for our fiscal year beginning October 1, 2019. We are currently evaluating the impact that ASU 2016-13 will have on our consolidated financial statements.

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows: Restricted Cash. ASU 2016-18 requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described

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as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. ASU ~~2016-17 will be~~2016-18 became effective and was adopted for our fiscal year beginning on October 1, ~~2018, with early adoption permitted. We expect the~~2018. The adoption of ASU 2016-18 ~~to have~~had a financial statement presentation and disclosure impact only.

In January 2017, the FASB issued ASU 2017-01, Clarifying the Definition of a Business. ASU 2017-01 assists entities in determining whether a transaction involves an asset or a business. Specifically, it states that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or group of similar identifiable assets, the set is not a business. If this initial test is not met, a set cannot be considered a business unless it includes an input and a substantive process that together significantly contribute to the ability to create output. ASU 2017-01 ~~will be~~became effective and was adopted for our fiscal year beginning on October 1, ~~2018, with early~~2018. The adoption ~~permitted. We are currently evaluating~~of ASU 2017-01 ~~but do~~did not ~~expect it to~~ have a significant impact on our consolidated financial statements.

In March 2017, the FASB issued ASU 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. ASU 2017-07 states that an employer must report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period and present the other components of net benefit cost (as defined in paragraphs 715-30-35-4 and 715-60-35-9) in the income statement separately from the service cost component and outside a subtotal of income from operations (if one is presented). In addition, ASU 2017-07 limits the capitalization of compensation costs to the service cost component only (if capitalization is appropriate). ASU 2017-07 ~~will be~~became effective and was adopted for our fiscal year beginning on October 1, 2018. On the Consolidated Statements of Income, the adoption of this standard resulted in the reclassification of $0.1 credit from Cost of goods sold to Other income (expense), net, for the three months ended March 31, 2018, ~~with early adoption permitted. We are currently evaluating~~and $0.2 credit from Cost of goods sold and $0.1 from Operating expenses to Other income (expense), net, for the ~~impact that ASU 2017-07 will have on our consolidated financial statements.~~six months ended March 31, 2018.

In May 2017, the FASB issued ASU 2017-09, Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting. ASU 2017-09 clarifies when changes to the terms or conditions of a share-based payment award must be accounted for as modifications (in accordance with Topic 718). The new guidance will provide relief to entities that make non-substantive changes to share-based payment awards. ASU 2017-09 ~~will be~~became effective and was adopted for our fiscal year beginning on October 1, ~~2018, with early~~2018. The adoption ~~permitted. The amendment would be applied prospectively to an award modified on or after the adoption date. We do not expect~~of ASU 2017-09 todid not have a significant impact on our consolidated financial statements.

~~In August 2017,~~Beginning in 2014, the FASB issued ASU ~~2017-12,~~No. 2014-09, ~~Derivatives~~Revenue from Contracts with Customers (“ASC 606”), plus a number of related ASUs designed to clarify and ~~Hedging (Topic 815): Targeted Improvements~~interpret ASC 606. The new standard requires entities to ~~Accounting~~recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for ~~Hedging Activities.~~ ~~ASU 2017-12 intends to better align an entity's risk management activities and financial reporting for hedging relationships through changes to both the designation and measurement~~those goods or services. The new standard supersedes U.S. GAAP guidance ~~for qualifying hedging relationships and the presentation of hedge results. The amendments expand and refine hedge accounting for both nonfinancial and financial risk components, and align the~~on revenue recognition and ~~presentation~~requires the use of more estimates than the previously effective standards. It also requires significant disclosures sufficient to enable users to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers, including qualitative and quantitative disclosures about contracts with customers, significant judgments and changes in judgments, and assets recognized from the costs to obtain or fulfill a contract. The new standard became effective for our fiscal year beginning on October 1, 2018 and was adopted on a modified retrospective basis. The Company elected the practical expedient and only evaluated contracts for which substantially all revenue had not been recognized under ASC Topic 605, with the cumulative effect of the new guidance recorded as of the date of initial application.

The primary changes from the adoption of ASC 606 resulted from certain performance obligations that were previously recognized at a point in time that are now recognized over time. The cumulative effect of the changes made to the Consolidated Balance Sheet as of October 1, 2018 for the adoption of ASC 606 was as follows:

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	Balance at September 30, 2018		Adjustments due to ASC 606			Balance at October 1, 2018
Assets
Receivables from long-term manufacturing contracts	$	120.3	$	1.9		$	122.2
Inventories	172.5		(1.6		)	170.9

Liabilities
Deferred income taxes	$	76.4	$	0.1		$	76.5

Shareholders’ Equity
Retained earnings	$	531.0	$	0.2		$	531.2

The following tables summarize the impacts of adopting ASC 606 on the Company’s consolidated financial statements as of and for the three and six months ended March 31, 2019.

Consolidated Statements of Income:



	Three Months Ended March 31, 2019							Six Months Ended March 31, 2019
	As Reported		Adjustments Due to ASC 606			Balances without Adoption		As Reported		Adjustments Due to ASC 606			Balances without Adoption
Net revenue	$	464.6	$	(0.1	)	$	464.5	$	874.9	$	(1.1	)	$	873.8
Cost of goods sold	303.7		(0.1		)	303.6		567.0		(1.0		)	566.0
Gross profit	160.9		—			160.9		307.9		(0.1		)	307.8
Income before income taxes	53.3		—			53.3		96.8		(0.1		)	96.7
Consolidated net income	39.5		—			39.5		68.5		(0.1		)	68.4

Consolidated Balance Sheet:



	March 31, 2019
	As Reported		Adjustments Due to ASC 606			Balances without Adoption
Assets
Receivables from long-term manufacturing contracts	$	164.8	$	(3.0	)	$	161.8
Inventories	183.0		2.7			185.7

Liabilities
Deferred income taxes	$	79.4	$	(0.1	)	$	79.3

Shareholders’ Equity
Retained earnings	$	571.1	$	(0.2	)	$	570.9

The Company has elected the following as a result of adopting the new standard on revenue recognition:

Hillenbrand elected not to adjust the promised amount of consideration for the effects of the ~~hedging instrument~~time value of money for contracts in which the anticipated period between when Hillenbrand transfers the goods or services to the customer and when the ~~hedged item in~~customer pays is equal to one year or less.

Hillenbrand elected to account for shipping and handling activities that occur after the ~~financial statements.~~ customer has obtained control of a good as fulfillment activities rather than as a promised service.

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Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, and that are collected by the Company from a customer, are excluded from revenue.

Recently Issued Accounting Standards

In ~~addition, this~~February 2016, the FASB issued ASU ~~makes certain targeted improvements~~2016-02, Leases. ASU 2016-02 requires lessees to ~~simplify~~recognize a right of use asset and related lease liability for leases that have terms of more than twelve months. For income statement purposes, the ~~application of hedge accounting guidance.~~FASB retained a dual model, requiring leases to be classified as either operating or finance, with the classifications based on criteria that are similar to those applied under the current lease guidance, without the explicit bright lines. ASU ~~2017-12~~2016-02 will be effective for our fiscal year beginning on October 1, ~~2019, with early adoption permitted. The amendment would be applied to hedging relationships existing on the date of adoption~~2019. We have developed an implementation plan and ~~the effect of adoption would be reflected as of the beginning of the fiscal year of adoption (that is, the initial application date). We~~we are currently ~~evaluating~~gathering data to further assess the impact that ASU ~~2017-12~~2016-02 will have on our consolidated financial statements. The adoption is anticipated to have a significant impact on assets and liabilities within our Consolidated Balance Sheets due to the recognition of right-of-use assets and corresponding lease liabilities.

In ~~February 2018,~~June 2016, the FASB issued ASU ~~2018-02,~~2016-13, ~~Reclassification~~Measurement of ~~Certain Tax Effects from Accumulated Other Comprehensive Income~~Credit Losses on Financial Statements.. ASU ~~2018-02 allows~~2016-13 replaces the current incurred loss impairment model with a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Act. The amendments in this ASU also require certain disclosures about stranded tax effects. The amendments eliminate the stranded tax effects resulting from the Tax Cutsmethodology that reflects expected credit losses and Jobs Act and will improve the usefulness of information reported to financial statement users. However, because the amendments only relate to the reclassification of the income tax effects of the Tax Cuts and Jobs Act, the underlying guidance that requires ~~that the effect~~consideration of a ~~change in tax laws or rates be included in income from continuing operations is not affected.~~broader range of reasonable and supportable information to determine credit loss estimates. ASU ~~2018-02~~2016-13 will be effective for our fiscal year beginning on October 1, ~~2019,~~2020, with early adoption ~~permitted.~~permitted for our fiscal year beginning October 1, 2019. We are currently evaluating the impact that ASU ~~2018-02~~2016-13 will have on our consolidated financial statements.


3.	Revenue Recognition

We adopted ASC 606, Revenue from Contracts with Customers, on October 1, 2018. As a result, we have changed our accounting policy for revenue recognition as detailed below.

Net revenue includes gross revenue less sales discounts, customer rebates, sales incentives, and product returns, all of which require us to make estimates for the portion of these allowances that have yet to be credited or paid to our customers. We estimate these allowances using the expected value method, which is based upon historical rates and projections of customer purchases toward contractual rebate thresholds.

Performance Obligations & Contract Estimates

The Process Equipment Group designs, engineers, manufactures, markets, and services differentiated process and material handling equipment and systems for a wide variety of industries. A large portion of our revenue across the Process Equipment Group is derived from manufactured equipment, which may be standard, customized to meet customer specifications, or turnkey.

Our contracts with customers in the Process Equipment Group segment often include multiple performance obligations. Performance obligations are promises in a contract to transfer a distinct good or service to the customer, and are the basis for determining how revenue is recognized. For instance, a contract may include obligations to deliver equipment, installation services, and spare parts. We frequently have contracts for which the equipment and the installation services, as well as highly engineered or specialized spare parts, are all considered a single performance obligation, as in these instances the installation services and/or spare parts are not separately identifiable. However, due to the varying nature of equipment and contracts across the Process Equipment Group, we also have contracts where the installation services and/or spare parts are deemed to be separately identifiable and are therefore deemed to be distinct performance obligations.

The timing of revenue recognition for each performance obligation is either over time or at a point in time. We recognize revenue over time for contracts that have an enforceable right to collect payment for performance completed to-date upon customer cancellation and provide one or more of the following: (i) service over a period of time, (ii) highly customized equipment, or (iii) parts which are highly engineered and have no alternative use. Revenue generated from standard equipment and highly customized equipment or parts contracts without an enforceable right to payment for performance completed to-date, as well as non-specialized parts sales and sales of death care products, is recognized at a point in time.

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We use the input method of “cost-to-cost” to recognize revenue over time. Accounting for these contracts involves management judgment in estimating total contract revenue and cost. Contract revenues are largely determined by negotiated contract prices and quantities, modified by our assumptions regarding contract options, change orders, and incentive and award provisions associated with technical performance clauses. Contract costs are incurred over longer periods of time and, accordingly, the estimation of these costs requires judgment. We measure progress based on costs incurred to date relative to total estimated cost at completion. Incurred cost represents work performed, which corresponds with, and we believe thereby best depicts, the transfer of control to the customer. Contract costs include labor, material, and certain overhead expenses. Cost estimates are based on various assumptions to project the outcome of future events, including labor productivity and availability, the complexity of the work to be performed, the cost of materials, and the performance of subcontractors. Significant factors that influence these estimates include inflationary trends, technical and schedule risk, internal and subcontractor performance trends, business volume assumptions, asset utilization, and anticipated labor agreements. Revenue and cost estimates are regularly monitored and revised based on changes in circumstances. Anticipated losses on long-term contracts are recognized immediately when such losses become evident. We maintain financial controls over the customer qualification, contract pricing, and estimation processes to reduce the risk of contract losses.

Stand-alone service revenue is recognized either over time proportionately over the period of the underlying contract or as invoiced, depending on the terms of the arrangement. Stand-alone service revenue is not material to the Company.

For the Process Equipment Group and Batesville segment products where revenue is recognized at a point in time, we recognize it when our customers take control of the asset. We define this as the point in time at which the customer has the capability of full beneficial use of the asset as intended per the contract.

Contract balances

In the Process Equipment Group segment, the Company requires an advance deposit based on the terms and conditions of contracts with customers for many of its contracts. Payment terms generally require an upfront payment at the start of the contract, and the remaining payments during the contract or within a certain number of days of delivery. Typically, revenue is recognized within one year of receiving an advance deposit. For contracts where an advance payment is received greater than one year from expected revenue recognition, or a portion of the payment due extends beyond one year, the Company has determined it does not constitute a significant financing component.

The timing of revenue recognition, billings, and cash collections can result in customer receivables, advance payments, and billings in excess of revenue recognized. Customer receivables include amounts billed and currently due from customers and are included in Trade receivables, net, as well as unbilled amounts (contract assets) which are included in Receivables from long-term manufacturing contracts on our Consolidated Balance Sheets. Amounts are billed in accordance with contractual terms or as work progresses in accordance with contractual terms. Unbilled amounts arise when the timing of billing differs from the timing of revenue recognized, such as when contract provisions require specific milestones to be met before a customer can be billed. Unbilled amounts primarily relate to performance obligations satisfied over time when the cost-to-cost method is used and the revenue recognized exceeds the amount billed to the customer as there is not yet a right to payment in accordance with contractual terms. Unbilled amounts are recorded as a contract asset when the revenue associated with the contract is recognized prior to billing and derecognized when billed in accordance with the terms of the contract. Trade receivables are recorded at face amounts and represent the amounts we believe to be collectible. The Company maintains allowances for doubtful accounts for estimated losses as a result of customers’ inability to make required payments. Management evaluates the aging of the customer receivable balances, the financial condition of its customers, historical trends and the time outstanding of specific balances to estimate the amount of customer receivables that may not be collected in the future, and records the appropriate provision.

Advance payments and billings in excess of revenue recognized are included in Liabilities from long-term manufacturing contracts and advances on our Consolidated Balance Sheets. Advance payments and billings in excess of revenue recognized represent contract liabilities and are recorded when customers remit contractual cash payments in advance of us satisfying performance obligations under contractual arrangements, including those with performance obligations satisfied over time. Billings in excess of revenue recognized primarily relate to performance obligations satisfied over time when the cost-to-cost method is used and revenue cannot yet be recognized as the Company has not completed the corresponding performance obligation. Contract liabilities are derecognized when revenue is recognized and the performance obligation is satisfied.

The balance in Receivables from long-term manufacturing contracts at March 31, 2019 and September 30, 2018 was $164.8 and $120.3. The change was driven by the adoption of ASC 606 ($3.0) and the impact of net revenue recognized prior to billings ($41.5). The balance in the Liabilities from long-term manufacturing contracts and advances at March 31, 2019 and September 30, 2018 was $125.1 and $125.9 and consists primarily of cash payments received or due in advance of satisfying our performance obligations. The revenue recognized for the six months ended March 31, 2019 related to Liabilities from long-term manufacturing

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contracts and advances as of September 30, 2018 was $107.0. During the six months ended March 31, 2019, the adjustments related to performance obligations satisfied in previous periods were immaterial.

Costs incurred to obtain a customer contract are not material to the Company. The Company elected to apply the practical expedient to not capitalize contract costs to obtain contracts with a duration of one year or less, which are expensed as incurred.

Transaction price allocated to the remaining performance obligations

As of March 31, 2019, the aggregate amount of transaction price of remaining performance obligations, which corresponds to backlog as defined in Item 2 of this Form 10-Q, for the Company was $960.5. Approximately 85% of these obligations are expected to be satisfied over the next twelve months, and the remaining performance obligations, primarily within one to three years.

Disaggregation of revenue



	Three Months Ended March 31, 2019						Six Months Ended March 31, 2019
	Process Equipment Group		Batesville		Total		Process Equipment Group		Batesville		Total
Revenue by End Market
Plastics	$	202.2	$	—	$	202.2	$	363.1	$	—	$	363.1
Chemicals	22.9		—		22.9		52.5		—		52.5
Food & Pharmaceuticals	24.4		—		24.4		40.9		—		40.9
Minerals & Mining	22.2		—		22.2		50.2		—		50.2
Water & Wastewater	7.7		—		7.7		17.2		—		17.2
Death Care	—		137.9		137.9		—		266.0		266.0
Other	47.3		—		47.3		85.0		—		85.0
Total	$	326.7	$	137.9	$	464.6	$	608.9	$	266.0	$	874.9



	Three Months Ended March 31, 2019						Six Months Ended March 31, 2019
	Process Equipment Group		Batesville		Total		Process Equipment Group		Batesville		Total
Products and Services
Equipment	$	227.6	$	—	$	227.6	$	411.0	$	—	$	411.0
Parts and Services	99.1		—		99.1		197.9		—		197.9
Death Care	—		137.9		137.9		—		266.0		266.0
Total	$	326.7	$	137.9	$	464.6	$	608.9	$	266.0	$	874.9



	Three Months Ended March 31, 2019						Six Months Ended March 31, 2019
	Process Equipment Group		Batesville		Total		Process Equipment Group		Batesville		Total
Timing of Transfer
Point in Time	$	176.8	$	137.9	$	314.7	$	340.5	$	266.0	$	606.5
Over Time	149.9		—		149.9		268.4		—		268.4
Total	$	326.7	$	137.9	$	464.6	$	608.9	$	266.0	$	874.9

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4.	Business Acquisitions

~~Abel~~

We completed the acquisition of ~~Abel Pumps LP~~Burnaby Machine and ~~Abel GmbH & Co. KG and certain of their affiliates (collectively “Abel”~~Mill Equipment Ltd. (“BM&M”) ~~on October 2, 2015~~in November 2018 for ~~€95~~$26.2 in cash. We ~~utilized borrowings under~~used our ~~former $700.0~~ revolving credit facility ~~and former~~

~~$180.0 term loan~~(the “Facility”) to fund ~~this~~the acquisition. Based in ~~Büchen, Germany, Abel is~~Canada, BM&M provides high-speed gyratory screeners for a globally-recognized leader in positive displacement pumps. Abel specializes in designing, developing, and manufacturing piston and piston diaphragm pumps as well as pumping solutions and in providing related parts and service. This equipment is sold under the ABEL^® ~~Pump Technologybrandinto the power generation, wastewater treatment, mining, general industry, and marine markets.~~variety of industries. The results of ~~Abel are~~BM&M will be reported in ~~our~~the Process Equipment Group ~~segment for the relevant periods.~~

segment. Based on ~~the final~~our purchase price allocation, we recorded ~~goodwill~~$14 of ~~$36 and acquired identifiable intangible assets of $58,~~intangibles, which consisted of $5$10 of customer relationships, $1 of trade names ~~not subject to amortization, $9 of developed technology,~~and $3 of ~~backlog, and $41 of customer relationships.~~backlog. In addition, we recorded ~~$14~~$9 of goodwill and $3 of net tangible assets, primarily working capital. Goodwill is ~~deductible for tax purposes in Germany. Supplemental proforma information has~~ not ~~been provided as the acquisition did not have a material impact on consolidated results of operations.~~

~~Red Valve~~

On February 1, 2016, we completed the acquisition of Red Valve Company, Inc. (“Red Valve”) for $130.4 in cash, net of certain adjustments. We utilized borrowings under our former $700.0 revolving credit facility and former $180.0 term loan to fund this acquisition. Based in Carnegie, Pennsylvania, Red Valve is a global leader in highly-engineered valves designed to operate in the harshest municipal and industrial wastewater environments. Its products support mission critical applications in water/wastewater, power and mining, and other general industrial markets. The results of Red Valve are reported in our Process Equipment Group segment for the relevant periods.

Based on the final purchase price allocation, we recorded goodwill of $59 and acquired identifiable intangible assets of $61, which consisted of $4 of trade names not subject to amortization, $8 of developed technology, $1 of backlog, and $48 of customer relationships. In addition, we recorded $10 of net tangible assets, primarily working capital. Goodwill is deductible for tax purposes. ~~Supplemental proforma information has not been provided as the acquisition did not have a material impact on consolidated results of operations.~~

Both of these acquisitions continue Hillenbrand’s strategy to transform into a world-class global diversified industrial company by increasing our ability to expand into new markets and geographies within the highly attractive flow control space. The fair value ~~of these acquisitions~~ did not ascribe a significant amount to tangible assets, as we often seek to acquire companies with a relatively low physical asset base in order to limit the need to invest significant additional cash post-acquisition.


4.5.	Supplemental Balance Sheet Information


	March 31, 2018		September 30, 2017		March 31, 2019		September 30, 2018
Trade accounts receivable reserves	$	21.7	$	21.6	$	21.0	$	22.2

Accumulated depreciation on property, plant, and equipment	$	317.5	$	311.8	$	310.6	$	303.8

Inventories:
Raw materials and components	$	67.2	$	52.6	$	71.3	$	68.3
Work in process	56.5		55.4		49.5		44.7
Finished goods	56.9		43.6		62.2		59.5
Total inventories	$	180.6	$	151.6	$	183.0	$	172.5

We had restricted cash of ~~$0.5~~$0.8 and ~~$0.8~~$0.5 included in ~~other~~Other current assets in the Consolidated Balance Sheets at March 31, ~~2018~~2019 and at September 30, ~~2017.~~2018.


5.6.	Intangible Assets and Goodwill

Intangible Assets

Intangible assets are stated at the lower of cost or fair value. With the exception of most trade names, intangible assets are amortized on a straight-line basis over periods ranging from three to 21 years, representing the period over which we expect to receive future economic benefits from these assets. We assess the carrying value of most trade names annually, or more often if events or changes in circumstances indicate there may be an impairment.

The following tables summarize the carrying amounts and related accumulated amortization for intangible assets as of March 31, ~~2018~~2019 and September 30, ~~2017.~~

2018.


