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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

Annual Report Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

For the fiscal year ended September 30, 2012

Commission File No. 001-33794

HILLENBRAND, INC.

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code: (812) 934-7500

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x  No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.  Yes o  No x

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 x  No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, 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 x  No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, non-accelerated filer, or a smaller reporting company (as defined in Rule 12b-2 of the Exchange Act).

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

The aggregate market value of voting stock (consisting solely of shares of common stock) held by non-affiliates of the registrant as of March 30, 2012 was $1,435,908,427.  As of November 15, 2012, 62,618,678 shares of common stock were outstanding.

Documents Incorporated by Reference

Portions of our definitive proxy statement for the 2012 Annual Meeting of Stockholders are incorporated by reference into Part III of this report. These will be filed no later than January 14, 2013.

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(monetary amounts in millions, except per share data)

PART I

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

Throughout this Form 10-K, 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.

Accordingly, in this Form 10-K, 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:

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.

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 this Form 10-K.  We assume no obligation to update or revise any forward-looking statements.

In this section of the Form 10-K, we provide you a basic understanding of our Company, our reportable segments, the products we manufacture and sell, how we distribute our products, with whom we compete, and the key inputs to production.  We also provide you background on industry trends, regulatory matters, key patents and trademarks important to our business, and an explanation of our business strategies.  Finally, we provide you a brief background on our executive officers so that you can understand their experience and qualifications.

Further quantitative information about the business is set forth in Note 14 to our consolidated financial statements included in Part II, Item 8, of this Form 10-K.

General

Hillenbrand, Inc. is a global diversified industrial company that makes and sells premium business-to-business products and services for a wide variety of industries.  Hillenbrand has two business platforms: the Process Equipment Group and Batesville®.  The Process Equipment Group is a recognized leader in the design and production of equipment and systems used in processing applications and Batesville is a recognized leader in the North American funeral products industry.  “Hillenbrand,” “the Company,” “we,” “us,” “our,” and similar words refer to Hillenbrand, Inc. and its subsidiaries.

Hillenbrand was incorporated on November 1, 2007, in the state of Indiana and began trading on the New York Stock Exchange under the symbol “HI” on April 1, 2008.  Hillenbrand became a publicly traded company as the result of the separation of Hillenbrand Industries, Inc. (also referred to by its new corporate name, Hill-Rom Holdings, Inc., or “Hill-Rom”) into two separate publicly traded companies, Hillenbrand and Hill-Rom, through a tax-free distribution on March 31, 2008, of Hillenbrand shares to Hill-Rom’s shareholders.

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Although Hillenbrand has been a separate public company for more than four years, the businesses operated by Hillenbrand have been in place for decades.  Batesville serves as the Company’s core cash-generating operation, providing strong annual operating cash flows.

Batesville’s performance has allowed management to invest in acquisitions that provide diversification, with a focus on companies with revenue growth opportunities and an ability to benefit from Hillenbrand’s strong core competencies.  With the acquisition of K-Tron International, Inc. and its subsidiaries (“K-Tron”) in April 2010 and Rotex Global, LLC (“Rotex”) in August 2011, now comprising the Process Equipment Group, Hillenbrand added companies with long profitable histories and multiple pathways for revenue and earnings growth.  See Note 17 to our consolidated financial statements included in Part II, Item 8 of this Form 10-K for more information on our planned acquisition of Coperion Capital GmbH (Coperion), expected to close in early December 2012.

Hillenbrand’s strong, steady cash flow since becoming a separate publicly traded company has also provided the foundation to pay a meaningful dividend to shareholders.  The annual dividend has increased each year, growing from $0.73 per share in 2008 to $0.77 per share in 2012.

We believe we can most effectively continue to increase shareholder value by leveraging our strong financial position and core competencies to continue to build a global diversified industrial company with strong positions in multiple industries.  Our long-term value creation strategy consists of:

·                  Growing revenue and income within our existing platforms through organic growth and targeted acquisitions:  Each operating company within the business platforms has specific organic growth targets.  Our operating companies may also grow by select “add-on” acquisitions that are complementary to their organic growth strategies.  They are committed to achieving superior operational performance by employing Hillenbrand’s core competencies described below:

·                  Lean business:  continuously improving quality and customer satisfaction, increasing effectiveness and operational efficiency, driving costs down, and developing lean leaders;

·                  Talent development:  successfully recruiting, intentionally developing, retaining, and deploying talent in the organization for improved execution and results; and

·                  Strategy management:  overseeing the development, execution, and continuous assessment of strategic direction, serving as the basis for annual and long-term business planning.

·                  Using our strong cash flow and debt capacity to invest in additional growth platforms: We will focus on companies that can benefit from our core competencies and that meet our financial, cultural, and business model criteria.  In support of this effort, we intend to continue to enhance our public company capabilities to ensure that we remain compliant, efficient, well-controlled, and capable of supporting both current and future acquisitions.

Process Equipment Group

We acquired K-Tron in April 2010 and Rotex in August 2011.  These two businesses comprise what we now refer to as the Process Equipment Group.  The Process Equipment Group designs, produces, markets, sells, and services bulk solids material handling equipment and systems for a wide variety of industries, including plastics, food, chemicals, pharmaceuticals, power generation, coal mining, pulp and paper, frac sand, industrial minerals, agribusiness, recycling, wood and forest products, and biomass energy generation.  Global demand is increasing for products sold by many of the industries the Process Equipment Group serves, such as fertilizer, processed food, plastics, and energy.  This growth in demand is due specifically to rapid development in many emerging markets, an expanding global middle class and, in general, to global population growth.

Products and Services

Under the K-Tron brand, the Process Equipment Group designs, produces, markets, sells, and services feeders and pneumatic conveying equipment.  This equipment can be sold as stand-alone products or as part of engineered systems, where one or more feeders are combined with pneumatic conveying and other complementary materials handling equipment.  Feeding equipment controls the flow of materials into a manufacturing process.  Pneumatic conveying equipment and related systems are used in many of the same industries as feeders to transport bulk solids from point to point within a manufacturing process.  K-Tron products serve a variety of industries including plastics, processed food, pharmaceuticals, chemicals, and non-woven fabric.

The Process Equipment Group also designs, manufactures, markets, and sells size reduction equipment that is used to reduce various materials to a smaller size.  It has three primary brands that serve a variety of industries.  Pennsylvania Crusher™ and Gundlach® products are used to crush various materials related to processes in the power generation, mining, quarrying, glass

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making, salt processing, fertilizer manufacturing, and other industries.  Jeffrey Rader® products include equipment used in the pulp and paper, wood and forest, and biomass industries.

Key size reduction products include hammer mills, which crush materials by impact from hammers, then scrub the materials against a screen for desired size; double-roll crushers, which break material by compression; a variety of wood and bark hogs, chip sizers, screening equipment, and pneumatic and mechanical conveying systems; and storage/reclamation systems.  Other size reduction products include specialty crushers and other equipment.

Under the Rotex brand, the Process Equipment Group designs, produces, markets, sells, and services dry material separation machines.  These machines sort dry, granular products based on the size of the particles being processed.  For example, they can be used in grading sugar into various size groupings for different purposes such as table, super fine, and powdered sugar.  Rotex serves a variety of industries including frac sand, potash, urea, phosphates, chemical, agricultural, plastics, and food processing.

Approximately 40% of the Process Equipment Group’s revenue is derived from the sale of replacement parts.  This business has recurring sales that often follow an installed base of equipment for decades.

Sales, Distribution, and Operations

The Process Equipment Group sells its material handling equipment and systems throughout the world to a wide variety of industrial and engineering customers using a combination of direct sales and a global network of independent sales representatives and distributors.  A significant portion of sales are made through independent sales representatives who are compensated by commission, which tends to make sales expense vary directly with revenue changes.  In situations where a representative purchases our equipment and resells it as a distributor, we sell the product at a price net of commission, depending on the type of product sold.

Due to the nature of the Process Equipment Group’s business, equipment and systems orders are often for unique, engineered-to-order items.  Therefore, the Process Equipment Group does not typically maintain significant amounts of raw material and component stock inventory on hand at any one time, except to cover replacement part orders.  Products are generally assembled and tested at the Process Equipment Group facilities and then shipped to a customer’s desired location.

Future revenue for the Process Equipment Group is influenced by order backlog because of the lead time involved in fulfilling engineered-to-order equipment for customers.  Though backlog can be an indicator of future revenue, it might not include many 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 is also affected by foreign exchange fluctuations for orders denominated in currencies other than United States (“U.S.”) dollars.

Customers

The Process Equipment Group’s customers exist in multiple industries, including the plastics, food, chemical, pharmaceutical, power generation, coal mining, pulp and paper, frac sand, wood and forest products, and biomass energy generation industries.  These customers range from large, Fortune 500 global companies to regional and local businesses.  No one customer accounted for more than 10% of the Process Equipment Group’s consolidated net revenue during the year ended September 30, 2012.  For large or customized orders, customers generally pay a deposit and make progress payments in advance of delivery.

Competition

We believe the Process Equipment Group holds leading positions in key industries because of brand name recognition, design and quality of its products, years of application experience, product support services, and commitment to serving the needs of its customers.

The Process Equipment Group faces strong competition in the markets in which it competes.  Its competitors range in size from small privately-held companies serving narrow market segments or geographical areas to larger well-known global companies serving national and international markets with multiple product lines.  We believe its base of replacement parts business and its strong worldwide network of suppliers and dealers will allow the Process Equipment Group to maintain its leading market positions even during economic downturns.

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Raw and Component Materials

The manufacturing of the Process Equipment Group’s products involves the machining and welding of raw materials (primarily sheet metals and steel) and castings into machined parts.  These parts are then combined and assembled with other component parts purchased from third-party vendors.  Although most of these raw materials and components are generally available from several sources, some of these items are currently purchased from sole sources.  The Process Equipment Group has not experienced any significant production delay that was primarily attributable to an outside supplier.

