SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K/A
Amendment No. 1
CURRENT REPORT
Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
Date of Report (date of earliest event reported) November 8, 1993
----------------
CINCINNATI MILACRON INC.
- ---------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
Delaware 1-8475 31-1062125
- ---------------------------- ---------------- -------------------
(State or other jurisdiction (Commission File (I.R.S. Employer
of incorporation) Number) Identification No.)
4701 Marburg Avenue, Cincinnati, Ohio 45209
- ---------------------------------------- ------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (513) 841-8100
--------------------
NONE
- ------------------------------------------------------------------------
(Former name or former address, if changed since last report)
Item 2. ACQUISITION OR DISPOSITION OF ASSETS
On November 8, 1993 (the "Closing Date"), pursuant to the Purchase
Agreement dated as of November 2, 1993, as amended by the Notarial Deed
dated November 8, 1993 (together with a related document listed below as
Exhibit 2.3, the "Purchase Agreement"), Cincinnati Milacron Inc. (the
"Registrant") acquired 100% of the outstanding capital stock (the "Stock")
of FM Maschinenbau GmbH ("Newco") consisting of the Ferromatik plastics
injection molding business, including product lines, plant and distribution
network (the "Ferromatik Business") of Klockner Ferromatik Desma GmbH (the
"Seller") and certain related assets and liabilities. A copy or the
Purchase Agreement is filed herewith as Exhibits 2.1 through 2.3 and
reference is made thereto for the complete terms and conditions thereof.
The total purchase price, including assumed debt of approximately
10,600,000 DM, is approximately 93,420,000 DM (approximately $55,600,000
using the exchange rate of $1=1.68 DM in effect on the Closing Date). On
the Closing Date, 82,070,000 DM of the purchase price was paid by the
registrant to the Seller and 750,000 DM was held back pending the
completion of certain transactions and transfers specified in the Purchase
Agreement. The amount of the purchase price paid on the Closing Date was
based upon estimates of the amount of assets and liabilities of Newco and
the certain related assets and liabilities on the Closing Date, and is
subject to adjustment as set forth in the Purchase Agreement. The
Registrant obtained the purchase price through or in connection with an
amendment to its revolving credit facility with its existing bank group,
which was amended prior to the Closing Date to increase the Total Revolving
Loan Commitment from $75,000,000 to $130,000,000 (a copy of Amendment
Number One dated as of October 26, 1993 to the Amended and Restated
Revolving Credit Agreement dated as of January 28, 1993 and amended and
restated as of July 20, 1993, is filed herewith as Exhibit 99.1 and
reference is made thereto for the complete terms and conditions thereof
(including the identity of the parties thereto)). $30,000,000 of the Total
Revolving Loan Commitment was drawn in connection with the acquisition.
No material relationship exists between the Seller and the Registrant or
any of its affiliates, directors or officers, or any associate of any such
directors or officers.
The Ferromatik Business as transferred to Newco on the Closing Date is one
of the world's leading producers of injection molding machines and is
recognized for its high-end technology including multi-color machines,
multi-component systems and other specialty applications. Following the
Closing Date, the Registrant intends to operate Newco as a wholly-owned
subsidiary of the Registrant and to have Newco continue to use a majority
of the plant, equipment and other physical property of the Ferromatik
Business for substantially the same uses for which they were used prior to
the Closing Date.
Press Releases of the Registrant dated November 2, 1993, announcing the
acquisition described above and 1993 third quarter earnings data are filed
herewith as Exhibit 99.2 and 99.3, respectively, and are incorporated
herein by reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of business acquired
The following financial statements of the Malterdingen Plastics
Machinery Division of Kloeckner Ferromatik Desma GmbH are filed
herewith as Item 7(a):
Report of Independent Auditors
Combined Statements of Net Assets as of September 30, 1993
and 1992
Combined Statements of Operations for the years ended
September 30, 1993 and 1992
Combined Statements of Cash Flows for the years ended
September 30, 1993 and 1992
Notes to Combined Financial Statements
(b) Pro forma financial information
The Pro Forma Consolidated Balance Sheet as of October 9, 1993
and the related Pro Forma Consolidated Statements of Earnings
for the fiscal year ending January 2, 1993 and the 40 weeks
ended October 9, 1993 reflecting, on a pro forma basis, the
acquisition of the Malterdingen Plastics Machinery Division of
Kloeckner Ferromatik Desma GmbH are filed herewith as Item 7(b)
ITEM 7(a)
COMBINED FINANCIAL STATEMENTS
MALTERDINGEN PLASTICS MACHINERY DIVISION
OF
KLOECKNER FERROMATIK DESMA GMBH
SUBJECT TO THE PURCHASE AND SALE AGREEMENT
BETWEEN KLOECKNER FERROMATIK DESMA GMBH, KLOECKNER-WERKE AG
AND
CINCINNATI MILACRON INC.