	March 31, 2018					September 30, 2017					March 31, 2019					September 30, 2018
	Cost		Accumulated Amortization			Cost		Accumulated Amortization			Cost		Accumulated Amortization			Cost		Accumulated Amortization
Finite-lived assets:
Trade names	$	0.2	$	(0.1	)	$	0.2	$	(0.1	)	$	0.2	$	(0.2	)	$	0.2	$	(0.2	)
Customer relationships	477.4		(140.0		)	468.7		(125.9		)	469.2		(158.8		)	464.5		(148.4		)
Technology, including patents	82.8		(43.7		)	80.7		(39.9		)	78.2		(47.3		)	79.6		(45.1		)
Software	57.5		(47.6		)	48.3		(41.5		)	58.5		(50.6		)	58.0		(48.9		)
Other	0.2		(0.2		)	0.2		(0.2		)	2.8		(1.7		)	0.2		(0.2		)
	618.1		(231.6		)	598.1		(207.6		)	608.9		(258.6		)	602.5		(242.8		)
Indefinite-lived assets:
Trade names	131.3		—			133.4		—			127.0		—			127.6		—

Total	$	749.4	$	(231.6	)	$	731.5	$	(207.6	)	$	735.9	$	(258.6	)	$	730.1	$	(242.8	)

~~As a result~~

Table of the required annual impairment assessment performed in the third quarter of 2017, the fair value of trade names was determined to meet or exceed the carrying value for all trade names, resulting in no impairment to trade names.Contents

The net change in intangible assets during the six months ended March 31, ~~2018~~2019 was driven primarily by the acquisition of BM&M in November 2018, which included intangible assets of approximately $14, normal amortization, and foreign currency ~~translation, and an impairment charge~~adjustments. See Note 4 for further detail on ~~certain trade names. See below for an update to~~ the ~~impairment assessment for trade names most directly impacted by domestic coal mining and coal power for which an impairment~~acquisition of $4.6 pre-tax ($3.5 after tax) was recorded during the quarter ended March 31, 2018. As of March 31, 2018 we had approximately $4 of trade name book value remaining in the Process Equipment Group segment most directly impacted by domestic coal mining and coal power. In conjunction with our impairment testing, we also reassessed the useful lives of other definite-lived intangible assets specific to the intangibles impacted by domestic coal mining and coal power, resulting in no significant changes in amortization.BM&M.

Goodwill

Goodwill is not amortized, but is subject to annual impairment tests. Goodwill has been assigned to reporting units. We assess the carrying value of goodwill annually, or more often if events or changes in circumstances indicate there may be impairment. Impairment testing is performed at a reporting unit level.

Process
Equipment
Group
Batesville Total
Balance September 30, 2017 $ 639.2
$ 8.3
$ 647.5
Impairment charge 58.8
—
58.8
Foreign currency adjustments 13.9
—
13.9
Balance March 31, 2018 $ 594.3
$ 8.3
$ 602.6



	Process Equipment Group			Batesville		Total
Balance September 30, 2018	$	573.6		$	8.3	$	581.9
Acquisition	9.1			—		9.1
Foreign currency adjustments	(8.0		)	—		(8.0		)
Balance March 31, 2019	$	574.7		$	8.3	$	583.0

As a result of the required annual impairment assessment performed in the third quarter of 2017, the Company tested the recoverability of its goodwill, and in all reporting units, the fair value of goodwill was determined to exceed the carrying value, resulting in no impairment of goodwill. Since the fair value of each reporting unit exceeded its carrying value, the second step of the goodwill impairment test was not necessary.Impairment

As previously disclosed, the fair value of the reporting unit in the Process Equipment Group segment that is most directly impacted by domestic coal mining and coal power had exceeded its carrying value by less than 10% for three quarters. Testing for impairment of goodwill and indefinite lived assets must be performed annually, or on an interim basis upon the occurrence of triggering events or substantive changes in circumstances that indicate fair value is impaired. In connection with the

preparation of the quarterly financial statements for the second quarter 2018, an interim impairment assessment was performed at ~~the previously mentioned~~a reporting unit in the Process Equipment Group ~~segment.~~segment most directly impacted by domestic coal mining and coal power. During the quarter ended March 31, 2018, published industry reports reduced their forecasts for domestic coal production and consumption. The reporting unit also experienced a larger than expected decline in orders for equipment and parts used in the domestic coal mining and coal power industries. In conjunction with these events and as part of the long-term strategic forecasting process, the Company made the decision to redirect strategic investments for growth, significantly reducing the reporting unit’s terminal growth rate. As a result of this change in expected future cash flows, along with comparable fair value information, management concluded that the reporting unit carrying value exceeded its fair value, resulting in a goodwill impairment charge of ~~$58.8. The pre-impairment goodwill balance for~~$58.8 during the ~~reporting unit was $71.3. A 10% further reduction in the fair value of this reporting unit would indicate a potential additional impairment of $7.4.~~quarter ended March 31, 2018. Intangible asset impairment charges for trade names associated with the same reporting unit were $4.6 pre-tax ($3.5 after tax) based on similar ~~factors.~~factors during the quarter ended March 31, 2018.


6.7.	Financing Agreements


	March 31, 2018		September 30, 2017		March 31, 2019		September 30, 2018
$900 revolving credit facility (excluding outstanding letters of credit)	$	229.7	$	68.0	$	112.6	$	95.7
$180 term loan	—		148.5
$150 senior unsecured notes, net of discount (1)	149.1		148.9		149.5		149.3
$100 Series A Notes (2)	99.6		99.7		99.6		99.6
Other	0.7		0.6		1.7		—
Total debt	479.1		465.7		363.4		344.6
Less: current portion	0.7		18.8
Less: current portion (3)					1.7		—
Total long-term debt	$	478.4	$	446.9	$	361.7	$	344.6

(1) Includes debt issuance costs of $0.5 and $0.6 at March 31, 2018 and September 30, 2017.
(2) Includes debt issuance costs of $0.4 and $0.3 at March 31, 2018 and September 30, 2017.
(1) Includes debt issuance costs of $0.3 and $0.4 at March 31, 2019 and September 30, 2018.					(1) Includes debt issuance costs of $0.3 and $0.4 at March 31, 2019 and September 30, 2018.
(2) Includes debt issuance costs of $0.4 and $0.4 at March 31, 2019 and September 30, 2018.					(2) Includes debt issuance costs of $0.4 and $0.4 at March 31, 2019 and September 30, 2018.
(3) Included in Other current liabilities in the Consolidated Balance Sheets.					(3) Included in Other current liabilities in the Consolidated Balance Sheets.

OnOur private shelf agreement expired in March ~~8, 2018, the Company~~2019. We entered into ~~a Syndicated Letter of Guarantee Facility~~this Private Shelf Agreement (the “L/G Facility Agreement”) by and among the Company and certain of its affiliates, the lenders party thereto, and Commerzbank Finance & Covered Bond S.A., acting as agent. The L/G Facility Agreement replaces the Company’s former Syndicated L/G Facility Agreement dated as of June 3, 2013 and permits the Company and certain of its subsidiaries to request that one or more of the lenders issue up to an aggregate of €150.0 in unsecured letters of credit, bank guarantees or other surety bonds (collectively, the “Guarantees”).

~~The Guarantees carry an annual fee that varies based~~ on ~~the Company’s leverage ratio. The L/G Facility Agreement also provides for a leverage-based commitment fee assessed on the undrawn portion of the facility. The L/G Facility Agreement matures in~~ December 2022, but can be extended or terminated earlier under certain conditions. New deferred financing costs related to the L/G Facility Agreement were $1.0, which along with existing costs of $0.6, are being amortized to interest expense over the term of the agreement.

On December 8, 2017, the Company entered into a Second Amended and Restated Credit Agreement (the “Credit Agreement”), which governs our revolving credit facility (the “Facility”), by and among the Company and certain of its affiliates, the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent. The Credit Agreement amended and extended the Company’s former credit agreement which provided for a revolving credit facility of up to $700.0 in aggregate principal amount and a term loan in an original principal amount of $180.0.

The Credit Agreement increased the maximum principal amount available for borrowing under the Facility from $700.0 to $900.0. In connection with the Credit Agreement, the Company repaid the existing term loan in full with borrowings under the Facility. The aggregate principal amount available for borrowing under the Credit Agreement may be expanded, subject to the approval of the lenders, by an additional $450.0. The Credit Agreement extended the maturity date of the Facility to December 8, 2022. New deferred financing costs related to the Credit Agreement were $2.1, which along with existing costs of $1.0, are being amortized to interest expense over the term of the Facility.

~~On December 8, 2017, the Company and certain of its domestic subsidiaries entered into the fourth amendment to the private shelf agreement~~6, 2012 (as amended, the “Shelf Agreement”), ~~which amended the private shelf agreement dated December 6, 2012, among the Company, the subsidiary guarantors, PGIM, Inc. (f/k/a~~with Prudential Investment Management, Inc. (“Prudential”) and each

Prudential Affiliate (as defined therein)~~, pursuant to which the Company~~ that became a purchaser thereunder, and on December 15, 2014, we issued ~~its~~$100.0 in 4.60% Series A unsecured notes ~~maturing December 15, 2024 (the “Series~~(“Series A Notes”)~~. The amendment conformed certain terms of the Shelf Agreement with those contained in the Credit Agreement.~~ pursuant thereto, which remain outstanding.

The Credit Agreement, the L/G Facility Agreement, and the Shelf Agreement provide the Company with increased flexibility in its financial covenants, specifically: the maximum ratio of Indebtedness to EBITDA (as defined in the agreements, “Leverage Ratio”) of 3.5 to 1.0 allows for the application of cash as a reduction of Indebtedness (subject to certain limitations); the maximum Leverage Ratio resulting from an acquisition in excess of $75.0 is increased to 4.0 to 1.0 for a period of three consecutive quarters following such acquisition; and the minimum ratio of EBITDA (as defined in the agreements) to interest expense is reduced to 3.0 to 1.0. Additionally, the Credit Agreement, the L/G Facility Agreement, and the Shelf Agreement provide the Company with increased flexibility to sell assets and to incur debt at our international subsidiaries.

With respect to the ~~Facility,~~revolving credit facility, as of March 31, ~~2018,~~2019, we had ~~$7.5~~$7.2 in outstanding letters of credit issued and ~~$662.8~~$780.2 of maximum borrowing capacity. ~~$644.3~~$741.6 of this borrowing capacity iswas immediately available based on our ~~most restrictive~~leverage covenant at March 31, 2019, with additional amounts available in the event of a qualifying acquisition. The weighted-average interest rates on borrowings under the Facility were ~~2.03%~~2.73% and ~~1.82%~~2.57% for the three and six months ended March 31, ~~2018,~~2019, and ~~1.44%~~2.03% and ~~1.42%~~1.82% for the same periods in the prior year. The weighted average facility fee was ~~0.15%~~0.12% and ~~0.17%~~0.11% for the three and six months ended March 31, ~~2018,~~2019, and ~~0.23%~~0.15% and 0.17% for the same periods in the prior year. ~~The weighted average interest rate on the Facility’s term loan was 2.60% for 2018 (until the date~~

Table of ~~repayment) and 2.16% and 2.05% for the three and six months ended March 31, 2017.~~Contents

We have interest rate swaps on $50.0 of outstanding borrowings under the Facility in order to manage exposure to our variable interest payments. Additionally, we have cross currency swaps on $55.0 of outstanding borrowings under the Facility to manage currency and interest rate risk exposure on foreign currency denominated debt. The cross currency swaps are not designated as hedging instruments for accounting purposes.

In the normal course of business, the Process Equipment Group provides to certain customers bank guarantees and other credit arrangements in support of performance, warranty, advance payment, and other contractual obligations. This form of trade finance is customary in the industry and, as a result, we maintain adequate capacity to provide the guarantees. As of March 31, ~~2018,~~2019, we had credit arrangements totaling ~~$252.7,~~$300.9, under which ~~$187.4~~$210.6 was utilized, for this purpose. These arrangements include our ~~L/G~~€150.0 Syndicated Letter of Guarantee Facility ~~Agreement~~(as amended, the “LG Facility”) and other ancillary ~~guarantee~~credit facilities.

The ~~Credit Agreement,~~Facility, the ~~L/G~~LG Facility, ~~Agreement,~~ and the ~~Shelf Agreement~~Series A Notes, require us to meet certain conditions including compliance with covenants, absence of default, and continued accuracy of certain representations and warranties. Financial covenants include a maximum ratio of Indebtedness to EBITDA (as defined in the agreements, “Leverage Ratio”) of 3.5 to 1.0 including the application of cash as a reduction of Indebtedness (subject to certain limitations); a maximum Leverage Ratio resulting from an acquisition in excess of $75.0 of 4.0 to 1.0 for a period of three consecutive quarters following such acquisition; and a minimum ratio of EBITDA (as defined in the agreements) to interest expense of 3.0 to 1.0. As of March 31, ~~2018,~~2019, we were in compliance with all covenants.

~~All obligations of the Company arising under the Credit Agreement, our~~The Facility, senior unsecured notes, 4.60% Series A unsecured notes issued under the Shelf Agreement ~~the~~ (“Series A ~~Notes,~~Notes”), and ~~the L/G~~LG Facility ~~Agreement~~ are fully and unconditionally, and jointly and severally, guaranteed by certain of the Company’s domestic subsidiaries.


7.8.	Retirement Benefits

Defined Benefit Plans


	U.S. Pension Benefits						Non-U.S. Pension Benefits						U.S. Pension Benefits						Non-U.S. Pension Benefits
	Three Months Ended March 31,						Three Months Ended March 31,						Three Months Ended March 31,						Three Months Ended March 31,
	2018			2017			2018			2017			2019			2018			2019			2018
Service costs	$	0.7		$	0.9		$	0.4		$	0.4		$	0.6		$	0.7		$	0.4		$	0.4
Interest costs	2.1			2.1			0.3			0.1			2.5			2.1			0.3			0.3
Expected return on plan assets	(3.5		)	(3.4		)	(0.1		)	(0.2		)	(3.3		)	(3.5		)	(0.2		)	(0.1		)
Amortization of unrecognized prior service costs, net	0.1			0.1			—			—			0.1			0.1			—			—
Amortization of net loss	0.8			1.0			0.3			0.7			0.2			0.8			0.3			0.3
Net pension costs	$	0.2		$	0.7		$	0.9		$	1.0		$	0.1		$	0.2		$	0.8		$	0.9

	U.S. Pension Benefits						Non-U.S. Pension Benefits
	Six Months Ended March 31,						Six Months Ended March 31,
	2018			2017			2018			2017
Service costs	$	1.4		$	1.9		$	1.0		$	0.8
Interest costs	4.3			4.3			0.6			0.3
Expected return on plan assets	(7.0		)	(6.7		)	(0.3		)	(0.3		)
Amortization of unrecognized prior service costs, net	0.1			0.2			—			—
Amortization of net loss	1.6			2.1			0.5			0.7
Net pension costs	$	0.4		$	1.8		$	1.8		$	1.5

During the first quarter of 2017, we made an $80.0 contribution to our U.S. defined benefit pension plan (the “Plan”) using cash on hand and funds borrowed from our former $700.0 revolving credit facility. During 2017, we also began implementing a plan to transition our U.S. employees not covered by a collective bargaining agreement, and our employees covered by a collective bargaining agreement at two of our U.S. facilities, from a defined benefit-based model to a defined contribution structure over a three-year sunset period. These changes caused immaterial remeasurements for the Plan for the affected populations.



	U.S. Pension Benefits						Non-U.S. Pension Benefits
	Six Months Ended March 31,						Six Months Ended March 31,
	2019			2018			2019			2018
Service costs	$	1.2		$	1.4		$	0.7		$	1.0
Interest costs	5.1			4.3			0.6			0.6
Expected return on plan assets	(6.6		)	(7.0		)	(0.3		)	(0.3		)
Amortization of unrecognized prior service costs, net	0.1			0.1			—			—
Amortization of net loss	0.4			1.6			0.5			0.5
Net pension costs	$	0.2		$	0.4		$	1.5		$	1.8

Postretirement Healthcare Plans — Net postretirement healthcare costs were ~~$0.1 and $0.1~~not significant for the three and six months ended March 31, ~~2018,~~2019 and ~~$0.1 and $0.2 for the same periods in the prior year.~~2018.

Defined Contribution Plans — Expenses related to our defined contribution plans were $2.9 and ~~$5.6~~$5.7 for the three and six months ended March 31, ~~2018,~~2019 and ~~$3.1~~$2.9 and ~~$5.7~~$5.6 for the same periods in the prior year.


8.9.	Income Taxes

The effective tax rates for the three months ended March 31, 2019 and 2018 were 25.9% and ~~2017 were~~ (176.6)% ~~and 30.5%~~. The negative effective tax rate in the ~~current~~prior year quarter primarily resulted from the nondeductible portion of the previously mentioned impairment charge recorded in the Process Equipment Group segment and the resulting loss before tax for the quarter. ~~Partially offsetting this impact,~~Additionally, the current year increase in the effective tax rate includes the effect of an unfavorable geographic mix of pretax income, partially offset by the full implementation of the Tax Cuts and Jobs Act ~~resulted in a reduced tax rate as compared to the prior year.~~(“Tax Act”).

Table of Contents

The effective tax rates for the six months ended March 31, 2019 and 2018 were 29.2% and ~~2017 were~~ 106.3% ~~and 27.9%~~. The high effective tax rate in the ~~period~~prior year primarily resulted from the nondeductible portion of the previously mentioned impairment charge recorded in the Process Equipment Group ~~segment. Additionally,~~segment and the impact of the Tax Act, ~~resulted in a higher tax rate~~ as ~~compared to the prior year~~ driven by the items discussed below. Additionally, the current year decrease in the effective tax rate is partially driven by the full implementation of the Tax Act, partially offset by the effects of an unfavorable geographic mix of pretax income and an increase in reserve for uncertain tax positions.

The Tax Act was enacted on December 22, 2017. The majority of the provisions of the Tax Act were to be effective for tax years beginning after December 31, 2017 (which corresponds to Hillenbrand’s current fiscal year ending September 30, 2019). As a non-calendar year end company, certain of the provisions of the Tax Act were effective for us for the fiscal year ended September 30, 2018, while others became effective for our current fiscal year ending September 30, 2019. The Tax Act reduced the federal corporate tax rate from 35% to 21%, which became effective on January 1, 2018. The Internal Revenue Code provides that our fiscal year ended September 30, 2018 had a blended U.S. corporate tax rate of 24.5%, which is based on a proration of the applicable tax rates before and after effective date of the Tax Act. The statutory tax rate of 21% applies to fiscal year ending September 30, 2019 and future years. Shortly after the Tax Act was enacted, the SEC staff issued Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act(“ (“SAB 118”), which provides guidance on accounting for the Tax Act’s impact. SAB 118 provides a measurement period, which in no case should extend beyond one year from the Tax Act enactment date, during which a company acting in good faith may complete the accounting for the impacts of the Tax Act under Accounting Standards Codification Topic 740 (“ASC 740”). Per SAB 118, the Company must reflect the income tax effects of the Tax Act in the reporting period in which the accounting under ASC 740 is complete.

In accordance with SAB 118, to the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete, the ~~Company~~company can determine a reasonable estimate for those effects and record a provisional estimate in the financial statements in the first reporting period in which a reasonable estimate can be determined. If a ~~Company~~company cannot determine a provisional estimate to be included in the financial statements, the ~~Company~~company should continue to apply ASC 740 based on the provisions of the tax laws that were in effect immediately prior to the Tax Act being enacted. If a Company is unable to provide a reasonable estimate of the impacts of the Tax Act in a reporting period, a provisional amount must be recorded in the first reporting period in which a reasonable estimate can be determined.

The impact of the federal tax rate reduction ~~from 35.0%~~under the Tax Act ~~to 24.5%~~ was recognized in the rate applied to ~~earnings. We have reflected~~earnings for the ~~tax effect~~fiscal year ended September 30, 2018. The reduction for this period was from 35.0% to 24.5%. The further reduction of ~~temporary differences originating in~~ the ~~current period at the 24.5%~~ federal tax rate ~~and have~~to the statutory tax rate of 21% under the Tax Act is being recognized in the ~~deferred tax effect of such differences that will reverse in future periods at~~rate applied to earnings for the ~~21% federal tax rate.~~fiscal year ending September 30, 2019. ~~In addition, we~~

We recorded a provisional discrete net tax expense of $14.3 related to the Tax Act in the quarter ~~ending~~ended December 31, 2017. This net expense includes a benefit of $14.9 due to the remeasurement of our deferred tax items to reflect the impact of the ~~corporate~~federal tax rate reduction on our net deferred tax ~~balances. While we are able~~liabilities.

Furthermore, Hillenbrand is subject to ~~make~~ a ~~reasonable estimate~~one-time transition tax on certain unrepatriated earnings of foreign subsidiaries (the “Transition Tax”) as enacted pursuant to the ~~impact of the reduction in corporate rate~~Tax Act. This Transition Tax was imposed on the deferred ~~tax balances,~~accumulated earnings of foreign subsidiaries at an effective rate of 15.5% of foreign earnings attributable to cash and cash equivalents, and 8% of the residual foreign earnings. During the fiscal year ended September 30, 2018, we ~~are continuing to analyze the temporary differences that existed on the date of enactment and the temporary differences originating in the current fiscal year.~~

~~These benefits were more than offset by~~recorded a provisional net expense for the Transition Tax of ~~$28.9~~ ~~during~~$24.6. During the quarter ~~ending~~ended December 31, ~~2017. We will not be able to precisely~~ ~~determine~~2018, we completed our determination of the ~~amount~~effect of the Transition Tax ~~until the end of fiscal 2018 because certain cash~~ and, ~~cash equivalent balances at September 30, 2018 and current year earnings are key inputs in the calculation. Additionally, other information needs~~pursuant to ~~be verified, including cumulative foreign earnings in order~~SAB 118, we recognized a $0.5 increase to ~~precisely compute the amount of~~ the Transition ~~Tax. Provisional~~Tax liability, resulting in a Transition Tax liability of ~~$2.3~~$25.1. Hillenbrand elected to pay the Transition Tax over eight years and ~~$26.6~~made the first installment payment of $2.0 during the quarter ended December 31, 2018. The remaining Transition Tax liability is included in ~~other~~Other current liabilities ($2.0) and ~~other~~Other long-term liabilities ($21.1) in the Consolidated Balance Sheet at March 31, ~~2018. During~~2019.

In connection with the ~~three months ended March 31, 2018,~~Tax Act, we ~~did not record~~evaluated our future cash deployment needs and revised our permanent reinvestment assertions. While we continue to assert permanent reinvestment for the earnings of certain of our foreign subsidiaries, we recognized an ~~adjustment to the provisional~~additional $1.3 of deferred tax ~~expense recognized~~liability during the quarter ended December 31, ~~2017, as~~2018, associated with those foreign subsidiaries where we ~~continue to evaluate the impact of the Tax Act. We will recognize an adjustment to the provisional tax expense once we have determined the actual tax impact, pursuant to SAB 118.~~no longer maintain a permanent reinvestment assertion.

