K Tron International — Merger or Acquisition (January 2010)
51 slides from K Tron International's merger presentation, Jan 14, 2010
Slide 1: Hillenbrand, Inc. - Creating Shareholder Value
HILLENBRAND, INC. | Creating Shareholder Value | Investor Meetings New York / Boston January 2010
Slide 2: Forward-looking statements
Certain statements in this presentation contain forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, regarding the company’s future plans, objectives, beliefs, expectations, representations and projections. The company has tried, wherever possible,
Slide 3: Hillenbrand / K-Tron International Team Introductions
Hillenbrand / K-Tron International Team Introductions Cindy Lucchese Senior Vice President & Chief Financial Officer Hillenbrand, Inc. Mark Lanning Vice President of Investor Relations & Treasurer Hillenbrand, Inc. Ken Camp President & Chief Executive Officer Hillenbrand, Inc. Lukas Guenthardt Senio
Slide 4: Agenda
Agenda Transaction Summary Strategic Benefits Financial Highlights Business Summary Wrap-up Appendix
Slide 5: Transaction Summary
Transaction Summary
Slide 6: Transaction Summary
Overview Purchase Price Ownership Closing Conditions Timing Transaction Summary Hillenbrand, Inc. to acquire K-Tron International, Inc. (Nasdaq: KTII) for 100% cash consideration The net purchase price associated with this transaction is approximately $390 million based on equity purchase price of $
Slide 7: Transaction Rationale
Transaction Rationale • Hillenbrand’s sole operating unit, Batesville Casket, remains a high-margin cash generator with a leading brand and excellent management • However, revenue growth is historically challenging in death care and has been even more challenging in the current economic environment
Slide 8: Strategic Benefits
Strategic Benefits
Slide 9: It's the Right Acquisition
Operational and Cultural Financial Strategic It ’ s the Right Acquisition • $435MM cash purchase ($390MM net purchase price) provides approximately $200MM of revenue • Preserves Hillenbrand’s high quality of earnings and cash flows while improving growth potential • EBITDA multiple of 10.3x EBITDA i
Slide 10: K-Tron International's Corporate Profile Is Very Attractive to Hillenbrand
Size Reduction Group Process Group Size Reduction Group Process Group K-Tron International ’ s Corporate Profile Is Very Attractive to Hillenbrand • 2008 Revenues and EBITDA of $243 MM and $44.6 MM • 21% Total revenue CAGR over last 5 years; • 10% Organic revenue CAGR over last 5 years • Two attract
Slide 11: Diversifies Hillenbrand's Platforms and Markets
BCC Death Care 75% BCC Diversifies Hillenbrand ’ s Platforms and Markets Pulp, Paper & Forest Products / Biomass Energy 2% Food Processing 5% Power Generation 2% Chemical Detergent & Other Process Group Industries 3% Other 4% Plastics Compounding & Base Resin Manufacturing 9% Post Acquisition Revenu
Slide 12: Broadens Our Product Portfolio of Leading Brands
Broadens Our Product Portfolio of Leading Brands Hillenbrand Today Post Acquisition
Slide 13: Provides Hillenbrand With a Global Business Platform
Belleville, IL 54,000 sq. ft. Wuxi, China 30,000 sq. ft. K-Tron HQ Pitman, NJ 92,000 sq. ft. Cuyahoga Falls , OH 70,000 sq. ft. Woodruff, SC 149,000 sq. ft. Niederlenz, Switzerland 65,000 sq. ft. Batesville, IN 494,000 sq. ft . Salina, KS 134,000 sq. ft . Manchester, TN 375,000 sq. ft . Mexico City,
Slide 14: Creates Multiple Pathways to Strong Revenue Growth Through New Platforms
Creates Multiple Pathways to Strong Revenue Growth Through New Platforms • Proven history of modest acquisitions ($10-$30MM) • Opportunities for bolt-on acquisitions in both platforms • Size Reduction Group well positioned to capture Biomass Energy growth • Pharmaceutical Industry trending from batc
Slide 15: K-Tron International Financial Highlights
K-Tron International Financial Highlights $ IN MILLIONS, EXCEPT PER SHARE DATA 2004 2005 2006 2007 2008 LTM 10/03/09 (1) 2004 - 2008 Total Revenue $113 $119 $148 $202 $243 $213 Gross Profit $46 $50 $62 $86 $101 $88 EBITDA $14 $17 $25 $38 $44 $39 Diluted EPS $2.65 $2.85 $4.95 $7.93 $9.37 $6.79 Growth
Slide 16: K-Tron Strongly Positioned to Weather Economic Downturn
K-Tron International Is Strongly Positioned to Weather the Current Economic Downturn and Thrive Post Recession • K-Tron revenues declined in the first nine months of 2009 by $30.2 MM, or 17%, compared to the same period in 2008 • A significant component of the revenue decline was K-Tron ’ s Process
Slide 17: Looking Through the Economic Trough to Assess Future Value
Cash Flow Accretion +++++ +++++ +++ +++ ++ ++ 0/+ 0/+ Looking Through the Economic Trough to Assess Future Value
Slide 18: Small Cap Industrial Machinery Comparables
SMALL CAP INDUSTRIAL MACHINERY Company Name Market Cap TEV Revenue Gross Margin EBITDA EBITDA Margin P/E Ratio Return (NI) Net Assets (1) on TEV / Revenue EBITDA (2) Gardner Denver Inc. $2,198.4 $2,506.2 $1,851.6 30.7% $276.1 $14.9% NM NM 1.4x 9.1x Nordson Corporation 2,121.1 2267.1 819.2 57.2% 163.
