Hillenbrand Industries, Inc. - Company Profile, Information, Business Description, History, Background Information on Hillenbrand Industries, Inc.
Batesville, Indiana 47006
U.S.A.
Company Perspectives:
People turn to our products, services and companies for positive outc omes. We help deliver a mother's newborn infant; speed a boy's recove ry from a biking injury; make a military veteran's funeral more meani ngful to his family with personalized products; and we deliver value to our shareholders. We are proud that our products and services are making a meaningful difference in people's lives everyday.
History of Hillenbrand Industries, Inc.
Hillenbrand Industries, Inc. is a holding company for two major opera ting businesses, Batesville Casket Company and Hill-Rom Company. Bate sville Casket manufactures caskets and cremation-related products, se lling its products to funeral homes in North America, the United King dom, Australia, Mexico, and Puerto Rico. The company ranks as the lar gest coffin manufacturer in the United States, controlling nearly hal f of the domestic market. Hill-Rom operates in the healthcare industr y, selling and renting hospital beds, furnishings and accessories, an d systems for wound, pulmonary, and circulatory care.
Origins
"The first generation starts a company, the second builds it, and the third generation destroys it," recalled August (Gus) Hillenbrand, pr esident and CEO of Hillenbrand Industries, in the Cincinnati Busin ess Courier in 1993. A family friend had offered those words in j est to Hillenbrand when he was boy. "That has just stuck with me all my life ... and that's why we work so dang hard." Indeed, in the mid- 1990s Hillenbrand was sustaining a legacy of success which his grandf ather, John A. Hillenbrand, initiated in the late 1800s.
John A. Hillenbrand's father, a German immigrant and woodworker, sett led in the German-speaking community of Cincinnati, Ohio, before the Civil War. He was soon drawn, however, to the enormous timber stocks of southeastern Indiana. Shortly after moving to Batesville, Indiana, in 1861, the 16-year-old Hillenbrand found himself orphaned with two infant sisters. Realizing that timberland was abundant and inexpensi ve in comparison to farmland, he abandoned his family's unprofitable farm and began purchasing small sections of woodland. He cut and sold the rich hardwood to the railroads for track ties, and then sold the cleared land to farmers.
Like his father, John A. Hillenbrand combined hard work and ingenuity to create several Hillenbrand family enterprises, including a genera l store. In 1906, Hillenbrand seized an opportunity to rescue the Bat esville Coffin Company, a local casket manufacturer founded in 1884, from bankruptcy. He employed German woodworkers, carvers, and cabinet makers to craft his high quality coffins, and used his business acum en to turn the company around. Steady coffin demand, a swelling popul ation, and Hillenbrand's success at increasing his share of the regio nal casket market allowed the company to realize healthy profit growt h throughout the early 20th century.
Part of John A. Hillenbrand's unique recipe for success was close coo peration with his four talented sons. For example, John W., the eldes t son, eventually assumed his father's role as president, and guided company expansion during the mid-20th century. George C. became the c ompany's manufacturing genius. His numerous patents and his insistenc e on continuous product improvement made innovation a Hillenbrand hal lmark. Daniel A., the youngest son, is credited with extending the co mpany's reach nationally and, during the late 20th century, globally.
William A., the second oldest son, vastly broadened the scope of the Hillenbrand operations into the healthcare field. In an attempt to st art a furniture business, he founded the Hill-Rom Company in 1929, du ring the Great Depression. Determined to set himself apart from other furniture makers, William decided to enter the hospital market. He s pent almost a full year visiting hospitals throughout the United Stat es to determine how he could improve furniture in patient's rooms. Th e end result was his development of the first wood and metal hospital bed, which soon replaced the prevailing white tubular steel beds.
Hill-Rom, a division of Hillenbrand Industries, prospered along with the Batesville Casket Company during the 1930s, and especially during the post-World War II economic expansion in the United States. The c ompany combined high-quality hardwoods, including cherry, mahogany, o ak, and walnut, with expert craftsmanship and design to broaden its s hare of regional casket and hospital bed markets. Importantly, though , it was the companies' completely new product innovations that vault ed them past their competitors.
In 1940, for example, Hillenbrand pioneered the mass production of me tal caskets, which became considerably less expensive to manufacture than traditional wooden coffins. The company eventually integrated st ainless steel, bronze, and copper into its products. Metal caskets, m any of which are warranted against corrosion for 75 years, grew to do minate U.S. coffin sales. By the 1990s, wood caskets represented only 15 percent of global industry sales.