Strategy

Leadership of the Process Equipment Group is focusing on three strategic initiatives to drive growth:

Profitably grow top-line revenue in our core Process Equipment Group operating companies

Continued growth through acquisitions

Utilize lean business principles to increase profit margins

Batesville

Batesville® is a recognized leader in the North American funeral products industry, where it has been designing, manufacturing, distributing, and selling funeral service products and solutions to licensed funeral directors operating licensed funeral homes for more than 100 years.  Batesville-branded products include:  burial caskets; cremation caskets; containers; cremation vaults, urns; burial vaults; selection room display fixturing for funeral homes; personalization and memorialization products and services; and web-based applications which include the creation and hosting of websites for licensed funeral homes.

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Products and Services

Most Batesville brand metal caskets are electronically welded and utilize rubber gaskets and a locking bar mechanism.  Batesville’s gasketed caskets are made of carbon steel, stainless steel, copper, and bronze.  Batesville premium steel caskets also employ an alloy bar to help protect the casket cathodically from rust and corrosion, a feature we believe is found only on Batesville-produced caskets.  We also produce and market non-gasketed steel products.

Batesville solid and veneer hardwood caskets are made from a variety of woods, which are offered in more than nine different species.  Batesville veneer caskets are manufactured using a proprietary process for veneering that allows for rounded corners and a furniture-grade finished appearance.  The Company also manufactures and provides Marsellus® premium solid wood caskets, and cloth-covered and all-wood caskets suitable for green burials.

Batesville has a complete line of burial vault offerings that includes the Endura® and Engevity™ burial vaults and a grave liner.  Made of lightweight nonporous polyethylene, the burial vaults offer the strength and durability to withstand the weight of the earth and heavy cemetery equipment, while providing significant advantages due to their innovative material design.  The lightweight nature of the material allows for reduced labor and heavy equipment costs at the cemetery and improved safety, while the multiple layers of material provide barriers for strength, durability, and resistance to water.

The Options® by Batesville’s cremation business is focused on helping funeral professionals capitalize on the growing trend to select cremation.  In addition to a broad line of cremation caskets, containers, urns, jewelry, and keepsakes, Options offers training, merchandising, and packaging support, and a complete line of marketing support materials to educate families on cremation choices.  Cremation caskets and containers are manufactured primarily of hardwoods and fiberboard.  Batesville’s memorial urns are made from a variety of materials including bronze, acrylic, wood, cloisonné, and marble.  The Company also offers a broad selection of biodegradable urns and scattering urns.

Batesville Interactive is the largest provider of funeral home websites and a trusted technology partner to thousands of funeral homes across North America. Batesville Interactive offers a suite of integrated, easy-to-use technology products and services that provide funeral directors with stronger connections with their communities and better brand recognition.  Core technology offerings include WebLink® funeral home websites, TributeLink® online video tributes, and ObitLink®, an online obituary solution offered in partnership with Legacy.com®.  Batesville also has exclusive agreements with national brands like FTD.COM, Inc., that make it easy for families to order sympathy flowers, cards, and gifts directly from the funeral home’s website.  These solutions are marketed as part of Batesville’s Expressions of Sympathy™ offerings and are available to licensed funeral homes using Batesville’s WebLink websites.

Sales, Distribution, and Operations

Batesville offers several marketing and merchandising programs to funeral professionals for caskets, cremation products, and burial vaults.  Batesville-branded caskets are marketed by a direct sales force only to licensed funeral professionals operating licensed funeral establishments throughout the U.S., Puerto Rico, Canada, Mexico, the United Kingdom, and Australia.  In the absence of state licensing requirements, we market to full-service funeral establishments offering funeral products in conformance with state law.  A portion of Batesville’s sales are made to national funeral service providers under contracts.  None of Batesville’s customers account for more than 10% of consolidated net revenue during the year ended September 30, 2012.  We also serve more than 12,000 independent, privately owned funeral homes across North America.

Demographics and Customer Preferences

The death of a family member or loved one causes most people to seek the services of a state-licensed funeral director.  Most consumers have limited familiarity with funeral-related products and expect funeral directors to provide information on product and service alternatives.  Although caskets and urns can be purchased from a variety of sources, including internet sellers and casket stores, the overwhelming majority of those who arrange a funeral purchase these products directly from the funeral home.

Prior to 2012, the total number of deaths in North America had been relatively flat for a number of years.  However, we experienced one of the largest declines in thirty years during 2012.  We expect that the number of North American deaths will return to a relatively flat level in the future; however, we cannot be certain of this.  The rate at which consumers opt for cremation has been steadily increasing.  Cremations as a percentage of total deaths now represent more than one-third in the U.S. and more than one-half in Canada.  These factors have yielded a decline in the total number of burials in North America.  The current trends are expected to continue for the foreseeable future until the post-World War II spike in births causes an increase in deaths.  While the primary drivers of market size are population and age, the actual number of deaths (and, therefore, the actual number of caskets sold) is affected by a variety of additional factors, including improving healthcare and the severity of seasonal pneumonia and influenza outbreaks.  The unpredictability of these factors can cause periodic fluctuations in industry demand patterns and

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revenue generated in any given fiscal period.  While it is difficult to accurately predict the number of deaths on a monthly or annual basis, we anticipate that the number of deaths in North America should remain relatively flat and the cremation rate should continue to increase, resulting in a steady decline in the demand for burial caskets for the foreseeable future.  In addition, the funeral products industry has experienced a long-term decline in the product mix of burial caskets sold, a trend that has also affected Batesville’s financial results.

Competition

Batesville is a recognized leader in the sale of funeral service products in North America.  Competition in this industry is based on product quality, design features, personalization, price, delivery, and service.  Batesville competes with several national casket manufacturers/distributors, regional manufacturers/distributors, and more than 100 independent casket distributors, most of whom serve fairly narrow geographic segments.  Some non-traditional funeral product providers, such as large discount retail stores, casket stores, and internet casket retailers, sell caskets directly to consumers.  The industry has also seen a few foreign manufacturers, mostly from China, import caskets into the U.S. and Canada.  For the past three years, sales from these non-traditional and Chinese providers have remained relatively stable and represent a small percentage of total casket sales in North America, collectively less than 5%.

The effect of declining casket demand continues to put added economic pressures on casket manufacturers and distributors as they seek to maintain volume.  Existing domestic over-capacity and commodity price increases further impacts these pressures, resulting in higher per unit costs.

Raw Materials

Batesville uses carbon and stainless steel, copper and bronze sheets, wood, fabrics, finishing materials, rubber gaskets, zinc, and magnesium alloy in the manufacture of its caskets.  Although most of these raw materials are generally available from several sources, some are currently procured from a single source.

Volatility in the prices Batesville pays for raw materials used in its products, including steel, fuel, petroleum-based products, and fuel-related delivery costs, has a direct effect on profitability.  Batesville generally does not engage in hedging transactions for these purchases, but does enter into fixed-price supply contracts at times.  Batesville regularly takes steps to offset the impact of volatility in raw material and fuel prices, including lean business initiatives and various sourcing actions.

Most of Batesville’s sales are made pursuant to supply agreements with its customers, and historically it has instituted annual price adjustments to help offset some, but not necessarily all, raw material cost increases.

Strategy

While volume growth in the burial casket space continues to be limited, there are opportunities to generate additional business within a wider range of funeral products and services.  Batesville’s leadership team is focusing on three categories of strategic initiatives to drive growth:

Recognize and respond to unique needs in the funeral products industry

·            Batesville will capitalize on niche casket opportunities where we can remain differentiated and will continue to demonstrate the value its Batesville-branded products and services bring to funeral home operations and the families served by our customers of all sizes across North America.

·            Batesville will expand its personalization platforms by investing in its marketing capabilities and brand promotion to launch products with consumer-oriented features.

·            Batesville will continue to expand The Options® by Batesville brand as we expect continued growth in this product line as more consumers choose cremation over burial.

·            Batesville will continue to expand its position as the largest provider of funeral home websites in North America, a service we believe provides many family-owned funeral homes access to resources and capabilities they may not otherwise have or wish to develop on their own.  As additional consumers use the internet as their first point of contact when making a purchase decision, Batesville technology offerings help to improve the visibility of the local funeral home to the families in their community.

·            Batesville Vault Solutions is a natural extension of the Batesville strategy to provide additional products and services to funeral home customers.  Our goal is to provide funeral directors alternative products and services that generate revenue within the vault business.

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Build and deliver integrated solutions that provide quantifiable value to our customers

·            Batesville will continue to focus on providing integrated solutions that lead the funeral products industry and are uniquely integrated to provide greater value for our customers.

Utilize lean business principles as an integrated business system to deliver operational efficiencies

·            Batesville’s highly integrated manufacturing facilities utilize “one-piece flow” to manufacture caskets and “pull production” from their stamping and wood processing facilities that quickly and efficiently feed its high-velocity distribution network.  These processes allow Batesville to carry lower inventory while still meeting the growing demand of its customers.  Batesville intends to continue to leverage its processes to allow it to carry lower inventory per sales dollar than its competitors, enabling customers to carry few or no products in their funeral homes, while continuing to achieve on-time delivery.

·            Batesville’s effective execution of Hillenbrand Lean Business improves product quality and customer satisfaction, which paves the way to annual lead time and cost reductions in its operations, distribution, and administrative functions.

·            Batesville will continue to capitalize on its leadership position as the largest manufacturer and distributor of caskets and containers in North America to capture efficiencies that allow Batesville to compete with a low cost structure.

Regulatory Matters

Both the Process Equipment Group and Batesville are subject to a variety of federal, state, local, and foreign laws and regulations relating to environmental, health, and safety concerns, including the handling, storage, discharge, and disposal of hazardous materials used in or derived from our manufacturing processes.  We are committed to operating all our businesses in a manner that protects the environment and causes us to be viewed as good corporate citizens in the communities in which we operate.  In the past, we have voluntarily entered into remediation agreements with various environmental authorities to address onsite and offsite environmental impacts.  From time to time we provide for reserves in our financial statements for environmental matters.  We believe we have appropriately satisfied the financial responsibilities for all currently known offsite issues.  Based on the nature and volume of materials involved regarding onsite impacts, we do not expect the cost for the onsite remediation activities in which we are currently involved to be material.  Future events or changes in existing laws and regulations or their interpretation may require us to make additional expenditures in the future.  The cost or need for any such additional expenditure is not known.