Slide 19: Financial Highlights
Financial Highlights
Slide 20: Financial Highlights of Combination
Financial Highlights of Combination • We believe the acquisition increases net revenue and EBITDA growth rates in first year excluding acquisition and purchase accounting costs. • We believe the transaction will be immediately accretive to EPS and cash flow, excluding acquisition costs, transition c
Slide 21: Combination Provides a Superior Financial Profile
Twelve Months Ended $ IN MILLIONS Hillenbrand 9/30/09 K-Tron 10/03/09 Pro forma Non-GAAP (1) Combined Net Revenue $649.0 $213.0 $862.0 Gross Profit $274.0 $88.0 $362.0 Margin % 42.2% 41.3% 42.0% EBITDA % of Revenue $181.0 27.9% $39.0 18.3% $220.0 25.5% Net Income $102.0 $23.0 $125.0 Operating cash f
Slide 22: Acquisition Funded With Cash and Borrowings
$ IN MILLIONS Acquisition Funding Credit Facility $300-$350 Cash & Other Borrowings $85-$135 Total Purchase Price $435 The Acquisition Will Be Funded With a Combination of Cash and Borrowings ü We will remain in compliance with the Hill-Rom covenant
Slide 23: Financial Principles
Financial Principles Pro-Forma Capital Structure & Strategy Remains Consistent with Hillenbrand’s Previously Discussed Guidelines Generate stable and predictable revenues and cash flows Maintain a healthy capital structure that minimizes risks and provides flexibility Maintain a solid investment gra
Slide 24: Overview of Hillenbrand's Key Financial Policies
Overview of Hillenbrand ’ s Key Financial Policies Dividend Policy • Payout amounts will be reviewed and approved quarterly by the board of directors • Payout levels structured to provide long-term stability • Dividend payout currently higher than peers • Dividend level should grow modestly over the
Slide 25: Business Overview
Business Overview
Slide 26: Batesville Casket Commands a Premium as Industry's Most Respected Brand
BCC Hillenbrand’s Batesville Casket Commands a Premium as the Industry ’ s Most Respected Brand World’s Largest Casket Manufacturer • Iconic brand with 100+ years of history • Industry leader: volume, revenue, margin share • Superior mix of products sold • Brand of choice for funeral directors’ fami
Slide 27: Batesville Casket Is the Largest Player in Funeral Products
Funeral Products ($2.6 Billion Industry) Batesville Casket Is the Largest Player in the Largest Segment of the Death Care Industry Caskets $1.3 Grave Markers $0.6 Cremation $0.3 Source: Company estimates and public filings Vaults $0.4 Caskets 90% Other (100+) Options 7% NorthStar 1% Batesville Impor
Slide 28: Batesville Casket Solid Financial Results in Declining Casket Market
Batesville Casket Has Generated Solid Financial Results in a Declining Casket Market Revenue Gross Margin Net Income Operating Margin Cash Flow * $28 million, after tax pension funding ** $13 million, after tax separation costs * N.A. Casket Market **
Slide 29: Death Care Industry Is Stable, but Challenges Remain
Reduced Burial Demand Reduced Consumer Spending Increased Competition Commodity Risk Death Care Industry Is Stable, but Challenges Remain • Cost conscious consumers have been mixing down, opting for less expensive caskets • It remains to be seen whether the severe economic downturn will cause lastin
