UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
SCHEDULE
14A
(Rule 14A-101)
Proxy
Statement Pursuant to Section 14(a) of the
Securities
Exchange Act of 1934
(Amendment
No. __)
Filed
by the Registrant £
Filed
by a Party other than the Registrant S
Check
appropriate box:
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£
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Preliminary
Proxy Statement
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£
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Confidential,
For Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
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£
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Definitive
Proxy Statement
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£
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Definitive
Additional Materials
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S
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Soliciting
Material under Rule 14a-12
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K-TRON
INTERNATIONAL, INC.
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(Name
of Registrant as Specified in Its Charter)
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HILLENBRAND,
INC.
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(Name
of Person(s) Filing Proxy Statement, if Other Than the
Registrant)
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Payment
of filing fee (Check the appropriate box):
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S
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No
fee required.
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£
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Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
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(1)
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Title
of each class of securities to which transaction
applies:
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(2)
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Aggregate
number of securities to which transaction applies:
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(3)
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Per
unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):
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(4)
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Proposed
maximum aggregate value of transaction:
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(5)
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Total
fee paid:
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£
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Fee
paid previously with preliminary materials:
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box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its
filing.
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(1)
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Amount
Previously Paid:
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Schedule or Registration Statement No.:
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(3)
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Party:
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(4)
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Date
Filed:
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Filed
by Hillenbrand, Inc.
Pursuant
to Rule 14a-12
of
the Securities Exchange Act of 1934
Subject
Company: K-Tron International, Inc.
Commission
File No: 000-09576
The
following investor presentation was used during a conference call with investors
held by Hillenbrand, Inc. on January 11, 2010:
Transaction
Overview
January
11,2010
2
Mark
Lanning
Vice President of Investor
Relations & Treasurer
Vice President of Investor
Relations & Treasurer
Hillenbrand,
Inc
Hillenbrand
Speaker
Certain
statements in this presentation contain forward-looking statements, within the
meaning of the Private Securities Litigation Reform Act of 1995, regarding
the
company’s future plans, objectives, beliefs, expectations, representations and projections. The company has tried, wherever possible, to identify these forward-looking
statements using words such as “intend,” “anticipate,” “believe,” “plan,” “encourage,” “expect,” “may,” “goal,” “become,” “pursue,” “estimate,” “strategy,” “will,”
“projection,” “forecast,” “continue,” “accelerate,” “promise,” “increase,” “higher,” “lower,” “reduce,” “improve,” “expand,” “progress,” “potential” or the negative of
those terms or other variations of them or by comparable terminology. The absence of such terms, however, does not mean that the statement is not forward-looking. It is
important to note that forward-looking statements are not guarantees of future performance, and the company's actual results could differ materially from those set forth in
any forward-looking statements. Factors that could cause actual results to differ from forward-looking statements include but are not limited to: the company’s ongoing
antitrust litigation; the company’s dependence on its relationships with several large national providers; continued fluctuations in mortality rates and increased cremations;
ongoing involvement in claims, lawsuits and governmental proceedings related to operations; failure of the company’s announced strategic initiatives to achieve expected
growth, efficiencies or cost reductions; disruptions in the company’s business or other adverse consequences resulting from the separation of Hillenbrand Industries into
two operating companies; failure of the company to execute its acquisition and business alliance strategy through the consummation and successful integration of
acquisitions (such as the acquisition of K-Tron International, Inc.) or entry into joint ventures or other business alliances; competition from nontraditional sources in the
funeral services business; volatility of the company’s investment portfolio; increased costs or unavailability of raw materials; labor disruptions; the ability to retain
executive officers and other key personnel; and certain tax-related matters. 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 Item 1 of the company’s Annual Report on Form 10-K
for the year ended September 30, 2009, filed November 24, 2009. The company assumes no obligation to update or revise any forward-looking information.
company’s future plans, objectives, beliefs, expectations, representations and projections. The company has tried, wherever possible, to identify these forward-looking
statements using words such as “intend,” “anticipate,” “believe,” “plan,” “encourage,” “expect,” “may,” “goal,” “become,” “pursue,” “estimate,” “strategy,” “will,”
“projection,” “forecast,” “continue,” “accelerate,” “promise,” “increase,” “higher,” “lower,” “reduce,” “improve,” “expand,” “progress,” “potential” or the negative of
those terms or other variations of them or by comparable terminology. The absence of such terms, however, does not mean that the statement is not forward-looking. It is
important to note that forward-looking statements are not guarantees of future performance, and the company's actual results could differ materially from those set forth in
any forward-looking statements. Factors that could cause actual results to differ from forward-looking statements include but are not limited to: the company’s ongoing
antitrust litigation; the company’s dependence on its relationships with several large national providers; continued fluctuations in mortality rates and increased cremations;
ongoing involvement in claims, lawsuits and governmental proceedings related to operations; failure of the company’s announced strategic initiatives to achieve expected
growth, efficiencies or cost reductions; disruptions in the company’s business or other adverse consequences resulting from the separation of Hillenbrand Industries into
two operating companies; failure of the company to execute its acquisition and business alliance strategy through the consummation and successful integration of
acquisitions (such as the acquisition of K-Tron International, Inc.) or entry into joint ventures or other business alliances; competition from nontraditional sources in the
funeral services business; volatility of the company’s investment portfolio; increased costs or unavailability of raw materials; labor disruptions; the ability to retain
executive officers and other key personnel; and certain tax-related matters. 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 Item 1 of the company’s Annual Report on Form 10-K
for the year ended September 30, 2009, filed November 24, 2009. The company assumes no obligation to update or revise any forward-looking information.
Additional
Information and Where to Find It
This
investor presentation may be deemed to be solicitation material in respect of
the proposed acquisition of K-Tron International, Inc. (“K-Tron”) by
Hillenbrand, Inc.
(“Hillenbrand”). In connection with the proposed acquisition, K-Tron plans to file a proxy statement with the SEC. INVESTORS AND SECURITY HOLDERS OF K-
TRON ARE ADVISED TO READ THE PROXY STATEMENT AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC WHEN THEY
BECOME AVAILABLE BECAUSE THOSE DOCUMENTS WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED ACQUISITION.
The final proxy statement will be mailed to shareholders of K-Tron. Investors and security holders may obtain a free copy of the proxy statement when it
becomes available, and other documents filed by K-Tron with the SEC, at the SEC’s web site at http://www.sec.gov. Free copies of the proxy statement, when it
becomes available, and K-Tron’s other filings with the SEC may also be obtained from K-Tron by directing a request to K-Tron International, Inc., Attention:
Investor Relations, Route 55 and 553, P.O. Box 888, Pitman, N.J. 08071, or by calling 856-589-0500.
(“Hillenbrand”). In connection with the proposed acquisition, K-Tron plans to file a proxy statement with the SEC. INVESTORS AND SECURITY HOLDERS OF K-
TRON ARE ADVISED TO READ THE PROXY STATEMENT AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC WHEN THEY
BECOME AVAILABLE BECAUSE THOSE DOCUMENTS WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED ACQUISITION.
The final proxy statement will be mailed to shareholders of K-Tron. Investors and security holders may obtain a free copy of the proxy statement when it
becomes available, and other documents filed by K-Tron with the SEC, at the SEC’s web site at http://www.sec.gov. Free copies of the proxy statement, when it
becomes available, and K-Tron’s other filings with the SEC may also be obtained from K-Tron by directing a request to K-Tron International, Inc., Attention:
Investor Relations, Route 55 and 553, P.O. Box 888, Pitman, N.J. 08071, or by calling 856-589-0500.
Hillenbrand,
K-Tron and their respective directors, executive officers and other members of
their management and employees may be deemed to be soliciting proxies
from K-Tron shareholders in favor of the proposed acquisition. Information regarding Hillenbrand’s directors and executive officers is available in its 2009 Annual
Report on Form 10-K filed with the SEC on November 24, 2009, and definitive proxy statement relating to its 2010 Annual Meeting of Shareholders filed with the SEC
on January 5, 2010. Information regarding K-Tron’s directors and executive officers is available in its 2008 Annual Report on Form 10-K filed with the SEC on March
13, 2009, and definitive proxy statement relating to its 2009 Annual Meeting of Shareholders filed with the SEC on April 6, 2009. Additional information regarding the
interests of such potential participants will be included in the proxy statement and the other relevant documents filed with the SEC when they become available.
from K-Tron shareholders in favor of the proposed acquisition. Information regarding Hillenbrand’s directors and executive officers is available in its 2009 Annual
Report on Form 10-K filed with the SEC on November 24, 2009, and definitive proxy statement relating to its 2010 Annual Meeting of Shareholders filed with the SEC
on January 5, 2010. Information regarding K-Tron’s directors and executive officers is available in its 2008 Annual Report on Form 10-K filed with the SEC on March
13, 2009, and definitive proxy statement relating to its 2009 Annual Meeting of Shareholders filed with the SEC on April 6, 2009. Additional information regarding the
interests of such potential participants will be included in the proxy statement and the other relevant documents filed with the SEC when they become available.
