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CALGARY, AB, Nov. 11, 2020 /PRNewswire/ – Sundial Growers Inc. (NASDAQ: SNDL) (“Sundial” or the “Company”) reported its financial and operational results for the third quarter ended September 30, 2020. All financial information in this press release is reported in millions of Canadian dollars, unless otherwise indicated.

THIRD QUARTER 2020 FINANCIAL AND OPERATIONAL HIGHLIGHTS

• Branded net cannabis sales increased to 77% of total cannabis sales from 69% in the previous quarter as Sundial continues to transition from reliance on wholesale to branded retail sales
• Net cannabis revenue for the third quarter of 2020 was $12.9 million, a decrease of 36% over the second quarter of 2020 due primarily to focus on branded retail sales
• Branded product average gross selling price for the quarter remained relatively stable at $5.53 per gram equivalent from $5.67 per gram equivalent in the previous quarter
• Principal amount of debt outstanding decreased by $23 million during the third quarter. A total of $100 million of debt has been eliminated year to date and current cash on hand stands at $60 million
• Cash used from operations decreased by 63% to $5.3 million for the quarter, not including the change in non-cash working capital, financing and investing activities, from $14.3 million during the previous quarter
• Dried bulk cost per gram sold was $1.18, a decrease of 12% from the previous three months ended June 30, 2020. Management is working towards a target cash cost of $0.69 per gram
• General and administrative costs were reduced by 7% from $7.7 million to $7.2 million in the third quarter of 2020 when compared to the previous three months ended June 30, 2020
• Capital raises provided gross proceeds of $26.4 million during the quarter and $48.1 million subsequent to the end of the quarter
• A total of $4.1 million was received under the Canada Emergency Wage Subsidy (CEWS)
• Net loss was $71.4 million in the third quarter; adjusted EBITDA loss increased by 13% over the previous quarter to $4.4 million from $3.9 million
• A property, plant, and equipment impairment provision of $60 million was recorded on the Olds facility and an inventory impairment provision of $19.9 million was recorded on dried cannabis and cannabis extracts

“While our third quarter revenue decreased, we are pleased with the demonstrated improvement in operating discipline, successful cost optimization initiatives and a material reduction of our debt,” said Zach George, Sundial’s CEO. “Following the announcement of our financial restructuring in June of this year, we have accelerated improvements in our operating practices targeting a sustainable cost structure and a simplified business model that will better enable us to focus on delighting consumers.”

“Having entered 2020 with a challenged capital structure, and a disparate business model, our team has moved aggressively to focus our operations and product portfolio to get the very best from our high-quality people and assets,” added Mr. George. “We faced some challenges with our cultivation processes this past quarter, but the modular nature of our indoor facility enabled Sundial to quickly adapt to rapidly evolving market conditions and consumer preferences in today’s Canadian cannabis market. We firmly believe that the changes we’ve made to the business these past four months will position Sundial for future success.”

THIRD QUARTER 2020 KEY FINANCIAL METRICS

THIRD QUARTER 2020 BUSINESS & OPERATIONAL HIGHLIGHTS

 The decrease in net revenue in the third quarter of 2020 can be attributed to:

• Changes to the Company’s processes as it continues to adapt its cultivars to meet consumers’ expectations, including high THC potency
• The Company’s decision to prioritize larger pack formats in flower during the early stages of COVID-19, resulted in a slower than expected ramp-up in pre-roll production. Demand for Sundial’s pre-roll products remains strong and capacity constraints have been removed, which should benefit product mix in subsequent quarters
• Many provincial boards have adjusted their inventory stocking and re-ordering practices in response to short-term market demand and inventory management
• Sundial underestimated on-hand inventory on certain SKUs at select customers, which resulted in smaller re-orders in the quarter as the Company continues to move through its inventory depletion

In response to these factors, Sundial is implementing critical changes that have enhanced the Company’s cultivation results:

• The modular room design of Sundial’s facility has rapidly created a broad set of cultivation statistics. Since inception the company has completed over 600 harvests, including 243 in 2020 and 52 in the third quarter. Sundial has leveraged its data analytics capability to focus on key improvement areas within cultivation. Recently improved cultivation processes have led to Sundial’s highest average potency results since inception. Sundial expects to realize benefits from those products in early 2021
• Sundial’s commitment to data and science-based decisions has also been supported by the restructuring of our cultivation teams. These changes will be vital to accelerate the momentum of improvements in quality, potency, and cost
• Sundial acquired an expanded library of genetics to better serve evolving consumer preferences and cultivate higher potency products

GROSS MARGIN
Gross margin before inventory impairment and fair value adjustments for the three months ended September 30, 2020 was 20% compared to 14% for the three months ended June 30, 2020. The increase in the gross margin percentage of 6% was mainly due to efficiency gains realized through decreased cost of goods sold and one large LP order.

