10-K: Hillenbrand Reports FY25 Results, Merger with Lone Star

Hillenbrand, Inc. announced its fiscal year 2025 results, including a significant decrease in net income and adjusted EBITDA, alongside updates on its pending acquisition by Lone Star.

Summary

• Net revenue decreased by $509.0 million (16%) to $2,673.8 million in fiscal year 2025 compared to fiscal year 2024.
• Net income attributable to Hillenbrand increased to $43.1 million in fiscal year 2025 from a loss of $211.0 million in fiscal year 2024, primarily due to lower impairment charges and a gain on divestiture.
• Adjusted EBITDA decreased by $123.7 million (24%) to $388.0 million in fiscal year 2025 compared to fiscal year 2024.
• Advanced Process Solutions net revenue decreased by $218.6 million (10%), driven by lower capital equipment sales volume and aftermarket parts and service net revenue.
• Molding Technology Solutions net revenue decreased by $290.4 million (32%), primarily due to the divestiture of Milacron.
• A goodwill impairment charge of $82.3 million and an indefinite-lived intangible asset impairment charge of $1.2 million were recorded in the Molding Technology Solutions segment as of July 1, 2025.
• The divestiture of a majority interest in the Milacron injection molding and extrusion business was completed on March 31, 2025, resulting in a pre-tax loss of $57.2 million.
• The divestiture of a 46% interest in TerraSource Holdings, LLC was completed on July 1, 2025, for $245.0 million, yielding a pre-tax gain of $68.1 million.
• Hillenbrand entered into an Agreement and Plan of Merger with affiliates of Lone Star Fund XII, L.P. on October 14, 2025, for $32.00 per share in cash, expected to close by the end of the first quarter of calendar year 2026.
• Cash flows from operating activities from continuing operations decreased by $135.1 million (71%) to $56.2 million in fiscal year 2025.
• The quarterly dividend increased to $0.2250 per common share in fiscal year 2025 from $0.2225 per common share paid in fiscal year 2024.

Sentiment

Score: 3

Explanation: The company experienced significant declines in net revenue, adjusted EBITDA, and operating cash flow. While net income improved due to lower impairment charges and a divestiture gain, the core operational performance shows weakness, particularly in the Molding Technology Solutions segment which faced substantial impairment. The pending merger provides a clear exit for shareholders but reflects underlying challenges.

Positives

• Net income attributable to Hillenbrand significantly increased to $43.1 million in fiscal year 2025 from a loss of $211.0 million in fiscal year 2024, primarily due to lower impairment charges and a gain on the TerraSource divestiture.
• Gross profit margin improved by 50 basis points to 33.7% in fiscal year 2025.
• Molding Technology Solutions gross profit margin improved 550 basis points to 32.8% in fiscal year 2025, driven by decreased restructuring charges, productivity improvements, and favorable product mix.
• A pre-tax gain of $68.1 million was realized from the sale of the minority interest in TerraSource.
• Interest expense decreased by $27.0 million (22%) due to lower weighted average borrowings.
• The quarterly dividend increased to $0.2250 per common share in fiscal year 2025.
• The company maintains a strong global footprint and large installed base, supporting profitable aftermarket expansion.
• Hillenbrand has not experienced a significant work stoppage due to labor relations in more than 20 years.
• Management concluded that the company maintained effective internal control over financial reporting as of September 30, 2025.