Forward-looking
Statements
3
4
Ken
Camp
President &
President &
Chief
Executive Officer
Hillenbrand,
Inc
Hillenbrand
Speaker
It’s
the Right Acquisition
• $435MM cash
purchase ($390MM net purchase price) provides approximately $200MM
of revenue
of revenue
• Preserves
Hillenbrand’s high quality of earnings and cash flows while improving
growth
potential
potential
• EBITDA
multiple of 10.3x EBITDA is in line with recent market comparables
• We expect
the transaction to be immediately accretive to EPS and cash flow,
excluding
acquisition costs, transition costs, and non-recurring purchase accounting adjustments
acquisition costs, transition costs, and non-recurring purchase accounting adjustments
• Attractive
product, industry and customer diversification
• Creates
sizable new global platforms in two attractive sectors
• Ideal fit
with Hillenbrand’s stringent acquisition criteria
• K-Tron
International has limited lean experience. Meaningful improvement opportunities
exist
through the application of lean business practices
through the application of lean business practices
• Strong
cultural fit with proven management
• Adds
leading brands and market positions with two new platforms
• A proven
high margin, high growth business
Operational
and
Cultural
Financial
Strategic
5
6
K-Tron
International’s
Corporate Profile Is Very Attractive
to Hillenbrand
to Hillenbrand
• 2008
Revenues and EBITDA of $243 MM and $44.6 MM
• 21% Total
revenue CAGR over last 5 years;
• 10%
Organic revenue CAGR over last 5 years
• Two
attractive segments within bulk solids material handling equipment
sector
• Leading,
respected brands
• Serves
diverse base of global customers through wholly-owned subsidiaries and
independent representatives
• Highly
productive operation with more than 650 employees
• Operates 7
manufacturing facilities: 5 in the U.S. and 1 each in Switzerland and
China
• Numerous
meaningful opportunities have been identified to grow as economy
recovers
Estimated
Revenue by Business Line (1)
Estimated
EBITDA by Business Line (1)
(1) For FY
2008
Size
Reduction
Group
Reduction
Group
Process
Group
Group
Size
Reduction
Group
Reduction
Group
Process
Group
Group
7
New
Platform: K-Tron Process Group Is a Leader
in Feeding and Conveying With a Clear Growth
Path
in Feeding and Conveying With a Clear Growth
Path
Feeders
Provide
accurate feeding of “hard-to-handle” materials in a wide variety of
manufacturing
processes, enabling customers in key end markets to produce high quality products and
optimize raw material usage
processes, enabling customers in key end markets to produce high quality products and
optimize raw material usage
Conveyers
Product Summary
Brand Names
(1) Higher
sensitivity to economic cycles.
Convey
bulk solids with positive or negative pressure through mass-customized
pneumatic
conveying equipment and systems
conveying equipment and systems
Growth Strategy
• Differentiated
by material flow expertise (multiple types)
• Leading
brand position in each category
• Expanding
back into value chain: same sales, engineering & service channels, and same
customers
Feeders
Conveyers
Gravimetric
Feeders
Twin Screw
Micro-Ingredient Feeder
Pneumatic
Conveying Components
Sanitary
Pneumatic Conveying Systems
for Food
and Pharmaceutical
8
New
Platform: K-Tron Size Reduction Group Is a
Brand Leader Supported by its High Margin,
Recurring Consumable Parts Business
Brand Leader Supported by its High Margin,
Recurring Consumable Parts Business
Size
Reduction
Coal
Processing:
Hammermills, sizers, roll crushers
Wood/pulp
Processing/Biomass: Wood/bark
hogs, chip screens
Mining: Potash
and mineral mining crushers
Significant
recurring parts revenue
Product Summary
Brand Names
Growth Strategy
Leverage
installed base and brand equity (#1 or #2 brand presence)
Penn Crusher
& Reversible Hammermill
Jeffrey EZ
Access Word/Bark Hog
Gundlach Cage
Packer
Grundlach
Two-stage Four-roll Breaker
Duratip® Wood Hog
Jammers
Big Buster™
Hammer
Stant-Flow®
Grates
Buster®
Bar
To
Maximize Value Creation, We Will Leverage Hillenbrand’s Core
Competencies Across New Platforms
Competencies Across New Platforms
9
Lean Business
(Capabilities nationally
recognized
beyond the death care industry)
beyond the death care industry)
Culture
of
Execution
Execution
Management Team
§ High
quality
§ Low-cost
§ Flexible
§ Safety-conscious
§ Innovative
§ Profitability
improvement
§ Highly
effective merchandising
§ History
of successful acquisition
integration
integration
§ Manage
for strong cash flow
Supply Chain
Optimization
(Favorably benchmarked against FedEx
& UPS)
§ Efficient
§ Dependable
§ Fast
§ Optimizes
finished goods inventory
§ Deep
acquisition &
integration skills
integration skills
§ Robust
business development
& lean skills
& lean skills
New Platforms
Processes
&
People
People
§ Strategic
planning
§ People
development
§ Policy
deployment
10
K-Tron
International Historical Results Show Strong Growth
and Cash Generation Capabilities
and Cash Generation Capabilities
Revenue
EBITDA
Total
Debt
Cash
11
Creates
Multiple Pathways to Strong Revenue Growth
Through New Platforms
Through New Platforms
• Proven history of modest
acquisitions
($10-$30MM)
• Opportunities for bolt-on
acquisitions in both
platforms
platforms
• Size Reduction Group well
positioned to
capture Biomass Energy growth
capture Biomass Energy growth
• Pharmaceutical Industry
trending from
batch
to continuous process
• Expand Pneumatics into
Europe, Asia and the
Middle East
Middle East
• Swiss facility offers
competitive advantage to
serve high growth Eastern Europe markets
serve high growth Eastern Europe markets
• China & India for coal
mining
• Aggressively grow Wuxi
K-Tron Colormax
division in China
division in China
• Enhance Sales &
Marketing efforts for Penn
Crusher in China
Crusher in China
• Strong growth in demand
from mineral mining
sector
sector
Complementary Acquisitions
Attractive New End Markets
New Platform
Key
Growth Drivers
New Geographics
Growth Within Existing Regions
12
K-Tron
International Has a Proven Senior Management Team
30+ Year Industry
Veteran
Ground-up Knowledge of Coal
Industry
Long-standing Industry
Executive
Donald W.
Melchiorre
SVP Size Reduction
Group
30+ Yrs with the
Company
Well Regarded Sales & Marketing
Expertise
Extensive Knowledge of each K-Tron
Divisions
Kevin C. Bowen
SVP Process
Group
Point Person on Each Acquisition
Since 2003
Extensive Global
Experience
Regarded as a Strategy
Enabler
Lukas Guenthardt
SVP Corporate
Development
Corporate Finance and Private Equity
Background
Former Siemens Executive and 11
years at Ernst & Young
Newest Management Team Member
(2008)
Robert E.
Wisniewski
SVP & CFO
Turnaround and Acquisition
Expertise
Diverse Industry
Knowledge
Strong Legal / M&A
Background
Edward B.
Cloues,II
Chairman &
CEO
13
Provides
Hillenbrand With a Global Business Platform
Belleville, IL
54,000 sq. ft.
Wuxi, China
30,000 sq. ft.
K-Tron HQ
Pitman, NJ
92,000 sq. ft.
Cuyahoga Falls,
OH
70,000 sq. ft.
Woodruff, SC
149,000 sq. ft.
Niederlenz,
Switzerland
Switzerland
65,000 sq. ft.
Batesville, IN
494,000 sq. ft.
Salina, KS
134,000 sq. ft.
Manchester, TN
375,000 sq. ft.
Mexico City,
Mexico
58.700 sq. ft.
Chihauhau,
Mexico
125,000 sq. ft.
Batesville, MS
180,000 sq. ft.
Vicksburg, MS
142,000 sq. ft.
Process
Group and Size Reduction Group have
~175 sales reps. (mostly independent) in U.S.,
Canada, France, Germany, the United Kingdom,
Singapore and China.
~175 sales reps. (mostly independent) in U.S.,
Canada, France, Germany, the United Kingdom,
Singapore and China.
Size Reduction
Manufacturing
Process Group
Manufacturing
Batesville
Manufacturing
Post Acquisition
Locations
Batesville Warehouse Distribution,
Service or Sales
(165 sales reps in the U.S. and
Canada.)
Penn Crusher
HQ
14
Cindy
Lucchese
Senior Vice President &
Senior Vice President &
Chief
Financial Officer
Hillenbrand, Inc
Hillenbrand, Inc
Hillenbrand
Speaker
(1)
Excludes a $3.0 MM gain in 2009 on sale of 19.9% investment in Hasler
International. Including the gain, K-Tron’s LTM EPS would have been $7.81 and
the EBITDA would have been $42MM.
