Hillenbrand Reports Fourth Quarter and Fiscal Year 2020 Results
Hillenbrand, Inc., reported results for the fourth quarter and full fiscal year, which ended September 30, 2020.
Fiscal Fourth Quarter 2020 Highlights:
– Record quarterly revenue of $694 million increased 43% over prior year driven by the acquisition of Milacron; organic revenue decreased 2% as Batesville growth of 8% was more than offset by a decrease of 6% in Advanced Process Solutions, formerly referred to as the Process Equipment Group
– GAAP EPS of ($0.09) included non-cash impairment charges of $62 million; adjusted EPS1 of $0.92 increased 8% driven by the acquisition of Milacron and strong Batesville results
– Record order backlog of $1.23 billion grew 43% year over year primarily driven by the acquisition of Milacron and large plastics projects in Advanced Process Solutions; organic backlog grew 14% year over year; total backlog increased 10% sequentially
Fiscal Year 2020 Highlights:
– Record revenue of $2.52 billion increased 39% over prior year driven by the Milacron acquisition; organic revenue decreased 2%
– GAAP EPS of ($0.82) included non-cash impairment charges of $145 million; adjusted EPS 1 of $3.19 increased 14% year over year
– Exceeded targeted year-one synergy cost savings from the acquisition of Milacron; on track to deliver $75 million in annual run-rate cost savings by year three
– Record cash flow from operations of $355 million increased $176 million compared to the prior year; net leverage decreased to 2.7x
– Fiscal Q1 2021 guidance: adjusted EPS 1 expected to be $0.65 to $0.75
Changes to Segment Names
During the fourth quarter of fiscal 2020, the Company changed the name of the Milacron segment to Molding Technology Solutions and the name of the Process Equipment Group segment to Advanced Process Solutions, in order to better reflect the nature of business activities, end-market exposure and future opportunities of the segments.
Fourth Quarter Results
Revenue of $694 million grew 43% compared to the prior year primarily driven by the acquisition of Milacron. Revenue decreased 2% organically as Batesville growth of 8% was more than offset by a decrease of 6% in Advanced Process Solutions. Excluding the impact of foreign currency exchange, total revenue increased 41%.
Net loss of $7 million, or ($0.09) per share, decreased $0.48 per share compared to the prior year, primarily as a result of non-cash impairment charges of $62 million related to the Company’s TerraSource Global and flow control businesses, which were recently identified for divestiture as announced in August 2020, and an increase in tax expense associated with domestic tax on foreign income inclusion and taxes on distributions from foreign subsidiaries.
Adjusted net income of $69 million, or $0.92 per share1, increased $0.07, or 8%, year over year, mainly driven by the acquisition of Milacron and strong Batesville performance. The adjusted effective tax rate was 32.1%, an increase of 560 basis points from the prior year, driven by increased distributions from foreign subsidiaries.
Adjusted EBITDA of $141 million increased 62% over the prior year, primarily due to the Milacron acquisition, which contributed $51 million, and an increase of $5 million from Batesville. Adjusted EBITDA margin of 20.3% expanded 240 basis points compared to a year ago. On an organic basis, adjusted EBITDA increased 4%, and adjusted EBITDA margin increased 110 basis points driven by margin expansion in Advanced Process Solutions and Batesville.
Hillenbrand generated cash flow from operations of $235 million in the quarter, an increase of $165 million year over year. All three reportable segments contributed to the improvement. During the quarter, the Company returned nearly $16 million to shareholders in the form of quarterly dividends and paid down $159 million of debt. Net debt at the end of the quarter was $1.3 billion, and the net debt to adjusted EBITDA ratio was 2.7x, an improvement of 1.1x from December 31, 2019, and a sequential improvement of 0.6x. The Company had nearly $1.2 billion of liquidity and no near-term debt maturities.
“Our fourth quarter financial results, including outstanding free cash flow, represent a strong finish to our fiscal year in a very challenging environment. Our teams prioritized safety and executed exceptionally well, managing costs while positioning the businesses to capitalize on opportunities going forward. Results were stronger than we anticipated as orders rebounded at Molding Technology Solutions, and Batesville again delivered strong margins on higher volume. We continued to leverage the Hillenbrand Operating Model across the enterprise as a catalyst for growth and margin improvement,” said Joe Raver, President and Chief Executive Officer of Hillenbrand. “We believe that we are well positioned heading into fiscal 2021, especially considering our record backlog and the significant progress we’ve made in building momentum with the Milacron integration. In addition, the process for the portfolio actions we announced in August is going well as we pursue the long-term benefits of a more focused portfolio. While the current business environment remains unpredictable, we’re focused on managing the things we can control and executing against our strategic initiatives to drive profitable growth over the long term.”
Advanced Process Solutions
Advanced Process Solutions fourth quarter revenue of $330 million decreased 6% compared to the same period in the prior year but improved by 17% sequentially versus the third quarter. Excluding the impact of foreign currency exchange, revenue decreased 9% year over year. Revenue was lower primarily as a result of general demand softness across industrial end markets. Adjusted EBITDA margin of 20.6% increased 160 basis points, primarily driven by pricing, productivity improvements and cost containment actions, partially offset by cost inflation. Record order backlog of $988 million at the end of the fourth quarter increased 14% over the prior year. Backlog increased 5% sequentially compared to the third quarter.