Slide 30: Investing Prudently in Batesville Casket
By Investing Prudently in Batesville Casket, We Will Continue to Focus on Future Revenue and Earnings Growth From This Segment and Generate Strong Cash Flow Top-line Growth • Focused sales coverage that leverages strong customer relationships and premium brand • Targeted investments to drive innovat
Slide 31: K-Tron Process Group: Leader in Feeding and Conveying
Product Summary Brand Names Growth Strategy Feeders Conveyers New Platform: K-Tron Process Group Is a Leader in Feeding and Conveying With a Clear Growth Path Feeders Provide accurate feeding of “hard-to-handle” materials in a wide variety of manufacturing processes, enabling customers in key end ma
Slide 32: K-Tron Size Reduction Group: Brand Leader
Product Summary Brand Names Growth Strategy New Platform: K-Tron Size Reduction Group Is a Brand Leader Supported by its High Margin, Recurring Consumable Parts Business Size Reduction Coal Processing : Hammermills, sizers, roll crushers Wood/pulp Processing/Biomass: Wood/bark hogs, chip screens Min
Slide 33: Leverage Hillenbrand's Core Competencies Across New Platforms
New Platforms To Maximize Value Creation, We Will Leverage Hillenbrand’s Core Competencies Across New Platforms Lean Business (Capabilities nationally recognized beyond the death care industry) Culture of Execution Management Team § High quality § Low-cost § Flexible § Safety-conscious § Innovative
Slide 34: Hillenbrand, Inc.
HILLENBRAND, INC.
Slide 35: K-Tron Represents a Very Attractive Strategic Opportunity
K-Tron International Represents a Very Attractive Strategic Opportunity • Matches Hillenbrand’s growth strategy • Market leader with preeminent brands • Strong platforms in growing industries/markets • Proven growth potential (organic and acquisition) • Attractive markets - large, diversified, fragm
Slide 36: Hillenbrand, Inc. - Creating Shareholder Value
HILLENBRAND, INC. | Creating Shareholder Value |
Slide 37: Hillenbrand, Inc. Appendix
HILLENBRAND, INC.
Slide 38: K-Tron International Has a Proven Senior Management Team
K-Tron International Has a Proven Senior Management Team 30+ Year Industry Veteran Ground-up Knowledge of Coal Industry Long-standing Industry Executive Donald W. Melchiorre SVP Size Reduction Group 30+ Yrs with the Company Well Regarded Sales & Marketing Expertise Extensive Knowledge of each K-Tron
Slide 39: K-Tron Historical Results Show Strong Growth and Cash Generation
K-Tron International Historical Results Show Strong Growth and Cash Generation Capabilities Revenue EBITDA Total Debt Cash
Slide 40: K-Tron Historical Credit Metrics Complement Hillenbrand's Credit Strength
K-Tron International Historical Credit Metrics Complement Hillenbrand ’ s Credit Strength Debt / EBITDA
Slide 41: K-Tron International - Operating Performance Summary
FISCAL YEAR ENDING $ IN MILLIONS 2005 ACTUAL 2006 ACTUAL 2007 ACTUAL 2008 ACTUAL LTM 10/03/09 ACTUAL Net Revenue % Y/Y Growth $119 5.3% $148 24.4% $202 36.5% $243 20.3% $213 N/A Gross Profit % of Revenue $50 42.0% $62 41.9% $86 42.6% $101 41.6% $88 41.3% Operating Expenses % of Revenue $37 31.1% $42
Slide 42: K-Tron International - Balance Sheet Summary