Hillenbrand also led changes in the hospital furniture business. In 1 950, for instance, Hill-Rom introduced the first electronically contr olled bed. A slew of advancements followed, such as beds that monitor ed patients, maternity beds, and special beds for burn victims. The c ompany later boasted that it had developed virtually every meaningful innovation in the hospital room furniture and equipment industry sin ce World War II.
Besides high-quality materials and craftsmanship, inventiveness, and family cooperation, other important factors influenced Hillenbrand In dustries' success. For example, the company prided itself on a herita ge of fiscal responsibility. Prudent management allowed the Hillenbra nd brothers to expand the company almost entirely from cash flow inst ead of debt. Even during the 1980s, when many other corporations were assuming large debt loads, Hillenbrand minimized its debt ratio. The Hillenbrand family retained a 60 percent ownership share of the corp oration in 1993.
The company attributed its past achievements to a strong work ethic a nd a cooperative relationship between management, labor, and the loca l community. Hillenbrand poured millions of dollars into the local co mmunity, and in 1993 employed about 60 percent of Batesville's 4,500 residents. "If it weren't for the Hillenbrands, this wouldn't be the town that it is," remarked Mary Gauck, a 20-year Hillenbrand veteran, in the Cincinnati Business Courier. "We wouldn't have the YMC A, the swimming pool, or the library." In explaining his company's su ccess, Gus Hillenbrand returned the praise: "The work ethic [in Bates ville] is phenomenal."
After serving as president of the Batesville Casket Company for seven years, Daniel took the reins from his eldest brother in 1971 when he became chairman of the board of Hillenbrand Industries. In an effort to continue his brother's successful leadership and to parlay the co mpany's numerous competitive advantages into new achievements, Daniel sought to expand Hillenbrand's market presence.
Diversification Beginning in the Late 1970s
Besides taking the company public in 1971, Daniel led the company int o completely new arenas. The company purchased American Tourister, In c., of Warren, Rhode Island, in 1978. American Tourister was a major U.S. luggage manufacturer with a reputation for producing high-qualit y, affordable goods. In 1984, Hillenbrand made Medeco Security Locks, Inc. of Salem, Virginia, the fourth company operating under its corp orate umbrella. Medeco was a leading producer of high-performance loc king devices and security systems.
In 1985, Hillenbrand entered the insurance business when it organized the Forethought Group, Inc. This group of companies was established to provide advance funeral planning services, in the form of insuranc e policies, through funeral homes. In a bid to increase its healthcar e presence, Hillenbrand also purchased SSI Medical Services, Inc. of Charleston, South Carolina, in 1985. SSI was a leading provider of sp ecialized therapeutic products and services. By 1994, SSI and Hill-Ro m were being integrated under the Hill-Rom name.
Hillenbrand's diversification strategy began to pay off in the late 1 970s and early 1980s. As revenues multiplied from about $60 milli on in 1970 to over $325 million in 1980, the company's net income surged from less than $10 million per year to $25 million. M oreover, by 1985 the company netted almost $35 million in income from about $440 million in sales.
Besides new lines of business, Hillenbrand's profit growth during the 1980s reflected the continued success of its core casket and hospita l furniture segments. New products and manufacturing techniques allow ed both Hill-Rom and Batesville Casket Company to achieve greater mar ket dominance. Hill-Rom broadened its product line to include items s uch as infant warmers, special stretchers, and nurse communication sy stems. Its hospital bed offerings grew to encompass a variety of spec ialty devices, including critical care beds, sleep surfaces for ulcer patients, and birthing beds.
Like Hill-Rom, the Batesville Casket Company increased its offerings during the 1980s to include over 400 products sold to more than 16,00 0 funeral homes. By the end of that decade, the company was manufactu ring caskets in several states, including Kentucky, Mississippi, New Hampshire, and Tennessee. Its Kentucky plant, which employed advanced robotics, was one of the world's most automated metal casket product ion facilities.
Hillenbrand also developed new marketing techniques during the 1970s and 1980s, emphasizing customer service and satisfaction. The company 's sales pitch to prospective hospital furniture clients often entail ed a trip to Batesville, a stay at a company farm and conference cent er, and product demonstrations between rounds of food and drink. Simi larly, the company hosted thousands of funeral directors annually at its Batesville headquarters.
As Hillenbrand widened its scope, improved its products, and boosted marketing efforts during the 1970s and 1980s, it also benefitted from favorable demographic and economic trends. The number of annual deat hs in the United States rose about 12 percent between 1970 and 1990, resulting in gradual growth in the combined demand for caskets and cr emation products and services. Furthermore, U.S. expenditures on hosp ital beds and other medical equipment rose at a rate of roughly 15 pe rcent per year throughout much of the 1970s and 1980s.