~~The~~As noted above, the enactment dates for many of the provisions within the Tax Act ~~are~~were for tax years beginning after December 31, 2017, and as a result, certain provisions ~~are~~were not effective until our current fiscal year ending September 30, 2019. ~~The~~These provisions ~~that are not effective until our fiscal year 2019 and, as such,~~ have ~~not~~ been incorporated into the current period tax provision, and include ~~creating a base erosion anti-abuse tax,~~recognizing global intangible low-taxed income and foreign derived intangible income, eliminating U.S. federal income taxes on dividends from foreign subsidiaries, eliminating the domestic production activity deduction, limiting the amount of deductible interest expense, limiting the ~~repeal of the domestic production activity deduction, limitations on the utilization~~use of foreign tax credits to reduce the U.S. income tax liability, and limiting the deduction of executive compensation, as well as other provisions.~~With the enactment of the Tax Act, we are evaluating our future cash deployment and may change our permanent reinvestment assertion in future periods.~~

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9.10.	Earnings ~~Per Share~~per share

The dilutive effects of performance-based stock awards were included in the computation of diluted earnings per share at the level the related performance criteria were met through the respective balance sheet date. At March 31, ~~2018~~2019 and ~~2017,~~2018, potential dilutive effects, representing approximately 400,000 ~~and 600,000~~ shares at each period, were excluded from the computation of diluted earnings per share as the related performance criteria were not yet met, although we expect to meet various levels of criteria in the future.


	Three Months Ended March 31,					Six Months Ended March 31,					Three Months Ended March 31,					Six Months Ended March 31,
	2018			2017		2018			2017		2019		2018			2019		2018
Net (loss) income(1)	$	(21.9	)	$	33.4	$	(3.8	)	$	55.1
Net income (loss) (1)											$	38.0	$	(21.9	)	$	66.3	$	(3.8	)
Weighted average shares outstanding (basic - in millions)	63.3			63.9		63.5			63.8		62.9		63.3			62.9		63.5
Effect of dilutive stock options and other unvested equity awards (in millions)	—			0.5		—			0.5		0.5		—			0.5		—
Weighted average shares outstanding (diluted - in millions)	63.3			64.4		63.5			64.3		63.4		63.3			63.4		63.5

Basic earnings per share	$	(0.34	)	$	0.52	$	(0.06	)	$	0.86	$	0.60	$	(0.34	)	$	1.05	$	(0.06	)
Diluted earnings per share	$	(0.34	)	$	0.52	$	(0.06	)	$	0.86	$	0.60	$	(0.34	)	$	1.05	$	(0.06	)

Shares with anti-dilutive effect excluded from the computation of diluted earnings per share (in millions)	1.2			0.6		1.0			0.9		1.1		1.2			0.9		1.0

(1) Net income (loss) ~~income~~ attributable to Hillenbrand


~~10.~~	~~Shareholders’ Equity~~

During the six months ended March 31, 2018, we paid approximately $26.2 of cash dividends. We also repurchased approximately 906,000 shares of our common stock during the six months ended March 31, 2018, at a total cost of approximately $38.9. In connection with our share-based compensation plans discussed further in Note 12, we also issued approximately 548,000 shares of common stock, of which approximately 412,000 shares were from treasury stock.


11.	Other Comprehensive Income (Loss)


	Pension and Postretirement			Currency Translation			Net Unrealized Gain (Loss) on Derivative Instruments			Total Attributable to Hillenbrand, Inc.			Noncontrolling Interests		Total			Pension and Postretirement			Currency Translation			Net Unrealized Gain (Loss) on Derivative Instruments			Total Attributable to Hillenbrand, Inc.			Noncontrolling Interests		Total
Balance at September 30, 2016	$	(67.5	)	$	(61.6	)	$	(0.7	)	$	(129.8	)
Balance at September 30, 2018																		$	(41.0	)	$	(44.1	)	$	0.9		$	(84.2	)
Other comprehensive income before reclassifications
Before tax amount	11.0			(13.6		)	2.0			(0.6		)	$	0.2	$	(0.4	)	—			(9.7		)	(11.0		)	(20.7		)	$	0.2	$	(20.5	)
Tax expense	(4.0		)	—			(0.7		)	(4.7		)	—		(4.7		)	—			—			2.6			2.6			—		2.6
After tax amount	7.0			(13.6		)	1.3			(5.3		)	0.2		(5.1		)	—			(9.7		)	(8.4		)	(18.1		)	0.2		(17.9		)
Amounts reclassified from accumulated other comprehensive income(1)	1.9			—			0.2			2.1			—		2.1			0.5			—			—			0.5			—		0.5
Net current period other comprehensive income (loss)	8.9			(13.6		)	1.5			(3.2		)	$	0.2	$	(3.0	)	0.5			(9.7		)	(8.4		)	(17.6		)	$	0.2	$	(17.4	)
Balance at March 31, 2017	$	(58.6	)	$	(75.2	)	$	0.8		$	(133.0	)
Balance at March 31, 2019																		$	(40.5	)	$	(53.8	)	$	(7.5	)	$	(101.8	)

(1) Amounts are net of tax.

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	Pension and Postretirement			Currency Translation			Net Unrealized Gain (Loss) on Derivative Instruments			Total Attributable to Hillenbrand, Inc.			Noncontrolling Interests		Total
Balance at September 30, 2017	$	(45.3	)	$	(36.9	)	$	1.0		$	(81.2	)
Other comprehensive income before reclassifications
Before tax amount	—			21.0			0.8			21.8			$	—	$	21.8
Tax expense	—			—			(0.2		)	(0.2		)	—		(0.2		)
After tax amount	—			21.0			0.6			21.6			—		21.6
Amounts reclassified from accumulated other comprehensive income(1)	1.4			—			(0.3		)	1.1			—		1.1
Net current period other comprehensive income (loss)	1.4			21.0			0.3			22.7			$	—	$	22.7
Balance at March 31, 2018	$	(43.9	)	$	(15.9	)	$	1.3		$	(58.5	)

(1) Amounts are net of tax.

Pension and
Postretirement

Currency
Translation

Net
Unrealized
Gain (Loss)
on Derivative
Instruments

Total
Attributable
to
Hillenbrand,
Inc.

Noncontrolling
Interests
Total
Balance at September 30, 2017 $ (45.3 ) $ (36.9 ) $ 1.0
$ (81.2 )

Other comprehensive income before reclassifications

Before tax amount —
21.0
0.8
21.8
$ —
$ 21.8
Tax expense —
—
(0.2 ) (0.2 ) —
(0.2 )
After tax amount —
21.0
0.6
21.6
—
21.6
Amounts reclassified from accumulated other comprehensive income(1) 1.4
—
(0.3 ) 1.1
—
1.1
Net current period other comprehensive income (loss) 1.4
21.0
0.3
22.7
$ —
$ 22.7
Balance at March 31, 2018 $ (43.9 ) $ (15.9 ) $ 1.3
$ (58.5 )

~~(1) Amounts are net of tax.~~

Reclassifications out of Accumulated Other Comprehensive Income include:


	Three Months Ended March 31, 2017										Three Months Ended March 31, 2019
	Amortization of Pension and Postretirement (1)				(Gain)/Loss on Derivative Instruments						Amortization of Pension and Postretirement (1)						(Gain)/Loss on
	Net Loss Recognized		Prior Service Costs Recognized				Total			Net Loss Recognized			Prior Service Costs Recognized			Derivative Instruments				Total
Affected Line in the Consolidated Statement of Operations:
Net revenue	$	—	$	—	$	0.1		$	0.1		$	—		$	—		$	0.1			$	0.1
Cost of goods sold	1.1		—		—			1.1			—			—			(0.1		)		(0.1		)
Operating expenses	0.6		0.1		—			0.7			—			—			—				—
Other income (expense), net	—		—		—			—			0.4			—			—				0.4
Total before tax	$	1.7	$	0.1	$	0.1		$	1.9		$	0.4		$	—		$	—			$	0.4
Tax expense								(0.7		)											(0.1		)
Total reclassifications for the period, net of tax								$	1.2												$	0.3

	Six Months Ended March 31, 2017
	Amortization of Pension and Postretirement (1)				(Gain)/Loss on Derivative Instruments
	Net Loss Recognized		Prior Service Costs Recognized				Total
Affected Line in the Consolidated Statement of Operations:
Net revenue	$	—	$	—	$	0.2		$	0.2
Cost of goods sold	1.9		0.1		—			2.0
Operating expenses	0.9		0.1		—			1.0
Other income (expense), net	—		—		0.1			0.1
Total before tax	$	2.8	$	0.2	$	0.3		$	3.3
Tax expense								(1.2		)
Total reclassifications for the period, net of tax								$	2.1


	Three Months Ended March 31, 2018											Six Months Ended March 31, 2019
	Amortization of Pension and Postretirement (1)					(Gain)/Loss on						Amortization of Pension and Postretirement (1)				(Gain)/Loss on
	Net Loss Recognized		Prior Service Costs Recognized			Derivative Instruments			Total			Net Loss Recognized		Prior Service Costs Recognized		Derivative Instruments			Total
Affected Line in the Consolidated Statement of Operations:
Net revenue	$	—	$	—		$	—		$	—		$	—	$	—	$	0.2		$	0.2
Cost of goods sold	0.6		0.1			—			0.7			—		—		(0.2		)	(0.2		)
Operating expenses	0.3		(0.1		)	—			0.2			—		—		—			—
Other income (expense), net	—		—			—			—			0.7		—		—			0.7
Total before tax	$	0.9	$	—		$	—		$	0.9		$	0.7	$	—	$	—		$	0.7
Tax expense									(0.2		)								(0.2		)
Total reclassifications for the period, net of tax									$	0.7									$	0.5

	Six Months Ended March 31, 2018
	Amortization of Pension and Postretirement (1)					(Gain)/Loss on
	Net Loss Recognized		Prior Service Costs Recognized			Derivative Instruments			Total
Affected Line in the Consolidated Statement of Operations:
Net revenue	$	—	$	—		$	(0.4	)	$	(0.4	)
Cost of goods sold	1.3		0.1			—			1.4
Operating expenses	0.7		(0.1		)	—			0.6
Other income (expense), net	—		—			—			—
Total before tax	$	2.0	$	—		$	(0.4	)	$	1.6
Tax expense									(0.5		)
Total reclassifications for the period, net of tax									$	1.1

(1) These accumulated other comprehensive income components are included in the computation of net periodic pension cost (see Note 7)8).

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	Three Months Ended March 31, 2018
	Amortization of Pension and Postretirement (1)				(Gain)/Loss on
	Net Loss Recognized		Prior Service Costs Recognized		Derivative Instruments		Total
Affected Line in the Consolidated Statement of Operations:
Net revenue	$	—	$	—	$	—	$	—
Cost of goods sold	—		—		—		—
Operating expenses	—		—		—		—
Other income (expense), net	0.9		—		—		0.9
Total before tax	$	0.9	$	—	$	—	$	0.9
Tax expense							(0.2		)
Total reclassifications for the period, net of tax							$	0.7



	Six Months Ended March 31, 2018
	Amortization of Pension and Postretirement (1)				(Gain)/Loss on
	Net Loss Recognized		Prior Service Costs Recognized		Derivative Instruments			Total
Affected Line in the Consolidated Statement of Operations:
Net revenue	$	—	$	—	$	(0.4	)	$	(0.4	)
Cost of goods sold	—		—		—			—
Operating expenses	—		—		—			—
Other income (expense), net	2.0		—		—			2.0
Total before tax	$	2.0	$	—	$	(0.4	)	$	1.6
Tax expense								(0.5		)
Total reclassifications for the period, net of tax								$	1.1

(1) These accumulated other comprehensive income components are included in the computation of net periodic pension cost (see Note 8).


12.	Share-Based Compensation


	Three Months Ended March 31,				Six Months Ended March 31,				Three Months Ended March 31,				Six Months Ended March 31,
	2018		2017		2018		2017		2019		2018		2019		2018
Share-based compensation costs	$	3.9	$	3.1	$	6.2	$	5.7	$	3.9	$	3.9	$	5.8	$	6.2
Less impact of income tax benefit	1.0		1.0		1.6		2.0		0.9		1.0		1.3		1.6
Share-based compensation costs, net of tax	$	2.9	$	2.1	$	4.6	$	3.7	$	3.0	$	2.9	$	4.5	$	4.6

We have share-based compensation with long-term performance-based metrics that are contingent upon our relative total shareholder return and the creation of shareholder value. Relative total shareholder return is determined by comparing our total shareholder return during a three-year period to the respective total shareholder returns of companies in a designated performance peer group. Creation of shareholder value is measured by the cumulative cash returns and final period net operating profit after tax compared to the established hurdle rate over a three-year period. For the performance-based awards contingent upon the creation of shareholder value, compensation expense is adjusted each quarter based upon actual results to date and any changes to forecasted information on each of the separate grants.

During the six months ended March 31, ~~2018,~~2019, we made the following grants:

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	Number of Units
Stock options	~~352,752~~431,726
Time-based stock awards	~~18,539~~23,921
Performance-based stock awards (maximum that can be earned)	~~230,890~~334,335

Stock options granted during fiscal ~~2018~~2019 had a weighted-average exercise price of ~~$45.78~~$41.31 and a weighted-average grant date fair value of ~~$11.10.~~$10.15. Our time-based stock awards and performance-based stock awards granted during fiscal ~~2018~~2019 had weighted-average grant date fair values of ~~$45.19~~$41.29 and ~~$53.37.~~$41.77. Included in the performance-based stock awards granted during ~~2018~~fiscal 2019 are ~~111,126~~181,994 units whose payout level is based upon the Company’s relative total shareholder return over the three-year measurement period, as described above. These units will be expensed on a straight-line basis over the measurement period and are not subsequently adjusted after the grant date.


13.	Other Income (Expense), Net


	Three Months Ended March 31,						Six Months Ended March 31,						Three Months Ended March 31,					Six Months Ended March 31,
	2018			2017			2018			2017			2019		2018			2019			2018
Equity in net income of affiliates	$	—		$	0.3		$	—		$	1.0
Foreign currency exchange (loss) gain, net	(0.5		)	(0.6		)	(0.8		)	(1.4		)
Equity in net income (loss) of affiliates													$	—	$	—		$	(0.1	)	$	—
Foreign currency exchange gain (loss), net													0.1		(0.5		)	0.5			(0.8		)
Other, net	(0.7		)	(0.3		)	(0.8		)	(1.5		)	—		(0.6		)	0.2			(0.7		)
Other income (expense), net	$	(1.2	)	$	(0.6	)	$	(1.6	)	$	(1.9	)	$	0.1	$	(1.1	)	$	0.6		$	(1.5	)


14.	Commitments and Contingencies

Like most companies, we are involved from time to time in claims, lawsuits, and government proceedings relating to our operations, including environmental, patent infringement, business practices, commercial transactions, product and general liability, workers’ compensation, auto liability, employment, and other matters. The ultimate outcome of these matters cannot be predicted with certainty. An estimated loss from these contingencies is recognized when we believe it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated; however, it is difficult to measure the actual loss that might be incurred related ~~to litigation.~~these matters. If a loss is not considered probable and/or cannot be reasonably estimated, we are required to make a disclosure if there is at least a reasonable possibility that a significant loss may have been incurred. Legal fees associated with claims and lawsuits are generally expensed as incurred.

Claims covered by insurance have in most instances deductibles and self-funded retentions up to $0.5 per occurrence or per claim, depending upon the type of coverage and policy period. For auto, workers compensation, and ~~product and~~ general liability, outside insurance companies and third-party claims administrators generally assist in establishing individual claim ~~reserves, and an~~reserves. An independent outside actuary ~~often~~ provides estimates of ultimate projected losses, including incurred but not reported claims, which are used to establish reserves for losses. For all other types of claims, reserves are established based upon advice from internal and external counsel and historical settlement information for claims when such amounts are considered probable of payment.

The recorded amounts represent our best estimate of the costs we will incur in relation to such exposures, but it is possible that actual costs will differ from those estimates.

Aldrees Litigation

In April 2016, Hamad M. Aldrees & Partners Holding Co. for Industry and Mining (Closed Joint Company) (“Aldrees”) filed a lawsuit against Company subsidiary Rotex Europe Limited (“Rotex”) in the High Court of Justice, Queen’s Bench Division, Technology and Construction Court (the “High Court”) in London, England (the “Aldrees Litigation”). The Aldrees Litigation ~~arises as a result of~~resulted from an agreement made in 2010 for Rotex to supply, among other things, five mineral separating machines. Aldrees ~~has~~ alleged breach of contract and misrepresentation by Rotex and iswas seeking damages of approximately £38.5.

The ~~Company is defending this matter vigorously. The case went to~~ trial concluded in the ~~second~~third quarter ~~but~~of fiscal 2018 and a ~~result has not been announced, and~~final decision was released by the ~~timing~~High Court in March 2019 awarding a fraction of the claimed damages to Aldrees. This result ~~of the trial is unknown. Based on currently available information, the Company is~~did not ~~able to reasonably estimate the amount of any reasonably possible loss in respect of this matter; however, the Company does not believe that the outcome of this lawsuit will~~ have a material ~~adverse effect~~impact on the Company’s consolidated results of operations, financial statements. If Aldrees prevails at trial, however, the outcome could be materially adverse to the Company’s financial statements for the particular period, depending, in part, upon the operating resultsposition, or cash ~~flows for such period.~~flows.

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15.	Fair Value Measurements

Fair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. The authoritative guidance establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are from sources independent of the Company. Unobservable inputs reflect the Company’s assumptions about the factors market participants would use in valuing the asset or liability, developed based upon the best information available in the circumstances. The categorization of financial assets and liabilities within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The hierarchy is broken down into three levels:



Level 1:	Inputs are quoted prices in active markets for identical assets or liabilities.
Level 2:	Inputs include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, and inputs (other than quoted prices) that are observable for the asset or liability, either directly or indirectly.
Level 3:	Inputs are unobservable for the asset or liability.


									Carrying
	Carrying Value at March 31, 2018		Fair Value at March 31, 2018 Using Inputs Considered as:						Value at March 31,		Fair Value at March 31, 2019 Using Inputs Considered as:
			Level 1		Level 2		Level 3		2019		Level 1		Level 2		Level 3
Assets:
Cash and cash equivalents	$	68.5	$	68.5	$	—	$	—	$	58.6	$	58.6	$	—	$	—
Investments in rabbi trust	4.0		4.0		—		—		4.0		4.0		—		—
Derivative instruments	5.0		—		5.0		—		2.2		—		2.2		—
Indefinite-lived assets	4.0		—		—		4.0

Liabilities:
$150 senior unsecured notes	149.6		157.6		—		—		149.8		154.0		—		—
Revolving credit facility	229.7		—		229.7		—		112.6		—		112.6		—
$100 Series A Notes	100.0		—		103.1		—		100.0		—		105.4		—
Derivative instruments	3.3		—		3.3		—		12.4		—		12.4		—

The fair value of the amounts outstanding under the ~~Facility~~revolving credit facility approximated carrying value at March 31, ~~2018.~~2019. The fair values of the ~~Facility~~revolving credit facility and Series A Notes ~~are~~were estimated based on internally developed models, using current market interest rate data for similar issues, as there is no active market for our ~~Facility~~revolving credit facility or Series A Notes.

Derivative instruments

The Company has hedging programs in place to manage its currency exposures. The objectives of our hedging programs are to mitigate exposures in gross margin and non-functional-currency-denominated assets and liabilities. Under these programs, we use derivative financial instruments to manage the economic impact of fluctuations in currency exchange rates. These include foreign currency exchange forward contracts, which generally have terms up to 24 months. Additionally, the Company has derivative instruments in place to hedge the interest rate associated with $150.0 of ten-year, fixed-rate financing we expect to issue in the future. These derivative instruments terminate in December 2020, if not settled earlier in connection with the underlying expected future financing. Our objectives in using these derivatives are to reduce volatility in future interest expense and to manage our exposure to interest rate movements.

The fair values of the Company’s derivative instruments ~~are~~were based upon pricing models using inputs derived from third-party pricing services or observable market data such as currency spot and forward rates. These values are periodically validated by comparing to third-party broker quotes. The aggregate notional value of ~~these foreign currency~~ derivatives was ~~$256.7~~$283.3 at March 31, ~~2018.~~2019. The derivatives are included at fair value in ~~other~~Other current assets, ~~other assets, other~~Other current liabilities, and ~~other~~Other long-term liabilities on the ~~balance sheet.~~Consolidated Balance Sheets.

~~The indefinite-lived assets are trade names for which an impairment was recorded during the quarter ended March 31, 2018. See Note 5 for further information.~~

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16.	Segment and Geographical Information


	Three Months Ended March 31,						Six Months Ended March 31,						Three Months Ended March 31,						Six Months Ended March 31,
	2018			2017			2018			2017			2019			2018			2019			2018
Net revenue
Process Equipment Group	$	299.8		$	244.1		$	564.1		$	465.7		$	326.7		$	299.8		$	608.9		$	564.1
Batesville	152.4			151.2			285.3			285.7			137.9			152.4			266.0			285.3
Total	$	452.2		$	395.3		$	849.4		$	751.4		$	464.6		$	452.2		$	874.9		$	849.4

Adjusted EBITDA
Process Equipment Group	$	49.9		$	37.3		$	95.5		$	70.0		$	55.5		$	49.9		$	101.7		$	95.5
Batesville	38.6			42.7			66.5			73.7			31.6			38.6			58.3			66.5
Corporate	(12.2		)	(9.7		)	(20.5		)	(17.0		)	(12.2		)	(12.2		)	(21.0		)	(20.5		)

Net revenue ~~(2)~~(1)
United States	$	246.2		$	227.3		$	465.0		$	428.7		$	232.4		$	246.2		$	447.2		$	465.0
Germany	129.8			106.2			240.2			200.8			141.6			129.8			252.9			240.2
All other foreign business units	76.2			61.8			144.2			121.9			90.6			76.2			174.8			144.2
Total	$	452.2		$	395.3		$	849.4		$	751.4		$	464.6		$	452.2		$	874.9		$	849.4

(1) We attribute revenue to a geography based upon the location of the business unit that consummates the external sale.