GROSS SELLING PRICE
Average gross selling price per gram equivalent of branded products was $5.53 per gram in the third quarter of 2020, including net provisions, compared to $5.67 per gram in the prior quarter.  Average gross selling price on branded products held firm despite price compression seen in the market and a decrease in vape sales. Average gross selling price for unbranded flower in the third quarter was $0.84 per gram down from $2.22 per gram. The decrease was due to the monetization of winterized oil, trim and shake inventory at a discounted price.  

REVENUE BY FORMATS
Sundial remains focused on delivering premium products with an emphasis on inhalable formats, including flower, pre-rolls and vape cartridges.  Gross revenue from vape cartridge sales was $3.6 million in the third quarter of 2020 representing a 43% decrease from the previous quarter. The decrease in vape sales was due in part by Sundial’s SKU increase in the segment along with significant price compressions. Gross revenue from dried flower sales was $11.6 million in the third quarter of 2020 representing a 28% decrease from the previous quarter. Gross revenue from oil sales was $319,000 in the third quarter of 2020 representing an 84% decrease from the previous quarter. The decrease in oil sales was due to a one-time bulk sale to a licensed producer. Sundial was under indexed in the pre-roll format and will increase production in the fourth quarter and into 2021 to meet consumer demand. Sundial is currently undertaking a proactive SKU optimization initiative to ensure top selling SKUs replace less popular products. The Company continues to diversify its product mix with plans for the addition of solventless extracts by the end of the fourth quarter of this year.

KILOGRAMS SOLD
The Company sold 5,819 kilogram equivalents of cannabis in the third quarter of 2020, a 3% decrease over the previous quarter sales of 5,997 kilogram equivalents.

NET BRANDED SALES
The Company continues to focus on increasing its sales to Provincial Boards through continued brand portfolio penetration coast-to-coast, the addition of new formats and supply chain optimization. Branded net cannabis sales in the third quarter of 2020 were $9.9 million compared to $14.0 million in the second quarter of 2020, a decrease of 29%.

COST OF GOODS SOLD PER GRAM EQUIVALENT
Cultivation costs per gram of bulk dried cannabis were $1.18 in the third quarter, compared to $1.34 in the previous quarter. Total cost of goods sold per gram including packaging, shipment and fulfillment costs for the three months ended September 30, 2020 was $1.76 compared to $2.89 for the previous quarter. The decrease of $1.13 per gram was mainly due to a bulk sale to an LP that had a low per gram cost. 

SALES, MARKETING AND GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative costs were further reduced by 7% from $7.7 million to $7.2 million in the third quarter of 2020 when compared to the prior quarter. The reduction in the Company’s workforce to adjust to market conditions and a focused review of all spending resulted in this decline. Sundial is fully committed to investing in its brands, and as a result sales and marketing expenses increased to $1.1 million from $0.5 million in the previous quarter. These investments will continue to increase in upcoming quarters.

NET LOSS
Net loss from continuing operations for the three months ended September 30, 2020 was $71.4 million compared to a net loss of $32.8 million for three months ended June 30, 2020. The net loss included impairment charges related to inventory ($19.9 million) and property, plant and equipment ($60.0 million) of $79.9 million.

ADJUSTED EBITDA 
Adjusted EBITDA from cannabis operations was a loss of $4.4 million for the three months ended September 30, 2020 compared to a loss of $3.9 million for the three months ended June 30, 2020. The increased loss was primarily due to lower net revenue and higher sales and marketing expense, partially offset by lower cost of sales and general and administrative expenses.

LIQUIDITY AND CAPITAL RESOURCES

Through a combination of cash repayments, asset dispositions, equity and equity-linked issuances and debt-for-equity conversions in 2020, Sundial has greatly improved its leverage and cash balance positions.