When Gus Hillenbrand replaced his uncle as president and CEO of Hille nbrand Industries in 1989, he presided over the culmination of 83 yea rs of immense growth and prosperity. His grandfather's fledgling cask et business had grown into a national corporation with six separate o perating companies and nearly 10,000 employees. Hillenbrand's 1989 ne t income topped $71 million, as revenues vaulted past $870 mi llion, up an extraordinary 98 percent since 1985. Furthermore, the Hi llenbrand umbrella could boast dominance of over 90 percent of the en tire U.S. hospital bed market and over 30 percent of the total casket business.
In addition to its business accomplishments, the Hillenbrand organiza tion had also achieved success in its local community. Aside from don ating money for various recreational and educational facilities and c ontributing the lion's share of Batesville's operating budget, Hillen brand prided itself on emphasizing employee satisfaction and personal development. Indeed, the Hillenbrand family was credited locally wit h having a direct and positive impact on the lives of the Batesville citizenry.
Hillenbrand in the 1990s
Motivated in part by the prophetic jest of his childhood--that the th ird generation destroys a company--Gus Hillenbrand entered the 1990s determined to quash that Germanic myth. To boost sales in its casket division, for example, Hillenbrand initiated an aggressive campaign i n the early 1990s to expand into its first line of cremation products and services. It also strove to elevate its presence in the African- American and Hispanic burial market.
To jump-start shipments in the slowing hospital furniture market, Hil l-Rom focused on the development of niche products. One of the compan y's most notable achievements in 1993 was its introduction of the fir st voice-activated control system for hospital beds. Using a new high -tech attachment, a quadriplegic patient, for example, could operate the bed, call a nurse, adjust a television or radio, make a telephone call, or activate a light switch. The system was designed to pick up sounds from only one direction, and could be trained to respond only to the patient's voice.
In 1991 Hillenbrand acquired Block Medical, Inc., of Carlsbad, Califo rnia, a leading manufacturer of infusion pumps. Block introduced a po rtable home infusion pump and was experiencing significant productivi ty gains under Hillenbrand management.
Perhaps Gus Hillenbrand's greatest aspiration was the globalization o f Hillenbrand Industries. To continue the 16 percent revenue growth r ate that the company had averaged since 1972, he believed that Hillen brand would have to expand its international presence. In 1991, Hill- Rom acquired French manufacturer Le Courviour S.A., a leading Europea n supplier of hospital beds and furniture. In 1993 Batesville Casket Company acquired leading casket producers in both Canada and Mexico, strengthening its dominance of the North American market, and in 1994 Hill-Rom bought L. & C. Arnold S.G., a major German hospital man ufacturer.
Although burgeoning domestic markets and proliferating global opportu nities boded well for the company, a few impediments threatened to sl ow Hillenbrand's momentous growth. Federal proposals for government i ntervention in the U.S. healthcare system, for example, meant that te chnological advancements in the Hill-Rom and SSI subsidiaries might r equire more extensive government approval before healthcare providers could purchase their equipment. In addition, the entrance of Michiga n-based Stryker Corp. into the hospital bed market posed a potential threat to Hill-Rom's command of that segment.
Hillenbrand jettisoned its lagging American Tourister division in 199 3, while its Medeco lock company benefitted from renewed consumer spe nding and concerns about crime during that year. Late in 1993, Hill-R om became the target of a federal antitrust probe. Noting its almost unequaled reputation for integrity, analysts suspected the charges we re of little relevance.
Despite minor hindrances, Gus Hillenbrand's multifaceted growth strat egy successfully guided the corporation through the perilous early 19 90s. Indeed, Hillenbrand's unprecedented growth and profitability bet ween 1989 and 1993 seemed almost staggering, particularly in light of a relentless world economic recession that lingered into 1993. Sales jumped an impressive 13 percent in 1990 and 10 percent in 1991, to & #36;1.08 billion, and 1991 net income jumped 18 percent, to more than $89 million. In 1992, moreover, net income rocketed 30 percent a s sales ballooned to more than $1.3 billion. Explosive growth con tinued in 1993, as sales jumped 11 percent to $1.45 billion and n et income soared 25 percent to $146 million. About 40 percent of the company's revenues came from its funeral-related subsidiaries, wh ile the other 60 percent were derived from healthcare divisions.