(2) In 2017, the Company corrected its disclosure of net revenue by geography. The effect of this adjustment for the three months ended March 31, 2017 was to decrease Germany net revenue by $9.6, from $115.8 as previously disclosed, to $106.2, and to increase the All other foreign business units net revenue by the same amount, from $52.2 as previously disclosed, to $61.8. The effect of this adjustment for the six months ended March 31, 2017 was to decrease Germany net revenue by $19.4, from $220.2 as previously disclosed, to $200.8, and to increase the All other foreign business units net revenue by the same amount, from $102.5 as previously disclosed, to $121.9. Management performed an assessment of the materiality of this correction and concluded that the net revenue by geography as originally disclosed was not material to previously issued financial statements.


	March 31, 2018		September 30, 2017		March 31, 2019		September 30, 2018
Total assets assigned
Process Equipment Group	$	1,755.4	$	1,722.2	$	1,667.9	$	1,638.8
Batesville	199.3		203.4		187.0		191.8
Corporate	34.7		30.9		30.6		34.0
Total	$	1,989.4	$	1,956.5	$	1,885.5	$	1,864.6

Tangible long-lived assets, net
United States	$	80.1	$	84.4	$	74.3	$	76.6
Germany	39.7		39.0		38.6		40.7
All other foreign business units	26.3		27.0		24.7		24.7
Total	$	146.1	$	150.4	$	137.6	$	142.0

The following schedule reconciles segment adjusted EBITDA to consolidated net income (loss) ~~income.~~


	Three Months Ended March 31,						Six Months Ended March 31,						Three Months Ended March 31,						Six Months Ended March 31,
	2018			2017			2018			2017			2019			2018			2019			2018
Adjusted EBITDA:
Process Equipment Group	$	49.9		$	37.3		$	95.5		$	70.0		$	55.5		$	49.9		$	101.7		$	95.5
Batesville	38.6			42.7			66.5			73.7			31.6			38.6			58.3			66.5
Corporate	(12.2		)	(9.7		)	(20.5		)	(17.0		)	(12.2		)	(12.2		)	(21.0		)	(20.5		)
Less:
Interest income	(0.3		)	(0.1		)	(0.8		)	(0.3		)	(0.2		)	(0.3		)	(0.4		)	(0.8		)
Interest expense	6.0			6.3			12.3			12.4			5.4			6.0			10.9			12.3
Income tax expense	13.6			14.9			37.3			21.6			13.8			13.6			28.3			37.3
Depreciation and amortization	14.0			13.6			27.8			28.6			15.1			14.0			29.2			27.8
Impairment charge	63.4			—			63.4			—			—			63.4			—			63.4
Business acquisition, development, and integration	0.2			0.3			2.5			0.6			0.5			0.2			1.1			2.5
Restructuring and restructuring related	0.7			1.3			1.2			7.9			0.7			0.7			1.2			1.2
Consolidated net (loss) income	$	(21.3	)	$	34.0		$	(2.2	)	$	55.9
Inventory step-up													0.1			—			0.2			—
Consolidated net income (loss)													$	39.5		$	(21.3	)	$	68.5		$	(2.2	)

Table of Contents


17.	Condensed Consolidating Information

Certain 100% owned domestic subsidiaries of Hillenbrand fully and unconditionally, jointly and severally, agreed to guarantee all of the indebtedness and guarantee obligations relating to our obligations under our senior unsecured notes. The following are the condensed consolidating financial statements, including the guarantors, which present the statements of income, balance sheets, and cash flows of (i) the parent holding company, (ii) the guarantor subsidiaries, (iii) the non-guarantor subsidiaries, and (iv) eliminations necessary to present the information for Hillenbrand on a consolidated basis.

Table of Contents

Condensed Consolidating Statements of Income


	Three Months Ended March 31, 2018															Three Months Ended March 31, 2017														Three Months Ended March 31, 2019													Three Months Ended March 31, 2018
	Parent			Guarantors			Non- Guarantors			Eliminations			Consolidated			Parent			Guarantors			Non- Guarantors		Eliminations			Consolidated			Parent			Guarantors			Non- Guarantors		Eliminations			Consolidated		Parent			Guarantors			Non- Guarantors			Eliminations			Consolidated
Net revenue	$	—		$	250.9		$	256.4		$	(55.1	)	$	452.2		$	—		$	228.7		$	217.5	$	(50.9	)	$	395.3		$	—		$	230.6		$	294.1	$	(60.1	)	$	464.6	$	—		$	250.9		$	256.4		$	(55.1	)	$	452.2
Cost of goods sold	—			129.3			181.3			(27.1		)	283.5			—			117.2			156.7		(27.2		)	246.7			—			126.8			210.0		(33.1		)	303.7		—			129.7			181.0			(27.1		)	283.6
Gross profit	—			121.6			75.1			(28.0		)	168.7			—			111.5			60.8		(23.7		)	148.6			—			103.8			84.1		(27.0		)	160.9		—			121.2			75.4			(28.0		)	168.6
Operating expenses	13.7			64.5			48.1			(28.0		)	98.3			11.4			57.1			40.8		(23.7		)	85.6			13.7			60.9			46.1		(27.0		)	93.7		13.6			64.8			47.9			(28.0		)	98.3
Amortization expense	—			3.2			4.3			—			7.5			—			3.4			3.8		—			7.2			—			3.4			5.2		—			8.6		—			3.2			4.3			—			7.5
Impairment charge	—			63.4			—			—			63.4			—			—			—		—			—			—			—			—		—			—		—			63.4			—			—			63.4
Interest expense	5.3			—			0.7			—			6.0			5.4			—			0.9		—			6.3			4.7			0.1			0.6		—			5.4		5.3			—			0.7			—			6.0
Other (expense) income, net	—			(0.9		)	(0.3		)	—			(1.2		)	(0.4		)	(0.4		)	0.2		—			(0.6		)
Other income (expense), net																														(0.2		)	(0.1		)	0.4		—			0.1		(0.1		)	(0.2		)	(0.8		)	—			(1.1		)
Equity in net income (loss) of subsidiaries	(5.1		)	1.8			—			3.3			—			42.7			1.5			—		(44.2		)	—			51.4			3.5			—		(54.9		)	—		(5.1		)	1.8			—			3.3			—
(Loss) income before income taxes	(24.1		)	(8.6		)	21.7			3.3			(7.7		)	25.5			52.1			15.5		(44.2		)	48.9
Income (loss) before income taxes																														32.8			42.8			32.6		(54.9		)	53.3		(24.1		)	(8.6		)	21.7			3.3			(7.7		)
Income tax expense (benefit)	(2.2		)	9.4			6.4			—			13.6			(7.9		)	19.0			3.8		—			14.9			(5.2		)	10.6			8.4		—			13.8		(2.2		)	9.4			6.4			—			13.6
Consolidated net (loss) income	(21.9		)	(18.0		)	15.3			3.3			(21.3		)	33.4			33.1			11.7		(44.2		)	34.0
Consolidated net income (loss)																														38.0			32.2			24.2		(54.9		)	39.5		(21.9		)	(18.0		)	15.3			3.3			(21.3		)
Less: Net income attributable to
noncontrolling interests	—			—			0.6			—			0.6			—			—			0.6		—			0.6			—			—			1.5		—			1.5		—			—			0.6			—			0.6
Net (loss) income (1)	$	(21.9	)	$	(18.0	)	$	14.7		$	3.3		$	(21.9	)	$	33.4		$	33.1		$	11.1	$	(44.2	)	$	33.4
Consolidated comprehensive (loss) income	$	(5.9	)	$	(17.6	)	$	30.1		$	(12.0	)	$	(5.4	)	$	46.2		$	38.2		$	19.7	$	(57.0	)	$	47.1
Net income (loss) (1)																														$	38.0		$	32.2		$	22.7	$	(54.9	)	$	38.0	$	(21.9	)	$	(18.0	)	$	14.7		$	3.3		$	(21.9	)
Consolidated comprehensive income (loss)																														$	30.5		$	32.4		$	19.6	$	(50.5	)	$	32.0	$	(5.9	)	$	(17.6	)	$	30.1		$	(12.0	)	$	(5.4	)
Less: Comprehensive income attributable
to noncontrolling interests	—			—			0.5			—			0.5			—			—			0.9		—			0.9			—			—			1.5		—			1.5		—			—			0.5			—			0.5
Comprehensive (loss) income (2)	$	(5.9	)	$	(17.6	)	$	29.6		$	(12.0	)	$	(5.9	)	$	46.2		$	38.2		$	18.8	$	(57.0	)	$	46.2
Comprehensive income (loss) (2)																														$	30.5		$	32.4		$	18.1	$	(50.5	)	$	30.5	$	(5.9	)	$	(17.6	)	$	29.6		$	(12.0	)	$	(5.9	)

Table of Contents

Six Months Ended March 31, 2018 Six Months Ended March 31, 2017
Parent Guarantors Non-
Guarantors Eliminations Consolidated Parent Guarantors Non-
Guarantors Eliminations Consolidated
Net revenue $ —
$ 469.1
$ 485.5
$ (105.2 ) $ 849.4
$ —
$ 431.4
$ 420.4
$ (100.4 ) $ 751.4
Cost of goods sold —
243.9
341.8
(51.3 ) 534.4
—
226.4
302.2
(51.8 ) 476.8
Gross profit —
225.2
143.7
(53.9 ) 315.0
—
205.0
118.2
(48.6 ) 274.6
Operating expenses 24.8
125.9
90.7
(53.9 ) 187.5
21.0
115.8
80.2
(48.6 ) 168.4
Amortization expense —
6.7
8.4
—
15.1
—
6.8
7.6
—
14.4
Impairment charge —
63.4
—
—
63.4
—
—
—
—
—
Interest expense 11.1
—
1.2
—
12.3
10.8
—
1.6
—
12.4
Other (expense) income, net (0.1 ) (1.1 ) (0.4 ) —
(1.6 ) (0.4 ) (0.4 ) (1.1 ) —
(1.9 )
Equity in net income (loss) of subsidiaries 32.3
3.2
—
(35.5 ) —
71.5
3.7
—
(75.2 ) —
(Loss) income before income taxes (3.7 ) 31.3
43.0
(35.5 ) 35.1
39.3
85.7
27.7
(75.2 ) 77.5
Income tax expense (benefit) 0.1
24.9
12.3
—
37.3
(15.8 ) 30.7
6.7
—
21.6
Consolidated net (loss) income (3.8 ) 6.4
30.7
(35.5 ) (2.2 ) �� 55.1
55.0

21.0
(75.2 ) 55.9
Less: Net income attributable to
noncontrolling interests —
—
1.6
—
1.6
—
—
0.8
—
0.8
Net (loss) income (1) $ (3.8 ) $ 6.4
$ 29.1
$ (35.5 ) $ (3.8 ) $ 55.1
$ 55.0
$ 20.2
$ (75.2 ) $ 55.1
Consolidated comprehensive (loss) income $ 18.9
$ 7.3
$ 51.4
$ (57.1 ) $ 20.5
$ 51.9
$ 59.7
$ 8.1
$ (66.8 ) $ 52.9
Less: Comprehensive income attributable
to noncontrolling interests —
—
1.6
—
1.6
—
—
1.0
—
1.0
Comprehensive (loss) income (2) $ 18.9
$ 7.3
$ 49.8
$ (57.1 ) $ 18.9
$ 51.9
$ 59.7
$ 7.1
$ (66.8 ) $ 51.9



	Six Months Ended March 31, 2019													Six Months Ended March 31, 2018
	Parent			Guarantors			Non- Guarantors		Eliminations			Consolidated		Parent			Guarantors		Non- Guarantors			Eliminations			Consolidated
Net revenue	$	—		$	446.7		$	541.9	$	(113.7	)	$	874.9	$	—		$	469.1	$	485.5		$	(105.2	)	$	849.4
Cost of goods sold	—			242.6			384.4		(60.0		)	567.0		—			244.8		341.1			(51.3		)	534.6
Gross profit	—			204.1			157.5		(53.7		)	307.9		—			224.3		144.4			(53.9		)	314.8
Operating expenses	23.9			122.3			91.9		(53.7		)	184.4		24.5			126.4		90.4			(53.9		)	187.4
Amortization expense	—			6.7			9.7		—			16.4		—			6.7		8.4			—			15.1
Impairment charge	—			—			—		—			—		—			63.4		—			—			63.4
Interest expense	9.2			0.1			1.6		—			10.9		11.1			—		1.2			—			12.3
Other income (expense), net	(0.5		)	(0.1		)	1.2		—			0.6		(0.4		)	0.3		(1.4		)	—			(1.5		)
Equity in net income (loss) of subsidiaries	93.4			5.7			—		(99.1		)	—		32.3			3.2		—			(35.5		)	—
Income (loss) before income taxes	59.8			80.6			55.5		(99.1		)	96.8		(3.7		)	31.3		43.0			(35.5		)	35.1
Income tax expense (benefit)	(6.5		)	20.5			14.3		—			28.3		0.1			24.9		12.3			—			37.3
Consolidated net income (loss)	66.3			60.1			41.2		(99.1		)	68.5		(3.8		)	6.4		30.7			(35.5		)	(2.2		)
Less: Net income attributable to
noncontrolling interests	—			—			2.2		—			2.2		—			—		1.6			—			1.6
Net income (loss) (1)	$	66.3		$	60.1		$	39.0	$	(99.1	)	$	66.3	$	(3.8	)	$	6.4	$	29.1		$	(35.5	)	$	(3.8	)
Consolidated comprehensive income (loss)	$	48.7		$	60.2		$	31.4	$	(89.2	)	$	51.1	$	18.9		$	7.3	$	51.4		$	(57.1	)	$	20.5
Less: Comprehensive income attributable
to noncontrolling interests	—			—			2.4		—			2.4		—			—		1.6			—			1.6
Comprehensive income (loss) (2)	$	48.7		$	60.2		$	29.0	$	(89.2	)	$	48.7	$	18.9		$	7.3	$	49.8		$	(57.1	)	$	18.9

(1) Net income (loss) ~~income~~ attributable to Hillenbrand

(2) Comprehensive income (loss) attributable to Hillenbrand

Table of Contents

Condensed Consolidating Balance Sheets


	March 31, 2018											September 30, 2017											March 31, 2019											September 30, 2018
	Parent		Guarantors		Non- Guarantors		Eliminations			Consolidated		Parent		Guarantors		Non- Guarantors		Eliminations			Consolidated		Parent		Guarantors		Non- Guarantors		Eliminations			Consolidated		Parent		Guarantors		Non- Guarantors		Eliminations			Consolidated
Cash and cash equivalents	$	0.4	$	6.8	$	61.3	$	—		$	68.5	$	0.1	$	4.9	$	61.0	$	—		$	66.0	$	0.2	$	5.3	$	53.1	$	—		$	58.6	$	1.1	$	5.8	$	49.1	$	—		$	56.0
Trade receivables, net	—		111.6		83.2		—			194.8		—		114.5		91.6		—			206.1		—		105.7		93.8		—			199.5		—		124.5		94.0		—			218.5
Receivables from long-term
manufacturing contracts	—		6.6		172.7		—			179.3		—		8.5		116.7		—			125.2
Receivables from long-term manufacturing contracts																							—		8.4		156.4		—			164.8		—		5.3		115.0		—			120.3
Inventories	—		72.9		110.4		(2.7		)	180.6		—		68.2		85.9		(2.5		)	151.6		—		82.9		103.0		(2.9		)	183.0		—		76.7		98.6		(2.8		)	172.5
Prepaid expense	3.2		11.9		19.2		—			34.3		2.1		7.6		18.5		—			28.2		2.9		7.7		13.5		—			24.1		2.7		7.0		15.5		—			25.2
Intercompany receivables	—		1,029.0		66.6		(1,095.6		)	—		—		1,050.4		93.9		(1,144.3		)	—		—		1,130.9		49.1		(1,180.0		)	—		—		1,131.1		79.1		(1,210.2		)	—
Other current assets	0.2		1.8		21.0		0.2			23.2		0.2		1.6		14.4		0.3			16.5		—		1.9		18.1		0.4			20.4		—		3.2		14.6		0.3			18.1
Total current assets	3.8		1,240.6		534.4		(1,098.1		)	680.7		2.4		1,255.7		482.0		(1,146.5		)	593.6		3.1		1,342.8		487.0		(1,182.5		)	650.4		3.8		1,353.6		465.9		(1,212.7		)	610.6
Property, plant and equipment, net	4.1		62.0		80.0		—			146.1		4.7		64.5		81.2		—			150.4		3.6		58.9		75.1		—			137.6		3.8		60.2		78.0		—			142.0
Intangible assets, net	3.7		202.9		311.2		—			517.8		3.6		211.3		309.0		—			523.9		2.8		188.6		285.9		—			477.3		3.2		196.0		288.1		—			487.3
Goodwill	—		225.0		377.6		—			602.6		—		283.9		363.6		—			647.5		—		225.0		358.0		—			583.0		—		225.0		356.9		—			581.9
Investment in consolidated subsidiaries	2,165.7		567.6		—		(2,733.3		)	—		2,298.0		664.1		—		(2,962.1		)	—		2,290.8		668.0		—		(2,958.8		)	—		2,263.1		653.9		—		(2,917.0		)	—
Other assets	17.9		30.5		1.4		(7.6		)	42.2		20.2		29.0		4.4		(12.5		)	41.1		27.1		26.5		1.9		(18.3		)	37.2		15.7		28.2		5.9		(7.0		)	42.8
Total Assets	$	2,195.2	$	2,328.6	$	1,304.6	$	(3,839.0	)	$	1,989.4	$	2,328.9	$	2,508.5	$	1,240.2	$	(4,121.1	)	$	1,956.5	$	2,327.4	$	2,509.8	$	1,207.9	$	(4,159.6	)	$	1,885.5	$	2,289.6	$	2,516.9	$	1,194.8	$	(4,136.7	)	$	1,864.6

Trade accounts payable	$	0.5	$	54.6	$	120.1	$	—		$	175.2	$	1.0	$	36.7	$	120.0	$	0.3		$	158.0	$	0.2	$	62.9	$	144.6	$	—		$	207.7	$	—	$	62.4	$	134.4	$	—		$	196.8
Liabilities from long-term manufacturing
contracts and advances	—		24.1		141.7		—			165.8		—		26.2		106.1		—			132.3
Current portion of long-term debt	—		—		0.7		—			0.7		18.0		—		0.8		—			18.8
Liabilities from long-term manufacturing contracts and advances																							—		24.6		100.5		—			125.1		—		26.6		99.3		—			125.9
Accrued compensation	3.7		14.4		37.7		—			55.8		7.6		17.9		41.4		—			66.9		3.9		13.6		38.0		—			55.5		7.2		20.1		44.6		—			71.9
Intercompany payables	1,097.0		1.3		—		(1,098.3		)	—		1,142.8		4.0		—		(1,146.8		)	—		1,176.6		6.3		—		(1,182.9		)	—		1,206.2		6.1		—		(1,212.3		)	—
Other current liabilities	17.7		39.5		75.8		0.3			133.3		14.0		42.2		79.3		0.2			135.7		22.8		47.4		58.3		(11.0		)	117.5		19.4		38.9		78.1		0.7			137.1
Total current liabilities	1,118.9		133.9		376.0		(1,098.0		)	530.8		1,183.4		127.0		347.6		(1,146.3		)	511.7		1,203.5		154.8		341.4		(1,193.9		)	505.8		1,232.8		154.1		356.4		(1,211.6		)	531.7
Long-term debt	331.0		—		147.4		—			478.4		392.0		—		54.9		—			446.9		333.6		—		28.1		—			361.7		300.2		—		44.4		—			344.6
Accrued pension and
postretirement healthcare	0.8		32.4		96.8		—			130.0		0.8		33.3		95.5		—			129.6
Accrued pension and postretirement healthcare																							0.7		29.1		84.8		—			114.6		0.7		29.8		90.0		—			120.5
Deferred income taxes	—		19.6		50.1		(7.7		)	62.0		—		27.5		60.9		(12.7		)	75.7		—		26.6		59.7		(6.9		)	79.4		0.7		22.9		60.9		(8.1		)	76.4
Other long-term liabilities	27.7		18.3		10.2		—			56.2		1.3		15.3		10.1		—			26.7		32.8		12.5		8.6		—			53.9		24.1		14.3		8.9		—			47.3
Total Liabilities	1,478.4		204.2		680.5		(1,105.7		)	1,257.4		1,577.5		203.1		569.0		(1,159.0		)	1,190.6		1,570.6		223.0		522.6		(1,200.8		)	1,115.4		1,558.5		221.1		560.6		(1,219.7		)	1,120.5
Hillenbrand Shareholders’ Equity	716.8		2,124.4		608.9		(2,733.3		)	716.8		751.4		2,305.4		656.7		(2,962.1		)	751.4
Total Hillenbrand Shareholders’ Equity																							756.8		2,286.8		672.0		(2,958.8		)	756.8		731.1		2,295.8		621.2		(2,917.0		)	731.1
Noncontrolling interests	—		—		15.2		—			15.2		—		—		14.5		—			14.5		—		—		13.3		—			13.3		—		—		13.0		—			13.0
Total Shareholders’ Equity	716.8		2,124.4		624.1		(2,733.3		)	732.0		751.4		2,305.4		671.2		(2,962.1		)	765.9
Total Equity																							756.8		2,286.8		685.3		(2,958.8		)	770.1		731.1		2,295.8		634.2		(2,917.0		)	744.1
Total Liabilities and Equity	$	2,195.2	$	2,328.6	$	1,304.6	$	(3,839.0	)	$	1,989.4	$	2,328.9	$	2,508.5	$	1,240.2	$	(4,121.1	)	$	1,956.5	$	2,327.4	$	2,509.8	$	1,207.9	$	(4,159.6	)	$	1,885.5	$	2,289.6	$	2,516.9	$	1,194.8	$	(4,136.7	)	$	1,864.6

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Condensed Consolidating Statements of Cash Flow