Patents and Trademarks

We own a number of patents on our products and manufacturing processes that are of importance, but we do not believe any single patent or related group of patents is of material significance to our business as a whole.  We also own a number of trademarks and service marks relating to products and product services which are of importance.  We believe the marks “Pennsylvania Crusher™,” “Gundlach®,” “Jeffrey Rader®,” “K-Tron™,” “Rotex®,” and “Batesville®” are of material significance to our business as a whole.

Our ability to compete effectively depends, to an extent, on our ability to maintain the proprietary nature of our intellectual property. In the past, certain of our products have been copied and sold by others.  Hillenbrand vigorously seeks to enforce its intellectual property rights.  However, we may not be sufficiently protected by our various patents, trademarks, and service marks, and they may be challenged, invalidated, cancelled, narrowed, or circumvented.  Beyond that, we may not receive the pending or contemplated patents, trademarks, or service marks for which we have applied or filed.

Foreign Operations and Export Sales

Quantitative information about foreign operations is set forth in tables relating to geographic information in Note 14 to our consolidated financial statements included in Part II, Item 8, of this Form 10-K.  For a discussion of risks related to our non-US operations and foreign currency exchange, refer to Part 1, Item 1A. Risk Factors, of this Form 10-K.

Employees

At September 30, 2012, we had approximately 3,900 employees worldwide.  Approximately 3,200 employees are located within the U.S. and 700 employees are located outside of the U.S., primarily throughout Mexico, Europe, and China.  Approximately 1,000 employees in North America and the United Kingdom work under collective bargaining agreements with expiration dates ranging from March 2013 to August 2016.  Hillenbrand strives to maintain satisfactory relationships with all its employees, including the

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unions representing those employees.  As a result, we have not experienced a significant work stoppage due to labor relations in more than 20 years.

Executive Officers of the Registrant

Our Board of Directors is responsible for electing the Company’s executive officers annually and from time to time as necessary.  Executive officers serve in the ensuing year and until their respective successors are elected and qualified.  There are no family relationships between any of our executive officers or between any of them and any members of the Board of Directors.  The following is a list of our executive officers as of November 15, 2012.

Kenneth A. Camp, 67, has served as a director and as President and Chief Executive Officer of the Company since February 8, 2008.  Mr. Camp previously served as President of Batesville from May 1, 2001, until June 16, 2008.  Mr. Camp previously held various positions with our former parent corporation, Hillenbrand Industries, Inc., commencing October 8, 2001.  He served as Senior Vice President of that company from October 1, 2006, until his resignation from that position on March 31, 2008, as part of the spin-off.  Mr. Camp has also held various positions at Batesville since beginning his business career with that company in 1981, including Senior Vice President/General Manager of Operations from 1995 to 2000; Vice President, Sales and Service; Vice President, Marketing; and Vice President, Strategic Planning.  Mr. Camp also serves on the boards of the Manufacturers Alliance/MAPI and the National Association of Manufacturers.

Joe A. Raver, 46, was elected President of Process Equipment Group effective April 4, 2011.  He previously served as President of Batesville, effective June 16, 2008, and has been Senior Vice President of Hillenbrand since July 15, 2008.  Prior to serving as President of Batesville, Mr. Raver served as Vice President and General Manager of the Respiratory Care Division of Hill-Rom, a leading global provider of medical equipment and services.  He joined Hill-Rom in 2004 as Vice President of Strategy and Shared Services.  Prior to joining Hill-Rom, Mr. Raver spent 10 years in a variety of leadership positions at Batesville and Hill-Rom, culminating in being named Vice President of Logistics at Batesville in 2002.

Kimberly K. Dennis, 45, was elected President of Batesville and Senior Vice President of the Company effective April 4, 2011.  Most recently she served as Senior Vice President, North America Post-Acute Care of Hill-Rom.  Prior to that, she held Vice President roles at Hill-Rom leading its Turnaround Program, Shared Services and Information Technology from 2005 to 2007.  Prior to 2005, Ms. Dennis served in a number of senior roles within Hillenbrand Industries and its subsidiaries including Vice President, Shared Services; Batesville Casket Vice President, Business Information Systems; and Director, Enterprise Systems between 2000 and 2005.  Her career began in 1989 with Batesville Casket Company.  During her tenure, she held positions of increasing responsibility in finance, planning, operations, logistics, and information technology in assignments at Batesville Casket Company and Hillenbrand.

Cynthia L. Lucchese, 52, was elected Senior Vice President and Chief Financial Officer of the Company effective February 8, 2008.  From 2005 to 2007, she served as Senior Vice President and Chief Financial Officer for Thoratec Corporation.  Prior to that, she worked 10 years for Guidant Corporation, now a part of Boston Scientific Corporation, in a variety of senior finance roles, including Vice President and Treasurer, Corporate Controller and Chief Accounting Officer, and Vice President of Finance and Administration of the Guidant Sales Corporation.  Ms. Lucchese was also previously employed by Eli Lilly and Company and Ernst & Young LLP.

Paul Douglas Wilson, 60, was elected Senior Vice President, Chief Administrative Officer of the Company effective January 3, 2011.  Prior to that, Mr. Wilson served as Senior Vice President, Human Resources effective March 14, 2008.  Prior to joining Hillenbrand, Mr. Wilson served as Vice President, Worldwide Merger Integration, for Boston Scientific Corporation, following the close of the merger between Boston Scientific and Guidant Corporation in 2006.  Mr. Wilson joined Guidant Corporation in 2002 and served as Vice President of Human Resources, the chief human resources officer.  Prior to Guidant, Mr. Wilson was president and a principal of Ronald Blue & Co., a privately held firm providing financial planning, investment management, tax planning, and philanthropic counsel.  Mr. Wilson began his career with Eli Lilly and Company, where he spent 20 years in a variety of increasingly senior executive human resource roles.

John R. Zerkle, 58, was elected Senior Vice President, General Counsel, and Secretary of the Company effective February 8, 2008.  Most recently, Mr. Zerkle had served as Vice President and General Counsel of Batesville since March 2004.  From September 2002 to February 2004, Mr. Zerkle served as Vice President and General Counsel of Forethought Financial Services, Inc., then a subsidiary of Hill-Rom.  He also served as Compliance Officer for Forethought Investment Management, Inc.  Prior to joining Forethought, Mr. Zerkle was in private practice for 20 years, where he focused his practice on corporate, securities, regulatory, and banking law matters.

Diane R. Bohman, 42, was elected Vice President, Corporate Strategy of the Company effective June 6, 2011.  Ms. Bohman previously served as Batesville’s Vice President, Logistics; Vice President and Chief Financial Officer; and Vice President, Strategy, from 2005 to 2011.  Prior to this, Ms. Bohman worked for seven years at Hill-Rom, holding several positions of increasing

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responsibility in the finance organization.  She began her career in the business assurance practice of Coopers & Lybrand, LLP.  Ms. Bohman is a Certified Public Accountant.

Scott P. George, 58, was elected Senior Vice President, Corporate Development of the Company effective January 23, 2012.  Mr. George previously served as managing director and head of the Illinois practice for P&M Corporate Finance, LLC.  Prior to that, Mr. George held a similar position at Morgan Joseph & Co.  Mr. George’s experience also includes senior investment banking advisory roles at Ernst & Young Corporate Finance, Morgan Stanley and Salomon Brothers Inc.  

Jan M. Santerre, 51, was elected Vice President, Lean Business of the Company effective December 1, 2008.  Prior to joining Hillenbrand, she worked at Parker Hannifin Corporation, the world’s largest manufacturer of motion and control products.  Most recently she was Vice President of Operations in the Hydraulics Group, where she had responsibility for half of the North American divisions.  Prior to that she was the Vice President of Lean Enterprise and Quality, where she developed the Parker Lean System and deployed it globally.  Ms. Santerre developed her lean knowledge through managerial roles during her 18 years with Delphi Automotive Systems and General Motors.

Elizabeth E. Dreyer, 50, was elected Vice President, Controller, and Chief Accounting Officer of the Company effective December 1, 2010.  Prior to joining Hillenbrand, Ms. Dreyer served as Vice President of Finance at Zimmer, Inc., an orthopedic medical device provider.  Ms. Dreyer has also held other management roles in finance, organizational effectiveness, and internal audit at Createc Corporation, ADESA, Inc., and Guidant Corporation.  She began her career in the business assurance practice of Deloitte & Touche.  Ms. Dreyer is a Certified Public Accountant.

Availability of Reports and Other Information

Our website is www.hillenbrand.com.  We make available on this website, free of charge, access to press releases, conference calls, our annual and quarterly reports, and other documents filed with or furnished to the Securities and Exchange Commission (SEC) as soon as these reports are filed or furnished.  We also make available through this website position specifications for the Chairman, Vice Chairman, members of the Board of Directors, and the Chief Executive Officer; our Code of Ethical Business Conduct; the Corporate Governance Standards of our Board of Directors; and the charters of each of the standing committees of the Board of Directors.  All these documents are also available to shareholders in print upon request.

All reports and documents filed with the SEC are also available via the SEC website, www.sec.gov, or may be read and copied at the SEC Public Reference Room at 100 F Street, NE, Washington, DC 20549.  Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330.

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Item 1A.                Risk Factors

In this section of the Form 10-K, we describe the risks we believe are most important for you to think about when you consider investing in, selling, or owning our stock or debt.  This information should be assessed along with the other information we provide you in this Form 10-K.  Like most companies, our business involves risks.  The risks described below are not the only risks we face, but these are the ones we currently think have the potential to significantly affect stakeholders in our Company if they were to develop adversely (due to size, volatility, or both).  We exclude risks that we believe are inherent in all businesses broadly as a function of simply being “in business.”  Additional risks not currently known or considered immaterial by us at this time and thus not listed below could also result in adverse effects on our business.  In the risk descriptions below, we have assigned the risks into categories to help you understand where they emanate from (e.g. the overall Company or a specific segment).

Risk Related to Our Overall Company

A key component of our growth strategy is making significant acquisitions, some of which may be outside our current industry.  We may not be able to achieve some or all of the benefits that we expect to achieve from these acquisitions.  If an acquisition were to perform unfavorably, it could have an adverse impact on our value.