Highlights include:

• Eliminated $100 million of debt in 2020 as of November 9, 2020. Net debt was reduced by $72 million
• Reduced annualized debt service costs by $31 million through the June 5 restructuring
• Raised gross cash proceeds of $93 million since the June 5 restructuring and received unrestricted government subsidies of $4.1 million, as of November 9, 2020
• As of November 9, 2020, Sundial had $127 million of indebtedness outstanding, including $55 million aggregate principal amount of senior secured convertible notes and $72 million dollars of syndicated bank debt, 439 million common shares outstanding and an available cash balance of $60 million
• The process of converting debt into equity has significantly improved the Company’s balance sheet, but has resulted in pressure on the trading price of Sundial’s common shares
• Sundial’s shareholders have authorized the Board of Directors, subject to required regulatory and stock exchange approvals, to consolidate its outstanding common shares to ensure compliance with the Nasdaq’s continued listing standards, and to provide access to a broad universe of investors, access to equity capital and trading liquidity. Further details regarding a potential share consolidation will be announced at a later date

STRATEGIC AND ORGANIZATIONAL UPDATE

Sundial remains confident in its overall strategy of building sustainable, long-term shareholder value through reducing leverage, improving liquidity and cost of capital while optimizing the utilization and output of its production facilities.

• Subsequent to the end of the quarter, Sundial significantly increased its investment in brands through sales and marketing initiatives, including launching a comprehensive holiday campaign in early November (Top Leaf, Sundial and Palmetto) as well as increased its sales capacity with the addition of new sales representatives from coast-to-coast
• Subsequent to the quarter, Sundial renegotiated terms with an external manufacturing partner significantly reducing its costs by over 60% on those products. Sundial expects annual savings in excess of $2 million from this updated arrangement
• Following the quarter end, Sundial has internalized some processing operations that were previously performed by an external manufacturing partner. Sundial expects annual savings in excess of $2 million from this change. The lower costs will enable Sundial to be more competitive with its vape offering
• Following the quarter end, Sundial has undertaken an initiative to further simplify its supply chain and rationalize its SKUs across all brands and formats. The Company is taking a proactive approach with customers to limit SKU proliferation, and maximize shelf space and rate of sale with an optimized portfolio approach
• Subsequent to the quarter end, Sundial entered a sales and distribution agreement with local company Choklat Inc. The new collaboration provides Sundial the opportunity to continue to expand its product portfolio and enter the edible market

STRATEGIC ALTERNATIVES REVIEW

While Sundial remains focused on its core strategy, the Company continues to review potential strategic alternatives to ensure that all opportunities to maximize value are explored. There is no assurance that this review will result in a transaction of any kind, and the Company does not intend to provide any update or additional comment on these matters until the Board approves a specific action or otherwise concludes the review.  

COVID-19 UPDATE

The Company continues to monitor daily developments in the COVID-19 pandemic and actions taken by government authorities. In accordance with the guidance of provincial and federal health officials to limit the risk and transmission of COVID-19, Sundial continues to implement mandatory self-quarantine policies, travel restrictions, enhanced cleaning and sanitation processes and frequency, and social distancing measures. Sundial believes that it can maintain safe operations with these pandemic-related procedures and protocols in place. The Company has not experienced a material impact on its production and processing activities to date related to COVID-19. 

NON-IFRS MEASURES 

Certain financial measures in this news release, including adjusted EBITDA, working capital and gross margin before fair value adjustments are non-IFRS measures. These terms are not defined by IFRS and, therefore, may not be comparable to similar measures provided by other companies. These non-IFRS financial measures should not be considered in isolation or as an alternative for measures of performance prepared in accordance with IFRS. 

ADJUSTED EBITDA 

Adjusted EBITDA is a non-IFRS measure which the Company uses to evaluate its operating performance. Adjusted EBITDA provides information to investors, analysts and others to aid in understanding and evaluating the Company’s operating results in a similar manner to its management team. Adjusted EBITDA is defined as net income (loss) before finance costs, depreciation and amortization, accretion expense, income tax recovery and excluding change in fair value of biological assets, change in fair value realized through inventory, unrealized foreign exchange gains or losses, share-based compensation expense, asset impairment, gain or loss on disposal of property, plant and equipment and certain one-time non-operating expenses, as determined by management. 

SUNDIAL CORPORATE VIDEO

Sundial launched its new corporate video available to watch on https://www.sndlgroup.com/investors/corporate-video  

CONFERENCE CALL 

Sundial will host a conference call and webcast at 10:30 a.m. EDT (8:30 a.m. MDT) on Thursday, November 12, 2020.    A current investor presentation will be available on http://sndlgroup.com/investors at that time.

CONFERENCE CALL ACCESS 
Callers may access the conference call via the following phone numbers:
Canada/USA Toll Free: 1-800-319-4610
International Toll: +1-604-638-5340
UK Toll Free: 0808-101-2791
Callers should dial in 5-10 minutes prior to the scheduled start time.