	Six Months Ended March 31, 2018															Six Months Ended March 31, 2017															Six Months Ended March 31, 2019															Six Months Ended March 31, 2018
	Parent			Guarantors			Non- Guarantors			Eliminations			Consolidated			Parent			Guarantors			Non- Guarantors			Eliminations			Consolidated			Parent			Guarantors			Non- Guarantors			Eliminations			Consolidated			Parent			Guarantors			Non- Guarantors			Eliminations			Consolidated
Net cash provided by (used in) operating activities	$	143.6		$	125.0		$	(82.8	)	$	(124.3	)	$	61.5		$	(22.9	)	$	124.4		$	47.0		$	(128.7	)	$	19.8		$	(4.7	)	$	103.0		$	54.6		$	(106.4	)	$	46.5		$	143.6		$	125.0		$	(82.8	)	$	(124.3	)	$	61.5

Investing activities:
Capital expenditures	(1.4		)	(5.0		)	(4.2		)	—			(10.6		)	(0.4		)	(4.0		)	(4.7		)	—			(9.1		)	(0.4		)	(3.6		)	(4.3		)	—			(8.3		)	(1.4		)	(5.0		)	(4.2		)	—			(10.6		)
Proceeds from sales of property, plant, and equipment	—			—			—			—			—			—			1.8			0.4			—			2.2
Acquisition of business, net of cash acquired																															—			—			(26.2		)	—			(26.2		)	—			—			—			—			—
Other, net	—			0.2			0.1			—			0.3			2.7			(0.3		)	(2.5		)	—			(0.1		)	—			0.1			—			—			0.1			—			0.1			—			—			0.1
Net cash provided by (used in) investing activities	(1.4		)	(4.8		)	(4.1		)	—			(10.3		)	2.3			(2.5		)	(6.8		)	—			(7.0		)
Net cash used in investing activities																															(0.4		)	(3.5		)	(30.5		)	—			(34.4		)	(1.4		)	(4.9		)	(4.2		)	—			(10.5		)

Financing activities:
Repayments on term loan	(148.5		)	—			—			—			(148.5		)	(6.7		)	—			—			—			(6.7		)	—			—			—			—			—			(148.5		)	—			—			—			(148.5		)
Proceeds from revolving credit facilities, net of financing costs	445.7			—			256.1			—			701.8			189.1			—			362.6			—			551.7			164.0			—			178.0			—			342.0			445.7			—			256.1			—			701.8
Repayments on revolving credit facilities	(379.2		)	—			(163.6		)	—			(542.8		)	(133.0		)	—			(391.8		)	—			(524.8		)	(130.8		)				(193.0		)	—			(323.8		)	(379.2		)	—			(163.6		)	—			(542.8		)
Payment of dividends - intercompany	—			(118.3		)	(6.0		)	124.3			—			—			(122.6		)	(6.1		)	128.7			—			—			(100.0		)	(6.4		)	106.4			—			—			(118.3		)	(6.0		)	124.3			—
Payment of dividends on common stock	(26.2		)	—			—			—			(26.2		)	(26.0		)	—			—			—			(26.0		)	(26.2		)	—			—			—			(26.2		)	(26.2		)	—			—			—			(26.2		)
Repurchases of common stock	(38.9		)	—			—			—			(38.9		)	(17.0		)	—			—			—			(17.0		)	—			—			—			—			—			(38.9		)	—			—			—			(38.9		)
Net proceeds on stock plans	5.2			—			—			—			5.2			10.2			—			—			—			10.2
Proceeds from stock option exercises and other																															1.4			—			—			—			1.4			9.3			—			—			—			9.3
Payments for employee taxes on net settlement equity awards																															(4.2		)	—			—						(4.2		)	(4.1		)	—			—			—			(4.1		)
Other, net	—			—			(1.0		)	—			(1.0		)	—			—			(0.2		)	—			(0.2		)	—			—			(0.5		)	—			(0.5		)	—			—			(1.0		)	—			(1.0		)
Net cash provided by (used in) financing activities	(141.9		)	(118.3		)	85.5			124.3			(50.4		)	16.6			(122.6		)	(35.5		)	128.7			(12.8		)
Net cash (used in) provided by financing activities																															4.2			(100.0		)	(21.9		)	106.4			(11.3		)	(141.9		)	(118.3		)	85.5			124.3			(50.4		)

Effect of exchange rates on cash and cash equivalents	—			—			1.7			—			1.7			—			—			(0.6		)	—			(0.6		)	—			—			2.1			—			2.1			—			—			1.7			—			1.7

Net cash flow	0.3			1.9			0.3			—			2.5			(4.0		)	(0.7		)	4.1			—			(0.6		)	(0.9		)	(0.5		)	4.3			—			2.9			0.3			1.8			0.2			—			2.3
Cash and equivalents at beginning of period	0.1			4.9			61.0			—			66.0			4.4			5.6			42.0			—			52.0
Cash and equivalents at end of period	$	0.4		$	6.8		$	61.3		$	—		$	68.5		$	0.4		$	4.9		$	46.1		$	—		$	51.4
Cash, cash equivalents and restricted cash at beginning of period																															1.1			5.8			49.6			—			56.5			0.1			5.0			61.6			—			66.7
Cash, cash equivalents and restricted cash at end of period																															$	0.2		$	5.3		$	53.9		$	—		$	59.4		$	0.4		$	6.8		$	61.8		$	—		$	69.0

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18.	Restructuring

The following schedule details the restructuring charges by segment and the classification of those charges on the income statement.


	Three Months Ended March 31, 2018								Three Months Ended March 31, 2017						Three Months Ended March 31, 2019						Three Months Ended March 31, 2018
	Cost of goods sold			Operating expenses		Total			Cost of goods sold		Operating expenses		Total		Cost of goods sold		Operating expenses		Total		Cost of goods sold			Operating expenses		Total
Process Equipment Group	$	(0.1	)	$	—	$	(0.1	)	$	—	$	0.3	$	0.3	$	0.2	$	—	$	0.2	$	(0.1	)	$	—	$	(0.1	)
Batesville	—			0.2		0.2			0.1		—		0.1		0.1		0.4		0.5		—			0.2		0.2
Corporate	—			0.7		0.7			—		0.5		0.5		—		—		—		—			0.7		0.7
Total	$	(0.1	)	$	0.9	$	0.8		$	0.1	$	0.8	$	0.9	$	0.3	$	0.4	$	0.7	$	(0.1	)	$	0.9	$	0.8

	Six Months Ended March 31, 2018								Six Months Ended March 31, 2017
	Cost of goods sold			Operating expenses		Total			Cost of goods sold		Operating expenses		Total
Process Equipment Group	$	(0.1	)	$	0.2	$	0.1		$	—	$	0.3	$	0.3
Batesville	—			0.2		0.2			6.4		—		6.4
Corporate	—			0.6		0.6			—		2.1		2.1
Total	$	(0.1	)	$	1.0	$	0.9		$	6.4	$	2.4	$	8.8



	Six Months Ended March 31, 2019						Six Months Ended March 31, 2018
	Cost of goods sold		Operating expenses		Total		Cost of goods sold			Operating expenses		Total
Process Equipment Group	$	0.4	$	0.1	$	0.5	$	(0.1	)	$	0.2	$	0.1
Batesville	0.2		0.5		0.7		—			0.2		0.2
Corporate	—		—		—		—			0.6		0.6
Total	$	0.6	$	0.6	$	1.2	$	(0.1	)	$	1.0	$	0.9

The charges related primarily to ~~the closure of a Batesville plant and corporate functional restructuring.~~severance costs. At March 31, ~~2018, $1.3~~2019, $0.7 of restructuring costs were accrued and expected to be paid in ~~2018.~~fiscal 2019.

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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF

OPERATIONS

FORWARD-LOOKING STATEMENTS AND FACTORS THAT MAY AFFECT FUTURE RESULTS

Throughout this Form 10-Q, we make a number of “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. As the words imply, these are statements about future plans, objectives, beliefs, and expectations that might or might not happen in the future, as contrasted with historical information. Forward-looking statements are based on assumptions that we believe are reasonable, but by their very nature are subject to a wide range of risks. If our assumptions prove inaccurate or unknown risks and uncertainties materialize, actual results could vary materially from Hillenbrand’s expectations and projections.

Accordingly, in this Form 10-Q, we may say something like:

“We expect that future revenue associated with the Process Equipment Group will be influenced by order backlog.”

That is a forward-looking statement, as indicated by the word “expect” and by the clear meaning of the sentence.

Other words that could indicate we are making forward-looking statements include:

intend

believe

plan

expect

may

goal

would

become

pursue

estimate

will

forecast

continue

could

target

encourage

promise

improve

progress

potential

should

This is not an exhaustive list, but is intended to give you an idea of how we try to identify forward-looking statements. The absence of any of these words, however, does not mean that the statement is not forward-looking.

Here is the key point: Forward-looking statements are not guarantees of future performance, and our actual results could differ materially from those set forth in any forward-looking statements.

Any number of factors, many of which are beyond our control, could cause our performance to differ significantly from what is described in the forward-looking statements. This includes the impact of the Tax Act on the Company’s financial position, results of operations, and cash flows. For a discussion of factors that could cause actual results to differ from those contained in forward-looking statements, see the discussions under the heading “Risk Factors” in Item 1A of Part I of the Company’s Form 10-K filed with the SEC on November ~~15, 2017,~~13, 2018, and in Item 1A of Part II of this Form 10-Q. We assume no obligation to update or revise any forward-looking statements.

OPERATING PERFORMANCE MEASURES

The following discussion compares our results for the three and six months ended March 31, ~~2018,~~2019, to the same periods in fiscal year ~~2017.~~2018. The Company’s fiscal year ends on September 30. Unless otherwise stated, references to years relate to fiscal years. We begin the discussion at a consolidated level and then provide separate detail about the Process Equipment Group, Batesville, and Corporate. These financial results are prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”).

We also provide certain non-GAAP operating performance measures. These non-GAAP measures are referred to as “adjusted” measures and exclude impairment charges, expenses associated with business acquisition, development, and integration, ~~and~~ restructuring and restructuring related ~~charges.~~charges, and inventory step-up. The related income tax for all of these items is also excluded. The measures also exclude the non-recurring tax benefits and expenses related to the Tax Act. Non-GAAP information is provided as a supplement, not as a substitute for, or as superior to, measures of financial performance prepared in accordance with GAAP.

We use this non-GAAP information internally to make operating decisions and believe it is helpful to investors because it allows more meaningful period-to-period comparisons of our ongoing operating results. The information can also be used to perform trend analysis and to better identify operating trends that may otherwise be masked or distorted by these types of items. We believe this information provides a higher degree of transparency.

An important non-GAAP measure that we use is adjusted earnings before interest, income tax, depreciation, and amortization (“

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(“adjusted EBITDA”). A part of Hillenbrand’s strategy is to selectively acquire companies that we believe can benefit from the

Hillenbrand Operating Model (“HOM”) to spur faster and more profitable growth. Given that strategy, it is a natural consequence to incur related expenses, such as amortization from acquired intangible assets and additional interest expense from debt-funded acquisitions. Accordingly, we use adjusted EBITDA, among other measures, to monitor our business performance.

Another important non-GAAP operational measure used is backlog. Backlog is not a term recognized under GAAP; however, it is a common measurement used in industries with extended lead times for order fulfillment (long-term contracts), like those in which our Process Equipment Group competes. ~~Order backlog~~Backlog represents the amount of consolidated revenue that we expect to realize on contracts awarded related to the Process Equipment Group. For purposes of calculating backlog, 100% of estimated revenue attributable to consolidated subsidiaries is included. Backlog includes expected revenue from large systems and equipment, as well as replacement parts, components, and service. The length of time that projects remain in backlog can span from days for replacement parts or service to approximately 18 to 36 months for larger system sales. Backlog includes expected revenue from the remaining portion of firm orders not yet completed, as well as revenue from change orders to the extent that they are reasonably expected to be realized. We include in backlog the full contract award, including awards subject to further customer approvals, which we expect to result in revenue in future periods. In accordance with industry practice, our contracts may include provisions for cancellation, termination or suspension at the discretion of the customer.

We expect that future revenue associated with the Process Equipment Group will be influenced by backlog because of the lead time involved in fulfilling engineered-to-order equipment for customers. Although backlog can be an indicator of future revenue, it does not include projects and parts orders that are booked and shipped within the same quarter. The timing of order placement, size, extent of customization, and customer delivery dates can create fluctuations in backlog and revenue. Revenue attributable to backlog may also be affected by foreign exchange fluctuations for orders denominated in currencies other than U.S. dollars.

We calculate the foreign currency impact on net revenue, gross profit, ~~and~~ operating expenses, backlog, consolidated net income, and adjusted EBITDA in order to better measure the comparability of results between periods. We calculate the foreign currency impact by translating current year results at prior year foreign exchange rates. This information is provided because exchange rates can distort the underlying change in ~~sales,~~these metrics, either positively or negatively. The cost structures for Corporate and Batesville are generally not significantly impacted by the fluctuation in foreign exchange rates, and we do not disclose the foreign currency impact in the Operations Review below where the impact is not significant.

See page 3839 for reconciliation of adjusted EBITDA to consolidated net income, the most directly comparable GAAP measure. We use other non-GAAP measures in certain other instances and include information reconciling such non-GAAP measures to the respective most directly comparable GAAP measures. Given that there is no GAAP financial measure comparable to backlog, a quantitative reconciliation is not provided.

CRITICAL ACCOUNTING ESTIMATES

For the three and six months ended March 31, ~~2018,~~2019, there were no significant changes to our critical accounting estimates, as outlined in our Annual Report on Form 10-K for ~~2017,~~2018, except as described below.

2017 Tax Cuts and Jobs Act

— On December 22, 2017, the Tax Act was enacted. ~~While certain~~The majority of the provisions of the Tax Act ~~are~~were to be effective for tax years beginning after December 31, 2017 (which corresponds to Hillenbrand’s current fiscal year ending September 30, 2019)~~, several provisions are effective for the fiscal year ending September 30, 2018.~~. The Tax Act reduced the federal corporate tax rate from 35% to 21% and isbecame effective on January 1, 2018. As a non-calendar year end company, certain of the provisions of the Tax Act were effective for the fiscal year ended September 30, 2018, while others became effective for us for our current fiscal year ending September 30, 2019. The Internal Revenue Code provides that our fiscal year ~~ending~~ended September 30, 2018 ~~have~~had a blended U.S. corporate tax rate of 24.5%, which is based on a proration of the applicable tax rates before and after effective date of the Tax Act. The statutory tax rate of 21% ~~will apply~~applies to fiscal year ending September 30, 2019 and future years.

Furthermore, Hillenbrand is subject to the Transition Tax. This Transition Tax is imposed on the deferred accumulated earnings of foreign subsidiaries at an effective rate of 15.5% of foreign earnings attributable to cash and cash equivalents, and 8% of the residual foreign earnings. ~~It is anticipated that~~During the fiscal year ended September 30, 2018, we recorded a provisional net expense for the Transition Tax of $24.6. During the quarter ended December 31, 2018, we completed our determination of the Transition Tax and, pursuant to SAB 118, we recognized a $0.5 increase to the Transition Tax liability, resulting in a final Transition tax liability of $25.1. Hillenbrand ~~will elect~~elected to pay the Transition Tax over eight ~~years. We have recorded tax expense based on an estimate~~years and made the first installment payment of ~~the annual effective rate taking into account the reduced corporate tax rate for the year. Additionally,~~$2.0 during the ~~period~~quarter ended December 31, ~~2017,~~2018. In connection with the Tax Act, we ~~recorded a provisional deferred tax benefit~~evaluated our future cash deployment needs and revised our permanent reinvestment assertions. While we continue to assert permanent reinvestment for the ~~impact~~earnings of ~~the reduced corporate tax rate on the U.S. net~~certain of our foreign subsidiaries, we recognized an additional $1.3 of deferred tax liability during the quarter ended December 31, 2018, associated with those foreign subsidiaries where we no longer maintain a permanent reinvestment assertion.

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Revenue Recognition — Net revenue includes gross revenue less sales discounts, customer rebates, sales incentives, and ~~a provisional tax liability~~product returns, all of which require us to make estimates for the ~~Transition Tax.~~ portion of these allowances that have yet to be credited or paid to our customers. We estimate these allowances using the expected value method, which is based upon historical rates and projections of customer purchases toward contractual rebate thresholds.~~While~~

Performance Obligations & Contract Estimates

Our contracts with customers in the Process Equipment Group segment often include multiple performance obligations. Performance obligations are promises in a contract to transfer a distinct good or service to the customer, and are the basis for determining how revenue is recognized. For instance, a contract may include obligations to deliver equipment, installation services, and spare parts. We frequently have contracts for which the equipment and the installation services, as well as highly engineered or specialized spare parts, are all considered a single performance obligation, as in these instances the installation services and/or spare parts are not separately identifiable. However, due to the varying nature of equipment and contracts across the Process Equipment Group, we also have contracts where the installation services and/or spare parts are ~~able~~deemed to ~~make~~be separately identifiable and are therefore deemed to be distinct performance obligations.

A contract’s transaction price is allocated to each distinct performance obligation based on its respective stand-alone selling price, and recognized as revenue when, or as, the performance obligation is satisfied. When a ~~reasonable estimate~~distinct performance obligation is not sold separately, the value of the ~~impact~~standalone selling price is estimated considering all reasonably available information. When an obligation is distinct, as defined in ASC606, we allocate a portion of the ~~reduction in corporate rate on~~contract price to the ~~deferred tax balance, we are continuing to analyze~~obligation and recognize it separately from the ~~temporary differences that existed on the date of enactment and the temporary differences originating in the current fiscal year. Furthermore, we will not be able to precisely determine the amount of the Transition Tax~~other performance obligations.

~~until the end~~The timing of fiscal 2018 because certain cash and cash equivalent balances at September 30, 2018 and current year earnings are key inputs in the calculation. Additionally, other information needs to be verified, including cumulative foreign earnings, to precisely compute the amount of the Transition Tax. Therefore, tax expense associated with these provisions may be adjusted throughout the year as we refine our estimate. During the three months ended March 31, 2018, we did not record an adjustment to the provisional tax expense recognized during the period ended December 31, 2017, as we continue to evaluate the impact of the Tax Act. We will recognize an adjustment to the provisional tax expense once we have determined the actual tax impact, pursuant to SAB 118.

~~Asset Impairment Determinations~~

~~We have updated our critical accounting estimate for Asset Impairment Determinations to reflect the adoption of ASU 2017-04.~~

Goodwill and other intangible assets with indefinite lives, primarily trade names, are not amortized; rather, they are tested for impairment at least annually and upon the occurrence of certain triggering events or substantive changes in circumstances that indicate that the fair value may be impaired.

Impairment of goodwill is tested at the reporting unit level. A reporting unit is an operating segment or one level below an operating segment. For the purpose of the goodwill impairment test, the Company can elect to perform a qualitative analysis to determine if it is more likely than not that the fair values of its reporting units are less than the respective carrying values of those reporting units. Such factors we consider in a qualitative analysis include, but are not limited to, macroeconomic conditions, industry and market considerations, cost factors, Company-specific events, events affecting the reporting unit, and the overall financial performance of the reporting unit.

If we elect to perform or are required to perform a quantitative analysis, we compare the carrying amount of the reporting unit’s net assets, including goodwill, to the fair value of the reporting unit. If the fair value exceeds the carrying value, no further evaluation is required and no impairment loss is recognized. If the carrying amount exceeds the fair value, an impairment charge is recognized for the difference between carrying amount and fair value, not to exceed the original amount of goodwill.

In determining the estimated fair value of the reporting units when performing a quantitative analysis, we consider both the market approach and the income approach. Weighting is equally attributed to both the market and income approaches in arriving at the fair value of the reporting units.

Under the market approach, we utilize the guideline company method, which involves calculating valuation multiples based on operating data from comparable publicly traded companies. Multiples derived from these companies provide an indication of how much a knowledgeable investor in the marketplace would be willing to pay for a company. These multiples are then applied to the operating data for our reporting units to arrive at an indication of value.

Under the income approach, the fair value of the reporting unit is based on the present value of estimated future cash flows utilizing a market-based weighted-average cost of capital determined separatelyrevenue recognition for each ~~reporting unit.~~

To determine the reasonableness of the calculated fair values of our reporting units, the Company reviews the assumptions described below to ensure that neither the market approach nor the income approach yields significantly different valuations. We selected these valuation approaches because we believe the combination of these approaches, along with our best judgment regarding underlying assumptions and estimates, provides us with the best estimate of fair value of our reporting units. We believe these valuation approaches are appropriate for the industry and widely accepted by investors.

Determining the fair value of a reporting unit requires us to make significant judgments, estimates, and assumptions. While we believe that the estimates and assumptions underlying our valuation methodology are reasonable, these estimates and assumptions could have a significant impact on whether an impairment chargeperformance obligation is ~~recognized and also on the magnitude of any such charge. The results of an impairment analysis are as of~~either over time or at a point in time. ~~There is~~We recognize revenue over time for contracts that have an enforceable right to collect payment for performance completed to-date upon customer cancellation and provide one or more of the following: (i) service over a period of time, (ii) highly customized equipment, or (iii) parts which are highly engineered and have no ~~assurance that actual future earnings~~alternative use. Revenue generated from standard equipment and highly customized equipment or ~~cash flows of our reporting units will not decline significantly from our projections. We will monitor any changes~~parts contracts without an enforceable right to ~~our assumptions and will evaluate goodwill as deemed warranted during future periods.~~

~~The key assumptions~~payment for the market and income approaches we use to determine fair value of our reporting units are updated at least annually. Those assumptions and estimates include market data and market multiples (7.2-14.5 times adjusted EBITDA), discount rates (7.6-12.5%), and terminal growth rates (0.0-3.0%),performance completed to-date, as well as ~~future levels~~non-specialized parts sales and sales of death care products, is recognized at a point in time.

