2.2.0.7falseDiscontinued Operations0203 - Disclosure - Discontinued Operationstruefalsefalsefalse1USDfalsefalseUSDStandardhttp://www.xbrl.org/2003/iso4217USDiso42170USDEPSDividehttp://www.xbrl.org/2003/iso4217USDiso4217http://www.xbrl.org/2003/instancesharesxbrli0SharesStandardhttp://www.xbrl.org/2003/instancesharesxbrli0$20hrc_DiscontinuedOperationsAbstracthrcfalsenadurationDiscontinued Operations.falsefalsefalsefalsefalsetruefalsefalsefalsefalsefalsefalse1falsefalsefalsefalse00falsefalsefalsexbrli:stringItemTypestringDiscontinued Operations.false31us-gaap_DisposalGroupsIncludingDiscontinuedOperationsDisclosureTextBlockus-gaaptruenadurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalsefalseverboselabelfalse1falsefalsefalsefalse00<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 3 - us-gaap:DisposalGroupsIncludingDiscontinuedOperationsDisclosureTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>NOTE 3. DISCONTINUED OPERATIONS</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">As discussed in Note 1, on March 31, 2008, we completed the spin-off of our funeral services
business through a tax-free stock dividend to our shareholders. Pursuant to the Distribution
Agreement (“Distribution Agreement”) between us and Hillenbrand, Inc., the holding company for the
funeral services business, we contributed net assets in the amount of $270.1 million to
Hillenbrand, Inc. The following table presents summary information related to the net assets
contributed to Hillenbrand, Inc. at the close of business on March 31, 2008:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="86%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Assets</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Current Assets
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Cash
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">125.9</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Investment securities
</div></td>
<td> </td>
<td> </td>
<td align="right">55.3</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Trade accounts receivable, net of allowances
</div></td>
<td> </td>
<td> </td>
<td align="right">101.8</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Inventories
</div></td>
<td> </td>
<td> </td>
<td align="right">49.7</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Deferred income taxes
</div></td>
<td> </td>
<td> </td>
<td align="right">19.6</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Other current assets
</div></td>
<td> </td>
<td> </td>
<td align="right">37.2</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:45px; text-indent:-15px">Total current assets
</div></td>
<td> </td>
<td> </td>
<td align="right">389.5</td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Property, plant and equipment, net
</div></td>
<td> </td>
<td> </td>
<td align="right">93.7</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Intangible assets, net
</div></td>
<td> </td>
<td> </td>
<td align="right">21.3</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Investments
</div></td>
<td> </td>
<td> </td>
<td align="right">27.9</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Notes receivable
</div></td>
<td> </td>
<td> </td>
<td align="right">124.6</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Deferred income taxes
</div></td>
<td> </td>
<td> </td>
<td align="right">19.5</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Other assets
</div></td>
<td> </td>
<td> </td>
<td align="right">22.7</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px"><b>Total assets contributed</b>
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">699.2</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Liabilities</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Current liabilities
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Trade accounts payable
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">19.8</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Accrued compensation
</div></td>
<td> </td>
<td> </td>
<td align="right">23.1</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Short-term borrowings
</div></td>
<td> </td>
<td> </td>
<td align="right">250.0</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Accrued customer rebates
</div></td>
<td> </td>
<td> </td>
<td align="right">18.8</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Other current liabilities
</div></td>
<td> </td>
<td> </td>
<td align="right">40.5</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:45px; text-indent:-15px">Total current liabilities
</div></td>
<td> </td>
<td> </td>
<td align="right">352.2</td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Accrued pension and postretirement benefits
</div></td>
<td> </td>
<td> </td>
<td align="right">38.4</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Other liabilities
</div></td>
<td> </td>
<td> </td>
<td align="right">38.5</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px"><b>Total liabilities contributed</b>
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">429.1</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Total net assets contributed</b>
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">270.1</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">Included in the net assets contributed and discussed above were payables of $15.4 million related
to the final cash distribution to Hillenbrand, Inc., which was paid in full in April 2008.