WEBCAST
To access the live webcast of the call, please visit the following link:
http://services.choruscall.ca/links/sundialgrowers20201112.html

REPLAY
A telephone replay will be available for one month. To access the replay dial:
Canada/USA Toll Free: 1-800-319-6413 or International Toll: +1-604-638-9010
When prompted, enter Replay Access Code: 5547 #
The webcast archive will be available for three months via the link provided above.

ABOUT SUNDIAL GROWERS INC. 

Sundial is a public company with Common Shares traded on Nasdaq under the symbol “SNDL”.

Sundial is a licensed producer that crafts cannabis using state-of-the-art indoor facilities. Our ‘craft-at-scale’ modular growing approach, award-winning genetics and experienced growers set us apart. 

Our Canadian operations cultivate small-batch cannabis using an individualized “room” approach, with 470,000 square feet of total space.  

Sundial’s brand portfolio includes Top Leaf, Sundial Cannabis, Palmetto and Grasslands. Our consumer-packaged goods experience enables us to not just grow quality cannabis, but also to create exceptional consumer and customer experiences.  

We are proudly Albertan, headquartered in Calgary, AB, with operations in Olds, AB, and Rocky View County, AB.  

Forward-Looking Information Cautionary Statement
  

This news release includes statements containing certain “forward-looking information” within the meaning of applicable securities law (“forward-looking statements”), including, but not limited to, statements regarding the Company’s cost-cutting initiatives, the cost savings expected to be achieved, the Company’s ability to obtain new financing and covenant relief, operational goals, demand for the Company’s products, the Company’s ability to achieve profitability, the development of the legal cannabis market, future financings and the maintenance of production levels. In particular, any failure or delay in obtaining new financing would have a material adverse effect on our liquidity and impair our ability to operate as a going concern.  In such a case, the Company would look to delay investments or capital expenditures and evaluate potential asset sales, but it could be forced to curtail operations or seek relief under bankruptcy or insolvency laws.  In addition, depending on the development of the cannabis market and the Company’s ability to capture any growth opportunities, future liquidity issues may continue to arise, which could have a material adverse effect on our business, results of operations and financial condition. Forward-looking statements are frequently characterized by words such as “plan”, “continue”, “expect”, “project”, “intend”, “believe”, “anticipate”, “estimate”, “likely”, “outlook”, “forecast”, “may”, “will”, “potential”, “proposed” and other similar words, or statements that certain events or conditions “may” or “will” occur. These statements are only predictions. Various assumptions were used in drawing the conclusions or making the projections contained in the forward-looking statements throughout this news release. Forward-looking statements are based on the opinions and estimates of management at the date the statements are made, and are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking statements. Please see “Item 3D Risk Factors” in the Company’s Annual Report on Form 20-F, which was filed with the Securities and Exchange Commission (“SEC”) on March 30, 2020, and the risk factors included in our other SEC filings for a discussion of the material risk factors that could cause actual results to differ materially from the forward-looking information. The Company is under no obligation, and expressly disclaims any intention or obligation, to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as expressly required by applicable law.  

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SOURCE Sundial Growers Inc.

BATESVILLE, Ind., Nov. 11, 2020 /PRNewswire/ — 

Fiscal Fourth Quarter 2020 Highlights:

• Record quarterly revenue of $694 million increased 43% over prior year driven by the acquisition of Milacron; organic revenue decreased 2% as Batesville growth of 8% was more than offset by a decrease of 6% in Advanced Process Solutions, formerly referred to as the Process Equipment Group
• GAAP EPS of ($0.09) included non-cash impairment charges of $62 million; adjusted EPS¹ of $0.92 increased 8% driven by the acquisition of Milacron and strong Batesville results
• Record order backlog of $1.23 billion grew 43% year over year primarily driven by the acquisition of Milacron and large plastics projects in Advanced Process Solutions; organic backlog grew 14% year over year; total backlog increased 10% sequentially

Fiscal Year 2020 Highlights:

• Record revenue of $2.52 billion increased 39% over prior year driven by the Milacron acquisition; organic revenue decreased 2%
• GAAP EPS of ($0.82) included non-cash impairment charges of $145 million; adjusted EPS
  ¹
  of $3.19 increased 14% year over year
• Exceeded targeted year-one synergy cost savings from the acquisition of Milacron; on track to deliver $75 million in annual run-rate cost savings by year three
• Record cash flow from operations of $355 million increased $176 million compared to the prior year; net leverage decreased to 2.7x
• Fiscal Q1 2021 guidance: adjusted EPS
  ¹
  expected to be $0.65 to $0.75

Hillenbrand, Inc. (NYSE: HI) reported results today for the fourth quarter and full fiscal year, which ended September 30, 2020.