15
Contributes
to Hillenbrand’s
Ability to Deliver Predictable
Performance
Performance
• Strong
and consistent EBITDA margins during current severe economic
downturn
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K-Tron
International Financial Highlights
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|||||||
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$ IN
MILLIONS, EXCEPT PER SHARE DATA
|
2004
|
2005
|
2006
|
2007
|
2008
|
LTM
10/03/09(1)
|
2004
- 2008
|
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Total
Revenue
|
$113
|
$119
|
$148
|
$202
|
$243
|
$213
|
|
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Gross
Profit
|
$46
|
$50
|
$62
|
$86
|
$101
|
$88
|
|
|
EBITDA
|
$14
|
$17
|
$25
|
$38
|
$44
|
$39
|
|
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Diluted
EPS
|
$2.65
|
$2.85
|
$4.95
|
$7.93
|
$9.37
|
$6.79
|
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Growth
(yr/yr)
|
|
|
|
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|
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CAGR
|
|
Revenue
|
18.8%
|
5.7%
|
24.6%
|
36.2%
|
20.5%
|
(9.9%)
|
21.2%
|
|
EBITDA
|
43.3%
|
23.0%
|
46.8%
|
49.4%
|
17.1%
|
(11.0%)
|
33.3%
|
|
As
a % of Revenue
|
|
|
|
|
|
|
Average
|
|
Gross
Profit
|
41.2%
|
42.1%
|
42.1%
|
42.7%
|
41.7%
|
41.3%
|
42.0%
|
|
EBITDA
|
12.4%
|
14.4%
|
16.9%
|
18.6%
|
18.1%
|
18.2%
|
16.1%
|
16
K-Tron
International - Cash Flow Summary
*Free cash
flow is defined as operating cash flow less capital expenditures
|
FISCAL
YEAR ENDING
|
|||||
|
|
|
|
|
|
LTM
10/03/09
ACTUAL
|
|
$ IN
MILLIONS
|
2005
ACTUAL
|
2006
ACTUAL |
2007
ACTUAL |
2008
ACTUAL |
|
|
Operating
Activities
|
|
|
|
|
|
|
Net
Income
|
$7
|
$13
|
$21
|
$26
|
$23
|
|
Depreciation
& Amortization
|
4
|
5
|
6
|
6
|
6
|
|
Change
in Working Capital
|
(1)
|
0
|
(1)
|
(7)
|
9
|
|
Other,
Net
|
1
|
1
|
1
|
2
|
(1)
|
|
Cash
Flow from Operating Activities
|
11
|
19
|
27
|
27
|
37
|
|
|
|
|
|
|
|
|
Capex
& Purchase of Intangibles
|
(2)
|
(3)
|
(2)
|
(4)
|
(3)
|
|
Other
Investing Activities
|
0
|
(33)
|
(17)
|
0
|
0
|
|
Debt
Transactions
|
(6)
|
16
|
3
|
(14)
|
(8)
|
|
Capital
Stock Increase
|
1
|
0
|
3
|
2
|
0
|
|
Other
|
(1)
|
0
|
3
|
0
|
3
|
|
Net
Change in Cash
|
$3
|
$(1)
|
$17
|
$11
|
$29
|
|
Free
Cash Flow*
|
$9
|
$16
|
$25
|
$23
|
$34
|
17
Transaction
Summary
Overview
Purchase
Price
Ownership
Closing
Conditions
Timing
Hillenbrand,
Inc. to acquire K-Tron International, Inc. (Nasdaq: KTII) for 100%
cash consideration
cash consideration
The net
purchase price associated with this transaction is approximately $390
million based on equity purchase price of $435 million and a net cash balance at
10/03/09 of approximately $45 million. This net purchase price implies a
multiple of 10.3x EBITDA
million based on equity purchase price of $435 million and a net cash balance at
10/03/09 of approximately $45 million. This net purchase price implies a
multiple of 10.3x EBITDA
Upon
completion of the transaction, Hillenbrand stockholders would own 100%
of the combined company
of the combined company
The
transaction is subject to approval by K-Tron International shareholders,
as
well as the satisfaction of customary closing conditions and regulatory approvals
well as the satisfaction of customary closing conditions and regulatory approvals
The
transaction is expected to close near the end of March
18
K-Tron
International Represents a Very Attractive Strategic
Opportunity
Opportunity
• Matches
Hillenbrand’s growth strategy
• Market
leader with preeminent brands
• Strong
platforms in growing industries/markets
• Proven
growth potential (organic and acquisition)
• Attractive
markets - large, diversified, fragmented, growing and global
• Reduces
risk and dependence on death care
• Proven
management team eager to continue
• Risks
are manageable
• Solid
financials
• Predictable,
strong cash flows and margins
• Strong
balance sheet with little debt
• Growing
revenues with stable gross profit margins
• Proven
high margin, high growth business
• We
believe this acquisition will provide a platform for creating
significant
shareholder value over the next several years
shareholder value over the next several years
Transaction
Overview
January
11,2010
Additional Information and
Where to Find it
This
investor presentation may be deemed to be solicitation material in respect of
the proposed acquisition of K-Tron International, Inc. (“K-Tron”) by
Hillenbrand, Inc. (“Hillenbrand”). In connection with the proposed
acquisition, K-Tron plans to file a proxy statement with the SEC. INVESTORS AND SECURITY HOLDERS OF
K-TRON ARE ADVISED TO READ THE PROXY STATEMENT AND ANY OTHER RELEVANT DOCUMENTS
FILED WITH THE SEC WHEN THEY BECOME AVAILABLE BECAUSE THOSE DOCUMENTS WILL
CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED ACQUISITION. The final
proxy statement will be mailed to shareholders of K-Tron. Investors and security
holders may obtain a free copy of the proxy statement when it becomes available,
and other documents filed by K-Tron with the SEC, at the SEC’s web site at
http://www.sec.gov. Free copies of the proxy statement, when it becomes
available, and K-Tron’s other filings with the SEC may also be obtained from
K-Tron by directing a request to K-Tron International, Inc., Attention: Investor
Relations, Route 55 and 553, P.O. Box 888, Pitman, N.J. 08071, or by calling
856-589-0500.
Hillenbrand,
K-Tron and their respective directors, executive officers and other members of
their management and employees may be deemed to be soliciting proxies from
K-Tron shareholders in favor of the proposed acquisition. Information regarding
Hillenbrand’s directors and executive officers is available in its 2009 Annual
Report on Form 10-K filed with the SEC on November 24, 2009, and definitive
proxy statement relating to its 2010 Annual Meeting of Shareholders filed with
the SEC on January 5, 2010. Information regarding K-Tron’s directors
and executive officers is available in its 2008 Annual Report on Form 10-K filed
with the SEC on March 13, 2009, and definitive proxy statement relating to its
2009 Annual Meeting of Shareholders filed with the SEC on April 6, 2009.
Additional information regarding the interests of such potential participants
will be included in the proxy statement and the other relevant documents filed
with the SEC when they become available.
Filed
by Hillenbrand, Inc.
Pursuant
to Rule 14a-12
of
the Securities Exchange Act of 1934
Subject
Company: K-Tron International, Inc.
Commission
File No: 000-09576
On
January 11, 2010, Hillenbrand, Inc. posted the following investor presentation
to its website at http://ir.hillenbrandinc.com:
Certain
statements in this presentation contain forward-looking statements, within the
meaning of the Private Securities Litigation Reform Act of 1995, regarding
the
company’s future plans, objectives, beliefs, expectations, representations and projections. The company has tried, wherever possible, to identify these forward-looking
statements using words such as “intend,” “anticipate,” “believe,” “plan,” “encourage,” “expect,” “may,” “goal,” “become,” “pursue,” “estimate,” “strategy,” “will,”
“projection,” “forecast,” “continue,” “accelerate,” “promise,” “increase,” “higher,” “lower,” “reduce,” “improve,” “expand,” “progress,” “potential” or the negative of
those terms or other variations of them or by comparable terminology. The absence of such terms, however, does not mean that the statement is not forward-looking. It is
important to note that forward-looking statements are not guarantees of future performance, and the company's actual results could differ materially from those set forth in
any forward-looking statements. Factors that could cause actual results to differ from forward-looking statements include but are not limited to: the company’s ongoing
antitrust litigation; the company’s dependence on its relationships with several large national providers; continued fluctuations in mortality rates and increased cremations;
ongoing involvement in claims, lawsuits and governmental proceedings related to operations; failure of the company’s announced strategic initiatives to achieve expected
growth, efficiencies or cost reductions; disruptions in the company’s business or other adverse consequences resulting from the separation of Hillenbrand Industries into
two operating companies; failure of the company to execute its acquisition and business alliance strategy through the consummation and successful integration of
acquisitions (such as the acquisition of K-Tron International, Inc.) or entry into joint ventures or other business alliances; competition from nontraditional sources in the
funeral services business; volatility of the company’s investment portfolio; increased costs or unavailability of raw materials; labor disruptions; the ability to retain
executive officers and other key personnel; and certain tax-related matters. 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 Item 1 of the company’s Annual Report on Form 10-K
for the year ended September 30, 2009, filed November 24, 2009. The company assumes no obligation to update or revise any forward-looking information.