Additionally, at March 31, 2008, Hillenbrand, Inc. owed the Company $20.0 million related
primarily to income taxes payable on income generated by the funeral services business through the
date of separation. As of the end of fiscal 2008, this amount had been fully settled.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt">As a result of the spin-off transaction, the funeral services business and certain other costs
have been classified within discontinued operations in the Company’s 2008 Consolidated Statement
of Income. The following table and accompanying notes present certain summary income statement
information related to the discontinued funeral services business and the spin-off transaction for
the fiscal year ended September 30, 2008:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="86%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Fiscal Year Ended</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">September 30,</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">2008</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Funeral services sales
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">354.3</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Total expenses (a) (b) (c) (d)
</div></td>
<td> </td>
<td> </td>
<td align="right">275.5</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Income from discontinued operations before income taxes
</div></td>
<td> </td>
<td> </td>
<td align="right">78.8</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Income tax expense (e)
</div></td>
<td> </td>
<td> </td>
<td align="right">30.1</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Income from discontinued operations
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">48.7</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr style="font-size: 6pt">
<td width="3%"> </td>
<td width="1%"> </td>
<td width="96"> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(a)</td>
<td> </td>
<td>
<div style="text-align: justify">Total expenses include all costs of discontinued operations, including costs of goods sold,
operating expenses (research and development expenses and selling, general and administrative
expenses) and other income and expense items.
</div></td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(b)</td>
<td> </td>
<td>
<div style="text-align: justify">We incurred certain non-recurring costs directly related to the spin-off transaction of $26.1
million for fiscal year 2008. Of these amounts, which were primarily for investment banking
fees, legal, accounting, other professional and consulting fees, $24.5 million have been
allocated to discontinued operations in the 2008 Consolidated Statement of Income. All
remaining amounts are recorded within income from continuing operations.
</div></td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(c)</td>
<td> </td>
<td>
<div style="text-align: justify">Total one-time stock-based compensation charges of $10.3 million were recognized in the
second quarter of fiscal 2008 due to the modification of stock options and accelerated vesting
of certain restricted stock awards in connection with the spin-off. The portion of the
stock-based compensation charge related to outstanding awards held by employees of the funeral
services business, which was $4.5 million, were allocated to discontinued operations, while
the remaining $5.8 million was recorded within income from continuing operations. See Note 13
for more details of stock-based compensation activity related to the spin-off transaction.
</div></td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(d)</td>
<td> </td>
<td>
<div style="text-align: justify">On July 1, 2004, we closed on the sale of Forethought Financial Services, Inc., a previously
wholly-owned insurance business, to Forethought Financial Group, Inc. (“FFG”), for a
combination of consideration, including cash, seller financing and warrants. During our
second fiscal quarter of 2008, we renegotiated the terms of the seller financing provided to
FFG, resulting in the recognition of a cumulative charge in our second quarter of fiscal 2008
of $6.4 million. The remaining outstanding portion of the seller note and warrants were
contributed to a subsidiary of Hillenbrand, Inc. in conjunction with our spin-off of the
funeral services business, and accordingly, the $6.4 million charge was classified as a
component of income from discontinued operations in the 2008 Consolidated Statement of Income.
</div></td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(e)</td>
<td> </td>
<td>
<div style="text-align: justify">Includes the income tax effects of the adjustments described above.