Changes to Segment Names

During the fourth quarter of fiscal 2020, the Company changed the name of the Milacron segment to Molding Technology Solutions and the name of the Process Equipment Group segment to Advanced Process Solutions, in order to better reflect the nature of business activities, end-market exposure and future opportunities of the segments.

Fourth Quarter Results

Revenue of $694 million grew 43% compared to the prior year primarily driven by the acquisition of Milacron. Revenue decreased 2% organically as Batesville growth of 8% was more than offset by a decrease of 6% in Advanced Process Solutions. Excluding the impact of foreign currency exchange, total revenue increased 41%.

Net loss of $7 million, or ($0.09) per share, decreased $0.48 per share compared to the prior year, primarily as a result of non-cash impairment charges of $62 million related to the Company’s TerraSource Global and flow control businesses, which were recently identified for divestiture as announced in August 2020, and an increase in tax expense associated with domestic tax on foreign income inclusion and taxes on distributions from foreign subsidiaries.

Adjusted net income of $69 million, or $0.92 per share¹, increased $0.07, or 8%, year over year, mainly driven by the acquisition of Milacron and strong Batesville performance. The adjusted effective tax rate was 32.1%, an increase of 560 basis points from the prior year, driven by increased distributions from foreign subsidiaries.

Adjusted EBITDA of $141 million increased 62% over the prior year, primarily due to the Milacron acquisition, which contributed $51 million, and an increase of $5 million from Batesville. Adjusted EBITDA margin of 20.3% expanded 240 basis points compared to a year ago. On an organic basis, adjusted EBITDA increased 4%, and adjusted EBITDA margin increased 110 basis points driven by margin expansion in Advanced Process Solutions and Batesville.

Hillenbrand generated cash flow from operations of $235 million in the quarter, an increase of $165 million year over year. All three reportable segments contributed to the improvement. During the quarter, the Company returned nearly $16 million to shareholders in the form of quarterly dividends and paid down $159 million of debt. Net debt at the end of the quarter was $1.3 billion, and the net debt to adjusted EBITDA ratio was 2.7x, an improvement of 1.1x from December 31, 2019, and a sequential improvement of 0.6x. The Company had nearly $1.2 billion of liquidity and no near-term debt maturities.

“Our fourth quarter financial results, including outstanding free cash flow, represent a strong finish to our fiscal year in a very challenging environment.  Our teams prioritized safety and executed exceptionally well, managing costs while positioning the businesses to capitalize on opportunities going forward.  Results were stronger than we anticipated as orders rebounded at Molding Technology Solutions, and Batesville again delivered strong margins on higher volume. We continued to leverage the Hillenbrand Operating Model across the enterprise as a catalyst for growth and margin improvement,” said Joe Raver, President and Chief Executive Officer of Hillenbrand. “We believe that we are well positioned heading into fiscal 2021, especially considering our record backlog and the significant progress we’ve made in building momentum with the Milacron integration. In addition, the process for the portfolio actions we announced in August is going well as we pursue the long-term benefits of a more focused portfolio. While the current business environment remains unpredictable, we’re focused on managing the things we can control and executing against our strategic initiatives to drive profitable growth over the long term.”

Advanced Process Solutions

Advanced Process Solutions fourth quarter revenue of $330 million decreased 6% compared to the same period in the prior year but improved by 17% sequentially versus the third quarter. Excluding the impact of foreign currency exchange, revenue decreased 9% year over year. Revenue was lower primarily as a result of general demand softness across industrial end markets. Adjusted EBITDA margin of 20.6% increased 160 basis points, primarily driven by pricing, productivity improvements and cost containment actions, partially offset by cost inflation. Record order backlog of $988 million at the end of the fourth quarter increased 14% over the prior year. Backlog increased 5% sequentially compared to the third quarter.

Molding Technology Solutions

Molding Technology Solutions revenue of $217 million for the quarter decreased 1% on a pro forma basis year over year and improved 17% sequentially as the segment delivered its best top line performance of the year.  Adjusted EBITDA of $51 million increased 20% year over year, and adjusted EBITDA margin of 23.3% increased 410 basis points driven by productivity improvements, synergies, and cost containment actions. Order backlog of $243 million increased 54% year over year, driven by growth in injection molding, extrusion equipment and hot runner orders. Order backlog increased 31% sequentially. For purposes of this earnings release and comparative purposes only, all prior year comparisons for Molding Technology Solutions are made on a pro forma basis and exclude the Cimcool business, which the Company divested in March of this year.