company’s future plans, objectives, beliefs, expectations, representations and projections. The company has tried, wherever possible, to identify these forward-looking
statements using words such as “intend,” “anticipate,” “believe,” “plan,” “encourage,” “expect,” “may,” “goal,” “become,” “pursue,” “estimate,” “strategy,” “will,”
“projection,” “forecast,” “continue,” “accelerate,” “promise,” “increase,” “higher,” “lower,” “reduce,” “improve,” “expand,” “progress,” “potential” or the negative of
those terms or other variations of them or by comparable terminology. The absence of such terms, however, does not mean that the statement is not forward-looking. It is
important to note that forward-looking statements are not guarantees of future performance, and the company's actual results could differ materially from those set forth in
any forward-looking statements. Factors that could cause actual results to differ from forward-looking statements include but are not limited to: the company’s ongoing
antitrust litigation; the company’s dependence on its relationships with several large national providers; continued fluctuations in mortality rates and increased cremations;
ongoing involvement in claims, lawsuits and governmental proceedings related to operations; failure of the company’s announced strategic initiatives to achieve expected
growth, efficiencies or cost reductions; disruptions in the company’s business or other adverse consequences resulting from the separation of Hillenbrand Industries into
two operating companies; failure of the company to execute its acquisition and business alliance strategy through the consummation and successful integration of
acquisitions (such as the acquisition of K-Tron International, Inc.) or entry into joint ventures or other business alliances; competition from nontraditional sources in the
funeral services business; volatility of the company’s investment portfolio; increased costs or unavailability of raw materials; labor disruptions; the ability to retain
executive officers and other key personnel; and certain tax-related matters. 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 Item 1 of the company’s Annual Report on Form 10-K
for the year ended September 30, 2009, filed November 24, 2009. The company assumes no obligation to update or revise any forward-looking information.
Additional
Information and Where to Find It
This
investor presentation may be deemed to be solicitation material in respect of
the proposed acquisition of K-Tron International, Inc. (“K-Tron”) by
Hillenbrand, Inc.
(“Hillenbrand”). In connection with the proposed acquisition, K-Tron plans to file a proxy statement with the SEC. INVESTORS AND SECURITY HOLDERS OF K-
TRON ARE ADVISED TO READ THE PROXY STATEMENT AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC WHEN THEY
BECOME AVAILABLE BECAUSE THOSE DOCUMENTS WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED ACQUISITION.
The final proxy statement will be mailed to shareholders of K-Tron. Investors and security holders may obtain a free copy of the proxy statement when it
becomes available, and other documents filed by K-Tron with the SEC, at the SEC’s web site at http://www.sec.gov. Free copies of the proxy statement, when it
becomes available, and K-Tron’s other filings with the SEC may also be obtained from K-Tron by directing a request to K-Tron International, Inc., Attention:
Investor Relations, Route 55 and 553, P.O. Box 888, Pitman, N.J. 08071, or by calling 856-589-0500.
(“Hillenbrand”). In connection with the proposed acquisition, K-Tron plans to file a proxy statement with the SEC. INVESTORS AND SECURITY HOLDERS OF K-
TRON ARE ADVISED TO READ THE PROXY STATEMENT AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC WHEN THEY
BECOME AVAILABLE BECAUSE THOSE DOCUMENTS WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED ACQUISITION.
The final proxy statement will be mailed to shareholders of K-Tron. Investors and security holders may obtain a free copy of the proxy statement when it
becomes available, and other documents filed by K-Tron with the SEC, at the SEC’s web site at http://www.sec.gov. Free copies of the proxy statement, when it
becomes available, and K-Tron’s other filings with the SEC may also be obtained from K-Tron by directing a request to K-Tron International, Inc., Attention:
Investor Relations, Route 55 and 553, P.O. Box 888, Pitman, N.J. 08071, or by calling 856-589-0500.
Hillenbrand,
K-Tron and their respective directors, executive officers and other members of
their management and employees may be deemed to be soliciting proxies
from K-Tron shareholders in favor of the proposed acquisition. Information regarding Hillenbrand’s directors and executive officers is available in its 2009 Annual
Report on Form 10-K filed with the SEC on November 24, 2009, and definitive proxy statement relating to its 2010 Annual Meeting of Shareholders filed with the SEC
on January 5, 2010. Information regarding K-Tron’s directors and executive officers is available in its 2008 Annual Report on Form 10-K filed with the SEC on March
13, 2009, and definitive proxy statement relating to its 2009 Annual Meeting of Shareholders filed with the SEC on April 6, 2009. Additional information regarding the
interests of such potential participants will be included in the proxy statement and the other relevant documents filed with the SEC when they become available.
from K-Tron shareholders in favor of the proposed acquisition. Information regarding Hillenbrand’s directors and executive officers is available in its 2009 Annual
Report on Form 10-K filed with the SEC on November 24, 2009, and definitive proxy statement relating to its 2010 Annual Meeting of Shareholders filed with the SEC
on January 5, 2010. Information regarding K-Tron’s directors and executive officers is available in its 2008 Annual Report on Form 10-K filed with the SEC on March
13, 2009, and definitive proxy statement relating to its 2009 Annual Meeting of Shareholders filed with the SEC on April 6, 2009. Additional information regarding the
interests of such potential participants will be included in the proxy statement and the other relevant documents filed with the SEC when they become available.
Forward-looking
Statements
2
3
Hillenbrand
/ K-Tron International Team Introductions
Cindy
Lucchese
Senior Vice President &
Senior Vice President &
Chief
Financial Officer
Hillenbrand, Inc.
Hillenbrand, Inc.
Mark Lanning
Vice President of Investor
Relations & Treasurer
Hillenbrand,
Inc.
Ken
Camp
President &
President &
Chief
Executive Officer
Hillenbrand,
Inc.
Lukas Guenthardt
Senior Vice President,
Lukas Guenthardt
Senior Vice President,
Corporate
Development
K-Tron
International, Inc.