Sweeping Changes with the New Millennium
As Hillenbrand neared the end of the 20th century, maintaining its fi rm grip on its two primary markets proved to be a challenge. The comp any enjoyed a commanding market lead with both Batesville Casket and Hill-Rom, but it was buffeted by changes in the industries the two co mpanies served. During the 1990s, the funeral service industry consol idated, giving increasing power and influence to two firms in particu lar, Service Corp. International and Loewen Group Inc. As the two com panies grew into dominant players, large volume sales for Batesville Casket increased, but the considerable purchasing power wielded by Se rvice Corp. and Loewen Group drove the price of coffins downward, for cing Hillenbrand to discount its prices. Further, with significantly fewer funeral operators buying its coffins, the Batesville Casket sub sidiary was beset with an oversupply of certain models of coffins; th ose models not preferred by Service Corp. or Loewen Group became exce ss inventory stacked in the company's manufacturing facility. On the healthcare side of Hillenbrand's business, unwelcome change came in t he form of the Federal Balanced Budget Act of 1997, which led to chan ges in Medicare payments. "It wreaked havoc and uncertainty on the bu dgets of hospitals and nursing homes," an analyst explained in an Aug ust 23, 2001 interview with Investor's Business Daily. Hillenb rand felt the blow delivered to both sides of its two main businesses , as sales began to stagnate by the end of the decade and, worse, ear nings began to decline.
Hillenbrand responded to the changing dynamics of the funeral and hea lthcare industries by implementing its own sweeping changes. The firs t, and perhaps most profound, set of changes involved putting a new l eader in charge of the company, including the first non-Hillenbrand t o hold the titles of president and chief executive officer. Fredrick Rockwood, who joined the company in 1977 as director of corporate str ategy and spearheaded the formation of the company's insurance subsid iary in the mid-1980s, was named president in 1999. When Gus Hillenbr and retired in late 2000, Rockwood added the title of chief executive officer, representing just one of a slew of leadership changes made at the time. In January 2001, Dan Hillenbrand retired, vacating his p ost as chairman and handing it to his nephew, Ray Hillenbrand. A new chief financial officer was appointed soon afterwards, as well as new department heads for each of the company's three operating companies , Batesville Casket, Rom-Hill, and Forethought, which had been rename d Forethought Financial Services, Inc. in 1997.
Under a new management team led by Rockwood, Hillenbrand reassessed i ts operations, making alterations to combat problems with profitabili ty and stagnant sales. "The euphemism we use is 'weed and seed,'" the company's vice-president and treasurer explained in an August 23, 20 01 interview with Investor's Business Daily. "We're weeding ou t those not producing the results we expect. The businesses that are producing results, we're seeding with additional investment to grow t hem faster." Rockwood pared back the company's selection of coffins, reducing the company's product line by 20 percent, and, with fewer pr oducts to manage, was able to improve manufacturing and distribution efficiency. Hill-Rom's operations underwent a product-by-product revi ew as well, leading to the closure of its home-care and long-term-car e rental bed business in January 2001, the closure of certain facilit ies, and a reduction in payroll of 400 workers.
In the wake of the reductions, Hillenbrand began to build its busines s strategically, "seeding" after the "weeding" had been completed. By 2003, annual sales had remained flat for five years, hovering below $2 billion. To invigorate revenue growth, the company looked to t he medical care side of its business, deciding that the best opportun ities for future growth were to be offered to Hill-Rom. Toward this e nd, the company struck out on the acquisition trail, completing a ser ies of deals that extended the reach of Hill-Rom in the medical equip ment market. In February 2003, Hillenbrand acquired St. Paul, Minneso ta-based NaviCare Systems Inc., a healthcare management firm. Another St. Paul company joined the fold in September 2003, when a home-ther apy equipment provider, Advance Respiratory Inc., was purchased. In N ovember 2003, the company announced an agreement to acquire Pennsauke n, New Jersey-based Mediq Inc., which provided outsourcing services t o nearly 80 percent of acute-care hospitals in the nation. Mediq, whi ch generated $166 million in annual sales, offered a line of port able medical equipment, selling and renting infusion pumps, ventilato rs, incubators, and oxygen regulators.
After building up its healthcare business, Hillenbrand was leaner and more profitable. In 2004, the company decided to sell its Forethough t Financial Services business, divesting a substantial portion of its business to sharpen its focus on the funeral services and healthcare markets. The company completed the sale in July, when FFS Holdings, Inc. acquired Forethought Financial Services. As the company plotted its future course, it intended to pursue growth opportunities primari ly on the healthcare side of its business. The company's dominance in the casket business offered little opportunity for growth. Hillenbra nd's centennial celebrations promised to coincide with the appointmen t of a non-Hillenbrand as chairman. In late 2005, Ray Hillenbrand ann ounced his plans to retire in 2006, paving the way for Rolf A. Classo n, who succeeded Rockwood as president and chief executive officer, t o become the company's chairman. To Classon and the senior managers b eneath him fell the responsibility of ensuring Hillenbrand's legacy o f success continued into the company's second century of business.
