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Hillenbrand's Board and management believe that separation of the twocompanies is the best way to unlock value and allow each company to focus onaccelerating growth in their respective industries. By operatingindependently, each company can adopt an appropriate capital structure toallow it to better execute its business plans. The separation would alsoallow each company to utilize its own equity as currency for strategicpurposes. As two focused companies, Hill-Rom and Batesville Casket would bebetter positioned for investors looking for specific industry, valuation,yield, and growth profiles. Moreover, each company would be better able tocompete for, attract and retain talent. For employees, the separation wouldcreate opportunities to grow with two industry leaders and more directlyimpact performance of their corporate parent.
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"This filing represents an important milestone in our journey to separatethe two companies," said Peter H. Soderberg, president and CEO of Hillenbrandand Hill-Rom. "We look forward to discussing the status of the separationduring our earnings call on November 15 and, in the coming months, sharingmore details on our plans for growth for each of the companies."
The Form 10 registration statement is posted on the SEC website atwww.sec.gov and also can be viewed on the Hillenbrand website atwww.hillenbrand.com.
Hillenbrand is proceeding with the separation process while continuing toconsult with the SEC regarding the accounting treatment for a judgment sharingagreement that would apportion responsibility between the separated companiesfor any potential damages associated with anti-trust litigation pendingagainst Hillenbrand, its Batesville Casket Company subsidiary and threeunrelated national funeral home businesses. Hillenbrand decided to consultwith the SEC to be sure that the accounting treatment for the judgment sharingagreement, which is only being considered because of the separation, was fullyunderstood.
Neither Hillenbrand nor Batesville Casket believes it has committed anywrongdoing as alleged in the lawsuits. Hillenbrand believes it hasmeritorious defenses to class certification and to the plaintiffs' underlyingallegations and damage theories and will continue to assert those defensesvigorously. In accordance with applicable accounting standards, Hillenbrandhas not established a loss reserve for the lawsuits. However, Hillenbrand'smanagement concluded that it would be prudent to establish a judgment sharingagreement between Hillenbrand and Batesville in connection with the lawsuits,prior to a spin, in order to predictably allocate any potential litigationexposure.
Hillenbrand believes that Statement of Financial Accounting Standards No.5, Accounting for Contingencies, with which the company currently complies,should continue to apply to its accounting for the lawsuits and the judgmentsharing agreement after the separation. However, there is a possibility thatin consultation with the SEC, a determination may be reached that aprobability-based analysis would be required to determine reserve needs withrespect to the judgment sharing agreement.
Given the extremely high damages numbers the plaintiffs have alleged, evenan extremely low probability of an adverse outcome could result in asignificant reserve, which plaintiffs might misuse to argue for an admissionof liability or as a baseline from which to calcu