Batesville



Batesville fourth quarter revenue of $147 million grew 8% compared to the prior year and 5% sequentially, driven by higher burial casket volume. Adjusted EBITDA margin of 24.3% was 170 basis points higher than the prior year, mainly driven by operating leverage, productivity gains, and cost containment actions, which more than offset cost inflation.

Fiscal Year 2020 Results

Hillenbrand’s revenue of $2.52 billion for fiscal 2020 increased 39%. Excluding the impact of foreign currency exchange, revenue increased 40%. The acquisition of Milacron contributed 41%, and Batesville revenue increased 4% for the year with the estimated increased volume associated with the COVID-19 pandemic. Advanced Process Solutions revenue of $1.23 billion decreased 4%, or 3% excluding the impact of foreign currency, as general weakness in industrial demand was partially offset by favorable pricing.

Net loss of $60 million resulted in GAAP loss per share of $0.82. The loss was driven by $145 million of non-cash impairment charges, primarily on businesses identified for divestiture as part of our portfolio simplification. On an adjusted basis, net income of $235 million resulted in adjusted earnings per share of $3.19¹, an increase of 14%. Adjusted EBITDA increased 57% to $464 million and, as a percentage of revenue, was 18.5%, 220 basis points higher than the prior year. The adjusted EBITDA margin increase was primarily driven by margin expansion in Advanced Process Solutions and Batesville, as well as the addition of the higher margin Molding Technology Solutions product lines. Advanced Process Solutions adjusted EBITDA margin of 19.1% increased 160 basis points, and Batesville adjusted EBITDA margin of 23.0% increased 160 basis points. Operating cash flow for the year was $355 million, an increase of $176 million, and free cash flow of $319 million was approximately 136% of adjusted net income for the year.

Hillenbrand’s effective tax rate was (189%) in 2020 compared to 28.6% in 2019. The tax rate was negative for the year primarily related to the Company reporting a net loss for the year, while being in a taxable position for income tax purposes. The taxable position was primarily driven by nondeductible impairment charges and taxable gains from the sale of the Cimcool business. The adjusted effective tax rate of 27.8% increased 100 basis points compared to 26.8% in 2019, primarily due to taxes associated with foreign earnings distributions.

Other Notable Items

In October, Hillenbrand appointed Pete Dyke as Senior Vice President and Chief Human Resource Officer (CHRO). Mr. Dyke is responsible for driving Hillenbrand’s Human Resources strategy and talent management practices across the enterprise. Mr. Dyke was most recently CHRO at Innovative Water Care, a global specialty chemicals company. Prior to that, he served in Human Resources leadership positions at Luxfer Holdings PLC, Pentair PLC, and General Electric Company. 

Fiscal First Quarter 2021 Outlook

Hillenbrand is providing guidance for the fiscal first quarter 2021. Given the continued uncertainties regarding the duration and severity of the COVID-19 pandemic, the Company has provided the following outlook, on the assumption that a gradual stabilization of the global economy continues, with no increase in pandemic-related disruptions.

• Total revenue expected to decrease 1% – 4% year over year
• Advanced Process Solutions revenue expected to decrease 12 – 15%
• Molding Technology Solutions expected to increase 2% – 5% on a pro forma basis
• Batesville revenue expected to increase 12% – 15%
• Adjusted EPS¹ of $0.65 – $0.75

¹ As previously noted, beginning with fiscal third quarter 2020 results, the Company updated adjusted EPS to exclude after-tax acquisition-related intangible amortization. The Company believes reporting adjusted EPS in this manner better reflects its core operating results and offers greater consistency and transparency. A full reconciliation between GAAP and adjusted measures is included at the end of this release.

Conference Call Information
Date/Time: Thursday, November 12, 8:00 a.m. ET
Online registration: http://www.directeventreg.com/registration/event/9256319
Conference call ID number: 9256319
Webcast link: https://ir.hillenbrand.com (archived through Friday, December 11, 2020)

Replay – Conference Call
Date/Time: Available until midnight ET, Thursday, November 26, 2020
Replay ID number: 9256319
Dial-In for U.S. and Canada: 1-855-859-2056
Dial-In for International: +1-404-537-3406

Hillenbrand’s financial statements on Form 10-K are expected to be filed on November 12, 2020 before market open and will be made available on the Company’s website (https://ir.hillenbrand.com).