Principal Subsidiaries: Batesville Services, Inc.; Hill-Rom, I nc.; Hillenbrand Properties, Inc.; Travel Services, Inc.; Memory Show case, Inc.; Sleep Options, Inc.; The Acorn Development Group, Inc.; H ill-Rom International Inc.; Batesville Casket de Mexico, S.A. de C.V.
Principal Operating Units: Batesville Casket Company, Inc.; Hi ll-Rom Company, Inc.
Principal Competitors: Matthews International Corporation; Med line Industries, Inc.; Stryker Corporation.
Chronology
- Key Dates:
- 1906: John A. Hillenbrand acquires a troubled casket manufactu rer, Batesville Coffin Company, and changes its name to Batesville Ca sket Company.
- 1929: One of Hillenbrand's sons, William A. Hillenbrand, found s Hill-Rom Co., which begins making hospital beds.
- 1940: Hillenbrand Industries pioneers the mass production of m etal caskets.
- 1950: Hill-Rom unveils the first electronically controlled hos pital bed.
- 1971: Hillenbrand Industries completes its initial public offe ring of stock.
- 1978: American Tourister, Inc. is acquired.
- 1984: A fourth operating company, Medeco Security Locks, Inc., is acquired.
- 1985: Forethought Group, Inc. is formed, marking the company's entrance into the insurance business.
- 1991: A French manufacturer of hospital beds, Le Courviour S.A ., is acquired, the first of three foreign businesses acquired by the company during the first half of the decade.
- 1993: Hillenbrand Industries' American Tourister division is d ivested.
- 1999: Fredrick Rockwood is appointed president, ushering in a series of senior management changes.
- 2004: Forethought Financial Services is sold to FFS Holdings, Inc.
- 2005: Ray Hillenbrand announces his retirement.
Additional Details
- Public Company
- Incorporated: 1969
- Employees: 10,400
- Sales: $1.82 billion (2004)
- Stock Exchanges: New York
- Ticker Symbol: HB
- NAIC: 337127 Institutional Furniture Manufacturing; 337214 Non wood Office Furniture Manufacturing; 337910 Mattress Manufacturing; 3 39995 Burial Casket Manufacturing; 551112 Offices of Other Holding Co mpanies
Further Reference
- Boyer, Mike, "Hillenbrand Plans to Sell American Tourister,"< I> Cincinnati Enquirer, August 4, 1993.
- Elliot, Alan R., "Hillenbrand Industries Inc.," Investor's Bus iness Daily, August 23, 2001, p. A10.
- Evanoff, Ted, "Batesville, Ind.-Based Manufacturer's Stock Rises on Possible Subsidiary Sale," Indianapolis Star, February 14, 2004.
- Faris, Charlene, "Batesville Casket Co.: The Nation's Largest Cas ket Manufacturer," Indiana Business, April 1993.
- Head, Lauren Lawley, "Rockwood to Take Top Spot at Hillenbrand,"< I> Business Courier Serving Cincinnati--Northern Kentucky, Octobe r 13, 2000, p. 4.
- "Hillenbrand Agrees to Acquire Mediq for $330 Million," In dianapolis Business Journal, November 3, 2003, p. 36.
- "Hillenbrand Hospital-Bed Unit, German Company Link," Indianap olis Business Journal, June 28, 1993.
- Larking, Patrick, "Analysts Downplay Inquiry of Hill-Rom Co.," Cincinnati Post, October 19, 1993.
- Lubove, Seth, "Dancing on Graves," Forbes, February 28, 19 94, p. 64.
- Lundegaard, Karen M., "At Home with Hillenbrand," Cincinnati B usiness Courier, June 28, 1993.
- Pletz, John, "Hillenbrand Puts Unusual Twist on S&L," Indi anapolis Business Journal, June 15, 1998, p. 3.
- Song, Kyung M., "Indiana Hospital-Bed Maker Is Target of Probe,"< I> Louisville Courier-Journal, October 20, 1993.
- Tortora, Andrea, "Hillenbrand Hunting Buys," Business Courier Serving Cincinnati--Northern Kentucky, November 9, 2001, p. 3.
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