</div></td>
</tr>
</table>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">The Company entered into the Distribution Agreement, a Judgment Sharing Agreement and a Tax Sharing
Agreement as well as a number of other agreements with Hillenbrand, Inc. for the purpose of
accomplishing the separation of the funeral services business from the Company and the distribution
of Hillenbrand, Inc. common stock to the Company’s shareholders. These agreements govern the
relationship between the Company and Hillenbrand, Inc. subsequent to the distribution and provide
for the allocation of the assets, investments and property of the Company as well as of
investments, property, tax and other liabilities and obligations attributable to periods prior to
the distribution. They also limit our ability to incur indebtedness, pay dividends in excess of a
pre-determined amount, and make acquisitions.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><u>Distribution Agreement</u>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">The Distribution Agreement sets forth the agreements between the Company and Hillenbrand, Inc. with
respect to the principal corporate transactions that were required to effect the separation of
Hillenbrand, Inc. from the Company, the allocation of certain corporate assets and liabilities of
the Company and Hillenbrand, Inc., and the framework of the other agreements governing the
relationship between the two companies, including indemnifications between the parties.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt">Additionally, in order to preserve the credit capacity of each of the Company and Hillenbrand, Inc.
to perform its obligations under the Judgment Sharing Agreement described below, the Distribution
Agreement imposes certain restrictive covenants on the Company and Hillenbrand, Inc. Specifically,
the Distribution Agreement provides that the Company and its subsidiaries will not:
</div>
<div style="margin-top: 10pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="8%" style="background: transparent"> </td>
<td width="3%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td>
<div style="text-align: justify">incur indebtedness to finance the payment of any extraordinary cash dividend on
its outstanding capital stock or the repurchase of any outstanding shares of its
capital stock;
</div></td>
</tr>
</table>
</div>
<div style="margin-top: 10pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="8%" style="background: transparent"> </td>
<td width="3%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td>
<div style="text-align: justify">declare and pay regular quarterly cash dividends on the shares of the Company’s
common stock in excess of $0.1025 per share;
</div></td>
</tr>
</table>
</div>
<div style="margin-top: 10pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="8%" style="background: transparent"> </td>
<td width="3%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td>
<div style="text-align: justify">make any acquisition outside its core area of business;
</div></td>
</tr>
</table>
</div>
<div style="margin-top: 10pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
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<div style="text-align: justify">incur indebtedness in excess of $100 million to finance any acquisition in its
core area of business without the receipt of an opinion from a qualified investment
banker that the transaction is fair to the Company’s shareholders from a financial
point of view; or
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<div style="text-align: justify">incur indebtedness to make an acquisition in its core area of business that
either (1) causes the Company’s ratio, calculated as provided in the Distribution
Agreement, of Pro Forma Consolidated Total Debt to Consolidated EBITDA (each as
defined in the Distribution Agreement) to exceed 1.8x or (2) causes the Company’s
credit rating by either Standard & Poor’s Ratings Services or Moody’s Investor
Services to fall more than one category below its initial rating after giving effect
to the spin-off.
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<div align="justify" style="font-size: 10pt; margin-top: 10pt">These restrictive covenants will terminate in the event that either the Company’s or Hillenbrand,
Inc.’s funding obligations under the Judgment Sharing Agreement terminate in accordance with the
terms of that agreement. The Distribution Agreement imposes similar restrictions on Hillenbrand,
Inc. and its subsidiaries.
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<div align="justify" style="font-size: 10pt; margin-top: 10pt"><u>Judgment Sharing Agreement</u>
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<div align="justify" style="font-size: 10pt; margin-top: 10pt">The Company and Hillenbrand, Inc.’s Batesville Casket Company subsidiary have been named in an
antitrust lawsuit described in Note 16. The Company believes that it has committed no wrongdoing
as alleged by the plaintiffs and that it has meritorious defenses to plaintiffs’ underlying
allegations and damage theories.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">The Judgment Sharing Agreement is intended to allocate any potential liability that may arise from
certain anti-trust litigation and any other case that is consolidated with the litigation. We
apply the same methodology in recording liabilities for loss contingencies related to lawsuits in
evaluating and accounting for the Judgment Sharing Agreement.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">The Judgment Sharing Agreement provides that Hillenbrand, Inc. is responsible for bearing all fees
and costs incurred in the defense of the antitrust litigation matters on behalf of itself and the
Company. The Distribution Agreement contains provisions governing the joint defense of the
antitrust litigation and other claims. In the event that the Company or Hillenbrand, Inc. is
dismissed as a defendant in the antitrust litigation matters (except where the dismissal results
from a settlement agreement that does not include both the Company and Hillenbrand, Inc.) or is
found upon conclusion of trial not to be liable for payment of any damages to the plaintiffs, any
funding obligations under the Judgment Sharing Agreement of the party so dismissed or found not
liable will terminate once such dismissal or finding of no liability is finally judicially
determined. See Note 16 for additional
information on the litigation in question.