Negatives

• Net revenue decreased by $509.0 million (16%) in fiscal year 2025.
• Adjusted EBITDA decreased by $123.7 million (24%) in fiscal year 2025.
• Advanced Process Solutions net revenue decreased by $218.6 million (10%) due to lower capital equipment sales volume and aftermarket services.
• Molding Technology Solutions net revenue decreased by $290.4 million (32%), primarily driven by the Milacron divestiture.
• A goodwill impairment charge of $82.3 million and an indefinite-lived intangible asset impairment charge of $1.2 million were recorded in the Molding Technology Solutions segment.
• A pre-tax loss of $57.2 million was incurred on the divestiture of Milacron.
• Cash flows from operating activities from continuing operations decreased by $135.1 million (71%) to $56.2 million.
• Order backlog for Advanced Process Solutions decreased by $159.0 million (9%) to $1,522.4 million.
• Order backlog for Molding Technology Solutions decreased by $179.3 million (78%) to $51.8 million, primarily due to the Milacron divestiture.
• Selling, general and administrative expenses as a percentage of net revenue increased 210 basis points to 24.3%.
• The company has a significant amount of outstanding debt, totaling $1,524.8 million as of September 30, 2025.
• The Merger Agreement includes certain limitations on the company's ability to pay dividends, other than one cash dividend of $0.2275 per share on or prior to December 31, 2025.

Risks

• The announcement and pendency of the proposed acquisition by Lone Star could adversely impact the company's business, financial condition, and results of operations, including the ability to attract and retain employees and maintain customer relationships.
• There is a risk that the Merger may not be consummated in a timely manner or at all, due to factors such as failure to obtain required regulatory or shareholder approvals.
• Potential litigation relating to the Merger could prevent or delay its completion or result in significant costs and damages.
• The Merger Agreement contains restrictions on solicitation that limit the company's ability to pursue alternative acquisition proposals.
• If the Merger Agreement is terminated under certain circumstances, the company may be required to pay a termination fee of $69.0 million to Lone Star.
• Global market and economic conditions, including volatility in financial markets, tariffs, and changing trade policies, could have a material adverse effect on operations.
• Business disruptions associated with information technology, cyber-attacks, or catastrophic losses affecting infrastructure pose a significant risk to data security and operations.
• Increasing competition for highly skilled and talented workers, as well as labor shortages, could adversely affect the business and increase labor costs.
• Sustainability-related regulations could require changes in manufacturing processes, increase expenses, and adversely impact the company's reputation and financial performance.
• Increased prices for, poor quality of, or extended inability to source raw materials or associated services, and supply chain disruptions, could adversely affect profitability.
• Uncertainty in United States global trade policy and governmental instability in certain parts of the world could negatively impact the business.
• International economic, political, legal, and business factors, particularly in emerging markets, could negatively affect consolidated results of operations and growth.
• Operating in highly competitive industries, many subject to intense price competition, could materially adversely affect the business if the company is unable to compete successfully.
• The company operates in cyclical industries (e.g., plastics, packaging, automotive, construction), making it sensitive to general economic conditions and fluctuations in raw material prices like plastic resins.
• The company's growth strategy relies on significant acquisitions, and there is a risk of being unable to successfully integrate acquired businesses or realize anticipated benefits.
• Divestitures, including the historical Batesville segment and Milacron, involve risks such as significant costs, potential loss of customer/employee relationships, and dilutive impacts on future earnings.
• Goodwill and other identifiable indefinite-lived intangible assets, representing a significant portion of total assets, are subject to periodic impairment evaluations, and charges could materially impact financial condition.
• A decrease in demand for base resin or engineering plastics, changes in technological advances, or changes in laws/regulations related to the plastics industry could have a material adverse effect.
• Changes in economic conditions or food consumption patterns due to dietary trends could adversely affect the food-related business.
• The company relies on employees, agents, and business partners to comply with laws in many countries, and improper conduct could impair reputation and results of operations.
• The effective tax rate may be negatively impacted by changes in the mix of earnings or future changes to tax laws in global jurisdictions.
• Exposure to a number of different tax uncertainties and audits could have a material adverse effect on consolidated results of operations.
• Involvement in claims, lawsuits, and governmental proceedings (environmental, antitrust, patent infringement, etc.) carries an ultimate outcome that cannot be predicted with certainty.
• Uncertainty in the U.S. political and regulatory environment could negatively impact the business.
• Risks arising from currency exchange rate fluctuations may adversely affect consolidated results of operations and financial condition.
• The company could face labor disruptions that interfere with operations, as approximately 43% of employees work under collective bargaining agreements or works councils.
• Business disruptions due to physical risks of climate change, such as catastrophic weather events and natural disasters, could adversely impact operations and financial condition.
• Provisions in the company's Articles of Incorporation and By-laws and facets of Indiana law may prevent or delay an acquisition, potentially decreasing the trading price of common stock.
• The development and use of artificial intelligence technologies present risks and challenges, including evolving legal and regulatory landscapes, intellectual property, cybersecurity, privacy, and data protection concerns.