We use the input method of “cost-to-cost” to recognize revenue ~~growth, operating margins, depreciation, amortization,~~over time. Accounting for these contracts involves management judgment in estimating total contract revenue and ~~working capital requirements,~~cost. Contract revenues are largely determined by negotiated contract prices and quantities, modified by our assumptions regarding contract options, change orders, and incentive and award provisions associated with technical performance clauses. Contract costs are incurred over longer periods of time and, accordingly, the estimation of these costs requires judgment. We measure progress based on costs incurred to date relative to total estimated cost at completion. Incurred cost represents work performed, which corresponds with, and we believe thereby best depicts, the transfer of control to the customer. Contract costs include labor, material, and certain overhead expenses. Cost estimates are based ~~upon~~on various assumptions to project the ~~Company’s strategic plan. Hillenbrand’s strategic plan is updated as part~~outcome of ~~its annual planning process~~future events, including labor productivity and ~~is reviewed and approved by management~~availability, the complexity of the work to be performed, the cost of materials, and the ~~Board~~performance of ~~Directors. The strategic plan may be~~subcontractors. Significant factors that influence these estimates include inflationary trends, technical and schedule risk, internal and subcontractor performance trends, business volume assumptions, asset utilization, and anticipated labor agreements. Revenue and cost estimates are regularly monitored and revised ~~as necessary~~ based on changes in ~~market conditions or other changes~~circumstances. Anticipated losses on long-term contracts are recognized immediately when such losses become evident. We maintain financial controls over the customer qualification, contract pricing, and estimation processes to reduce the risk of contract losses.

inStand-alone service revenue is recognized either over time proportionately over the ~~reporting units. The discount rate assumption is based~~period of the underlying contract or as invoiced, depending on the ~~overall after-tax rate of return required by a market participant whose weighted-average cost of capital includes both equity and debt, including a risk premium.~~

Although there are always changes in assumptions to reflect changing business and market conditions, our overall valuation methodology and the types of assumptions we use have remained consistent. While we use the best available information to prepare the cash flow and discount rate assumptions, actual future cash flows or market conditions could differ significantly resulting in future impairment charges related to recorded goodwill balances.

Similar to goodwill, the Company can elect to perform the impairment test for indefinite-lived intangibles other than goodwill (primarily trade names) using a qualitative analysis, considering similar factors as outlined in the goodwill discussion in order to determine if it is more likely than not that the fair valuesterms of the ~~trade names are less than~~arrangement. Stand-alone service revenue is not material to the ~~respective carrying values. If~~Company.

For the Process Equipment Group and Batesville segment products where revenue is recognized at a point in time, we ~~elect to perform or are required to perform a quantitative analysis, the test consists of a comparison~~recognize it when our customers take control of the ~~fair value~~asset. We define this as the point in time at which the customer has the capability of ~~the indefinite-lived intangible asset to the carrying value~~full beneficial use of the asset as ofintended per the impairment testing date. We estimate the fair value of indefinite-lived intangibles using the relief-from-royalty method, which we believe is an appropriate and widely used valuation technique for such assets. The fair value derived from the relief-from-royalty method is measured as the discounted cash flow savings realized from owning such trade names and not being required to pay a royalty for their use.contract.

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EXECUTIVE OVERVIEW

(financial amounts in millions, except share and per share data, throughout Management’s Discussion and Analysis)

Hillenbrand is a global diversified industrial company with multiple ~~market-leading~~leading brands that serve a wide variety of industries around the world. Hillenbrand’s portfolio is composed of two business segments: the Process Equipment Group and ~~Batesville~~^®Batesville®. The Process Equipment Group businesses design, develop, manufacture, and service highly engineered industrial equipment around the world. Batesville is a recognized leader in the ~~North American~~ death care ~~industry.~~industry in North America.

We strive to provide superior return for our shareholders, exceptional value for our customers, ~~and~~ great professional opportunities for our employees, and to be responsible to our communities through deployment of the HOM. The HOM is a consistent and repeatable framework designed to produce sustainable and predictable results. The HOM describes our mission, vision, values and mindset as leaders; applies our management practices in Strategy Management, Segmentation, Lean, Talent Development, and Acquisitions; and prescribes three steps (Understand, Focus, and Grow) designed to make our businesses both bigger and better. Our goal is to continue developing Hillenbrand as a world-class global diversified industrial company through the deployment of the HOM.

Our strategy is to leverage our historically strong financial foundation and the HOM to deliver sustainable profit growth, revenue expansion and substantial free cash flow and then reinvest available cash in new growth initiatives that are focused on building platforms with leadership positions in our core markets and near adjacencies, both organically and inorganically, in order to create shareholder value.

OPERATIONS REVIEW — CONSOLIDATED


	Three Months Ended March 31,									Six Months Ended March 31,									Three Months Ended March 31,								Six Months Ended March 31,
	2018					2017				2018					2017				2019			2018					2019			2018
	Amount			% of Net Revenue		Amount			% of Net Revenue	Amount			% of Net Revenue		Amount			% of Net Revenue	Amount		% of Net Revenue	Amount			% of Net Revenue		Amount		% of Net Revenue	Amount			% of Net Revenue
Net revenue	$	452.2		100.0		$	395.3		100.0	$	849.4		100.0		$	751.4		100.0	$	464.6	100.0	$	452.2		100.0		$	874.9	100.0	$	849.4		100.0
Gross profit	168.7			37.3		148.6			37.6	315.0			37.1		274.6			36.5	160.9		34.6	168.6			37.3		307.9		35.2	314.8			37.1
Operating expenses	98.3			21.7		85.6			21.7	187.5			22.1		168.4			22.4	93.7		20.2	98.3			21.7		184.4		21.1	187.4			22.1
Amortization expense	7.5			1.7		7.2			1.8	15.1			1.8		14.4			1.9	8.6		1.9	7.5			1.7		16.4		1.9	15.1			1.8
Impairment charge	63.4			14.0		—			—	63.4			7.5		—			—	—		—	63.4			14.0		—		—	63.4			7.5
Interest expense	6.0			1.3		6.3			1.6	12.3			1.4		12.4			1.7	5.4		1.2	6.0			1.3		10.9		1.2	12.3			1.4
Other (expense) income, net	(1.2		)	0.3		(0.6		)	0.2	(1.6		)	0.2		(1.9		)	0.3
Other income (expense), net																			0.1		—	(1.1		)	0.2		0.6		0.1	(1.5		)	0.2
Income taxes	13.6			3.0		14.9			3.8	37.3			4.4		21.6			2.9	13.8		3.0	13.6			3.0		28.3		3.2	37.3			4.4
Net (loss) income(1)	(21.9		)	(4.8	)	33.4			8.4	(3.8		)	(0.4	)	55.1			7.3
Net income (loss) (1)																			38.0		8.2	(21.9		)	(4.8	)	66.3		7.6	(3.8		)	(0.4	)

(1) Net income (loss) ~~income~~ attributable to Hillenbrand.

Three Months Ended March 31, ~~2018~~2019 Compared to Three Months Ended March 31, ~~2017~~2018

Net revenue increased ~~$56.9 (14%~~$12.4 (3%), which included ~~favorable~~unfavorable foreign currency impact ~~of $22.3.~~(4%).

•The Process Equipment Group’s net revenue increased ~~$55.7 (23%~~$26.9 (9%), primarily due to ~~favorable foreign~~higher volume (11%), the acquisition of BM&M, and pricing. Foreign currency impact ~~($21.9) and increased demand for screening and separating equipment (including equipment that processes proppants for hydraulic fracturing), plastics projects, and parts and service.~~decreased net revenue by 5%.

•Batesville’s net revenue ~~increased $1.2 (1%~~decreased $14.5 (10%), primarily due to ~~favorable foreign currency impact ($0.4) and higher burial~~a decrease in volume (9%). Lower volume was primarily driven by ~~an estimated increase~~a decrease in burial sales resulting from what we estimate to be a decrease in North ~~America deaths, partially offset~~American burials driven by lower ~~sales~~estimated deaths and the increased rate at which families opted for ~~non-burial products.~~ cremation.

Gross profit ~~increased $20.1 (14%~~decreased $7.7 (5%), which included ~~favorable~~unfavorable foreign currency impact ~~of $7.1.~~(3%). Gross profit margin decreased 30270 basis points to ~~37.3%~~34.6%.

•

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The Process Equipment Group’s gross profit increased ~~$22.8 (26%~~$2.3 (2%), primarily due to ~~favorable foreign~~higher volume, pricing and productivity improvements, and the acquisition of BM&M, partially offset by unfavorable mix due to an increased proportion of lower margin, large systems sales in plastics and cost inflation. Foreign currency impact ~~($7.3) and increased demand for screening and separating equipment (including equipment that processes proppants for hydraulic fracturing), plastics projects, and parts and service.~~decreased gross profit by 5%. Gross profit margin ~~improved 90~~decreased 240 basis points to ~~37.0%~~34.7% in ~~2018,~~ 2019, primarily ~~driven~~due to an increased proportion of lower margin, large systems sales in plastics and cost inflation, partially offset by pricing and productivity improvements.

The Process Equipment Group’s gross profit included restructuring and ~~pricing improvements~~restructuring related charges of $0.2 and ~~favorable product mix.~~
inventory step-up charges of $0.1 in fiscal 2019. Excluding these charges, adjusted gross profit increased $2.7 (2%) and adjusted gross profit margin decreased 220 basis points to 34.8%.

•

Batesville’s gross profit decreased ~~$2.7 (4%~~$10.0 (17%) and gross profit margin decreased ~~210~~330 basis points to ~~38.0%~~34.4%. The decrease in gross profit and gross profit margin was primarily due to ~~operational inefficiencies~~the decrease in ~~our manufacturing~~volume. Inflation in commodities and ~~distribution network caused~~wages was offset by ~~the sudden surge in demand early in the quarter, along with higher raw material and fuel costs.~~productivity improvements.

Batesville’s gross profit included restructuring and restructuring related charges ~~of $0.3~~($0.1 in ~~2017.~~fiscal 2019). Excluding these charges, adjusted gross profit decreased ~~$3.0 (5%~~$9.9 (17%) and adjusted gross profit margin decreased ~~230~~320 basis points to 38.0%, primarily due to operational inefficiencies in our manufacturing and distribution network caused by the sudden surge in demand early in the quarter, along with higher raw material and fuel costs. 34.5%.

Operating expenses ~~increased $12.7 (15%~~decreased $4.6 (5%)~~, primarily due to unfavorable foreign~~. Foreign currency impact ~~of $4.6, an increase in variable compensation, wage~~decreased operating expenses by 3%. The remaining decrease was driven primarily by productivity improvements and ~~benefit inflation, and an increase in corporate project costs,~~lower litigation expenses, partially offset by ~~a decrease~~cost inflation. Our operating expense-to-revenue ratio improved by 150 basis points to 20.2% in ~~restructuring and restructuring related charges and business acquisition, development, and integration costs.~~

~~Operating expenses as a percentage of net revenue remained flat at 21.7%.~~2019. Operating expenses included the following items:


	Three Months Ended March 31,				Three Months Ended March 31,
	2018		2017		2019		2018
Business acquisition, development, and integration costs	$	0.2	$	0.3	$	0.5	$	0.2
Restructuring and restructuring related charges	0.8		1.0		0.4		0.8

On an adjusted basis, which excluded business acquisition, development, and integration costs and restructuring and restructuring related charges, operating expenses ~~increased $13.0 (15%~~decreased $4.5 (5%)~~, primarily due to unfavorable foreign currency impact of $4.6 and an increase in variable compensation, wage and benefit inflation, and an increase in corporate project costs.~~. Adjusted operating expenses as a percentage of net revenue ~~increased 20~~improved 150 basis points in ~~2018~~2019 to ~~21.5%~~20.0%.

Amortization expenseincreased ~~increased $0.3,~~$1.1 (15%) primarily due to ~~unfavorable foreign currency impact~~amortization on the acquired intangibles of ~~$0.5.~~BM&M.

Interest expense decreased $0.6, primarily due to lower average borrowings.

Impairment charge ~~increased~~decreased $63.4 due to the goodwill and trade name impairments recorded in 2018. See Note 56 of Part I of this Form 10-Q for further information on the impairment charges.

Other income (expense) ~~income,~~, net was ~~$1.2~~$0.1 of other income in 2019, compared to $1.1 of other expense in ~~fiscal 2018, compared to $0.6 of other expense in fiscal 2017.~~2018. The ~~increase in expense~~change was driven primarily by ~~lower equity earnings from affiliates.~~decreased foreign currency exchange losses.

The effective tax rate was 25.9% in fiscal 2019 compared to (176.6)% in fiscal ~~2018 compared to 30.5% in fiscal 2017.~~2018. The negative effective tax rate induring the ~~current year quarter~~three months ended March 31, 2018 primarily ~~results~~resulted from the nondeductible portion of the impairment charge recorded in the Process

Equipment Group segment and the resulting loss before tax for the quarter. ~~Partially offsetting this impact, the~~The Tax Act resulted in a ~~reduced tax~~reduction of the domestic statutory rate ~~(21% versus~~from 35%~~) as compared~~ to ~~the prior quarter.~~ 21%. The Internal Revenue Code provides that our fiscal year ~~ending~~ended September 30, 2018 ~~has~~had a blended corporate tax rate of 24.5%, which is based on a proration of the applicable tax rates before and after the effective date of the Tax Act. The domestic statutory tax rate of 21% ~~will apply~~applies to the fiscal year ending September 30, 2019 and future years. ~~The impact of the tax rate reduction was recognized in the rate applied to earnings.~~

~~Our~~Excluding the tax effect of all adjustments discussed above, as well as the impairment charge, our adjusted effective income tax rate ~~which excludes the impact of the impairment charge, Transition Tax, and the revaluation of the deferred tax balances as a result of the Tax Act,~~ was 25.9% in fiscal 2019 compared to 25.4% in fiscal 2018 compared to 30.9% in fiscal 2017. Management expects the Tax Act to favorably impact the Company’s net income, diluted earnings per share, and cash flows in future periods, due primarily to the reduction2018. The increase in the ~~federal corporate~~adjusted effective tax rate from 35% to 21%. Additionally, the Tax Act could incentivize additional investments in facilities and infrastructure in the U.S. that may increase future demand for equipment in the end-markets that the Company serves.

Management currently estimates that the Company’s consolidated adjusted effective income tax rate for full-year fiscal 2018 will be approximately 26% to 28%, compared with nearly 32% for the prior year. The aforementioned tax-related estimates may differ from actual results, possibly materially,was primarily due to ~~changes in interpretations~~an unfavorable geographic mix of ~~the Tax Act and assumptions made~~pretax income, partially offset by the ~~Company, as well as guidance that may be issued and actions the Company may take as a result~~full implementation of the Tax Act.

Six Months Ended March 31, ~~2018~~2019 Compared to Six Months Ended March 31, ~~2017~~2018

Net revenue increased ~~$98.0 (13%~~$25.5 (3%), which included ~~favorable~~unfavorable foreign currency impact ~~of $34.4.~~(3%).

•The Process Equipment Group’s net revenue increased ~~$98.4 (21%~~$44.8 (8%), primarily due to ~~favorable foreign~~higher volume (9%), pricing, and the acquisition of BM&M. Foreign currency impact ~~($33.7) and increased demand for screening and separating equipment (including equipment that processes proppants for hydraulic fracturing), plastics projects, and parts and service.~~decreased net revenue by 4%.

•

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Batesville’s net revenue decreased ~~$0.4 (0.1%~~$19.3 (7%), primarily due to a decrease in volume ~~($2.2)~~(7%), ~~partially offset~~Lower volume was primarily driven by ~~favorable foreign currency impact ($0.8). The primary driver of the decrease was lower burial volume and~~ a decrease in burial sales resulting from ~~product line simplification efforts. Sales of non-burial products were also down for the first six months, contributing~~what we estimate to ~~the volume decline. Even though~~be a decrease in North American burials driven by lower estimated deaths ~~were estimated to be higher year over year, burials were estimated to be flat to the prior year due to~~and the increased rate at which families opted for cremation.

Gross profit ~~increased $40.4 (15%~~decreased $6.9 (2%), which included ~~favorable~~unfavorable foreign currency impact ~~of $10.9.~~(2%). Gross profit margin ~~improved 60~~decreased 190 basis points to ~~37.1%~~35.2%.

•

The Process Equipment Group’s gross profit increased ~~$39.5 (23%~~$6.4 (3%), primarily due to ~~favorable foreign~~higher volume, pricing and productivity improvements and the acquisition of BM&M, partially offset by unfavorable mix due to an increased proportion of lower margin, large systems sales in plastics and cost inflation. Foreign currency impact ~~($11.2) and increased demand for screening and separating equipment (including equipment that processes proppants for hydraulic fracturing), plastics projects, and parts and service.~~decreased gross profit by 4%. Gross profit margin ~~improved 60~~decreased 160 basis points to ~~37.1%~~35.6% in ~~2018,~~ 2019, primarily ~~driven~~due to an increased proportion of lower margin, large systems sales in plastics and cost inflation, partially offset by pricing and productivity improvements.

The Process Equipment Group’s gross profit included restructuring and ~~pricing improvements.~~
restructuring related charges of $0.4 and inventory step-up charges of $0.2 in fiscal 2019. Excluding these charges, adjusted gross profit increased $7.0 (3%) and adjusted gross profit margin decreased 160 basis points to 35.6%.

•

Batesville’s gross profit ~~increased $0.9 (1%~~decreased $13.3 (13%) and gross profit margin ~~improved 40~~decreased 230 basis points to ~~37.0%~~34.4%. The ~~increase~~decrease in gross profit and gross profit margin was primarily due to athe decrease in ~~restructuring~~volume and ~~restructuring related charges. These items were~~inflation in commodities and wages, partially offset by the decline in volume, higher raw material and fuel costs, along with operational inefficiencies in our manufacturing and distribution network in the second quarter caused by the sudden surge in demand early in the quarter.productivity improvements.

Batesville’s grossprofit included restructuring and restructuring related charges ($~~0.1~~0.2 in ~~2018~~fiscal 2019 and ~~$6.7~~$0.1 in ~~2017)~~fiscal 2018). Excluding these charges, adjusted gross profit decreased ~~$5.7 (5%~~$13.1 (13%) and adjusted gross profit margin decreased ~~200~~220 basis points to ~~37.0%,~~ ~~primarily driven by the decline in volume, higher raw material and fuel costs, and operational inefficiencies in our manufacturing and distribution network in the second quarter.~~34.5%.

Operating expenses ~~increased $19.1 (11%~~decreased $3.0 (2%)~~, primarily due to unfavorable foreign~~. Foreign currency impact ~~of $7.0, an increase~~decreased operating expenses by 2%. In addition, productivity improvements, lower litigation expenses, and a decrease in ~~variable compensation, wage and benefit inflation, corporate project costs, and~~ business acquisition, development, and integration costs, ~~partially~~were more than offset by ~~a decrease~~cost inflation, an increase in ~~restructuring~~strategic project investments, and ~~restructuring related charges. Operating expenses as a percentage~~the acquisition of ~~net revenue~~BM&M. Our operating expense-to-revenue ratio improved 30by 100 basis points to ~~22.1%.~~21.1% in 2019. Operating expenses included the following items:


	Six Months Ended March 31,				Six Months Ended March 31,
	2018		2017		2019		2018
Business acquisition, development, and integration costs	$	2.5	$	0.6	$	1.1	$	2.5
Restructuring and restructuring related charges	1.2		2.7		0.6		1.2

On an adjusted basis, which excluded business acquisition, development, and integration costs and restructuring and restructuring related charges, operating expenses ~~increased $18.7 (11%~~decreased $1.0 (1%). ~~The increase in adjusted~~Foreign currency impact decreased operating expenses ~~was primarily driven~~ by ~~unfavorable foreign currency impact of $7.0,~~2%. Productivity improvements and lower litigation expenses were more than offset by cost inflation, an increase in ~~variable compensation, wage~~strategic project investments, and ~~benefit inflation, and corporate project costs.~~the acquisition of BM&M. Adjusted operating expenses as a percentage of net revenue improved 4070 basis points in 2019 to ~~21.6%~~20.9%.

Amortization expense increased ~~$0.7,~~$1.3 (9%) primarily due to ~~unfavorable foreign currency impact~~amortization on the acquired intangibles of ~~$0.8.~~BM&M.

Interest expense decreased $1.4, primarily due to lower average borrowings.

Other income (expense) ~~income,~~, net was ~~$1.6~~$0.6 of other income in 2019, compared to $1.5 of other expense in ~~fiscal 2018, compared to $1.9 of other expense in fiscal 2017.~~2018. The ~~decrease in expense~~change was driven primarily by ~~a decrease in~~decreased foreign currency exchange ~~loss, partially offset by lower equity earnings from affiliates.~~losses.

The effective tax rate was 29.2% in fiscal 2019 compared to 106.3% in fiscal ~~2018 compared to 27.9% in fiscal 2017.~~2018. The high effective tax rate induring the ~~period~~six months ended March 31, 2018 primarily ~~results~~resulted from the nondeductible portion of the impairment charge recorded in the Process Equipment Group ~~segment. Additionally,~~segment and the resulting loss before tax and the impact of the Tax Act, ~~resulted in a higher tax rate~~ as ~~compared to the prior year~~ driven by the items discussed below. Additionally, the current year decrease in the effective tax rate is partially driven by the full implementation of the Tax Act, partially offset by an unfavorable geographic mix of pretax income and an increase in reserve for uncertain tax positions.

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The Tax Act ~~reduced~~ resulted in a reduction of the ~~federal corporate tax~~domestic statutory rate from 35% to 21%. The Internal Revenue Code provides that our fiscal year ~~ending~~ended September 30, 2018 ~~have~~had a blended corporate tax rate of 24.5%, which is based on a proration of the applicable tax rates before and after effective date of the Tax Act. The domestic statutory tax rate of 21% ~~will apply~~applies to the fiscal year ending September 30, 2019 and future years. ~~The~~During the quarter ended December 31, 2017, we recognized a provisional net tax expense of $14.3, pursuant to SAB 118, for the impact of the tax rate reduction ~~was recognized in the rate applied to earnings as well as a provisional tax benefit of $14.9 related to the revaluation of~~on our domestic net deferred tax ~~liability. While we are able to make~~liability, as well as a ~~reasonable estimate~~recognition of the ~~impact of~~estimated Transition Tax liability. During the ~~reduction in corporate rate on the deferred~~ ~~tax balances,~~quarter ended December 31, 2018, we ~~are continuing~~recognized an additional $0.5 increase to ~~analyze the temporary differences that existed on the date of enactment and the temporary differences originating in the current fiscal year.~~ ~~These favorable adjustments were more than offset by the provisional recognition of an estimated $28.9 tax expense for the Transition Tax. We will not be able to precisely determine the amount of~~ the Transition Tax until the end of fiscal 2018 because certain cash and cash equivalent balances at September 30, 2018 and current year earnings are key inputs in the calculation. Additionally, other information needs to be verified, including cumulative foreign earnings, to precisely compute the amount of the Transition Tax. Therefore, tax expense associated with these provisions may be adjusted throughout the year as we refine our estimate.liability.