4
Agenda
Transaction
Summary
Strategic
Benefits
Financial
Highlights
Business
Summary
Wrap-up
Appendix
Transaction
Summary
6
Transaction
Summary
Overview
Purchase
Price
Ownership
Closing
Conditions
Timing
Hillenbrand,
Inc. to acquire K-Tron International, Inc. (Nasdaq: KTII) for 100%
cash consideration
cash consideration
The net
purchase price associated with this transaction is approximately $390
million based on equity purchase price of $435 million and a net cash balance at
10/3/09 of approximately $45 million. This net purchase price implies a
multiple of 10.3x EBITDA
million based on equity purchase price of $435 million and a net cash balance at
10/3/09 of approximately $45 million. This net purchase price implies a
multiple of 10.3x EBITDA
Upon
completion of the transaction, Hillenbrand stockholders would own 100%
of the combined company
of the combined company
The
transaction is subject to approval by K-Tron International shareholders,
as
well as the satisfaction of customary closing conditions and regulatory approvals
well as the satisfaction of customary closing conditions and regulatory approvals
The
transaction is expected to close near the end of March
7
Transaction
Rationale
• Hillenbrand’s
sole operating unit, Batesville Casket, remains a high-margin cash
generator
with a leading brand and excellent management
with a leading brand and excellent management
• However,
revenue growth is historically challenging in death care and has been even
more
challenging in the current economic environment
challenging in the current economic environment
• Therefore,
our strategy focuses on effective high value opportunities for our robust cash
flow,
creating a strong and enduring enterprise outside death care
creating a strong and enduring enterprise outside death care
• Through
disciplined due diligence, we identified K-Tron International, a well-run
company
with excellent financials, that will provide growth and diversification and maintain our strong
financial profile
with excellent financials, that will provide growth and diversification and maintain our strong
financial profile
• To fund
this acquisition, we will utilize a combination of existing and potentially new
(if
needed) credit and cash-on-hand
needed) credit and cash-on-hand
Strategic
Benefits
It’s
the Right Acquisition
• $435MM cash
purchase ($390MM net purchase price) provides approximately $200MM
of revenue
of revenue
• Preserves
Hillenbrand’s high quality of earnings and cash flows while improving
growth
potential
potential
• EBITDA
multiple of 10.3x EBITDA is in line with recent market comparables
• We expect
the transaction to be immediately accretive to EPS and cash flow,
excluding
acquisition costs, transition costs, and non-recurring purchase accounting adjustments
acquisition costs, transition costs, and non-recurring purchase accounting adjustments
• Attractive
product, industry and customer diversification
• Creates
sizable new global platforms in two attractive sectors
• Ideal fit
with Hillenbrand’s stringent acquisition criteria
• K-Tron
International has limited lean experience. Meaningful improvement opportunities
exist
through the application of lean business practices
through the application of lean business practices
• Strong
cultural fit with proven management
• Adds
leading brands and market positions with two new platforms
• A proven
high margin, high growth business
Operational
and
Cultural
Financial
Strategic
9
10
K-Tron
International’s
Corporate Profile Is Very Attractive
to Hillenbrand
to Hillenbrand
• 2008
Revenues and EBITDA of $243 MM and $44.6 MM
• 21% Total
revenue CAGR over last 5 years;
• 10%
Organic revenue CAGR over last 5 years
• Two
attractive segments within bulk solids material handling equipment
sector
• Leading,
respected brands
• Serves
diverse base of global customers through wholly-owned subsidiaries and
independent representatives
• Highly
productive operation with more than 650 employees
• Operates 7
manufacturing facilities: 5 in the U.S. and 1 each in Switzerland and
China
• Numerous
meaningful opportunities have been identified to grow as economy
recovers
Estimated
Revenue by Business Line (1)
Estimated
EBITDA by Business Line (1)
(1) For FY
2008
Size
Reduction
Group
Reduction
Group
Process
Group
Group
Size
Reduction
Group
Reduction
Group
Process
Group
Group
BCC
11
Diversifies
Hillenbrand’s
Platforms and Markets
Pulp,
Paper &
Forest Products /
Biomass Energy
Forest Products /
Biomass Energy
2%
Food
Processing
5%
Power
Generation
Generation
2%
Chemical
Detergent & Other
Process Group Industries
Process Group Industries
3%
Other
4%
Plastics
Compounding & Base
Resin Manufacturing
Resin Manufacturing
9%
Post
Acquisition Revenue By
End Market(1)
End Market(1)
Post
Acquisition
EBITDA By Platform(1)
EBITDA By Platform(1)
Death
Care
75%
K-Tron
K-Tron
BCC
(1)
Represents FY ending 2009 for Hillenbrand and LTM ending 10/03/09 for
K-Tron
13
Provides
Hillenbrand With a Global Business Platform
Belleville, IL
54,000 sq. ft.
Wuxi, China
30,000 sq. ft.
K-Tron HQ
Pitman, NJ
92,000 sq. ft.
Cuyahoga Falls ,
OH
70,000 sq. ft.
Woodruff, SC
149,000 sq. ft.
Niederlenz,
Switzerland
65,000 sq. ft.
Batesville, IN
494,000 sq. ft.
Salina, KS
134,000 sq. ft.
Manchester, TN
375,000 sq. ft.
Mexico City,
Mexico
58.700 sq. ft.
Chihauhau,
Mexico
125,000 sq. ft.
Batesville, MS
180,000 sq. ft.
Vicksburg, MS
142,000 sq. ft.
Process
Group and Size Reduction Group have
~175 sales reps. (mostly independent) in U.S.,
Canada, France, Germany, the United Kingdom,
Singapore and China.
~175 sales reps. (mostly independent) in U.S.,
Canada, France, Germany, the United Kingdom,
Singapore and China.
Size Reduction
Manufacturing
Process Group
Manufacturing
Batesville
Manufacturing
Post Acquisition
Locations
Batesville Warehouse Distribution,
Service or Sales
(165 sales reps in the U.S. and
Canada.)
Penn Crusher
HQ
14
Creates
Multiple Pathways to Strong Revenue Growth
Through New Platforms
Through New Platforms
• Proven history of modest
acquisitions ($10-$30MM)
• Opportunities for bolt-on
acquisitions in both
platforms
platforms
• Size Reduction Group well
positioned to
capture Biomass Energy growth
capture Biomass Energy growth
• Pharmaceutical Industry
trending from batch to
continuous process
continuous process
• Expand Pneumatics into
Europe, Asia and the
Middle East
Middle East
• Swiss facility offers
competitive advantage to
serve high growth Eastern Europe markets
serve high growth Eastern Europe markets
• China & India for coal
mining
• Aggressively grow Wuxi
K-Tron Colormax
division in China
division in China
• Enhance Sales &
Marketing efforts for Penn
Crusher in China
Crusher in China
• Strong growth in demand
from mineral mining
sector
sector
Complementary Acquisitions
Attractive New End Markets
New Platform
Key
Growth Drivers
New Geographics
Growth Within Existing Regions
(1)
Excludes a $3.0 MM gain in 2009 on sale of 19.9% investment in Hasler
International. Including the gain, K-Tron’s LTM EPS would have been $7.81 and
the EBITDA would have been $42MM.
15
Contributes
to Hillenbrand’s
Ability to Deliver Predictable
Performance
Performance
|
K-Tron
International Financial Highlights
|
|||||||
|
$ IN
MILLIONS, EXCEPT PER SHARE DATA
|
2004
|
2005
|
2006
|
2007
|
2008
|
LTM
10/03/09(1)
|
2004
- 2008
|
|
Total
Revenue
|
$113
|
$119
|
$148
|
$202
|
$243
|
$213
|
|
|
Gross
Profit
|
$46
|
$50
|
$62
|
$86
|
$101
|
$88
|
|
|
EBITDA
|
$14
|
$17
|
$25
|
$38
|
$44
|
$39
|
|
|
Diluted
EPS
|
$2.65
|
$2.85
|
$4.95
|
$7.93
|
$9.37
|
$6.79
|
|
|
Growth
(yr/yr)
|
|
|
|
|
|
|
CAGR
|
|
Revenue
|
18.8%
|
5.7%
|
24.6%
|
36.2%
|
20.5%
|
(9.9%)
|
21.2%
|
|
EBITDA
|
43.3%
|
23.0%
|
46.8%
|
49.4%
|
17.1%
|
(11.0%)
|
33.3%
|
|
As
a % of Revenue
|
|
|
|
|
|
|
Average
|
|
Gross
Profit
|
41.2%
|
42.1%
|
42.1%
|
42.7%
|
41.7%
|
41.3%
|
42.0%
|
|
EBITDA
|
12.4%
|
14.4%
|
16.9%
|
18.6%
|
18.1%
|
18.2%
|
16.1%
|
16
K-Tron
International Is Strongly Positioned to Weather the
Current Economic Downturn and Thrive Post Recession
Current Economic Downturn and Thrive Post Recession
• K-Tron
revenues declined in the first nine months of 2009 by $30.2 MM, or 17%,
compared to the same period in 2008
compared to the same period in 2008
• A
significant component of the revenue decline was K-Tron’s Process
Group
plastics business, which was impacted when automotive and other end customers
were hurt by the “great recession”
plastics business, which was impacted when automotive and other end customers
were hurt by the “great recession”
• However,
revenues in the Size Reduction Group increased during the year,
buffering the decline in plastics
buffering the decline in plastics
• We believe
the strength of K-Tron’s brands
was, and will continue to be, critical to its
ability to outperform their markets in economic downturns
ability to outperform their markets in economic downturns
• K-Tron has
a large installed base that generates recurring replacement parts
business,
thereby softening the impact of economic downturns in the capital equipment business
thereby softening the impact of economic downturns in the capital equipment business
• As the
economy strengthens, K-Tron is in a strong position to grow revenues in
both
base businesses and potential add-on business lines
base businesses and potential add-on business lines
Financial
Highlights
Financial
Highlights of Combination
• We believe
the acquisition increases net revenue and EBITDA growth rates
in first year excluding acquisition and purchase accounting costs.
in first year excluding acquisition and purchase accounting costs.