Molding Technology Solutions
Molding Technology Solutions revenue of $217 million for the quarter decreased 1% on a pro forma basis year over year and improved 17% sequentially as the segment delivered its best top line performance of the year. Adjusted EBITDA of $51 million increased 20% year over year, and adjusted EBITDA margin of 23.3% increased 410 basis points driven by productivity improvements, synergies, and cost containment actions. Order backlog of $243 million increased 54% year over year, driven by growth in injection molding, extrusion equipment and hot runner orders. Order backlog increased 31% sequentially. For purposes of this earnings release and comparative purposes only, all prior year comparisons for Molding Technology Solutions are made on a pro forma basis and exclude the Cimcool business, which the Company divested in March of this year.
Batesville fourth quarter revenue of $147 million grew 8% compared to the prior year and 5% sequentially, driven by higher burial casket volume. Adjusted EBITDA margin of 24.3% was 170 basis points higher than the prior year, mainly driven by operating leverage, productivity gains, and cost containment actions, which more than offset cost inflation.
Fiscal Year 2020 Results
Hillenbrand’s revenue of $2.52 billion for fiscal 2020 increased 39%. Excluding the impact of foreign currency exchange, revenue increased 40%. The acquisition of Milacron contributed 41%, and Batesville revenue increased 4% for the year with the estimated increased volume associated with the COVID-19 pandemic. Advanced Process Solutions revenue of $1.23 billion decreased 4%, or 3% excluding the impact of foreign currency, as general weakness in industrial demand was partially offset by favorable pricing.
Net loss of $60 million resulted in GAAP loss per share of $0.82. The loss was driven by $145 million of non-cash impairment charges, primarily on businesses identified for divestiture as part of our portfolio simplification. On an adjusted basis, net income of $235 million resulted in adjusted earnings per share of $3.191, an increase of 14%. Adjusted EBITDA increased 57% to $464 million and, as a percentage of revenue, was 18.5%, 220 basis points higher than the prior year. The adjusted EBITDA margin increase was primarily driven by margin expansion in Advanced Process Solutions and Batesville, as well as the addition of the higher margin Molding Technology Solutions product lines. Advanced Process Solutions adjusted EBITDA margin of 19.1% increased 160 basis points, and Batesville adjusted EBITDA margin of 23.0% increased 160 basis points. Operating cash flow for the year was $355 million, an increase of $176 million, and free cash flow of $319 million was approximately 136% of adjusted net income for the year.
Hillenbrand’s effective tax rate was (189%) in 2020 compared to 28.6% in 2019. The tax rate was negative for the year primarily related to the Company reporting a net loss for the year, while being in a taxable position for income tax purposes. The taxable position was primarily driven by nondeductible impairment charges and taxable gains from the sale of the Cimcool business. The adjusted effective tax rate of 27.8% increased 100 basis points compared to 26.8% in 2019, primarily due to taxes associated with foreign earnings distributions.
Other Notable Items
In October, Hillenbrand appointed Pete Dyke as Senior Vice President and Chief Human Resource Officer (CHRO). Mr. Dyke is responsible for driving Hillenbrand’s Human Resources strategy and talent management practices across the enterprise. Mr. Dyke was most recently CHRO at Innovative Water Care, a global specialty chemicals company. Prior to that, he served in Human Resources leadership positions at Luxfer Holdings PLC, Pentair PLC, and General Electric Company.
Fiscal First Quarter 2021 Outlook
Hillenbrand is providing guidance for the fiscal first quarter 2021. Given the continued uncertainties regarding the duration and severity of the COVID-19 pandemic, the Company has provided the following outlook, on the assumption that a gradual stabilization of the global economy continues, with no increase in pandemic-related disruptions.
– Total revenue expected to decrease 1% – 4% year over year
– Advanced Process Solutions revenue expected to decrease 12 – 15%
– Molding Technology Solutions expected to increase 2% – 5% on a pro forma basis
– Batesville revenue expected to increase 12% – 15%
– Adjusted EPS1 of $0.65 – $0.75
For the full fourth quarter results, click here.
1 As previously noted, beginning with fiscal third quarter 2020 results, the Company updated adjusted EPS to exclude after-tax acquisition-related intangible amortization. The Company believes reporting adjusted EPS in this manner better reflects its core operating results and offers greater consistency and transparency. A full reconciliation between GAAP and adjusted measures is included at the end of this release.
Hillenbrand (www.Hillenbrand.com) is a global diversified industrial company with businesses that serve a wide variety of industries around the world. We pursue profitable growth and robust cash generation to drive increased value for our shareholders. Hillenbrand’s portfolio includes industrial businesses such as Coperion, Milacron Injection Molding & Extrusion, and Mold-Masters, in addition to Batesville, a recognized leader in the death care industry in North America. Hillenbrand is publicly traded on the NYSE under “HI.”
Source: Hillenbrand, Inc.