FISCAL YEAR ENDING $ IN MILLIONS 2005 ACTUAL 2006 ACTUAL 2007 ACTUAL 2008 ACTUAL 10/03/09 ACTUAL ASSETS Cash $15 $14 $31 $42 $63 Accounts Receivable 18 23 31 37 27 Inventory 15 23 30 29 24 Other Current Assets 4 7 10 6 9 Current Assets 52 67 102 114 123 PP&E 22 29 27 27 25 Other Assets 15 45 55 58 5
Slide 43: K-Tron International - Cash Flow Summary
FISCAL YEAR ENDING LTM 10/03/09 ACTUAL $ IN MILLIONS 2005 ACTUAL 2006 ACTUAL 2007 ACTUAL 2008 ACTUAL Operating Activities Net Income $7 $13 $21 $26 $23 Depreciation & Amortization 4 5 6 6 6 Change in Working Capital (1) 0 (1) (7) 9 Other, Net 1 1 1 2 (1) Cash Flow from Operating Activities 11 19 27
Slide 44: Hillenbrand Financials
Hillenbrand Financials
Slide 45: Hillenbrand, Inc. - 2009 versus 2008
FISCAL YEAR ENDING SEPTEMBER 30 2009 ACTUAL 2008 ACTUAL $ IN MILLIONS Net Revenue % Y/Y Growth $649 (4.3%) $678 1.6% Gross Profit % of Revenue $274 42.3% $281 41.4% Operating Expenses % of Revenue $119 18.3% $131 19.3% Operating Income $155 $150 EBITDA % of Revenue $181 27.9% $175 25.8% Net Income $
Slide 46: Hillenbrand 2010 Guidance - Pre K-Tron Acquisition
FISCAL YEAR ENDING SEPTEMBER 30 AMOUNTS IN MILLIONS (EXCEPT PER SHARE DATA) FY09 FY10 RANGE LOW HIGH Net Revenues $649 $630 $670 Income before Taxes $161 $137 $161 Tax Rate 36.4% 37% 36% Net Income $102 $86 $103 Average Diluted Shares Outstanding 62 62 62 Diluted Net Income per Share $1.66 $1.40 $1.
Slide 47: Non-GAAP Financial Disclosures and Reconciliations
$ IN MILLIONS TWELVE MONTHS ENDED SEPTEMBER 30, 2009 FISCAL YEAR 2010 GUIDANCE (MIDPOINT) PRE- TAX INCOME TAXES POST- TAX PRE-TAX INCOME TAXES POST- TAX GAAP Income $160.8 $58.5 $102.3 $148.9 $54.3 $94.6 Certain non-operating Costs: Antitrust Litigation $2.2 $0.8 $1.4 $4.0 $1.5 $2.5 Separation $0.1
Slide 48: Hillenbrand, Inc. - Operating Performance Summary
FISCAL YEAR ENDING SEPTEMBER 30 2007 ACTUAL 2008 ACTUAL 2009 ACTUAL $ IN MILLIONS Net Revenue % Y/Y Growth $667 (1.2%) $678 1.6% $649 (4.3%) Gross Profit % of Revenue $279 41.8% $281 41.4% $274 42.3% Operating Expenses % of Revenue $123 18.4% $131 19.3% $119 18.3% Operating Income $156 $150 $155 EBI
Slide 49: Hillenbrand, Inc. - Balance Sheet Summary
FISCAL YEAR ENDING SEPTEMBER 30 $ IN MILLIONS 2007 ACTUAL 2008 ACTUAL 2009 ACTUAL ASSETS Cash $12 $15 $35 Accounts Receivable 91 88 85 Inventory 48 49 43 Other Current Assets 19 30 70 Current Assets 170 182 233 PP&E 89 91 85 Other Assets 58 272 243 Total Assets 317 545 561 LIABILITIES Current Liabil
Slide 50: Hillenbrand, Inc. - Cash Flow Summary
FISCAL YEAR ENDING SEPTEMBER 30 $ IN MILLIONS 2007 ACTUAL 2008 ACTUAL 2009 ACTUAL Operating Activities Net Income $100 $93 $102 Depreciation & Amortization 19 19 19 Change in Working Capital 8 (16) 5 Other, Net 0 6 (3) Cash Flow from Operating Activities 127 102 123 Capex & Purchase of Intangibles (
Slide 51: GAAP Reconciliation
K-TRON INTERNATIONAL FISCAL YEAR ENDING HILLENBRAND FISCAL YEAR ENDING SEPTEMBER 30 $ IN MILLIONS 2004 2005 2006 2007 2008 LTM 10/03/09 2007 2008 2009 Net Income $7 $7 $13 $21 $26 $20 $100 $93 $102 Taxes 2 5 6 9 11 12 57 61 58 Interest 1 1 1 2 1 1 0 2 2 Depreciation & Amortization 4 4 5 6 6 6 19 19
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