All acquisitions involve inherent uncertainties, which may include, among other things, our ability to:

We may acquire businesses with unknown liabilities, contingent liabilities, or internal control deficiencies.  We have plans and procedures to conduct reviews of potential acquisition candidates for compliance with applicable regulations and laws prior to acquisition.  Despite these efforts, realization of any of these liabilities or deficiencies may increase our expenses, adversely affect our financial position, or cause us to fail to meet our public financial reporting obligations.

We generally seek indemnification from sellers covering these matters; however, the liability of the sellers is often limited, and certain former owners may be unable to meet their indemnification responsibilities.  We cannot assure you that these indemnification provisions will fully protect us, and as a result we may face unexpected liabilities that adversely affect our profitability and financial position.

We may not achieve the intended benefits of the acquisition and our business could be materially impacted.  Under such circumstances, management could be required to spend significant amounts of time and resources in the transition of the acquired business.  In addition, any benefits we anticipate from application of our lean manufacturing and lean business expertise may not be fully realized.

If we acquire a company that operates in an industry that is different from the ones in which we operate, our lack of experience with that company’s industry could have a material adverse impact on our ability to manage that business and realize the benefits of that acquisition.

Global market and economic conditions, including those related to the financial markets, could have a material adverse effect on our operating results, financial condition, and liquidity.

Our business is sensitive to changes in general economic conditions, both inside and outside the U.S.  Although we  have seen stability or growth in some geographies since the global economic turmoil that began in 2008, we cannot assure you that these improvements will be sustainable or predict when the next recession will occur.  In addition, the current uncertainties in the euro zone may depress demand in the area and create additional risk to our financial results.

Instability in the global economy and financial markets can adversely affect our business in several ways, including limiting our customers’ ability to obtain sufficient credit or pay for our products within the terms of sale.  Competition could further intensify among the manufacturers and distributors with whom we compete for volume and market share, resulting in lower net revenue due to steeper discounts and product mix-down.  In addition, if certain key or sole suppliers were to become capacity constrained or insolvent, it could result in a reduction or interruption in supplies or a significant increase in the price of supplies.

Substantial losses in the equity markets could have an adverse effect on the assets of the Company’s pension plans.  Volatility of interest rates and negative equity returns could require greater contributions to the defined benefit plans in the future.

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International economic, political, legal, and business factors could negatively affect our operating results, cash flows, financial condition, and growth.

We derived approximately 17%, 16%, and 12% of our revenue from outside the U.S. for the years ended September 30, 2012, 2011, and 2010.  This revenue is primarily generated in Europe, the Middle East, Asia, South America, and Canada.  In addition, we have manufacturing operations, suppliers, and employees located outside the U.S.  Since our growth strategy depends in part on our ability to further penetrate markets outside the U.S., we expect to continue to increase our sales and presence outside the U.S.

Our international business is subject to risks that are customarily encountered in non-U.S. operations, including:

·                  interruption in the transportation of materials to us and finished goods to our customers;

·                  differences in terms of sale, including payment terms;

·                  local product preferences and product requirements;

·                  changes in a country’s or region’s political or economic condition, including with respect to safety and health issues;

·                  trade protection measures and import or export licensing requirements;

·                  unexpected changes in laws or regulatory requirements, including negative changes in tax laws;

·                  limitations on ownership and on repatriation of earnings and cash;

·                  difficulty in staffing and managing widespread operations;

·                  differing labor regulations;

·                  difficulties in implementing restructuring actions on a timely or comprehensive basis; and

·                  differing protection of intellectual property.

We rely upon our employees, agents, and business partners to comply with laws in many different countries and jurisdictions.  We establish policies and provide training to assist them in understanding our policies and the regulations most applicable to our business; however, our reputation, ability to do business, and financial results may be impaired by improper conduct by these individuals.

We cannot provide assurance that our internal controls and compliance systems will always protect us from acts committed by our employees, agents, or business partners that would violate U.S. and/or non-U.S. laws, including the laws governing payments to government officials, bribery, fraud, anti-kickback and false claims rules, competition, export and import compliance, money laundering, and data privacy.  In particular, the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act, and similar anti-bribery laws in other jurisdictions generally prohibit companies and their intermediaries from making improper payments to government officials for the purpose of obtaining or retaining business, and we operate in many parts of the world that have experienced governmental corruption to some degree.  Any such improper actions could subject us to civil or criminal investigations in the U.S. and in other jurisdictions; could lead to substantial civil and criminal, monetary and non-monetary penalties, and related shareholder lawsuits; could cause us to incur significant legal fees; and could damage our reputation.

We are subject to risks arising from currency exchange rate fluctuations, which may adversely affect our results of operations and financial condition.

We are subject to currency exchange rate risk to the extent that our costs are denominated in currencies other than those in which we earn revenues.  In addition, since our financial statements are denominated in U.S. dollars, changes in currency exchange rates between the U.S. dollar and other currencies have had, and will continue to have, an impact on our results of operations.  Although we address currency risk management through regular operating and financing activities, and, on a limited basis, through the use of derivative financial instruments, those actions may not prove to be fully effective.

Increased prices for, or unavailability of, raw materials used in our products could adversely affect profitability.

Our profitability is affected by the prices of the raw materials used in the manufacture of our products.  These prices fluctuate based on a number of factors beyond our control, including changes in supply and demand, general economic conditions, labor costs, fuel-related delivery costs, competition, import duties, tariffs, currency exchange rates, and, in some cases, government regulation.  Significant increases in the prices of raw materials that cannot be recovered through increases in the price of our products could adversely affect our results of operations and cash flows.

We cannot guarantee that the prices we are paying for commodities today will continue in the future or that the marketplace will continue to support current prices for our products or that such prices can be adjusted to fully offset commodity price increases in the future.  Any increases in prices resulting from a tightening supply of these or other commodities could adversely affect our

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profitability.  We generally do not engage in hedging transactions for raw material purchases, but we do enter into some fixed-price supply contracts.

Our dependency upon regular deliveries of supplies from particular suppliers means that interruptions or stoppages in such deliveries could adversely affect our operations until arrangements with alternate suppliers could be made.  Several of the raw materials used in the manufacture of our products currently are procured from a single source.  If any of these sole-source suppliers were unable to deliver these materials for an extended period of time as a result of financial difficulties, catastrophic events affecting their facilities, or other factors, or if we were unable to negotiate acceptable terms for the supply of materials with these sole-source suppliers, our business could suffer.  We may not be able to find acceptable alternatives, and any such alternatives could result in increased costs.  Extended unavailability of a necessary raw material could cause us to cease manufacturing one or more products for a period of time.

A portion of our workforce is unionized.  The Company could face labor disruptions that would interfere with operations.

Approximately 25% of Hillenbrand’s employees work under collective bargaining agreements.  Although we have not experienced any significant work stoppages in the past 20 years as a result of labor disagreements, we cannot ensure that such a stoppage will not occur in the future.  Inability to negotiate satisfactory new agreements or a labor disturbance at one of the principal facilities could have a material adverse effect on our operations.

Volatility in our investment portfolio could adversely impact our operating results and financial condition.

In connection with our separation from Hill-Rom, certain investments were transferred to us that had an aggregate carrying value of $13.3 as of September 30, 2012.  Volatility in our investment portfolio impacts earnings.  These investments could be adversely affected by general economic conditions, changes in interest rates, equity market volatility, and other factors, resulting in an adverse impact on our operating results and financial condition.

We are involved on an ongoing basis in claims, lawsuits, and governmental proceedings relating to our operations, including environmental, antitrust, patent infringement, business practices, commercial transactions, and other matters.  The ultimate outcome of these claims, lawsuits, and governmental proceedings cannot be predicted with certainty, but could have a material adverse effect on our financial condition, results of operations, and cash flows.

We are also subject to other potential claims, including product and general liability, workers compensation, auto liability, and employment-related matters. While we maintain insurance for certain of these exposures, the policies in place are high-deductible policies.  For a more detailed discussion of our asserted claims, see Note 11 to our consolidated financial statements included in Part II, Item 8, of this Form 10-K.

Upon closing the K-Tron and Rotex acquisitions, we increased our debt obligations significantly and expect to increase them further with the pending acquisition of Coperion, as discussed in Note 17 to our consolidated financial statements included in Part II, Item 8 of this Form 10-K.  This could adversely affect our Company and limit our ability to respond to changes in our businesses.

As of September 30, 2012, our outstanding debt was $271.6.  This level of debt could have important consequences to our businesses.  For example:

Provisions in our Articles of Incorporation and By-laws and facets of Indiana law may prevent or delay an acquisition of our Company, which could decrease the trading price of our common stock.

Our Articles of Incorporation and By-laws, as well as Indiana law, contain provisions that could delay or prevent changes in control if our Board of Directors determines that such changes in control are not in the best interests of our shareholders.  While these provisions have the effect of encouraging persons seeking to acquire control of our Company to negotiate with our Board of Directors, they could enable our Board of Directors to hinder or frustrate a transaction that the Board of Directors feels is not in the best interests of shareholders, but which some, or a majority, of our shareholders might believe to be in their best interests.

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These provisions include, among others:

Indiana law also imposes some restrictions on mergers and other business combinations between us and any holder of 10% or more of our outstanding common stock, as well as on certain “control share” acquisitions.

We believe these provisions are important for a public company and protect our shareholders from coercive or otherwise potentially unfair takeover tactics by requiring potential acquirers to negotiate with our Board of Directors and by providing our Board of Directors with appropriate time to assess any acquisition proposal.  These provisions are not intended to make our Company immune from takeovers; however, they may apply if the Board of Directors determines that a takeover offer is not in the best interests of our shareholders, even if some shareholders believe the offer to be beneficial.

Risk Related to the Process Equipment Group

A significant portion of our investments in the Process Equipment Group includes goodwill and intangible assets that are subject to periodic impairment evaluations.  An impairment loss on these assets could have a material adverse impact on our financial condition and results of operations.