• We believe
the transaction will be immediately accretive to EPS and cash
flow, excluding acquisition costs, transition costs, and non-recurring
purchase accounting adjustments
flow, excluding acquisition costs, transition costs, and non-recurring
purchase accounting adjustments
• Acquisition
and transition expenses estimated to be $10MM to $12MM
• Strong
liquidity position maintained
• Capital
deployment strategy remains unchanged
• Pro forma
capital structure & strategy consistent with previously discussed
financial principles
financial principles
18
19
Combination
Provides a Superior Financial Profile
• Combined
entity has nearly identical gross margin percentage
|
Twelve
Months Ended
|
|||
|
$ IN
MILLIONS
|
Hillenbrand
9/30/09
|
K-Tron
10/03/09
|
Pro
forma
Non-GAAP(1)
Combined
|
|
Net
Revenue
|
$649.0
|
$213.0
|
$862.0
|
|
Gross
Profit
|
$274.0
|
$88.0
|
$362.0
|
|
Margin
%
|
42.2%
|
41.3%
|
42.0%
|
|
EBITDA
% of
Revenue
|
$181.0
27.9%
|
$39.0
18.3%
|
$220.0
25.5%
|
|
Net
Income
|
$102.0
|
$23.0
|
$125.0
|
|
Operating
cash flow
%
of Revenue
|
$123.0
19.0%
|
$37.0
17.3%
|
$160.0
18.6%
|
(1)
Excludes effects of purchase accounting which may be significant
(1)
Excludes effects of purchase accounting which may be
significant
20
The
Acquisition Will Be Funded With a Combination of
Cash and Borrowings
Cash and Borrowings
ü We will
remain in compliance with the Hill-Rom covenant
|
$ IN
MILLIONS
|
Acquisition
Funding |
|
Credit
Facility
|
$300-$350
|
|
Cash
& Other Borrowings
|
$85-$135
|
|
Total
Purchase Price
|
$435
|
21
Financial
Principles
Pro-Forma
Capital Structure & Strategy Remains Consistent
with Hillenbrand’s Previously Discussed Guidelines
with Hillenbrand’s Previously Discussed Guidelines
Generate
stable and predictable revenues and cash flows
Maintain a
healthy capital structure that minimizes risks and provides
flexibility
Maintain a
solid investment grade credit rating
Return
capital to shareholders through dividends and share
repurchases
22
Overview
of Hillenbrand’s
Key Financial Policies
Dividend
Policy
• Payout
amounts will be
reviewed and approved
quarterly by the board of
directors
reviewed and approved
quarterly by the board of
directors
• Payout
levels structured to
provide long-term stability
provide long-term stability
• Dividend
payout currently
higher than peers
higher than peers
• Dividend
level should
grow modestly over the
next 3 years, but less than
earnings growth, to bring
payout levels more in-line
with peers
grow modestly over the
next 3 years, but less than
earnings growth, to bring
payout levels more in-line
with peers
Capital
Spending
• Strong
budgetary controls
and targets
and targets
• Annual
approval process for
overall plans
overall plans
• Project by
project approval
process during the year
process during the year
• $15-$18MM
annual spend ~
equal to depreciation
equal to depreciation
Acquisitions
• The
company continues to
evaluate prudent strategic
opportunities
evaluate prudent strategic
opportunities
• Will avoid
negative effect
on capital structure or credit
rating, and ensure
compliance with
distribution agreement
on capital structure or credit
rating, and ensure
compliance with
distribution agreement
Share
Purchases
• Periodically
purchase
treasury shares to off-set the
dilution from equity
compensation programs
treasury shares to off-set the
dilution from equity
compensation programs
• Opportunistic
share
repurchases to enhance
shareholder value
repurchases to enhance
shareholder value
Business
Overview
Hillenbrand’s
Batesville Casket Commands a
Premium as the Industry’s Most Respected Brand
Premium as the Industry’s Most Respected Brand
World’s
Largest Casket Manufacturer
• Iconic
brand with 100+ years of history
• Industry
leader: volume, revenue, margin share
• Superior
mix of products sold
• Brand of
choice for funeral directors’ families
Unparalleled
Commitment
• Superior
products
• Exceptional
service
• Leader in
innovation
• Highly
valued business partner
24
“Every
family deserves a Batesville”
Hillenbrand
Post
Acquisition Revenue
By Platform
Acquisition Revenue
By Platform
BCC
Funeral
Products
($2.6 Billion Industry)
($2.6 Billion Industry)
Batesville
Casket Is the Largest Player in the Largest
Segment of the Death Care Industry
Segment of the Death Care Industry
Caskets
$1.3
Grave
Markers
$0.6
Cremation
$0.3
Source:
Company estimates and public filings
Vaults
$0.4
Caskets
90%
Other
(100+)
Options
7%
NorthStar
1%
Batesville
Importers
Aurora
Matthews
Caskets
(Total
Revenue $1.3 Billion)
Batesville
Casket
(Total
2009 Revenue: $649 Million)
Other
2%
25
Batesville
Casket Has Generated Solid Financial
Results in a Declining Casket Market
Results in a Declining Casket Market
Revenue
Gross
Margin
Net
Income
Operating
Margin
Cash
Flow
* $28
million, after tax pension funding ** $13
million, after tax separation costs
*
N.A.
Casket Market
**
26
Death
Care Industry Is Stable, but Challenges Remain
• Cost
conscious consumers have been mixing down, opting for less expensive
caskets
• It remains
to be seen whether the severe economic downturn will cause lasting
pricing
repercussions
repercussions
• Slow and
steady increases in cremations have reduced burials in a flat death
market
• While
projected deaths will increase at some point as baby boomers age, this will
likely
be offset by continued increases in cremations
be offset by continued increases in cremations
• Cremations
are projected to grow steadily at 1.2% annually as a percentage of
total
deaths
deaths
• Market
share may be under pressure, as new entrants and Chinese imports continue
to
compete
compete
• 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
increases in the price of our products could adversely affect our results of operations and
cash flows
Reduced
Burial
Demand
Burial
Demand
Reduced
Consumer
Spending
Consumer
Spending
Increased
Competition
Competition
Commodity
Risk
27
By
Investing Prudently in Batesville Casket, We Will Continue to Focus
on Future Revenue and Earnings Growth From This Segment and
Generate Strong Cash Flow
on Future Revenue and Earnings Growth From This Segment and
Generate Strong Cash Flow
Top-line
Growth
• Focused
sales coverage that leverages strong customer relationships and premium
brand
• Targeted
investments to drive innovative product development
• Merchandising
programs increase value on every casket sale
• Growth in
NorthStar and Options product lines
• Enhanced
offerings in E-business
Margin
Improvement
• Operational
excellence
• Lean
manufacturing
• Continuous
improvement in all business processes
28
29
New
Platform: K-Tron Process Group Is a Leader
in Feeding and Conveying With a Clear Growth
Path
in Feeding and Conveying With a Clear Growth
Path
Feeders
Provide
accurate feeding of “hard-to-handle” materials in a wide variety of
manufacturing
processes, enabling customers in key end markets to produce high quality products and
optimize raw material usage
processes, enabling customers in key end markets to produce high quality products and
optimize raw material usage
Conveyers
Product
Summary
Summary
Brand Names
(1) Higher
sensitivity to economic cycles.
Convey
bulk solids with positive or negative pressure through mass-customized
pneumatic
conveying equipment and systems
conveying equipment and systems
Growth Strategy
• Differentiated
by material flow expertise (multiple types)
• Leading
brand position in each category
• Expanding
back into value chain: same sales, engineering & service channels, and same
customers
Feeders
Conveyers
Gravimetric
Feeders
Twin Screw
Micro-Ingredient Feeder
Pneumatic
Conveying Components
Sanitary
Pneumatic Conveying Systems
for Food
and Pharmaceutical
30
New
Platform: K-Tron Size Reduction Group Is a
Brand Leader Supported by its High Margin,
Recurring Consumable Parts Business
Brand Leader Supported by its High Margin,
Recurring Consumable Parts Business
Size
Reduction
Coal
Processing:
Hammermills, sizers, roll crushers
Wood/pulp
Processing/Biomass: Wood/bark
hogs, chip screens
Mining: Potash
and mineral mining crushers
Significant
recurring parts revenue
Product Summary
Brand Names
Growth Strategy
Leverage
installed base and brand equity (#1 or #2 brand presence)
Penn Crusher & Reversible
Hammermill
Jeffrey EZ
Access Wood/Bark Hog
Gundlach Cage
Paktor
Grundlach
Two-stage Four-roll Breaker
Duratip® Wood Hog Hammers
Big Buster™ Hammer
Stant-Flow® Screen Grates
Buster® Bar
To
Maximize Value Creation, We Will Leverage Hillenbrand’s Core
Competencies Across New Platforms
Competencies Across New Platforms
31
Lean Business
(Capabilities nationally
recognized
beyond the death care industry)
beyond the death care industry)
Culture
of
Execution
Execution
Management
Team
§ High
quality
§ Low-cost
§ Flexible
§ Safety-conscious
§ Innovative
§ Profitability
improvement
§ Highly
effective merchandising
§ History
of successful acquisition
integration
integration
§ Manage
for strong cash flow
Supply Chain
Optimization
(Favorably benchmarked against FedEx
& UPS)
§ Efficient
§ Dependable
§ Fast
§ Optimizes
finished goods inventory
§ Deep
acquisition &
integration skills
integration skills
§ Robust
business development
& lean skills
& lean skills
New Platforms
Processes &
People
§ Strategic
planning
§ People
development
§ Policy
deployment
Wrap-up
33
K-Tron
International Represents a Very Attractive Strategic
Opportunity
Opportunity
• Matches
Hillenbrand’s growth strategy
• Market
leader with preeminent brands
• Strong
platforms in growing industries/markets
• Proven
growth potential (organic and acquisition)
• Attractive
markets - large, diversified, fragmented, growing and global
• Reduces
risk and dependence on death care
• Proven
management team eager to continue
• Risks
are manageable
• Solid
financials
• Predictable,
strong cash flows and margins
• Strong
balance sheet with little debt
• Growing
revenues with stable gross profit margins
• Proven
high margin, high growth business
• We
believe this acquisition will provide a platform for creating
significant
shareholder value over the next several years
shareholder value over the next several years
Appendix
36
K-Tron
International Has a Proven Senior Management Team
30+ Year Industry
Veteran
Ground-up Knowledge of Coal
Industry
Long-standing Industry
Executive
Donald W.