Our adjusted effective income tax rate ~~which~~was 27.3% in fiscal 2019 compared to 23.9% in fiscal 2018. The adjusted effective income tax rate excludes the impact of the ~~impairment charge,~~ Transition Tax ($0.5 in fiscal 2019 and $28.9 in fiscal 2018), the revaluation of the deferred tax balances ~~discussed above, was 23.9%~~($14.9 benefit in fiscal ~~2018 compared to 29.0%~~2018), and accrued deferred tax liability associated with the permanent reinvestment assertions ($1.3 in fiscal ~~2017.~~2019). The adjusted effective income tax rate also excludes the tax effect of the previously mentioned impairment charge, as well as the tax impact of the adjustments discussed above. Excluding these items, the increase in the adjusted effective tax rate was primarily due to an unfavorable geographic mix of pretax income and an increase in reserve for uncertain tax positions, partially offset by the full implementation of the Tax Act.

OPERATIONS REVIEW — PROCESS EQUIPMENT GROUP


	Three Months Ended March 31,						Six Months Ended March 31,						Three Months Ended March 31,						Six Months Ended March 31,
	2018			2017			2018			2017			2019			2018			2019			2018
	Amount		% of Net Revenue	Amount		% of Net Revenue	Amount		% of Net Revenue	Amount		% of Net Revenue	Amount		% of Net Revenue	Amount		% of Net Revenue	Amount		% of Net Revenue	Amount		% of Net Revenue
Net revenue	$	299.8	100.0	$	244.1	100.0	$	564.1	100.0	$	465.7	100.0	$	326.7	100.0	$	299.8	100.0	$	608.9	100.0	$	564.1	100.0
Gross profit	110.8		37.0	88.0		36.1	209.5		37.1	170.0		36.5	113.4		34.7	111.1		37.1	216.5		35.6	210.1		37.2
Operating expenses	63.4		21.1	54.5		22.3	119.7		21.2	105.7		22.7	61.8		18.9	63.4		21.1	123.4		20.3	119.6		21.2
Amortization expense	7.5		2.5	7.2		2.9	15.1		2.7	14.3		3.1	8.6		2.6	7.5		2.5	16.4		2.7	15.1		2.7
Impairment charge	63.4		21.1	—		—	63.4		11.2	—		—	—		—	63.4		21.1	—		—	63.4		11.2

Three Months Ended March 31, ~~2018~~2019 Compared to Three Months Ended March 31, ~~2017~~2018

Net revenueincreased ~~$55.7 (23%~~$26.9 (9%), primarily due to ~~favorable foreign currency impact ($21.9)~~higher volume (11%), largely driven by increased demand for large systems in plastics, in addition to the acquisition of BM&M and ~~increased~~pricing, partially offset by a decline in demand for screening and separating equipment (including equipment that processes proppants for hydraulic fracturing)~~, plastics projects,~~ and parts and service. Foreign currency impact decreased net revenue by 5%. Order backlog increased ~~$194.8 (35%~~$207.8 (28%) from ~~$557.9 on March 31, 2017, to~~ $752.7 on March 31, 2018, ~~which included favorable foreign currency impact of $68.9. Order~~to $960.5 on March 31, 2019. The increase in backlog ~~increased~~is primarily ~~due to~~driven by an increase in orders for projects in the plastics ~~industry (polyolefin)~~industry. Foreign currency impact decreased order backlog by 9%.

On a sequential basis, order backlog increased ~~$41.7 (6%~~$14.1 (1%) to ~~$752.7~~$960.5 at March 31, ~~2018,~~2019, up from ~~$711.0~~$946.4 at December 31, ~~2017. This increase was primarily driven by orders in the plastics industry, partially offset by a decrease in separation equipment related to processing proppants.~~2018.

Gross profit increased ~~$22.8 (26%~~$2.3 (2%), primarily due to higher volume, pricing and productivity improvements, and the acquisition of BM&M, partially offset by unfavorable mix due to an increased proportion of lower margin, large systems sales in plastics and cost inflation. Foreign currency impact decreased gross profit by 5%. Gross profit margin decreased 240 basis points to 34.7% in 2019, primarily due to an increased proportion of lower margin, large systems sales in plastics and cost inflation, partially offset by pricing and productivity improvements.

The Process Equipment Group’s gross profit included restructuring and restructuring related charges of $0.2 and inventory step-up charges of $0.1 in fiscal 2019. Excluding these charges, adjusted gross profit increased $2.7 (2%) and adjusted gross profit margin decreased 220 basis points to 34.8%.

Operating expenses decreased $1.6 (3%), primarily due to favorable foreign currency impact ~~($7.3)~~(4%) and increased demand for screening and separating equipment (including equipment that processes proppants for hydraulic fracturing), plastics projects, and parts and service. Gross profit margin improved 90 basis points to 37.0% in 2018, ~~primarily driven~~lower litigation expenses, partially offset by ~~productivity and pricing improvements and favorable product mix.~~

~~Operating expenses~~ ~~increased $8.9 (16%), primarily due to unfavorable foreign currency impact ($4.6),~~cost inflation, an increase in variable compensation, ~~wage~~ and ~~benefit inflation, and increased project costs.~~the acquisition of BM&M. Operating expenses as a percentage of net revenue improved ~~120~~by 220 basis points to ~~21.1%~~18.9% in ~~2018.~~2019.

Operating expenses included ~~restructuring~~business acquisition, development, and ~~restructuring related charges of $0.3~~integration costs ($0.1 in ~~2017.~~2019). Excluding these items, adjusted operating expenses ~~increased $9.4 (17%~~decreased $1.7 (3%)~~, which was primarily driven by unfavorable foreign currency impact of $4.6~~ and ~~an increase in variable compensation, wage and benefit inflation, and project costs. Adjusted~~adjusted operating expenses as a percentage of net revenue improved ~~100~~220 basis points to ~~21.1%~~18.9% in ~~2018.~~2019.

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Amortization expense increased ~~$0.3~~$1.1 (15%) primarily due to ~~unfavorable foreign currency impact~~amortization on the acquired intangibles of ~~$0.5.~~BM&M.

Impairment charge~~increased~~ decreased $63.4 due to the goodwill and trade name impairments recorded in 2018. See Note 56 of Part I of this Form 10-Q for further information on the impairment charges.

Six Months Ended March 31, ~~2018~~2019 Compared to Six Months Ended March 31, ~~2017~~2018

Net ~~revenue~~Revenueincreased ~~$98.4 (21%~~$44.8 (8%), primarily due to ~~favorable foreign currency impact ($33.7)~~higher volume (9%), largely driven by increased demand for large systems in plastics, in addition to pricing and ~~increased~~the acquisition of BM&M, partially offset by a decline in demand for screening and separating equipment (including equipment that processes proppants for hydraulic fracturing)~~, plastics projects, and parts and service.~~. Foreign currency impact decreased net revenue by 4%.

Gross ~~profit~~Profit increased ~~$39.5 (23%~~$6.4 (3%), primarily due to ~~favorable foreign~~higher volume, pricing and productivity improvements and the acquisition of BM&M, partially offset by unfavorable mix due to an increased proportion of lower margin, large systems sales in plastics and cost inflation. Foreign currency impact ~~($11.2) and increased demand for screening and separating equipment (including equipment that processes proppants for hydraulic fracturing), plastics projects, and parts and service.~~decreased gross profit by 4%. Gross profit margin ~~improved 60~~decreased 160 basis points to ~~37.1%~~35.6% in ~~2018,~~ 2019, primarily ~~driven~~due to an increased proportion of lower margin, large systems sales in plastics and cost inflation, partially offset by pricing and productivity improvements.

The Process Equipment Group’s gross profit included restructuring and ~~pricing improvements.~~restructuring related charges of $0.4 and inventory step-up charges of $0.2 in fiscal 2019. Excluding these charges, adjusted gross profit increased $7.0 (3%) and adjusted gross profit margin decreased 160 basis points to 35.6%.

Operating expenses increased ~~$14.0 (13%~~$3.8 (3%), primarily driven by ~~unfavorable foreign currency impact ($6.9),~~an increase in strategic project investments, cost inflation, an increase in variable compensation, ~~wage~~ and ~~benefit inflation, and increased project costs.~~the acquisition of BM&M, partially offset by lower litigation expenses. Foreign currency impact decreased operating expenses by 3%. Operating expenses as a percentage of net revenue improved ~~150~~by 90 basis points to ~~21.2%~~20.3% in ~~2018.~~2019.

Operating expenses included restructuring and restructuring related charges ($~~0.2~~0.1 in ~~2018~~fiscal 2019 and ~~$0.4~~$0.2 in ~~2017)~~fiscal 2018) and business acquisition, development, and integration costs ($0.4 in 2019). Excluding these items, adjusted operating expenses increased ~~$14.5 (14%~~$3.4 (3%)~~, which was primarily driven by unfavorable foreign currency impact ($6.9), an increase in variable compensation, wage~~ and ~~benefit inflation, and increased project costs. Adjusted~~adjusted operating expenses as a percentage of net revenue improved ~~130~~100 basis points to ~~21.2%~~20.2% in ~~2018.~~2019.

Amortization expense increased ~~$0.8~~$1.3 (9%) primarily due to ~~unfavorable foreign currency impact~~amortization on the acquired intangibles of ~~$0.8.~~BM&M.

OPERATIONS REVIEW — BATESVILLE


	Three Months Ended March 31,						Six Months Ended March 31,						Three Months Ended March 31,						Six Months Ended March 31,
	2018			2017			2018			2017			2019			2018			2019			2018
	Amount		% of Net Revenue	Amount		% of Net Revenue	Amount		% of Revenue	Amount		% of Revenue	Amount		% of Net Revenue	Amount		% of Net Revenue	Amount		% of Net Revenue	Amount		% of Net Revenue
Net revenue	$	152.4	100.0	$	151.2	100.0	$	285.3	100.0	$	285.7	100.0	$	137.9	100.0	$	152.4	100.0	$	266.0	100.0	$	285.3	100.0
Gross profit	57.9		38.0	60.6		40.1	105.5		37.0	104.6		36.6	47.5		34.4	57.5		37.7	91.4		34.4	104.7		36.7
Operating expenses	21.2		13.9	20.4		13.5	43.0		15.1	41.7		14.6	18.8		13.6	21.4		14.0	38.4		14.4	43.3		15.2
Amortization expense	—		—	—		—	—		—	0.1		—

Three Months Ended March 31, ~~2018~~2019 Compared to Three Months Ended March 31, ~~2017~~2018

Net revenue~~increased $1.2 (1%~~ decreased $14.5 (10%), primarily due to ~~favorable foreign currency impact ($0.4) and higher burial~~a decrease in volume (9%). Lower volume was primarily driven by ~~an estimated increase~~a decrease in burial sales resulting from what we estimate to be a decrease in North ~~America deaths, partially offset~~American burials driven by lower ~~sales~~estimated deaths and the increased rate at which families opted for ~~non-burial products.~~
cremation.

Gross profitdecreased ~~$2.7 (4%~~$10.0 (17%) and gross profit margin decreased ~~210~~330 basis points to ~~38.0%~~34.4%. The decrease in gross profit and gross profit margin was primarily due to ~~operational inefficiencies~~the decrease in ~~our manufacturing~~volume. Inflation in commodities and ~~distribution network caused~~wages was offset by ~~the sudden surge in demand early in the quarter, along with higher raw material and fuel costs.~~productivity improvements.

~~Gross~~Batesville’s gross profit included restructuring and restructuring related charges ~~of $0.3~~($0.1 in ~~2017.~~fiscal 2019). Excluding these charges, adjusted gross profit decreased ~~$3.0 (5%~~$9.9 (17%) and adjusted gross profit margin decreased ~~230~~320 basis points to 38.0%, primarily due to operational inefficiencies in our manufacturing and distribution network caused by the sudden surge in demand early in the quarter, along with higher raw material and fuel costs. 34.5%.

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Operating expenses ~~increased $0.8 (4%~~decreased $2.6 (12%) to ~~$21.2~~$18.8 and operating expenses as a percentage of net revenue ~~increased~~decreased 40 basis points to ~~13.9%~~13.6%, primarily due to ~~wage~~productivity initiatives and ~~benefit inflation, an increase~~a decrease in variable ~~compensation, and an increase in restructuring and restructuring related charges, partially offset by current year productivity initiatives.~~compensation.

Operating expenses included ~~$0.2~~$0.4 of restructuring and restructuring related charges in fiscal 2019 and $0.2 in fiscal 2018. Excluding these charges, adjusted operating expenses ~~increased $0.6 (3%~~decreased $2.8 (13%)~~, primarily due to wage~~ and ~~benefit inflation and an increase in variable compensation, partially offset by current year productivity initiatives. Adjusted~~adjusted operating expenses as a percentage of net revenue ~~increased 30~~improved 60 basis points to ~~13.8%~~13.3% in ~~2018.~~fiscal 2019.

Six Months Ended March 31, ~~2018~~2019 Compared to Six Months Ended March 31, ~~2017~~2018

Net revenuedecreased ~~$0.4 (0.1%~~$19.3 (7%), primarily due to a decrease in volume ~~($2.2), partially offset~~(7%). Lower volume was primarily driven by ~~favorable foreign currency impact ($0.8). The primary driver of the decrease was lower burial volume and~~ a decrease in burial sales resulting from ~~product line simplification efforts. Sales of non-burial products were also down for the first six months, contributing~~what we estimate to ~~the volume decline. Even though~~be a decrease in North American burials driven by lower estimated deaths ~~were estimated to be higher year over year, burials were estimated to be flat to the prior year due to~~and the increased rate at which families opted for cremation.

Gross profit ~~increased $0.9 (1%~~decreased $13.3 (13%) and gross profit margin ~~improved 40~~decreased 230 basis points to ~~37.0%~~34.4%. The ~~increase~~decrease in gross profit and gross profit margin was primarily due to athe decrease in ~~restructuring~~volume and ~~restructuring related charges. These items were~~inflation in commodities and wages, partially offset by the decline in volume, higher raw material and fuel costs, along with operational inefficiencies in our manufacturing and distribution network in the second quarter caused by the sudden surge in demand early in the quarter.productivity improvements.

~~Gross~~Batesville’s gross profit included restructuring and restructuring related charges ($~~0.1~~0.2 in ~~2018~~fiscal 2019 and ~~$6.7~~$0.1 in ~~2017)~~fiscal 2018). Excluding these charges, adjusted gross profit decreased ~~$5.7 (5%~~$13.1 (13%) and adjusted gross profit margin decreased ~~200~~220 basis points to ~~37.0%,~~ ~~primarily driven by the decline in volume, higher raw material and fuel costs, and operational inefficiencies in our manufacturing and distribution network in the second quarter.~~34.5%.

Operating expenses ~~increased $1.3 (3%~~decreased $4.9 (11%) to ~~$43.0~~$38.4 and operating expenses as a percentage of net revenue ~~increased 50~~improved 80 basis points to ~~15.1%~~14.4%, primarily due to ~~wage~~productivity initiatives and ~~benefit inflation, an increase~~a decrease in variable ~~compensation, and an increase in restructuring and restructuring related charges, partially offset by current year productivity improvements.~~compensation.

Operating expenses included ~~$0.2~~$0.5 of restructuring and restructuring related charges in fiscal 2019 and $0.2 in fiscal 2018. Excluding these charges, adjusted operating expenses ~~increased $1.1 (3%~~decreased $5.1 (12%), ~~which was primarily due to wage~~ and ~~benefit inflation and an increase in variable compensation, partially offset by current year productivity improvements. Adjusted~~adjusted operating expenses as a percentage of net revenue ~~increased 40~~improved 80 basis points to ~~15.0%~~14.3% in ~~2018.~~fiscal 2019.

REVIEW OF CORPORATE EXPENSES


	Three Months Ended March 31,						Six Months Ended March 31,						Three Months Ended March 31,						Six Months Ended March 31,
	2018			2017			2018			2017			2019			2018			2019			2018
	Amount		% of Net Revenue	Amount		% of Net Revenue	Amount		% of Net Revenue	Amount		% of Net Revenue	Amount		% of Net Revenue	Amount		% of Net Revenue	Amount		% of Net Revenue	Amount		% of Net Revenue
Core operating expenses	$	12.9	2.9	$	9.9	2.5	$	21.5	2.5	$	18.3	2.4	$	12.7	2.7	$	12.7	2.8	$	21.9	2.5	$	21.2	2.5
Business acquisition, development, and integration costs	0.2		—	0.1		—	2.5		0.3	0.4		0.1	0.4		0.1	0.2		0.1	0.7		0.1	2.5		0.3
Restructuring and restructuring related charges	0.6		0.1	0.7		0.2	0.8		0.1	2.3		0.3	—		—	0.6		0.1	—		—	0.8		0.1
Operating expenses	$	13.7	3.0	$	10.7	2.7	$	24.8	2.9	$	21.0	2.8	$	13.1	2.8	$	13.5	3.0	$	22.6	2.6	$	24.5	2.9

Core operating expenses primarily represent operating expenses excluding restructuring and restructuring related charges and costs related to business acquisition, development, and integration, which we incur as a result of our strategy to grow through selective acquisitions.

Business acquisition, development, and integration costs include legal, tax, accounting, and other advisory fees and due diligence costs associated with investigating opportunities (including acquisition and disposition) and integrating completed acquisitions.

Three Months Ended March 31, ~~2018~~2019 Compared to Three Months Ended March 31, ~~2017~~2018

Operating expenses ~~increased $3.0 (28%~~decreased $0.4 (3%), primarily due to ~~an increase in variable compensation and corporate project costs, wage and benefit inflation, and increased business acquisition, development, and integration costs, partially offset by~~ a decrease in restructuring and restructuring related charges. These expenses as a percentage of net revenue were ~~3.0%~~2.8%, ~~an increase~~a decrease of 3020 basis points from ~~2017.~~the prior year.

Core operating expenses ~~increased $3.0 (30%), primarily due~~were flat compared to ~~an increase in variable compensation and corporate project costs, and wage and benefit inflation.~~the prior year. These expenses as a percentage of net revenue were ~~2.9%~~2.7%, ~~an increase~~a decrease of 4010 basis points from ~~2017.~~the prior year.

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Six Months Ended March 31, ~~2018~~2019 Compared to Six Months Ended March 31, ~~2017~~2018

Operating expenses ~~increased $3.8 (18%~~decreased $1.9 (8%), primarily due to ~~an increase~~a decrease in business acquisition, development, and integration costs, ~~variable compensation and corporate project costs, and wage and benefit inflation, partially offset by~~as well as a decrease in restructuring and restructuring related ~~charges.~~charges, partially offset by an increase in variable compensation. These expenses as a percentage of net revenue were ~~2.9%~~2.6%, ~~an increase~~a decrease of 1030 basis points from ~~2017.~~the prior year.

Core operating expenses increased ~~$3.2 (17%~~$0.7 (3%), primarily due to an increase in variable ~~compensation and corporate project costs, and wage and benefit inflation.~~compensation. These expenses as a percentage of net revenue were ~~2.5%, an increase of 10 basis points from 2017.~~flat compared to 2018.

NON-GAAP OPERATING PERFORMANCE MEASURES

The following is a reconciliation from the most directly comparable GAAP operating performance measure to our non-GAAP adjusted EBITDA.


	Three Months Ended March 31,						Six Months Ended March 31,						Three Months Ended March 31,						Six Months Ended March 31,
	2018			2017			2018			2017			2019			2018			2019			2018
Consolidated net (loss) income	$	(21.3	)	$	34.0		$	(2.2	)	$	55.9
Consolidated net income (loss)													$	39.5		$	(21.3	)	$	68.5		$	(2.2	)
Interest income	(0.3		)	(0.1		)	(0.8		)	(0.3		)	(0.2		)	(0.3		)	(0.4		)	(0.8		)
Interest expense	6.0			6.3			12.3			12.4			5.4			6.0			10.9			12.3
Income tax expense	13.6			14.9			37.3			21.6			13.8			13.6			28.3			37.3
Depreciation and amortization	14.0			13.6			27.8			28.6			15.1			14.0			29.2			27.8
EBITDA	$	12.0		$	68.7		$	74.4		$	118.2		$	73.6		$	12.0		$	136.5		$	74.4
Impairment charge	63.4			—			63.4			—			—			63.4			—			63.4
Business acquisition, development, and integration	0.2			0.3			2.5			0.6			0.5			0.2			1.1			2.5
Restructuring and restructuring related	0.7			1.3			1.2			7.9			0.7			0.7			1.2			1.2
Inventory step-up													0.1			—			0.2			—
Adjusted EBITDA	$	76.3		$	70.3		$	141.5		$	126.7		$	74.9		$	76.3		$	139.0		$	141.5

Three Months Ended March 31, 2019 Compared to Three Months Ended March 31, 2018

Consolidated net income ~~decreased $55.3 (163%)~~increased $60.8 for the three months ended March 31, ~~2018,~~2019, compared to the same period in fiscal ~~2017. The decrease was~~2018 primarily ~~due to~~driven by the impairment charges recorded in the Process Equipment Group segment in 2018, ~~as well as operational inefficiencies~~higher volume from increased demand for large systems in ~~our manufacturing~~plastics, and ~~distribution network at Batesville caused by the sudden surge in demand early in the quarter, wage~~pricing and ~~benefit, commodity, and fuel inflation, and an~~productivity improvements. This increase ~~in variable compensation and project costs. This decrease~~ in consolidated net income was partially offset by favorable foreign currency impact of $1.7, increased demand for screening and separating equipment (including equipment that processes proppants for hydraulic fracturing), plastics projects, and parts and service, as well as pricing and productivity improvements,cost inflation, a decrease in ~~restructuring~~volume at Batesville, and ~~restructuring related charges, a reduction~~unfavorable product mix resulting from an increased proportion of lower margin, large systems sales in ~~business acquisition, development, and integration costs, and the favorable~~plastics. Foreign currency impact ~~of the Tax Act on the effective tax rate.~~decreased consolidated net income by $2.1.