We acquired intangible assets with the acquisitions of K-Tron and Rotex, portions of which were identified as either goodwill or indefinite-lived assets.  We periodically assess these assets to determine if they are impaired.  Significant negative industry or economic trends, disruptions to our business, inability to effectively integrate acquired businesses, unexpected significant changes, or planned changes in use of the assets, divestitures, and market capitalization declines may impair these assets.  Any charges relating to such impairments could adversely affect our results of operations in the periods recognized.

The Process Equipment Group operates in cyclical industries.

As an industrial capital goods supplier, the Process Equipment Group serves industries that are cyclical.  During periods of economic expansion, when capital spending normally increases, the Process Equipment Group generally benefits from greater demand for its products.  During periods of economic contraction, when capital spending normally decreases, the Process Equipment Group generally is adversely affected by declining demand for new equipment orders, and it may be subject to uncollectible receivables from customers who become insolvent.  There can be no assurance that economic expansion or increased demand will be sustainable.

The Process Equipment Group derives significant revenues from the energy industry. Any decline in demand for electricity, natural gas, or coal or an increase in regulation of the energy industry could have a material adverse effect on our business, financial condition, and results of operations.

The Process Equipment Group sells dry material separation and size reduction equipment to the electric generating, natural gas, and coal mining industries.  A significant portion of its sales are tied to the consumption of natural gas and coal as a means of generating electricity. The demand for natural gas and coal is dependent upon the availability and cost of alternative sources of energy, such as oil or nuclear power. Additionally, the cost of compliance with federal, state, and local laws and regulations on the energy industry may impact the demand for our products. As a result, any downturn in or disruption to the natural gas or coal industries or decline in the demand for electricity, could have a material adverse effect on our business, financial condition, and results of operations.

Risk Related to Batesville

Continued fluctuations in mortality rates and increased cremations may adversely affect, as they have in recent years, the sales volume of our burial caskets.

The life expectancy of U.S. citizens has increased steadily since the 1950s and is expected to continue to do so for the foreseeable future.  As the population of the U.S. continues to age, we anticipate the number of deaths in the U.S. will be relatively flat until aging baby boomers cause the number of deaths to increase.

Cremations as a percentage of total U.S. deaths have increased steadily since the 1960s and are expected to continue to increase for the foreseeable future.  The increase in the number of cremations in the U.S. is resulting in a contraction in the

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demand for burial caskets.  This has been a contributing factor to lower burial casket sales volumes for Batesville in each of the last five fiscal years.  We expect these trends to continue in the foreseeable future and will likely continue to negatively impact burial casket volumes.

Finally, the number of deaths can vary over short periods of time and among different geographical areas, due to a variety of factors, including the timing and severity of seasonal outbreaks of illnesses such as pneumonia and influenza.  Such variations could cause the sale of burial caskets to fluctuate from quarter to quarter and year to year.

Batesville’s business is dependent on several major contracts with large national funeral providers. The relationships with these customers pose several risks.

Batesville has contracts with a number of national funeral home customers that comprise a sizeable portion of its overall sales volume.  Any decision by national funeral home customers to discontinue purchases from Batesville could have a material adverse effect on our financial condition, results of operations, and cash flows.  Also, while contracts with national funeral service providers give Batesville important access to purchasers of funeral service products, they may obligate Batesville to sell products at contracted prices for extended periods of time, therefore limiting Batesville’s ability, in the short term, to raise prices in response to significant increases in raw material prices or other factors.

Batesville is facing competition from a number of non-traditional sources and from caskets manufactured abroad and imported into North America.

Non-traditional funeral product providers, such as large discount retail stores, casket stores, and internet casket retailers, could present more of a competitive threat to Batesville and its sales channel than is currently anticipated.  In addition, a few foreign manufacturers, mostly from China, import caskets into the U.S. and Canada.  For the past three years, sales from these non-traditional and Chinese providers have remained relatively stable and represent a small percentage of total casket sales in North America, collectively less than 5%.  It is not possible to quantify the financial impact that these competitors will have on Batesville in the future.  These competitors and any new entrants into the funeral products business may drive pricing and other competitive actions in an industry that already has nearly twice the necessary domestic production capacity.  Such competitive actions could have a negative impact on our results of operations and cash flows.

Item 1B.                UNRESOLVED STAFF COMMENTS

We have not received any comments from the staff of the SEC regarding our periodic or current reports that remain unresolved.

Item 2.                   PROPERTIES

Our corporate headquarters are located in Batesville, Indiana, in a facility that we own.  At September 30, 2012, the Process Equipment Group had nine significant manufacturing facilities located in the U.S. (New Jersey, Kansas, Ohio, Illinois), Switzerland, China, the United Kingdom, and Belgium.  Six of these facilities are owned and three are leased.  The Process Equipment Group also leases a number of other sales offices in Europe, Asia, and Canada.

At September 30, 2012, Batesville had five significant manufacturing facilities located in Indiana, Tennessee, Mississippi, and Mexico.  Four of these facilities are owned and one is leased.  Batesville also leases or owns a number of other warehouse distribution centers, service centers, and sales offices in the U.S., United Kingdom, Mexico, Canada, and Australia.

Facilities often serve multiple purposes, such as administration, sales, manufacturing, testing, warehousing, and distribution.

Item 3.               LEGAL PROCEEDINGS

We are involved on an ongoing basis in claims, lawsuits, and government proceedings relating to our operations, including environmental, antitrust, patent infringement, business practices, commercial transactions, and other matters.  We are also subject to other claims and potential claims, including those relating to product and general liability, workers’ compensation, auto liability, and employment-related matters.  The ultimate outcome of claims, lawsuits, and proceedings cannot be predicted with certainty.  We carry various forms of commercial, property and casualty, product liability, and other forms of insurance; however, such insurance may not be applicable or adequate to cover the costs associated with a judgment against us.  It is difficult to measure the actual loss that might be incurred related to litigation, and the ultimate outcome of these claims, lawsuits, and proceedings could have a material adverse effect on our financial condition, results of operations, and cash flows.

For more information on various legal proceedings, see Note 11 to our consolidated financial statements included in Part II, Item 8, of this Form 10-K.  That information is incorporated into this Item by reference.

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Item 4.                                                         MINE SAFETY DISCLOSURES

None.

PART II

Item 5.                                                         MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES

Hillenbrand common stock is traded on the New York Stock Exchange under the ticker symbol “HI.”  The closing price of our common stock on the New York Stock Exchange on November 15, 2012, was $19.25.  The following table reflects the quarterly range of high and low selling prices of our common stock for fiscal 2012 and 2011.

On November 15, 2012, we had approximately 2,600 shareholders of record.

Dividends

Although we have paid cash dividends since our inception on April 1, 2008, the declaration and payment of cash dividends is at the sole discretion of our Board of Directors and depends upon many factors, including our financial condition, earnings potential, capital requirements, alternative uses of cash, covenants associated with debt obligations, legal requirements, and other factors deemed relevant by the Board of Directors.  We currently expect that comparable quarterly cash dividends will continue to be paid in the future.  The following table provides detail on the quarterly dividends paid to shareholders for the past three fiscal years.

Stock Performance Graph

The following graph compares the return on Hillenbrand common stock with that of Standard & Poor’s 500 Total Return Stock Index (S&P 500 Total Return Index) and the Standard & Poor’s 600 Total Return Small Cap Stock Index (S&P 600 Total Return Index) for the period from March 20, 2008, the date our common stock began trading on the New York Stock Exchange, to November 15, 2012.  The graph assumes that the value of the investment in our common stock, the S&P 500 Total Return Index, and S&P 600 Total Return Index was $100 on March 20, 2008, and that all dividends were reinvested.  Hillenbrand is included in the S&P 600 Total Return Index.

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On July 24, 2008, our Board of Directors approved the repurchase of $100 of our common stock. The program has no expiration date, but may be terminated by the Board of Directors at any time.

(in millions, except per share data):

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*                       The historical financial information related to the periods prior to the separation on March 31, 2008, does not necessarily reflect the financial condition, results of operations, or cash flow that we would have achieved as a separate, publicly traded company during the periods presented or those that we will achieve in the future.

**                Our first dividend as a stand-alone public company was paid on June 30, 2008.  Accordingly, there are no dividends reported for the first two quarters of fiscal year 2008.

Executive Overview

(in millions throughout Management’s Discussion and Analysis)

The following discussion compares our results for the fiscal year ended September 30, 2012, to the fiscal year ended September 30, 2011.  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” and exclude the tax benefit of the international integration, expenses associated with long-term incentive compensation related to the international integration, backlog amortization, antitrust litigation, business acquisitions, inventory step-up, restructuring, and sales tax recoveries, as well as the related income tax.  This 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 analyze net revenue on a constant currency basis to better measure the comparability of results between periods. We provide this information because exchange rates can distort the underlying change in sales, either positively or negatively.

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.

See page 24 for a reconciliation of non-GAAP measures to the closest GAAP-equivalent of each measure.

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Consolidated

Year Ended September 30, 2012 Compared to Year Ended September 30, 2011

Consolidated revenue grew $99.8 (11.3%) or $103.7 (11.7%) on a constant currency basis.

·                  Process Equipment Group’s revenue increased $130.5 (53.0%) or $133.3 (54.2%) on a constant currency basis.  The revenue increase was due primarily to the acquisition of Rotex in August 2011, in addition to growth in the existing Process Equipment Group operating companies.

·                  Batesville’s revenue was $606.8, a decrease of $30.7 (4.8%) or $29.6 (4.6%) on a constant currency basis.  The decline was driven by lower burial volume.

Consolidated gross profit margin was 39.6%, a decline of 230 basis points.  On an adjusted basis, the consolidated gross profit margin was 40.0%, a decline of 220 basis points.

·                  Process Equipment Group’s gross profit margin declined 10 basis points to 42.9% in fiscal year 2012 from 43.0% in fiscal year 2011.  Excluding restructuring charges of $0.9 in 2012 and inventory step-up charges related to the Rotex acquisition of $2.8 in 2011, the adjusted gross profit margin declined 100 basis points from 44.1% to 43.1% in fiscal year 2012 due to product mix and market factors that impact pricing.