Melchiorre
SVP Size Reduction
Group
30+ Yrs with the
Company
Well Regarded Sales & Marketing
Expertise
Extensive Knowledge of each K-Tron
Divisions
Kevin C. Bowen
SVP Process
Group
Point Person on Each Acquisition
Since 2003
Extensive Global
Experience
Regarded as a Strategy
Enabler
Lukas Guenthardt
SVP Corporate
Development
Corporate Finance and Private Equity
Background
Former Siemens Executive and 11
years at Ernst & Young
Newest Management Team Member
(2008)
Robert E.
Wisniewski
SVP & CFO
Turnaround and Acquisition
Expertise
Diverse Industry
Knowledge
Strong Legal / M&A
Background
Edward B.
Cloues,II
Chairman &
CEO
37
K-Tron
International Historical Results Show Strong Growth
and Cash Generation Capabilities
and Cash Generation Capabilities
Revenue
EBITDA
Total
Debt
Cash
38
K-Tron
International Historical Credit Metrics Complement
Hillenbrand’s Credit Strength
Hillenbrand’s Credit Strength
Debt
/ EBITDA
39
K-Tron
International - Operating Performance Summary
|
FISCAL
YEAR ENDING
|
|||||
|
$ IN
MILLIONS
|
2005
ACTUAL
|
2006
ACTUAL
|
2007
ACTUAL
|
2008
ACTUAL
|
LTM
10/03/09
ACTUAL
|
|
Net
Revenue
%
Y/Y Growth
|
$119
5.3%
|
$148
24.4%
|
$202
36.5%
|
$243
20.3%
|
$213
N/A
|
|
Gross
Profit
%
of Revenue
|
$50
42.0%
|
$62
41.9%
|
$86
42.6%
|
$101
41.6%
|
$88
41.3%
|
|
Operating
Expenses
%
of Revenue
|
$37
31.1%
|
$42
28.4%
|
$54
26.7%
|
$63
25.9%
|
$55
25.8%
|
|
Operating
Income
|
$13
|
$20
|
$32
|
$38
|
$35
|
|
EBITDA
%
of Revenue
|
$17
14.3%
|
$25
16.9%
|
$38
18.8%
|
$44
18.1%
|
$39
18.3%
|
|
Net
Income
|
$7
|
$13
|
$21
|
$26
|
$23
|
40
K-Tron
International - Balance Sheet Summary
|
FISCAL
YEAR ENDING
|
|||||
|
$ IN
MILLIONS
|
2005
ACTUAL
|
2006
ACTUAL
|
2007
ACTUAL
|
2008
ACTUAL
|
10/03/09
ACTUAL
|
|
ASSETS
|
|
|
|
|
|
|
Cash
|
$15
|
$14
|
$31
|
$42
|
$63
|
|
Accounts
Receivable
|
18
|
23
|
31
|
37
|
27
|
|
Inventory
|
15
|
23
|
30
|
29
|
24
|
|
Other
Current Assets
|
4
|
7
|
10
|
6
|
9
|
|
Current
Assets
|
52
|
67
|
102
|
114
|
123
|
|
PP&E
|
22
|
29
|
27
|
27
|
25
|
|
Other
Assets
|
15
|
45
|
55
|
58
|
57
|
|
Total
Assets
|
89
|
141
|
184
|
199
|
205
|
|
LIABILITIES
|
|
|
|
|
|
|
Current
Liabilities
|
26
|
38
|
50
|
47
|
37
|
|
Debt
|
13
|
34
|
37
|
22
|
17
|
|
Other
LT Liabilities
|
1
|
4
|
3
|
4
|
4
|
|
Total
Liabilities
|
40
|
76
|
90
|
73
|
58
|
|
SHAREHOLDERS’
EQUITY
|
|
|
|
|
|
|
Total
Shareholders’ Equity
|
49
|
65
|
94
|
126
|
147
|
|
Total
Liabilities & Equity
|
$89
|
$141
|
$184
|
$199
|
$205
|
41
K-Tron
International - Cash Flow Summary
*Free cash
flow is defined as operating cash flow less capital expenditures
|
FISCAL
YEAR ENDING
|
|||||
|
|
|
|
|
|
LTM
10/03/09
ACTUAL
|
|
$ IN
MILLIONS
|
2005
ACTUAL
|
2006
ACTUAL |
2007
ACTUAL |
2008
ACTUAL |
|
|
Operating
Activities
|
|
|
|
|
|
|
Net
Income
|
$7
|
$13
|
$21
|
$26
|
$23
|
|
Depreciation
& Amortization
|
4
|
5
|
6
|
6
|
6
|
|
Change
in Working Capital
|
(1)
|
0
|
(1)
|
(7)
|
9
|
|
Other,
Net
|
1
|
1
|
1
|
2
|
(1)
|
|
Cash
Flow from Operating Activities
|
11
|
19
|
27
|
27
|
37
|
|
|
|
|
|
|
|
|
Capex
& Purchase of Intangibles
|
(2)
|
(3)
|
(2)
|
(4)
|
(3)
|
|
Other
Investing Activities
|
0
|
(33)
|
(17)
|
0
|
0
|
|
Debt
Transactions
|
(6)
|
16
|
3
|
(14)
|
(8)
|
|
Capital
Stock Increase
|
1
|
0
|
3
|
2
|
0
|
|
Other
|
(1)
|
0
|
3
|
0
|
3
|
|
Net
Change in Cash
|
$3
|
$(1)
|
$17
|
$11
|
$29
|
|
Free
Cash Flow*
|
$9
|
$16
|
$25
|
$23
|
$34
|
Hillenbrand
Financials
Financials
43
Hillenbrand,
Inc. -
2009 versus 2008
|
FISCAL
YEAR ENDING SEPTEMBER 30
|
||
|
|
2009
ACTUAL
|
2008
ACTUAL
|
|
$ IN
MILLIONS
|
||
|
Net
Revenue
%
Y/Y Growth
|
$649
(4.3%)
|
$678
1.6%
|
|
Gross
Profit
%
of Revenue
|
$274
42.3%
|
$281
41.4%
|
|
Operating
Expenses
%
of Revenue
|
$119
18.3%
|
$131
19.3%
|
|
Operating
Income
|
$155
|
$150
|
|
EBITDA
%
of Revenue
|
$181
27.9%
|
$175
25.8%
|
|
Net
Income
|
$102
|
$93
|
NET REVENUES
Revenue
lower because of relatively mild flu and
pneumonia season, combined with higher
cremation rate and product mix-down from
economic recession
pneumonia season, combined with higher
cremation rate and product mix-down from
economic recession
GROSS PROFIT
Gross
profit percentage higher due to cost control
and lower materials cost, primarily fuel
and lower materials cost, primarily fuel
OPERATING
EXPENSES
Opex
percentage lower due to decreased
separation and anti-trust costs
separation and anti-trust costs
Hillenbrand,
Inc. 2010 Guidance -
Pre K-Tron Acquisition
(Unaudited)
(Unaudited)
|
FISCAL
YEAR ENDING SEPTEMBER 30
|
|||
|
AMOUNTS
IN MILLIONS (EXCEPT PER SHARE DATA)
|
FY09
|
FY10
RANGE
|
|
|
LOW
|
HIGH
|
||
|
Net
Revenues
|
$649
|
$630
|
$670
|
|
Income
before Taxes
|
$161
|
$137
|
$161
|
|
Tax
Rate
|
36.4%
|
37%
|
36%
|
|
Net
Income
|
$102
|
$86
|
$103
|
|
Average
Diluted Shares Outstanding
|
62
|
62
|
62
|
|
Diluted
Net Income per Share
|
$1.66
|
$1.40
|
$1.67
|
|
|
|
|
|
|
Excluding
Certain Non-operating Costs
(Antitrust
Litigation and Separation*)
|
|
|
|
|
Net
Income
|
$104
|
$89
|
$105
|
|
Diluted
Net Income per Share
|
$1.68
|
$1.45
|
$1.70
|
*Anti-trust
litigation and separation estimated to be $7.2MM in 2009; see appendix for
reconciliation to GAAP
44
Hillenbrand,
Inc. - Non-GAAP Financial Disclosures and
Reconciliations for 2009 Actual and 2010 Guidance
(Unaudited) (Excluding K-Tron International)
Reconciliations for 2009 Actual and 2010 Guidance
(Unaudited) (Excluding K-Tron International)
While
Hillenbrand, Inc. reports financial results in accordance with U.S. GAAP, this
press release includes non-GAAP
measures. These non-GAAP measures are not in accordance with, nor are they a substitute for, GAAP measures. Hillenbrand
uses the non-GAAP measures to evaluate and manage its operations and provides the information to investors so they can see
the results “through the eyes” of management. Hillenbrand further believes that providing this information better enables
investors to understand the ongoing operating performance of the company. Investors should consider non-GAAP measures in
addition to, not as a substitute for, or as superior to, measures of financial performance prepared in accordance with GAAP.