In addition to the financial measures prepared in accordance with United States generally accepted accounting principles (GAAP), this earnings release also contains non-GAAP operating performance measures. These non-GAAP measures are referred to as “adjusted” measures and exclude the following items:

• business acquisition, disposition, and integration costs;
• restructuring and restructuring related charges;
• impairment charges;
• inventory step-up charges;
• intangible asset amortization;
• debt financing activities related to the acquisition of Milacron;
• net loss on divestiture of Cimcool;
• COVID-19 pandemic-related costs;
• the related income tax impact for all of these items; and
• the interaction of tax benefits and expenses related to the foreign income inclusion tax provisions and certain tax carryforward attributes associated with the acquisition of Milacron and divestiture of Cimcool, including the tax provisions related to the imposition of tax on Global Intangible Low-Taxed Income (GILTI) earned by certain foreign subsidiaries, the Foreign Derived Intangible Income Deduction (FDII), and the Base Erosion and Anti-Abuse Tax (BEAT) and their impact on loss carryforward attributes.

In consideration of the Milacron acquisition, beginning with the quarter ended June 30, 2020, the Company has reported adjusted EPS results that exclude after-tax acquisition-related intangible amortization, in addition to backlog amortization excluded in previous periods.  Prior year periods have been restated to conform to the presentation in the current year periods.  The Company believes reporting adjusted EPS in this manner better reflects its core operating results and offers greater consistency and transparency.

Refer to the Reconciliation of Non-GAAP Measures for further information on these adjustments.  Non-GAAP information is provided as a supplement to, not as a substitute for, or as superior to, measures of financial performance prepared in accordance with GAAP.

Hillenbrand uses this non-GAAP information internally to make operating decisions and believes it is helpful to investors because it allows more meaningful period-to-period comparisons of 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 items such as the above excluded items. Hillenbrand believes this information provides a higher degree of transparency.

An important non-GAAP measure Hillenbrand uses is adjusted earnings before interest, income tax, depreciation, and amortization (“adjusted EBITDA”). A part of Hillenbrand’s strategy is to pursue acquisitions that strengthen or establish leadership positions in key markets. Given that strategy, it is a natural consequence to incur related expenses, such as amortization from acquired intangible assets and additional interest expense from debt-funded acquisitions. Accordingly, we use adjusted EBITDA, among other measures, to monitor business performance. Adjusted EBITDA is not a recognized term under U.S. GAAP and therefore does not purport to be an alternative to net (loss) income.  Further, Hillenbrand’s measure of adjusted EBITDA may not be comparable to similarly titled measures of other companies.

Organic growth, a non-GAAP measure, is defined as total sales growth less the sales of companies acquired in the past twelve months. Hillenbrand uses organic growth and organic revenue to assess performance of its reportable segments and the Company in total without the impact of recent acquisitions.  Hillenbrand believes that such measures are useful to investors as it provides a supplemental period-to-period comparison.

Another important non-GAAP operational measure used is backlog.  Backlog is not a term recognized under GAAP; however, it is a common measurement used in industries with extended lead times for order fulfillment (long-term contracts), like those in which our Advanced Process Solutions and Molding Technology Solutions reportable segments compete.  Backlog represents the amount of consolidated revenue that we expect to realize on contracts awarded to the Advanced Process Solutions and Molding Technology Solutions reportable segments.  For purposes of calculating backlog, 100% of estimated revenue attributable to consolidated subsidiaries is included.  Backlog includes expected revenue from large systems and equipment, as well as replacement parts, components, and service. The length of time that projects remain in backlog can span from days for replacement parts or service to approximately 18 to 24 months for larger system sales within the Advanced Process Solutions reportable segment. The majority of the backlog within the Molding Technology Solutions reportable segment is expected to be fulfilled within the next twelve months. Backlog includes expected revenue from the remaining portion of firm orders not yet completed, as well as revenue from change orders to the extent that they are reasonably expected to be realized.  We include in backlog the full contract award, including awards subject to further customer approvals, which we expect to result in revenue in future periods.  In accordance with industry practice, our contracts may include provisions for cancellation, termination, or suspension at the discretion of the customer.

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

Hillenbrand calculates the foreign currency impact on net revenue in order to better measure the comparability of results between periods. We calculate the foreign currency impact by translating current year results at prior year foreign exchange rates. This information is provided because exchange rates can distort the underlying change in sales, either positively or negatively.