·                  Batesville’s gross profit margin was 37.5%.  The 390-basis-point decline was due to lower volume, increased distribution and commodity costs, restructuring charges, and short-term transition costs including those related to the shift consolidation.  Excluding restructuring charges of $3.3 in 2012, the adjusted gross profit margin was 38.0%, a 340-basis-point decline.

Operating expenses as a percentage of sales increased 50 basis points to 24.4%.

·                  Amortization of intangible assets was $21.6, which includes a full year of amortization expense related to the Rotex acquisition, compared to $16.9 in fiscal year 2011, which includes only one month of amortization expense related to the Rotex acquisition.

·                  On an adjusted basis, our operating expense ratio improved by 40 basis points to 22.5%.  Adjusted operating expenses exclude the following items:

·                  Business acquisition costs of $4.2 in fiscal year 2012 and $6.3 in fiscal year 2011

·                  Restructuring charges of $4.3 in fiscal year 2012 and $1.3 in fiscal year 2011

·                  Antitrust litigation expenses of $5.5 in fiscal year 2012 and $1.3 in fiscal year 2011

·                  Backlog amortization of $2.5 in fiscal year 2012 and $0.8 in fiscal year 2011

·                  Long-term incentive compensation expense of $2.2 in fiscal year 2012 related to the international integration — The vesting of our long-term performance-based stock awards is contingent upon the creation of shareholder value as 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.  As such, the tax benefit from the international integration resulted in additional compensation expense related to performance-based stock awards.

Interest expense increased $1.4 due primarily to higher weighted-average principal borrowings on the revolving credit facility.

Other income and expense was $1.5 of expense in fiscal year 2012 compared to $10.2 of income in fiscal year 2011, representing a variance of $11.7.

·                  Interest income related to the Forethought Note was $6.4 less in fiscal year 2012 due to the early collection of the note in April 2011.

·                  Income from investments in limited partnerships decreased $3.8 in fiscal year 2012.

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·                  See Note 12 for more detailed information.

The income tax rate was 22.3% compared to 32.8%.  The variance was largely due to a $10.4 tax benefit recognized in the first quarter of 2012 due to our determination that certain international earnings that were previously expected to be repatriated are now permanently reinvested.  Our adjusted income tax rate was 30.5% compared to 32.9% in the prior year.  The rate was favorably impacted by an increase in the percentage of foreign source income in lower rate jurisdictions, and a decrease in uncertain tax positions.

Year Ended September 30, 2011, Compared to Year Ended September 30, 2010

Consolidated revenue grew $134.2 (17.9%) or $122.3 (16.3%) on a constant currency basis.

·                  The Process Equipment Group’s revenue increased $137.0 (125.8%) or $127.9 (117.4%) on a constant currency basis.  The revenue increase was due primarily to the acquisition of K-Tron in April 2010 (12 months of results included in fiscal year 2011 versus six months included in 2010) and Rotex in August 2011 (one month of results included in fiscal year 2011).

·                  Batesville’s revenue was $637.5, a decrease of $2.8 (0.4%) or $5.6 (0.9%) on a constant currency basis.  The decline was driven by lower burial volume due to increased cremations.

Consolidated gross profit margin of 41.9% increased slightly from 41.8%.  On an adjusted basis, the consolidated gross profit margin was 42.2%, a decline of 120 basis points.

·                  Process Equipment Group’s gross profit margin increased to 43.0% from 32.7%, primarily due to inventory step-up charges related to acquisitions that were $8.8 higher in fiscal year 2010 compared to fiscal year 2011.  Excluding these inventory step-up charges, the adjusted gross profit margin was 44.1% in 2011 compared to 43.3% in 2010, an 80-basis-point improvement.

·                  Batesville’s gross profit margin declined 200 basis points from 43.4% to 41.4% due primarily to rising commodity costs.

Operating expenses as a percentage of sales increased 50 basis points to 23.9% from 23.4% in the prior year.

·                  Amortization of intangible assets acquired was $12.2 in fiscal year 2011, which includes a full year of amortization related to the K-Tron acquisition and one month of amortization related to the Rotex acquisition, compared to $7.3 in the prior year, which includes six months of amortization related to the K-Tron acquisition.

·                  On an adjusted basis, our operating expense ratio declined by 160 basis points to 22.9%.  Adjusted operating expenses exclude the following items:

·                  Business acquisition costs of $6.3 in fiscal year 2011 and $10.5 in fiscal year 2010

·                  Sales tax recoveries of $0.8 in fiscal year 2011and $4.7 in fiscal year 2010

·                  Backlog amortization of $0.8 in fiscal year 2011 and $1.7 in fiscal year 2010

·                  Antitrust litigation expense of $1.3 in fiscal year 2011 and $5.0 in fiscal year 2010

·                  Restructuring charges related to termination benefits of $1.3 in fiscal year 2011 and $3.0 in fiscal year 2011

Interest expense increased $6.8 to $11.0 due primarily to the senior notes issued in July 2010.  Fiscal year 2011 included 12 months of related interest expense versus only three months in fiscal year 2010.  The proceeds from the notes were used to pay down our revolving credit facility, which has a lower interest rate than the senior notes.

Other income and expense was $10.2 of income in fiscal year 2011 compared to $12.7 of income in 2010, representing a variance of $2.5.

·                  Interest income related to the Forethought Note was $5.6 less in fiscal year 2011 due to the early collection of the note in April 2011.

·                  Income from investments in auction rate securities and limited partnerships was $5.7 higher in fiscal year 2011 compared to 2010.

·                  Bank charges, primarily for customer payments by credit card, increased $1.2 in fiscal year 2011.

·                  See Note 12 for more detailed information.

The income tax rate was 32.8% compared to 37.0%.  The rate was favorably impacted by a decrease in the current and deferred state income tax rates due to enacted law changes, an increase in the percentage of foreign source income in lower rate jurisdictions, an increase in the domestic manufacturing deduction, and non-deductible business acquisition costs incurred in the previous period.

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Results of Operations

The Process Equipment Group

(a)         Fiscal year 2011 includes one month of operations related to the Rotex acquisition on August 31, 2011.

(b)         Fiscal year 2010 includes six months of operations related to the K-Tron acquisition on April 1, 2010.

Fiscal Year Ended September 30, 2012, Compared to Fiscal Year Ended September 30, 2011

Revenue increased $130.5 (53%), or $133.3 (54%) on a constant currency basis.  The increase was attributable primarily to the Rotex acquisition, as well as growth in the existing Process Equipment Group’s revenue.  Revenue growth was also positively impacted by the sale of equipment related to the production of proppants used in hydraulic fracturing (“fracking”).  Hydraulic fracturing enables the production of natural gas and oil from rock formations, e.g. shale rock, far below the earth’s surface.  Future revenue could be impacted by market, legislative, environmental, and regulatory changes surrounding the use of hydraulic fracturing in the U.S. and abroad.

Future revenue for the Process Equipment Group is influenced by order backlog because of the lead time involved in fulfilling engineered-to-order equipment for customers.  Though backlog can be an indicator of future revenue, it might not include many 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 is also affected by foreign exchange fluctuations for orders denominated in currencies other than United States (“U.S.”) dollars.  Based upon new orders accepted, less orders completed and shipped, backlog increased from $119.0 on September 30, 2011 to $120.5 on September 30, 2012.

Gross profit increased 53% to $161.5 due to increased volume, primarily reflecting the impact from the Rotex acquisition.  Gross profit margin declined by 10 basis points to 42.9%.  Gross profit margin for the Process Equipment Group is influenced by a variety of factors, including the timing and size of orders, the mix of products and services sold, and market factors that impact pricing.

Adjusted gross profit margin declined by 100 basis points to 43.1% due to product mix and market factors that impact pricing.  Adjusted gross profit margin excludes restructuring costs ($0.9 in 2012) and inventory step-up charges ($2.8 in 2011).  Step-ups in inventory value were recorded at the time of the Rotex acquisition and were subsequently expensed when the inventory was sold.  The Process Equipment Group’s adjusted gross profit margin may fluctuate from quarter to quarter; however, we expect adjusted gross profit margin to fluctuate within a normal historical range on an annual basis.

We continue to see progress in the implementation of Hillenbrand Lean Business principles in our Process Equipment Group.  Earlier this year we strategically realigned the Process Equipment Group through the consolidation of certain manufacturing facilities.  This resulted in the closure of one manufacturing plant, enabling the Process Equipment group to more efficiently meet customer needs, while continuing to provide the same high-quality products and services.

Operating expenses increased $35.1 to $107.4 due to 12 months of operations from the Rotex acquisition in fiscal year 2012 compared to one month of operations from the Rotex acquisition in fiscal year 2011.  Acquisitions also impacted amortization expense with $18.3 of expense in fiscal year 2012 compared to $12.2 in the prior year.  On an operating expense to sales ratio basis, this represents an improvement of 90 basis points to 28.5%.  This improvement was driven by the integration of Rotex, which has a lower operating expense to sales ratio than the other Process Equipment Group operating companies.

On an adjusted basis, our operating expense ratio improved 190 basis points to 27.1%.  Adjusted operating expenses exclude restructuring charges ($2.8 in 2012 related to the consolidation of manufacturing facilities) and backlog amortization ($2.5 in 2012 and $0.8 in 2011).

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Fiscal Year Ended September 30, 2011, Compared to Fiscal Year Ended September 30, 2010

Revenue increased $137.0 (125.8%), or $127.9 (117.4%) on a constant currency basis.  Fiscal year 2011 included 12 months of operations related to the K-Tron acquisition and one month of operations related to the Rotex acquisition.  Fiscal year 2010 included only six months of operations related to the K-Tron acquisition.  Based upon an increased level of new orders accepted, including those related to the Rotex acquisition, minus orders completed and shipped during the period, the Process Equipment Group’s backlog increased from $57.1 on September 30, 2010, to $119.0 on September 30, 2011.

Gross profit increased 197% to $105.7, primarily due to increased volume, including the impact from the K-Tron and Rotex acquisitions.  Gross profit margin increased to 43.0% from 32.7% in the prior year.  Adjusted gross profit margin improved by 80 basis points to 44.1%.  Adjusted gross profit margin excludes charges for step-ups in inventory related to acquisitions ($2.8 in 2011 and $11.6 in 2010).