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<div align="justify" style="font-size: 10pt; margin-top: 10pt"><u>Tax Sharing Agreement</u>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">The Company entered into a Tax Sharing Agreement with Hillenbrand, Inc. that generally governs each
party’s respective rights, responsibilities and obligations after the spin-off with respect to
taxes, including ordinary course of business taxes and taxes, if any, incurred as a result of any
failure of the distribution to qualify as a tax-free distribution and the preparation and filing of
tax returns and the handling of tax audits. Under the Tax Sharing Agreement, Hillenbrand, Inc. is
responsible, with certain exceptions, for the payment of all income and non-income taxes
attributable to its operations, and the operations of its direct and indirect subsidiaries, whether
or not such tax liability is reflected on a consolidated or combined tax return filed by the
Company. The Company is responsible for the payment of all income and non-income taxes that are
not specifically the obligation of Hillenbrand, Inc.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">The Tax Sharing Agreement also imposes restrictions on the Company’s and Hillenbrand, Inc.’s
ability to engage in certain actions following the separation and sets forth the respective
obligations among the Company and Hillenbrand, Inc. with respect to the filing of tax returns, the
administration of tax contests, assistance and cooperation and other matters.
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<div align="justify" style="font-size: 10pt; margin-top: 10pt"><u>Other</u>
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<div align="justify" style="font-size: 10pt; margin-top: 10pt">The Company entered into shared services and transition services agreements regarding certain
services to be provided by each company and its subsidiaries to the other and its subsidiaries
following the separation, as well as leases and subleases with Hillenbrand, Inc. for shared
locations. Subleases for space in commercially leased locations have varying terms generally
matching the terms of the underlying leases, which approximate fair market value. Also, the
Company entered into agreements providing for the joint ownership by it and Hillenbrand, Inc. of
certain assets, including certain aircraft and corporate conference facilities used by both
companies. We also entered into a limited, mutual right of first offer or right of first refusal
agreement with Hillenbrand, Inc. with respect to various real estate and improvements thereon owned
by us or Hillenbrand, Inc. in the Batesville, Indiana area. As a result of these agreements and
resulting services provided by and for Hillenbrand, Inc. since the spin-off, we had a payable and
receivable with Hillenbrand, Inc. of $0.7 million and $5.0 million, as of September 30, 2008, a
payable and receivable of $0.3 million and $2.3 million, as of September 30, 2009 and a payable and
receivable of $0.2 million and $0.4 million as of September 30, 2010.
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<div align="justify" style="font-size: 10pt; margin-top: 10pt">Additional details on all these agreements may be found in the Company’s Current Report on Form 8-K
filed with the U.S. Securities and Exchange Commission (the “SEC”) on March 17, 2008.
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<!-- Begin Block Tagged Notefalsefalsefalseus-types:textBlockItemTypetextblockDisclosure includes the facts and circumstances leading to the completed or expected disposal, manner and timing of disposal, the gain or loss recognized in the income statement and the income statement caption that includes that gain or loss, amounts of revenues and pretax profit or loss reported in discontinued operations, the segment in which the disposal group was reported, and the classification (whether sold or classified as held for sale) and carrying value of the assets and liabilities comprising the disposal group. Includes all disposal groups, including those classified as components of the entity (discontinued operations).Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 144
-Paragraph 43-48
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