measures. These non-GAAP measures are not in accordance with, nor are they a substitute for, GAAP measures. Hillenbrand
uses the non-GAAP measures to evaluate and manage its operations and provides the information to investors so they can see
the results “through the eyes” of management. Hillenbrand further believes that providing this information better enables
investors to understand the ongoing operating performance of the company. Investors should consider non-GAAP measures in
addition to, not as a substitute for, or as superior to, measures of financial performance prepared in accordance with GAAP.
|
$ IN
MILLIONS
|
TWELVE
MONTHS ENDED
SEPTEMBER 30, 2009 |
FISCAL
YEAR 2010
GUIDANCE
(MIDPOINT)
|
||||
|
PRE-
TAX |
INCOME
TAXES |
POST-
TAX |
PRE-TAX
|
INCOME
TAXES |
POST-
TAX |
|
|
GAAP
Income
|
$160.8
|
$58.5
|
$102.3
|
$148.9
|
$54.3
|
$94.6
|
|
Certain
non-operating Costs:
|
|
|
|
|
|
|
|
Antitrust
Litigation
|
$2.2
|
$0.8
|
$1.4
|
$4.0
|
$1.5
|
$2.5
|
|
Separation
|
$0.1
|
-
|
$0.1
|
-
|
-
|
-
|
|
Adjusted
Income
|
$163.1
|
$59.3
|
$103.8
|
$152.9
|
$55.8
|
$97.1
|
45
46
Hillenbrand,
Inc. - Operating Performance Summary
|
FISCAL
YEAR ENDING SEPTEMBER 30
|
|||
|
|
2007
ACTUAL
|
2008
ACTUAL
|
2009
ACTUAL
|
|
$ IN
MILLIONS
|
|||
|
Net
Revenue
%
Y/Y Growth
|
$667
(1.2%)
|
$678
1.6%
|
$649
(4.3%)
|
|
Gross
Profit
%
of Revenue
|
$279
41.8%
|
$281
41.4%
|
$274
42.3%
|
|
Operating
Expenses
%
of Revenue
|
$123
18.4%
|
$131
19.3%
|
$119
18.3%
|
|
Operating
Income
|
$156
|
$150
|
$155
|
|
EBITDA
%
of Revenue
|
$176
26.4%
|
$175
25.8%
|
$181
27.9%
|
|
Net
Income
|
$100
|
$93
|
$102
|
47
Hillenbrand,
Inc. - Balance Sheet Summary
|
FISCAL
YEAR ENDING SEPTEMBER 30
|
|||
|
$ IN
MILLIONS
|
2007
ACTUAL
|
2008
ACTUAL |
2009
ACTUAL |
|
ASSETS
|
|
|
|
|
Cash
|
$12
|
$15
|
$35
|
|
Accounts
Receivable
|
91
|
88
|
85
|
|
Inventory
|
48
|
49
|
43
|
|
Other
Current Assets
|
19
|
30
|
70
|
|
Current
Assets
|
170
|
182
|
233
|
|
PP&E
|
89
|
91
|
85
|
|
Other
Assets
|
58
|
272
|
243
|
|
Total
Assets
|
317
|
545
|
561
|
|
LIABILITIES
|
|
|
|
|
Current
Liabilities
|
76
|
86
|
75
|
|
Debt
|
0
|
100
|
60
|
|
Other
LT Liabilities
|
60
|
71
|
122
|
|
Total
Liabilities
|
136
|
257
|
257
|
|
SHAREHOLDERS’
EQUITY
|
|
|
|
|
Total
Shareholders’ Equity
|
181
|
288
|
304
|
|
Total
Liabilities & Equity
|
$317
|
$545
|
$561
|
48
Hillenbrand,
Inc. - Cash Flow Summary
*Free cash
flow is defined as operating cash flow less capital expenditures
|
FISCAL
YEAR ENDING SEPTEMBER 30
|
|||
|
$ IN
MILLIONS
|
2007
ACTUAL
|
2008
ACTUAL |
2009
ACTUAL |
|
Operating
Activities
|
|
|
|
|
Net
Income
|
$100
|
$93
|
$102
|
|
Depreciation
& Amortization
|
19
|
19
|
19
|
|
Change
in Working Capital
|
8
|
(16)
|
5
|
|
Other,
Net
|
0
|
6
|
(3)
|
|
Cash
Flow from Operating Activities
|
127
|
102
|
123
|
|
|
|
|
|
|
Capex
& Purchase of Intangibles
|
(16)
|
(10)
|
(10)
|
|
Net
Activity of Parent
|
(104)
|
(165)
|
0
|
|
Net
Revolver Activity
|
0
|
100
|
(40)
|
|
Stock
Repurchases
|
0
|
(6)
|
(12)
|
|
Dividends
|
0
|
(23)
|
(46)
|
|
Other
|
(3)
|
5
|
5
|
|
Net
Change in Cash
|
4
|
3
|
20
|
|
Free
Cash Flow*
|
$111
|
$92
|
$113
|
49
GAAP
Reconciliation
|
|
K-TRON
INTERNATIONAL
FISCAL
YEAR ENDING
|
HILLENBRAND
FISCAL
YEAR ENDING
SEPTEMBER 30 |
|||||||
|
$ IN
MILLIONS
|
2004
|
2005
|
2006
|
2007
|
2008
|
LTM
10/03/09 |
2007
|
2008
|
2009
|
|
Net
Income
|
$7
|
$7
|
$13
|
$21
|
$26
|
$20
|
$100
|
$93
|
$102
|
|
Taxes
|
2
|
5
|
6
|
9
|
11
|
12
|
57
|
61
|
58
|
|
Interest
|
1
|
1
|
1
|
2
|
1
|
1
|
0
|
2
|
2
|
|
Depreciation
&
Amortization |
4
|
4
|
5
|
6
|
6
|
6
|
19
|
19
|
19
|
|
EBITDA
|
$14
|
$17
|
$25
|
$38
|
$44
|
$39
|
$176
|
$175
|
$181
|
Additional Information and
Where to Find it
This
investor presentation may be deemed to be solicitation material in respect of
the proposed acquisition of K-Tron International, Inc. (“K-Tron”) by
Hillenbrand, Inc. (“Hillenbrand”). In connection with the proposed
acquisition, K-Tron plans to file a proxy statement with the SEC. INVESTORS AND SECURITY HOLDERS OF
K-TRON ARE ADVISED TO READ THE PROXY STATEMENT AND ANY OTHER RELEVANT DOCUMENTS
FILED WITH THE SEC WHEN THEY BECOME AVAILABLE BECAUSE THOSE DOCUMENTS WILL
CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED ACQUISITION. The final
proxy statement will be mailed to shareholders of K-Tron. Investors and security
holders may obtain a free copy of the proxy statement when it becomes available,
and other documents filed by K-Tron with the SEC, at the SEC’s web site at
http://www.sec.gov. Free copies of the proxy statement, when it becomes
available, and K-Tron’s other filings with the SEC may also be obtained from
K-Tron by directing a request to K-Tron International, Inc., Attention: Investor
Relations, Route 55 and 553, P.O. Box 888, Pitman, N.J. 08071, or by calling
856-589-0500.
Hillenbrand,
K-Tron and their respective directors, executive officers and other members of
their management and employees may be deemed to be soliciting proxies from
K-Tron shareholders in favor of the proposed acquisition. Information regarding
Hillenbrand’s directors and executive officers is available in its 2009 Annual
Report on Form 10-K filed with the SEC on November 24, 2009, and definitive
proxy statement relating to its 2010 Annual Meeting of Shareholders filed with
the SEC on January 5, 2010. Information regarding K-Tron’s directors
and executive officers is available in its 2008 Annual Report on Form 10-K filed
with the SEC on March 13, 2009, and definitive proxy statement relating to its
2009 Annual Meeting of Shareholders filed with the SEC on April 6, 2009.
Additional information regarding the interests of such potential participants
will be included in the proxy statement and the other relevant documents filed
with the SEC when they become available.