Operating expenses increased by $38.9 to $72.3 due to 12 months of operations from the K-Tron acquisition and one month from the Rotex acquisition included in fiscal year 2011 compared to only six months of operations from the K-Tron acquisition in the prior year.  Acquisitions also impacted amortization expense with $12.2 of expense in fiscal year 2011 compared to $7.3 in the prior year.  On an operating expense to sales ratio basis, this represents an improvement of 130 basis points to 29.4%.

On an adjusted basis, the operating expense to sales ratio declined 20 basis points to 29.0% in fiscal year 2011.  Adjusted operating expenses exclude backlog amortization ($0.8 in 2011 and $1.7 in 2010) and business acquisition costs ($0.3 in 2011 and 2010).

Batesville

Fiscal Year Ended September 30, 2012, Compared to Fiscal Year Ended September 30, 2011

Revenue decreased $30.7 (4.8%), or $29.6 (4.6%) on a constant currency basis primarily due to a decline in burial volume.  The burial volume decline was caused by an estimated 4% reduction in North American burials, driven in part by an estimated 2% decline in North American deaths.  North America experienced one of the largest drops in year-over-year-deaths in the past 30 years.  Burial volume was also negatively impacted by the rate at which consumers opted for cremation.  Average sales prices were relatively flat year over year.

Gross profit decreased 14% to $227.4 primarily due to lower volume, increased distribution and commodity costs, restructuring charges, and short-term transition costs.  Gross profit margin declined 390 basis points to 37.5%. Adjusted gross profit margin declined 340 basis points to 38.0% and excludes $3.3 of restructuring charges.

Batesville’s management consistently sizes operations to respond to changing market conditions and consumer preferences, and continuously evaluates capacities to ensure products are manufactured in the most efficient manner possible.  Batesville consolidated the first and second shifts at one of its plants and converted one of its international manufacturing facilities into a distribution center.  We expect these changes to deliver approximately $5.0 of annual savings going forward; however, we did incur certain short-term transition costs that must be considered in determining the net long-term savings.  In the current year, Batesville experienced approximately $1.6 in short-term transition costs that negatively impacted gross profit.

Operating expenses decreased $2.5 (2%) to $99.0.  Management continues to adjust the cost structure to offset declining volumes and reduced compensation and benefit expenses this year by $7.6.  This included $4.4 of savings related to changes in employee benefits and other estimates that we do not expect to take place again in the future.  Our operating expense to sales ratio increased from 15.9% to 16.3%.

On an adjusted basis, our operating expense to sales ratio improved by 40 basis points to 15.2%.  Adjusted operating expenses exclude the following items:

·                  Antitrust litigation expense of $5.5 in fiscal year 2012 and $1.3 in fiscal year 2011

·                  Restructuring charges related to termination benefits of $0.6 in fiscal year 2012 and $1.3 in fiscal year 2011

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·                  Long-term incentive compensation of $0.8 related to the current year international integration

·                  Sales tax recoveries of $0.8 in fiscal year 2011

Fiscal Year Ended September 30, 2011, Compared to Fiscal Year Ended September 30, 2010

Revenue decreased $2.8 (0.4%), or $5.6 (0.9%) on a constant currency basis.  Burial unit volume decreased $8.5 (1.3%) and was the primary contributor to the reduction, although improved volume on non-burial products helped limit the impact.  We believe the volume decrease was attributable to increased cremation rates.  Offsetting this impact was a modest increase in average selling price that contributed $2.9 to revenue.

Gross profit decreased 4.9% to $264.2 primarily due to increased commodity costs ($9.7), in particular, fuel and steel.  Gross profit margin decreased 200 basis points to 41.4%.

Operating expenses decreased $1.1 (1.1%) to $101.5.  Our operating expense to sales ratio improved by 10 basis points to 15.9%.  On an adjusted basis, our operating expense to sales ratio improved by 40 basis points to 15.6%.  Adjusted operating expenses exclude the following items:

·                  Antitrust litigation expense of $1.3 in fiscal year 2011 and $5.0 in fiscal year 2010

·                  Restructuring charges related to termination benefits of $1.3 in fiscal year 2011

·                  Sales tax recoveries of $0.8 in fiscal year 2011 and $4.7 in fiscal year 2010

Corporate

Fiscal Year Ended September 30, 2012, Compared to Fiscal Year Ended September 30, 2011

Operating expenses excluding business acquisition costs, long-term incentive compensation related to the international integration, and restructuring costs decreased $4.1 (13%).  These expenses on a percentage of consolidated revenue basis were 2.8%, an improvement of 70 basis points compared to 3.5% in the prior year.  We expect this expense base to continue to decline as a percentage of sales.  The year-over-year decline was driven by decreased long-term incentive compensation ($1.9) and decreased short-term incentive compensation ($1.9) in our corporate operations.

During fiscal year 2012, we incurred $4.2 of business acquisition costs related to our planned acquisition of Coperion, see Note 17, and acquisition of Rotex, all incurred by our corporate operations.  During fiscal year 2011, we incurred $6.3 of business acquisition costs related to our acquisitions of Rotex and K-Tron, of which $6.0 was incurred by our corporate operations.

The vesting of our long-term performance-based stock awards is contingent upon the creation of shareholder value as 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.  As such, the tax benefit from the international integration resulted in $2.2 of additional expense related to performance-based stock awards in 2012, of which $1.2 was incurred by our corporate operations.

During fiscal year 2012, we incurred $0.9 of restructuring charges related to our joint ownership interests in corporate aircraft distributed to us when we separated from Hill-Rom and termination benefits related to the cessation of airport operations.  These restructuring charges resulted from our collective plans with Hill-Rom to sell or dispose of our jointly owned aircraft and to cease

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operations at the airport owned by Hill-Rom.  The charges are primarily related to asset impairments for the aircraft and termination benefits.  This restructuring will reduce future costs related to these aviation assets and the operation of the airport.

Fiscal Year Ended September 30, 2011, Compared to Fiscal Year Ended September 30, 2010

Operating expenses excluding business acquisition and restructuring costs increased $5.3 (20.2%).  Long-term incentive compensation increased $1.7 in our corporate operations and $4.1 in total for the Company, due to having a total of three years of long-term incentive compensation grants outstanding in fiscal year 2011 versus two years in fiscal year 2010.  Our annual grants began in fiscal year 2009 and vest over three years; therefore, fiscal year 2010 had two outstanding grants incurring expense and fiscal year 2011 had three outstanding grants incurring expense.  Employee compensation and benefits increased $1.6 and legal expenses increased $0.9 in fiscal year 2011.

During fiscal year 2011, we incurred $6.3 of business acquisition costs related to our acquisitions of Rotex and K-Tron, of which $6.0 was incurred by our corporate operations.  During fiscal year 2010, we incurred $10.5 of business acquisition costs related to our acquisition of K-Tron, of which $10.2 was incurred by our corporate operations.

During fiscal year 2010, we incurred $3.0 of restructuring charges related to our joint ownership interests in corporate aircraft distributed to us when we separated from Hill-Rom.  These restructuring charges resulted from our collective plans with Hill-Rom to sell or dispose of two of our jointly owned aircraft and modifications to our aviation access and use agreements.  The charges are primarily related to asset impairments for the two aircraft.

Non-GAAP Operating Performance Measures

The following are reconciliations from GAAP operating performance measures to the relevant non-GAAP (adjusted) performance measures.

We have previously discussed our strategy to selectively acquire manufacturing businesses with a record of success that could benefit from our core competencies 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 Earnings Before Interest, Income Tax, Depreciation, and Amortization (“EBITDA”), among other measures, to monitor our business performance.

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Consolidated adjusted EBITDA for the fiscal year ended September 30, 2012, decreased $1.0 (1%) primarily due to the decline in burial volume at Batesville and lower investment income.  This decline was offset in part by growth due to the Rotex acquisition, as well as growth in the existing Process Equipment Group operating companies.  For the fiscal year ended September 30, 2011, consolidated adjusted EBITDA increased $17.2 (9%) over the prior year primarily due to the K-Tron and Rotex acquisitions and higher investment income, offset in part by lower profits in the Batesville business platform.

Liquidity and Capital Resources

We believe the ability to generate cash is critical to the value of the Company.  In this section, we tell you about our ability to generate and access cash to meet our business needs.  We will describe actual results in generating and utilizing cash by comparing the last three years.  We will also talk about any significant trends to help you understand how this could impact us going forward.

We will tell you about how we see operating, investing, and financing cash flows being impacted for the next 12 months.  While it is not a certainty, we will tell you where we think cash will come from and how we intend to use it. We will also talk about significant risks or possible changes that could impact those expectations.  Finally, we will tell you about other significant matters that could affect our liquidity on an ongoing basis.

Operating Activities

Cash provided by operating activities was $51.3 less in fiscal year 2012 compared to fiscal year 2011, primarily because of the following:

·                  In fiscal year 2012, there was no activity related to the Forethought Note.  In fiscal year 2011, we received a $59.7 payment of interest in conjunction with the final settlement of the Forethought Note, offset by $6.4 of interest income.

·                  The Process Equipment Group’s core pre-tax operating cash flows contributed approximately $6.3 more to our consolidated operating cash flows in fiscal year 2012 compared to the prior year, as 12 months of operations were included for Rotex compared to one month in fiscal year 2011.

·                  Cash payments for income taxes decreased $26.2 in fiscal year 2012.

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Cash provided by operating activities was $71.3 higher in fiscal year 2011 compared to fiscal year 2010, primarily because of the following:

·                  In fiscal year 2011, we received a $59.7 payment of interest in conjunction with the final settlement of the Forethought Note in 2011 offset by $6.4 of interest income.  In fiscal year 2010, we received a $10.0 contractual payment offset by $12.0 of interest income.

·                  The Process Equipment Group’s core pre-tax operating cash flows contributed approximately $26.5 more to our consolidated operating cash flows in fiscal year 2011 compared to the prior year, as 12 months of operations were included in fiscal year 2011 compared to six months in the prior year.