Future Outlook

The merger with Lone Star is expected to close by the end of the first quarter of calendar year 2026, subject to customary closing conditions including shareholder and regulatory approvals. The company anticipates paying approximately $16.0 million in cash dividends in the first quarter of fiscal 2026. Management believes existing cash, cash flows from operations, and borrowings under existing arrangements will be sufficient to fund operating activities and cash commitments. The company plans to continue prioritizing cash flow deployment to pay down debt, invest in organic growth initiatives, and integration-related activities. The 'One Big Beautiful Bill Act' (OBBBA) legislation will impact the company's fiscal 2026 tax year, with the full impact currently under evaluation.

Management Comments

• "Guided by our Purpose, Shape What Matters For Tomorrow, we pursue excellence, collaboration, and innovation to shape solutions that best serve our people, our customers, and our communities."
• "Customers choose Hillenbrand due to our reputation for designing, manufacturing, and servicing highly-engineered, mission-critical equipment and solutions that meet their unique and complex processing requirements."
• "We strive to provide superior return for our shareholders, exceptional value for our customers, great professional opportunities for our employees, and to be responsible to our communities through the execution of our profitable growth strategy."
• "We aim to deliver sustainable revenue expansion, profit growth, and substantial free cash flow through our world-class products, solutions, and service, drive continuous improvement through the deployment of the Hillenbrand Operating Model (HOM), and effectively deploy our cash flow to maximize shareholder value creation."
• "We believe that a classified board helps to assure the continuity and stability of our board and our business strategies and policies as determined by our board, because a majority of the directors at any given time will have prior experience on our board."
• "We believe our current facilities will provide adequate capacity to meet expected demand for the next several years."
• "We believe our current liquidity position is sufficient and will continue to meet all of our financial commitments in the current business environment."

Industry Context

Hillenbrand operates as a global industrial company providing highly-engineered processing equipment and solutions across large end markets including durable plastics, food, and recycling. The company's strategy aligns with macro trends such as the expanding global middle class driving demand for plastics in various applications (construction, food safety, recycling) and the increasing demand for sustainable food sources like plant-based proteins. The industries are highly competitive, with competitors ranging from small niche players to large global companies. The plastics industry is cyclical and sensitive to general economic conditions and resin price fluctuations, while the food processing industry is influenced by economic conditions and evolving dietary trends. Hillenbrand leverages its process technology and systems engineering expertise to offer comprehensive solutions and maintain leadership positions.

Comparison to Industry Standards

• Advanced Process Solutions holds leading positions in key industries and has strong brand name recognition due to its commitment to design, quality, application and process engineering expertise, product support services, and ability to provide complete system solutions that optimize output, quality, and energy efficiency for lower total cost of ownership.
• Molding Technology Solutions maintains leading positions in key industries based on product design and quality, extensive application and process engineering expertise, product support services, and brand recognition.
• The company's cybersecurity risk management program utilizes the National Institute of Standards and Technology (NIST) Cybersecurity Framework, adapting elements to specific operational needs.
• Royalty rates utilized by the company for indefinite-lived trade names, ranging from 1.5% to 3.0%, are consistent with industry standards.
• The discount rate used in fair value determination is consistent with a market participant's weighted-average cost of capital, based on industry required rates of return.
• The Indiana Business Corporation Law (IBCL) provides that specified judicial decisions in Delaware and other jurisdictions, which might be looked upon for guidance in interpreting Indiana law, including decisions that propose a higher or different degree of scrutiny in response to a proposed acquisition of the corporation, are inconsistent with the proper application of the business judgment rule under that section.