See below for a reconciliation from GAAP operating performance measures to the most directly comparable non-GAAP (adjusted) performance measures.  Given that there is no GAAP financial measure comparable to backlog, a quantitative reconciliation is not provided. In addition, forward-looking adjusted earnings per share for the first quarter of fiscal 2021 excludes potential charges or gains that may be recorded during the fiscal year, including among other things, items described above in connection with other “adjusted” measures. Hillenbrand thus also does not attempt to provide reconciliations of forward-looking non-GAAP earnings guidance to the comparable GAAP measure, as permitted by Item 10(e)(1)(i)(B) of Regulation S-K, because the impact and timing of these potential charges or gains is inherently uncertain and difficult to predict and is unavailable without unreasonable efforts. In addition, the company believes such reconciliations would imply a degree of precision and certainty that could be confusing to investors. Such items could have a substantial impact on GAAP measures of Hillenbrand’s financial performance.

 

 

 

 

 

 

 

Forward-Looking Statements

Throughout this earnings release, we make a number of “forward-looking statements” that are within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995, and that are intended to be covered by the safe harbor provided under these sections. As the words imply, these are statements about future sales, earnings, cash flow, results of operations, uses of cash, financings, share repurchases, ability to meet deleveraging goals, and other measures of financial performance or potential future plans or events, strategies, objectives, beliefs, prospects, assumptions, expectations, and projected costs or savings or transactions of the Company that might or might not happen in the future, as contrasted with historical information. Forward-looking statements are based on assumptions that we believe are reasonable, but by their very nature are subject to a wide range of risks. If our assumptions prove inaccurate or unknown risks and uncertainties materialize, actual results could vary materially from Hillenbrand’s (the “Company”) expectations and projections.

Words that could indicate that we are making forward-looking statements include the following:

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. These factors include, but are not limited to: the impact of contagious diseases such as the COVID-19 pandemic and the societal, governmental, and individual responses thereto, including supply chain disruption, loss of contracts and/or customers, erosion of some customers’ credit quality, downgrades of the Company’s credit quality, closure or temporary interruption of the Company’s or suppliers’ manufacturing facilities, travel, shipping and logistical disruptions, loss of human capital or personnel, and general economic calamities;  risks that the integration of Milacron disrupts current operations or poses potential difficulties in employee retention or otherwise affects financial or operating results; the ability to recognize the benefits of the acquisition of Milacron or any other acquisition or disposition, including potential synergies and cost savings or the failure of the Company or any acquired company to achieve its plans and objectives generally; impairment charges to goodwill and other identifiable intangible assets; the risk of business disruptions associated with information technology, cyber-attacks, or catastrophic losses affecting infrastructure; competition in the industries in which we operate, including on price or from nontraditional sources in the death care industry; impacts of decreases in demand or changes in technological advances, laws, or regulation on the revenues that we derive from the plastics industry; our reliance upon employees, agents, and business partners to comply with laws in many countries and jurisdictions; the impact of the significant amount of indebtedness of the Company and its ability to meet its de-leveraging goals;  the ability of the Company to comply with financial or other covenants in its debt agreements; global market and economic conditions, including those related to the financial markets; our level of international sales and operations; cyclical demand for industrial capital goods; continued fluctuations in mortality rates and increased cremations; the dependence of our business units on relationships with several large customers and providers; the impact to the Company’s effective tax rate of changes in the mix of earnings or tax laws and certain other tax-related matters; involvement in claims, lawsuits and governmental proceedings related to operations; ; uncertainty in the United States political environment or global trade policy; adverse foreign currency fluctuations; increased costs or unavailability of raw materials or certain outsourced services; labor disruptions; increasing competition for highly skilled and talented workers; and the effect of certain provisions of the Company’s governing documents and Indiana law that could decrease the trading price of the Company’s common stock Shareholders, potential investors, and other readers are urged to consider these risks and uncertainties in evaluating forward-looking statements and are cautioned not to place undue reliance on the forward-looking statements. For a more in-depth discussion of these and other factors that could cause actual results to differ from those contained in forward-looking statements, see the discussions under the heading “Risk Factors” in Part I, Item 1A of Hillenbrand’s Form 10-K for the year ended September 30, 2020, to be filed with the Securities and Exchange Commission (“SEC”) on November 12, 2020 before the market open. The forward-looking information in this release speaks only as of the date covered by this release, and we assume no obligation to update or revise any forward-looking information.

About Hillenbrand
Hillenbrand (www.Hillenbrand.com) is a global diversified industrial company with businesses that serve a wide variety of industries around the world. We pursue profitable growth and robust cash generation to drive increased value for our shareholders. Hillenbrand’s portfolio includes industrial businesses such as Coperion, Milacron Injection Molding & Extrusion, and Mold-Masters, in addition to Batesville, a recognized leader in the death care industry in North America. Hillenbrand is publicly traded on the NYSE under “HI.”

 

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SOURCE Hillenbrand, Inc.