·                  Cash payments for income taxes decreased $14.2 in fiscal year 2011.

Investing Activities

Cash used for investing activities was $132.0 lower in fiscal year 2012 compared to fiscal year 2011, primarily because of the following:

·                  Cash paid for acquisitions in fiscal year 2012 totaled $4.4 compared to the Rotex acquisition in fiscal year 2011 that required a net cash payment of $240.4.  This represents a $236.0 decline in cash used for investing activities.

·                  In fiscal year 2012, there was no activity related to the Forethought Note.  In fiscal year 2011, we received a repayment of $91.5 of principal on the Forethought Note.

·                  We received $0.8 from our auction rate securities and investments in fiscal year 2012, representing an $11.6 decrease from the prior year.

Cash used for investing activities was $194.2 lower in fiscal year 2011 compared to fiscal year 2010, primarily because of the following:

·                  The Rotex acquisition required a $240.4 net cash payment in fiscal year 2011 compared to $369.0 paid for K-Tron in the prior year.  This represents a $128.6 decline in cash used for investing activities.

·                  We received a repayment of $91.5 of principal on the Forethought Note in fiscal year 2011.  There were no receipts of principal in 2010.

·                 Capital project spending was $5.6 more in fiscal year 2011 compared to the prior year.

·                  We received $12.4 from our auction rate securities and investments in fiscal year 2011, representing a $24.8 decrease from the prior year.

Financing Activities

Cash used in financing activities was $189.1 higher in fiscal year 2012 compared to fiscal year 2011, primarily because of the following:

·                  We made $162.3 net repayments under our revolving credit facilities in fiscal year 2012.

·                  In fiscal year 2011, we had net borrowings of $28.1.

·      We used $150.9 of proceeds from the collection of the Forethought Note to pay down our revolving credit facilities.

·      We borrowed $159.0 under our revolving credit facilities to fund the acquisition of Rotex.

Cash used in financing activities was $22.0 in fiscal year 2011 compared to net cash receipts of $289.8 in the prior year, primarily because of the following:

·                 We used $150.9 of proceeds from the collection of the Forethought Note to pay down our revolving credit facilities.

·                  We borrowed $159.0 under our revolving credit facilities to fund the acquisition of Rotex.

12 Month Outlook

We believe that our cash on hand, cash generated from operations, and cash available under our revolving credit facility will be sufficient to fund operations, working capital needs, capital expenditure requirements, and financing obligations.  We may use additional cash generated by the business to pay down our revolving credit facility, or we may borrow additional amounts depending on our working capital needs.  As a result, the amount borrowed as of the end of a period may not be representative of the balance during the period.

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The cash at our foreign subsidiaries totaled $10.7 at September 30, 2012.  The majority of these funds represented earnings considered to be permanently reinvested to support the growth strategies of our foreign subsidiaries.

We expect to continue moving forward with our acquisition strategy including the expected close of our acquisition of Coperion in early December 2012.  We plan to fund this acquisition with cash on hand and cash available under our revolving credit facility.  In November 2012, we exercised a feature under the Facility to increase our financing capacity by $300.  This provided a $200 term loan and increased the maximum revolving feature by $100 to $700.  The Company also has the potential, under certain circumstances and with the lenders’ approval, to increase the total amount under the Facility by an additional $300. See Note 17 for further details.

We did not make discretionary contributions to our pension plans in 2012.  We are not required, nor do we currently have plans to do so in 2013.  Our minimum required contribution to our pension plan in 2013 is $12.7.  We will continue to monitor plan funding levels, performance of the assets within the plan, and overall economic activity, and will make potential funding decisions based on the net impact of the above factors.

We currently expect to pay comparable quarterly cash dividends in the future which will require approximately $12.0 each quarter based on our outstanding common stock at September 30, 2012.  We are currently authorized by our Board of Directors to purchase additional shares of our common stock, and may elect to do so, depending on market conditions and other needs for cash consistent with our growth strategy.

Other Liquidity Matters

On July 27, 2012, we entered into a $600 five-year senior unsecured revolving credit facility (the “Facility”) available in multiple currencies to replace the $400 five-year revolving credit facility entered into in March 2008.  Borrowings under the new credit facility bear interest at variable rates plus a margin amount based upon our leverage.  In addition, there is a facility fee based upon our leverage.  The new credit facility matures on July 27, 2017.  For fiscal years ended September 30, 2012 and 2011, the weighted-average interest rates were 0.8% and 0.7%.  The availability of borrowings under the Facility is subject to our ability at the time of borrowing to meet certain specified conditions.  These conditions include compliance with covenants, absence of default, and continued accuracy of certain representations and warranties.  Financial covenants include a maximum ratio of Consolidated Indebtedness to Consolidated EBITDA of 3.5 to 1.0 and a minimum ratio of Consolidated EBITDA to interest expense of 3.5 to 1.0.  As of September 30, 2012, we had $6.7 outstanding letters of credit under the Facility, were in compliance with all covenants, and had $470.3 of remaining borrowing capacity available under the Facility.

Our Swiss location maintains additional availability of $15.9 through local credit facilities secured by cash or real property.  As of September 30, 2012, there were no borrowings under these facilities and availability was reduced by $6.6 for outstanding bank guarantees.  At September 30, 2012, we had additional outstanding letters of credit and bank guarantees with other financial institutions totaling $7.8.  We had restricted cash of $1.6 at September 30, 2012.

Off-Balance Sheet Arrangements

We have no significant off-balance sheet arrangements.

Inflation

The effect of broad based inflation on the Company’s revenues and net earnings was not significant in the years ended September 30, 2012, 2011, or 2010.

Contractual Obligations and Contingent Liabilities and Commitments

The following table summarizes our future obligations as of September 30, 2012.  This will help give you an understanding of the significance of cash outlays that are fixed beyond the normal accounts payable we have already incurred and have recorded in the financial statements.

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Critical Accounting Estimates

Our financial results are affected by the selection and application of accounting policies and methods.  Significant accounting policies which require management’s judgment are discussed below.  A detailed description of our accounting policies is included in the notes to our consolidated financial statements included in Part II, Item 8, of this Form 10-K.

Revenue Recognition — 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 based upon historical rates and projections of customer purchases toward contractual rebate thresholds.

Allowance for Doubtful Accounts — The accounting for our trade receivables requires us to estimate the net realizable value of these assets.  Our allowance for doubtful accounts is our best estimate of the amount of probable credit losses and collection risk in our existing trade accounts receivable portfolio.  Performing our evaluation of the allowance for doubtful accounts requires us to exercise significant judgment based on historical write-offs and individual customer collection experience.  As a result, the historical experience and current trends we are using in our estimates may not be indicative of the collectability of these balances in the future.

Liabilities for Loss Contingencies Related to Claims and Lawsuits — Like most companies, we are involved on an ongoing basis in claims, lawsuits, and government proceedings relating to our operations, including environmental, antitrust, 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.  For a more complete description of loss contingencies related to lawsuits, see Note 11 to our consolidated financial statements included in Part II, Item 8, of this Form 10-K.

We are also involved in other possible claims, including product and general liability, workers’ compensation, auto liability, and employment-related matters.  Outside insurance companies and third-party claims administrators assist in establishing individual claim reserves, and an independent outside actuary provides estimates of ultimate projected losses, including incurred but not reported claims, which are used to establish reserves for losses.  As our actuaries periodically provide us updated ultimate loss projections, we must increase or reduce previously recorded claim reserves.  Thus, any one period’s financial results could be significantly affected by the effect of this adjustment.  Claim reserves for employment-related matters are established based upon advice from internal and external counsel and historical settlement information for claims and related fees, when such amounts are considered probable of payment.

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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 could differ from those estimates.

Performance-Based Stock Compensation — The vesting of our performance-based stock awards is contingent upon the creation of shareholder value as 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.  The hurdle rate is a reflection of our weighted-average cost of capital and targeted capital structure.  The value of an award is based upon the fair value of our common stock at the date of grant.  Based on the extent to which the performance criteria are achieved, it is possible for none of the awards to vest or for a range up to the maximum to vest, which is reflected in the performance-based stock award table in Note 10 to our consolidated financial statements included in Part II, Item 8, of this Form 10-K.  We record expense associated with the awards on a straight-line basis over the vesting period based upon an estimate of projected performance.  The actual performance of the Company is evaluated quarterly, and the expense is adjusted according to the new projection if it has changed significantly.  As a result, depending on the degree to which we achieve the performance criteria or our projection changes, our expenses related to the performance-based stock awards may become more volatile as we approach the final performance measurement date at the end of the three years.  This increase in volatility stems from the requirement to increase or reduce compensation expense as the projection of performance changes.  Thus, any one period’s financial results could be significantly affected by the cumulative effect of the adjustment.  Preparing the projection of performance requires us to exercise significant judgment as to the expected outcome of final performance up to three years in the future.  In making the projection, we consider both actual results and probable business plans for the future.  At September 30, 2012, we have recorded cumulative compensation expense associated with unvested performance-based stock awards of $10.9 which continues to be subject to periodic adjustments as the related awards approach the final performance measurement date.

Retirement and Postretirement Plans — We sponsor retirement and postretirement benefit plans covering the majority of our employees.  Expense recognized for the plans is based upon actuarial valuations.  Inherent in those valuations are key assumptions including discount rates, expected returns on assets, and projected future salary rates.  The actuarial assumptions we use may differ significantly from actual results due to changing economic conditions, participant life span, and withdrawal rates. These differences may result in a material impact to the amount of net periodic pension expense to be recorded in our consolidated financial statements in the future. The discount rates used in the valuation of our defined benefit pension and postretirement benefit plans are evaluated annually based on current market conditions.  In setting the discount rate, we use a yield curve approach to discount each expected cash flow of the liability stream at an interest rate applicable to the timing of each cash flow based on corporate bond rates.  These present values are then converted into an equivalent weighted-average discount rate.  Our overall expected long-term rate of return on pension assets is based on historical and expected future returns, which are inflation adjusted and weighted for the expected return for each component of the investment portfolio.  Our rate of assumed compensation increase for pension benefits is also based on our specific historical trends of past wage adjustments in recent years and expectations for the future.