Consolidated adjusted EBITDA ~~increased $6.0 (9%~~decreased $1.4 (2%) for the three months ended March 31, ~~2018,~~2019, compared to the same period in fiscal ~~2017. The increase was~~2018, primarily ~~driven by favorable foreign currency impact~~due to cost inflation, a decrease in volume at Batesville, and unfavorable product mix resulting from an increased proportion of $2.7, increased demand for screening and separating equipment (including equipment that processes proppants for hydraulic fracturing), plastics projects, and parts and service, as well as pricing and productivity improvements.lower margin, large systems sales in plastics. This ~~increase~~decrease in consolidated adjusted EBITDA was partially offset by ~~operational inefficiencies~~higher volume from increased demand for large systems in ~~our manufacturing~~plastics, and ~~distribution network at Batesville caused~~pricing and productivity improvements. Foreign currency impact decreased adjusted EBITDA by ~~the sudden surge in demand early in the quarter, wage and benefit, commodity, and fuel inflation, and an increase in variable compensation and project costs.~~$2.9.

Six Months Ended March 31, 2019 Compared to Six Months Ended March 31, 2018

Consolidated net income ~~decreased $58.1 (104%)~~increased $70.7 for the six months ended March 31, ~~2018,~~2019, compared to the same period in fiscal ~~2017. The decrease was~~2018 primarily ~~due to~~driven by the impairment charges recorded in the Process Equipment Group segment in 2018, ~~wage~~higher volume from increased demand for large systems in plastics and ~~benefit, commodity,~~parts and ~~fuel inflation, operational inefficiencies in our manufacturing~~service, pricing and ~~distribution network at Batesville caused by the sudden surge in demand early~~productivity improvements, a decrease in the ~~quarter, an increase in variable compensation~~effective tax rate as a result of the Tax Act, and ~~project costs, an increase~~a decrease in business acquisition, development, and integration ~~costs, and the unfavorable impact of the Tax Act on the effective tax rate.~~costs. This ~~decrease~~increase in consolidated net income was partially offset by favorable foreign currency impact of $2.5, increased demand for screening and separating equipment (including equipment that processes proppants for hydraulic fracturing), plastics projects, and parts and service, as well as pricing and productivity improvements, andcost inflation, a decrease in ~~restructuring~~volume at Batesville, and ~~restructuring related charges.~~unfavorable product mix resulting from an increased proportion of lower margin, large systems sales in plastics. Foreign currency impact decreased consolidated net income by $2.7.

Consolidated adjusted EBITDA ~~increased $14.8 (12%~~decreased $2.5 (2%) for the six months ended March 31, ~~2018,~~2019, compared to the same period in fiscal ~~2017. The increase~~2018, primarily due to cost inflation, a decrease in volume at Batesville, and unfavorable product mix resulting from an increased proportion of lower margin, large systems sales in plastics. This decrease in consolidated adjusted EBITDA was ~~primarily driven~~partially

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offset by ~~favorable foreign currency impact of $4.0,~~higher volume from increased demand for ~~screening and separating equipment (including equipment that processes proppants for hydraulic fracturing),~~large systems in plastics ~~projects,~~ and parts and service, ~~as well as~~and pricing and productivity improvements. ~~This increase in~~Foreign currency impact decreased adjusted EBITDA ~~was partially offset~~ by wage and benefit, commodity, and fuel inflation, operational inefficiencies in our manufacturing and distribution network at Batesville caused by the sudden surge in demand early in the quarter, and an increase in variable compensation and project costs.$3.9.

LIQUIDITY AND CAPITAL RESOURCES

In this section, we discuss our ability to access cash to meet business needs. We discuss how we see cash flow being affected for the next twelve months and how we intend to use it. We describe actual results in generating and utilizing cash by comparing the first six months of ~~2018~~2019 to the same period last year. Finally, we identify other significant matters that could affect liquidity on an ongoing basis.

Ability to Access Cash

Our debt financing includes long-term notes ~~including the Series A Notes,~~ and our Facility as part of our overall financing strategy. We believe we have ready access to capital markets and regularly review the optimal mix of fixed-rate and variable-rate debt. In addition to cash balances and our ability to access additional long-term financing, we had ~~$662.8~~$780.2 of maximum borrowing capacity available under the Facility as of March 31, ~~2018,~~2019, of which ~~$644.3 of borrowing capacity is~~$741.6 was immediately available based on our most restrictive covenant at March 31, ~~2018,~~2019, with additional amounts available in the event of a qualifying acquisition. The available borrowing capacity reflects a reduction of ~~$7.5~~$7.2 for outstanding letters of credit issued under the Facility. The Company may request an increase of up to $450.0 in the total borrowing capacity under the Facility, subject to approval of the lenders.

In the normal course of business, the Process Equipment Group provides to certain customers bank guarantees and other credit arrangements in support of performance, warranty, advance payment, and other contractual obligations. This form of trade finance is customary in the industry and, as a result, we ~~are required to~~ maintain adequate capacity to provide the guarantees. As of March 31, ~~2018,~~2019, we had guarantee arrangements totaling ~~$252.7,~~$300.9, under which ~~$187.4~~$210.6 was utilized, for this purpose. These arrangements include the €150.0 ~~L/G~~LG Facility ~~Agreement~~ under which unsecured letters of credit, bank guarantees, or other surety bonds may be issued. The Company may request an increase to the total capacity under the ~~L/G~~LG Facility ~~Agreement~~ by an additional €70.0, subject to approval of the lenders.

We have significant operations outside the U.S. ~~The~~Pursuant to the Tax Act, we have reevaluated our indefinite reinvestment assertion with respect to the foreign earnings of those subsidiaries. We continue to assert that the majority of foreign earnings is considered to be indefinitely reinvested outside of the U.S. We have changed the permanent reinvestment assertions of certain of our lower tier subsidiaries in certain foreign jurisdictions where we foresee those earnings to no longer be permanently reinvested. We continue to assert permanent reinvestment in certain jurisdictions where the Company has made, and intends to continue to make, substantial investments to support the ongoing development and growth of our international operations. ~~Pursuant~~Accordingly, pursuant to the Tax Act, weno U.S. federal and state income taxes have ~~recognized a provisional~~been accrued ~~Transition Tax of $28.9~~ on the ~~unrepatriated earnings~~portion of our foreign ~~subsidiaries.~~earnings that is considered to be indefinitely reinvested outside the U.S. The cash at our ~~international~~foreign subsidiaries totaled ~~$60.2~~$52.1 at March 31, ~~2018.~~2019. While we do not intend, nor do we foresee a need, to repatriate these funds, repatriation of these funds under current regulatory and tax law for use in domestic operations ~~would~~may expose us to additional ~~foreign~~ taxes. ~~However, with the enactment of the Tax Act, we are evaluating our future cash deployment and may change this assertion in future periods.~~

12-month Outlook

We believe the 12-month outlook for our business remains positive. Although cash flow from operations in the Process Equipment Group naturally experiences substantial fluctuations driven by changes in working capital requirements at Coperion (due to the type of product and geography of customer projects in process at any ~~point in~~given time), we believe we have significant flexibility to meet our financial commitments, including working capital needs, capital expenditures, and financing obligations. We expect to continue to use a combination of ~~some of~~ our cash flows from operations and borrowings under our Facility to fund acquisitions. In considering attractive targets, we often look for companies with a relatively low physical asset base, in order to limit the need to invest significant additional cash into targets post-acquisition.

The Tax Act will require the Company to pay tax on ~~remitted~~unremitted earnings of its foreign subsidiaries in an ~~estimated~~ amount of ~~$28.9.~~ $25.1. During the quarter ended December 31, 2018, we elected to pay the Transition Tax in eight annual installments and made the first installment payment of $2.0. The portion of this tax we anticipate to pay in the next twelve months is ~~$2.3,~~$2.0, with the remainder to be paid over the next ~~seven~~six years. In addition, we expect the lower corporate tax rate of 21% to benefit our cash flow in current and future ~~periods; however,~~periods.

On December 7, 2018, we announced that our Board of Directors authorized a new share repurchase program of up to $200.0 in replacement of the ~~amount and use~~Company’s prior share repurchase program, which eliminated the balance of ~~those benefits has not yet been determined.~~approximately $39.6 remaining under that prior authorization.

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Our anticipated contribution to our pension plans in ~~2018~~2019 is ~~$9.9,~~$10, of which ~~$5.6~~$4.6 was made during the six months ended March 31, ~~2018.~~2019. We will continue to monitor plan funding levels, performance of the assets within the plans, and overall economic activity, and we may make additional discretionary funding decisions based on the net impact of the above factors.

We currently expect to pay quarterly cash dividends in the future comparable to those we paid in ~~2017,~~2018, which will require approximately ~~$13.0~~$13.1 each quarter based on our outstanding common stock at March 31, ~~2018.~~2019. We increased our quarterly dividend in ~~2018~~2019 to ~~$0.2075~~$0.2100 per common share from ~~$0.2050~~$0.2075 per common share paid in 2017. We are authorized by our Board of Directors to purchase up to $200.0 of our common stock in total under our existing share repurchase program, and may make such purchases, depending on market conditions and other needs for cash consistent with our growth strategy. We repurchased

approximately 530,000 shares of our common stock during the second quarter of fiscal 2018, at a total cost of approximately $23.7. At March 31, 2018, we had approximately $61.7 remaining for share repurchases under the existing authorization by the Board of Directors.2018.

We believe existing cash, cash flows from operations, borrowings under existing arrangements, and the issuance of debt will be sufficient to fund our operating activities and cash commitments for investing and financing activities. Based on these factors, we believe our current liquidity position is strong and will continue to meet all of our financial commitments for the foreseeable future.

Cash Flows


	Six Months Ended March 31,						Six Months Ended March 31,
(in millions)	2018			2017			2019			2018
Cash flows provided by (used in)
Operating activities	$	61.5		$	19.8		$	46.5		$	61.5
Investing activities	(10.3		)	(7.0		)	(34.4		)	(10.5		)
Financing activities	(50.4		)	(12.8		)	(11.3		)	(50.4		)
Effect of exchange rates on cash and cash equivalents	1.7			(0.6		)	2.1			1.7
Increase (decrease) in cash and cash equivalents	$	2.5		$	(0.6	)
Increase in cash and cash equivalents							$	2.9		$	2.3

Operating Activities

Operating activities provided $46.5 of cash during the first six months of fiscal year 2019, and provided $61.5 of cash during the first six months of fiscal year 2018, ~~and provided $19.8 of cash during the first six months of fiscal year 2017,~~ a ~~$41.7 (211%~~$15.0 (24%) ~~increase.~~decrease. The ~~increase~~decrease in operating cash flow was primarily due to ~~our $80.0 contribution to the Company’s U.S. defined benefit pension plan in 2017, partially offset by~~ an increase ~~in working capital requirements and $13.0~~of $10.2 in cash paid for taxes.

Working capital requirements for the Process Equipment Group may continue to fluctuate in the future due primarily to the type of product and geography of customer projects in process at any point in time. Working capital needs are lower when advance payments from customers are more heavily weighted toward the beginning of the project. Conversely, working capital needs are higher when a larger portion of the cash is to be received in later stages of manufacturing.

Investing Activities

The ~~$3.3~~$23.9 increase in cash used in investing activities in the first six months of fiscal ~~2018~~2019 was primarily due to ~~a decrease~~the acquisition of BM&M for $26.2 in ~~proceeds from sales~~November 2018, compared to no acquisitions in fiscal 2018. See Note 4 included in Part 1, Item 1 of ~~property, plant, and equipment.~~this Form 10-Q for further details on this acquisition.

Financing Activities

Cash used in financing activities was largely impacted by net borrowing activity. Our general practice is to utilize our cash to pay down debt unless it is needed ~~to fund~~for an acquisition. ~~Daily borrowing and repayment activity under the Facility may fluctuate significantly between periods as we fulfill the capital needs of our business units.~~ Cash used in financing activities during the first six months of ~~2018~~2019 was ~~$50.4,~~$11.3, including ~~$10.5~~$18.2 of proceeds, net of debt repayments. Cash used in financing activities in the first six months of fiscal ~~2017~~2018 was ~~$12.8.~~$50.4. The ~~increase~~decrease in cash used in financing activities was primarily due to ~~repayment~~the borrowings used to fund the acquisition of ~~the term loan~~BM&M for $26.2 in ~~2018~~2019 and ~~an increase~~a decrease in repurchases of common stock in ~~2018. This increase was partially offset by borrowings used to fund the $80.0 contribution to the Company’s U.S. defined benefit pension plan in 2017 that did not repeat in 2018.~~2019.

We returned ~~approximately~~ $26.2 to shareholders during the first six months of ~~2018~~2019 in the form of quarterly dividends. We increased our quarterly dividend in ~~2018~~2019 to ~~$0.2075~~$0.2100 per common share from ~~$0.2050~~$0.2075 per common share paid during ~~2017. We repurchased approximately 906,000 shares of our common stock in 2018, at a total cost of approximately $38.9.~~2018.

Off-Balance Sheet Arrangements

There were no significant changes in off-balance sheet arrangements, as described in Management’s Discussion and Analysis of Financial Condition and Results of Operations, Liquidity and Capital Resources, in our Annual Report on Form 10-K for ~~2017.~~2018.

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Recently Adopted and Issued Accounting Standards

For a summary of recently issued and adopted accounting standards applicable to us, see Item 1, Note 2 of Part I of this Form 10-Q.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

A discussion of quantitative and qualitative disclosures about market risk may be found in Item 7A of our ~~2017~~2018 Form 10-K filed with the SEC on November ~~15, 2017.~~13, 2018. There have been no material changes in this information since the filing of our ~~2017~~2018 Form 10-K.

Item 4. CONTROLS AND PROCEDURES

Our management, with the participation of our President and Chief Executive Officer and our Senior Vice President and Chief Financial Officer (the “Certifying Officers”), evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Based upon that evaluation, the Certifying Officers concluded that our disclosure controls and procedures as of the end of the period covered by this report are effective.

~~There~~In the ordinary course of business, we review our system of internal control over financial reporting and make changes to our systems and processes to improve such controls and increase efficiency, while ensuring that we maintain an effective internal control environment. Changes may include such activities as implementing new, more efficient systems, automating manual processes, and updating existing systems.

In 2018, the Company established new internal controls related to our accounting policies and procedures as part of our adoption of the new revenue recognition standard. These internal controls included providing global training to our finance team and holding regular meetings with management to review and approve key decisions. Beginning October 2018, we have ~~been~~implemented new internal controls to address risks associated with applying the new standard.

Other than as noted above, there were no changes in internal ~~controls~~control over financial reporting ~~(as defined~~identified in ~~Rules 13a-15(f) and 15d-15(f) of~~ the ~~Exchange Act)~~evaluation for the ~~period covered by this report~~quarter ended March 31, 2019 that have materially affected, or are reasonably likely to materially affect, ~~the Company’s~~our internal control over financial ~~reporting.~~reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act.

PART II — OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

Information pertaining to legal proceedings can be found in Note 14 to the interim consolidated financial statements included in Part I, Item 1 of this Form 10-Q.

Item 1A. RISK FACTORS

For information regarding the risks we face, see the discussion under Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended September 30, ~~2017,~~2018, and the revised risk ~~factors~~factor below.

~~Changes in the United States political environment could negatively impact our business.~~

The 2016 presidential and congressional elections in the United States have resulted in significant uncertainty with respect to, and have resulted in and could result in additional changes in, legislation, regulation and government policy. While it is not possible to predict whether and when any such additional changes will occur, changes at the local, state or federal level could significantly impact our business and the industries in which we compete. Specific legislative and regulatory proposals discussed during and after the election that could have a material impact on us include, but are not limited to, changes to existing trade agreements or entry into new trade agreements, import and export regulations, tariffs and customs duties, public company reporting requirements, environmental regulation and antitrust enforcement. To the extent changes in the political environment have a negative impact on the Company or our markets, it may materially and adversely impact our business, results of operations and financial condition in the periods to come.

The effective tax rate of the Company may be negatively impacted by economic downturns as well as future changes to tax laws in global jurisdictions in which we operate.

We are subject to income taxes in the United States and various other global jurisdictions. Our effective tax rate could be adversely affected by changes in the mix of earnings by jurisdiction and the valuation of deferred tax assets and liabilities. We recognize deferred tax assets and liabilities based on the differences between the financial statement carrying amounts and the tax basis of assets and liabilities. Significant judgment is required in determining our provision for income taxes. We regularly review our deferred tax assets for recoverability and establish a valuation allowance if it is more likely than not that some portion or all of a deferred tax asset will not be realized. If we are unable to generate sufficient future taxable income, if there is a material change in the actual effective tax rates, or if there is a change to the time period within which the underlying temporary differences become taxable or deductible, we could be required to increase our valuation allowance against our deferred tax assets, which could result in a material increase in our effective tax rate.

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In addition, the ~~recently~~ enacted Tax Act makes significant changes to the U.S. Internal Revenue Code. Such changes include a reduction in the domestic corporate tax rate, limitations on certain corporate deductions and credits, and a ~~Transition Tax~~one-time transition tax on ~~the deemed repatriation~~certain unrepatriated earnings of foreign ~~earnings.~~subsidiaries. Some of the Tax Act changes could have a negative impact on our business. The ~~estimated~~ impact of the ~~new~~ law is based on management’s current knowledge and assumptions, and ~~recognized~~further impacts ~~could be materially different~~may result from ~~current estimates based on actual results in 2018 and our further analysis of~~any additional regulations or guidance issued by the ~~new law.~~U.S. government. Changes in other tax laws or tax rulings could also have a material impact on our effective tax rate. Additionally, many countries in the European Union, as well as a number of other countries and organizations such as the Organization for Economic Cooperation and Development, are actively considering changes to existing tax laws. Certain proposals could include recommendations that could increase our tax obligations in many countries where we do business. Any changes in the taxation of our activities in such jurisdictions may result in a material increase in our effective tax rate.

~~Item 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS~~

~~The following table summarizes repurchases of common stock during the three months ended March 31, 2018.~~

Period
Total
Number
of Shares
Purchased

Average
Price Paid
per Share

Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Programs

Maximum Dollar Amount
that May Yet be
Purchased Under Plans or
Programs

January 152,600
$ 44.59
152,600
$ 78.6
February 186,000
$ 44.36
186,000
$ 70.3
March 191,752
$ 45.03
191,752
$ 61.7
Total 530,352
$ 44.67
530,352
$ 61.7

On July 24, 2008, our Board of Directors approved a stock repurchase program for the repurchase of up to $100.0 of our common stock. On February 23, 2017, our Board of Directors approved an increase of $100.0 to the existing stock repurchase program. The authorization brings the maximum cumulative repurchase authorization up to $200.0. The repurchase program has no expiration date, but may be terminated by the Board of Directors at any time. As of March 31, 2018, we had repurchased approximately 4,500,000 shares for approximately $138.3 in the aggregate. Such shares were classified as treasury stock. We repurchased approximately 530,000 shares of our common stock during the second quarter of fiscal 2018, at a total cost of approximately $23.7. At March 31, 2018, we had approximately $61.7 remaining for share repurchases under the existing authorization by the Board of Directors.

Item 6. EXHIBITS

The exhibits filed with this report are listed ~~on the Exhibit Index, which is incorporated herein by reference.~~below. In reviewing any agreements included as exhibits to this report, please remember that they are included to provide you with information regarding their terms and are not intended to provide any other factual or disclosure information about us or the other parties to the agreements. The agreements may contain representations and warranties by the parties to the agreements, including us. Except where explicitly stated otherwise, these representations and warranties have been made solely for the benefit of the other parties to the applicable agreement and:

•should not necessarily be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate;

•may have been qualified by disclosures that were made to the other party in connection with the negotiation of the applicable agreement, which disclosures are not necessarily reflected in the agreement;

•may apply standards of materiality in a way that is different from what may be viewed as material to you or other investors; and

•were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement and are subject to more recent developments.

Accordingly, these representations and warranties may not describe the actual state of affairs as of the date they were made or at any other time.

~~SIGNATURES~~

~~Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.~~

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	~~HILLENBRAND, INC.~~

~~Date: May 2, 2018~~	~~BY:~~	~~/s/ Kristina A. Cerniglia~~
		~~Kristina A. Cerniglia~~
		~~Senior Vice President and Chief Financial Officer~~

~~Date: May 2, 2018~~		~~/s/ Eric M. Teegarden~~
		~~Eric M. Teegarden~~
		~~Vice President, Controller, and Chief Accounting Officer~~

~~EXHIBIT INDEX~~



Exhibit 3.1		Restated and Amended Articles of Incorporation of Hillenbrand, Inc., effective March 31, 2008 (Incorporated by reference to Exhibit 3.1 to Quarterly Report on Form 10-Q filed August 12, 2008)
Exhibit 3.2		Articles of Correction of the Restated and Amended Articles of Incorporation of Hillenbrand, Inc., effective March 31, 2008 (Incorporated by reference to Exhibit 3.2 to Quarterly Report on Form 10-Q filed August 12, 2008)
Exhibit 3.3		Articles of Amendment of the Restated and Amended Articles of Incorporation of Hillenbrand, Inc., effective February 27, 2015 (Incorporated by reference to Exhibit 3.3 to Quarterly Report on Form 10-Q filed May 11, 2015)
Exhibit 3.4		Amended and Restated Code of By-laws of Hillenbrand, Inc. (Incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K filed February 26, 2015)
~~Exhibit 10.1~~		Syndicated L/G Facility Agreement, dated as of March 8, 2018, among Hillenbrand, Inc. and certain of its subsidiaries named therein, Commerzbank Aktiengesellschaft and various other lenders named therein, and Commerzbank Finance & Covered Bond S.A., acting as agent (Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on March 9, 2018)
Exhibit 31.1*		Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Exhibit 31.2*		Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Exhibit 32.1*		Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Exhibit 32.2*		Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Exhibit 101.INS		Instance document
Exhibit 101.SCH		Schema document
Exhibit 101.CAL		Calculation linkbase document
Exhibit 101.LAB		Labels linkbase document
Exhibit 101.PRE		Presentation linkbase document
Exhibit 101.DEF		Definition linkbase document

* Filed herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



	HILLENBRAND, INC.

Date: May 1, 2019	BY:	/s/ Kristina A. Cerniglia
		Kristina A. Cerniglia
		Senior Vice President and Chief Financial Officer

Date: May 1, 2019		/s/ Timothy C. Ryan
		Timothy C. Ryan
		Vice President, Controller, and Chief Accounting Officer



Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Dollar Amount that May Yet be Purchased Under Plans or Programs

January	152,600	$	44.59	152,600	$	78.6
February	186,000	$	44.36	186,000	$	70.3
March	191,752	$	45.03	191,752	$	61.7
Total	530,352	$	44.67	530,352	$	61.7