Management Changes

Corporate Governance

Legal Proceedings

• The company is involved from time to time in claims, lawsuits, and government proceedings related to its operations, including environmental, antitrust, patent infringement, business practices, commercial transactions, product and general liability, cybersecurity and privacy matters, workers compensation, auto liability, and employment-related matters.
• The ultimate outcome of these legal matters cannot be predicted with certainty, but they could have a material adverse effect on the company's financial condition, consolidated results of operations, and cash flows.
• Insurance policies for claims typically have high deductibles and self-funded retentions up to $0.5 million per occurrence or claim.
• A discrete commercial dispute liability of $11.2 million from September 30, 2024, was settled and paid during fiscal year 2025.
• The company is currently under examination in various federal, state, and foreign tax jurisdictions, with ongoing audits specifically in India, Canada, and Germany that could prove significant.

Related Party Transactions

• The company completed the divestiture of its majority interest in the Milacron injection molding and extrusion business to an affiliate of Bain Capital on March 31, 2025, retaining a 48.74% minority ownership in the newly formed Milacron Holdings, LLC, which is now accounted for under the equity method of accounting.

Stakeholder Impact

• Shareholders will receive $32.00 per share in cash upon the closing of the merger with Lone Star, providing a definitive value for their investment.
• Employees face uncertainty related to the pending merger and ongoing integration activities, but the company emphasizes talent management, health and safety, and diversity, equity, and inclusion programs.
• Customers may experience impacts from supply chain disruptions and the company's ability to fulfill orders, particularly for engineered-to-order equipment with long lead times.
• Suppliers are affected by the company's supply chain management practices, raw material price volatility, and potential shifts in sourcing strategies.
• Creditors are impacted by the company's debt levels, adherence to financial covenants, and cash flow generation for debt servicing, with the merger potentially altering the credit profile.
• Communities where Hillenbrand operates are affected by the company's business activities, employment opportunities, and sustainability initiatives.

Next Steps

• Closing of the merger with Lone Star by the end of the first quarter of calendar year 2026, subject to customary closing conditions including shareholder and regulatory approvals.
• Payment of approximately $16.0 million in cash dividends in the first quarter of fiscal 2026.
• Continued monitoring of pension plan funding levels and asset performance, with estimated contributions of $10.1 million in 2026.
• Evaluation of the impact of the 'One Big Beautiful Bill Act' (OBBBA) on the fiscal 2026 tax year.
• Integration of acquired companies (FPM, Linxis) and realization of anticipated benefits.
• Ongoing efforts to mitigate supply chain risks and identify alternative sources for raw materials.
• Continued focus on driving product innovation, best-in-class pricing, and margin enhancement through the Hillenbrand Operating Model (HOM).

Key Dates

Recommendation

The definitive merger agreement with Lone Star at $32.00 per share provides a clear and certain cash exit for shareholders. Given the operational headwinds, including declining revenue and adjusted EBITDA, significant impairment charges, and reduced operating cash flow, the cash offer represents a favorable and de-risked outcome. The stock is likely to trade near the offer price until the merger closes, making a 'sell' recommendation prudent to capture the announced value and avoid any potential risks associated with the merger's closing conditions or the company's underlying operational challenges.

Keywords

Industrial equipment, Processing equipment, Manufacturing, Plastics, Food, Recycling, Material handling, Extrusion, Compounding, Hot runner systems, Mold bases, SEC filing, 10-K, Financial results, Merger, Acquisition, Lone Star, Divestiture, Milacron, TerraSource, Goodwill impairment, Dividends, Debt, Capital structure, Corporate governance, Risk factors, Supply chain, Cybersecurity, Sustainability