YEARS ENDED SEPTEMBER 30, 1993 AND 1992
WITH REPORT OF INDEPENDENT AUDITORS
MALTERDINGEN PLASTICS MACHINERY DIVISION
OF
KLOECKNER FERROMATIK DESMA GMBH
SUBJECT TO THE PURCHASE AND SALE AGREEMENT
BETWEEN KLOECKNER FERROMATIK DESMA GMBH, KLOECKNER-WERKE AG
AND
CINCINNATI MILACRON INC.
Combined Financial Statements
Years Ended September 30, 1993 and 1992
CONTENTS
Page
----
Report of Independent Auditors 3
Combined Financial Statements:
Combined statements of net assets 4
Combined statements of operations 5
Combined statements of cash flows 6
Notes to combined financial statements 7-24
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors
Cincinnati Milacron Inc.
We have audited the accompanying combined statements of net
assets of the Malterdingen Plastics Machinery Division of
Kloeckner Ferromatik Desma GmbH (the "Acquired Business", see
Note 1) subject to the Purchase and Sale Agreement between
Kloeckner Ferromatik Desma GmbH, Kloeckner-Werke AG and
Cincinnati Milacron Inc. as of September 30, 1993 and 1992, and
the related combined statements of operations, and cash flows for
the years then ended. These financial statements are the
responsibility of the Acquired Business' Management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards in Germany and the United States. Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the combined net assets
of the Acquired Business as of September 30, 1993 and 1992, and
the combined results of their operations and their cash flows for
the years then ended in conformity with generally accepted
accounting principles in Germany.
Generally accepted accounting principles in Germany vary in
certain significant respects from generally accepted accounting
principles in the United States. Application of generally
accepted accounting principles in the United States would have
affected the results of operations for the years ended September
30, 1993 and 1992, and net assets as of September 30, 1993 and
1992, to the extent summarized in Note 3 to the combined
financial statements.
Duesseldorf BDO BINDER GMBH
December 10, 1993 Wirtschaftspruefungsgesellschaft
Dr. G. Kaulen J. Rolls
Wirtschaftspruefer Certified Public
Accountant
MALTERDINGEN PLASTICS MACHINERY DIVISION
OF
KLOECKNER FERROMATIK DESMA GMBH
SUBJECT TO THE PURCHASE AND SALE AGREEMENT
BETWEEN KLOECKNER FERROMATIK DESMA GMBH, KLOECKNER-WERKE AG
AND
CINCINNATI MILACRON INC.
Combined Statements of Net Assets
(DM in thousands)
September 30, 1993 1992
---- ----
ASSETS Note
----
Non-current assets:
Intangible assets 4 645 947
Fixed assets 5 30,094 35,648
Financial assets 6 1,476 1,470
------ ------
Total non-current assets 32,215 38,065
------ ------
Current assets:
Inventories 7 50,230 56,978
Less payments received on orders 1,377 1,101
------ ------
48,853 55,877
Receivables 8 35,345 42,139
Other assets 1,949 2,140
Cash 3,262 2,158
------ ------
Total current assets 89,409 102,314
Prepaid expenses 657 769
------ ------
Total assets 122,281 141,148
------- -------
LIABILITIES
Accruals:
Accruals for pensions and similar
obligations 9 11,991 11,127
Tax accruals 10 356 134
Other accruals 11 21,330 19,779
------ ------
33,677 31,040
------ ------
Liabilities: 12
Bank borrowings 19,247 26,759
Customer deposits 1,840 2,860
Trade payables 9,683 4,623
Bills of exchange 1,390 1,497
Payable to related entities 5,624 7,538
Other liabilities 5,612 5,888
------ ------
43,396 49,165
------ ------
Total liabilities 77,073 80,205
------ ------
Net Assets 13 45,208 60,943
====== ======
See notes to combined financial statements.
MALTERDINGEN PLASTICS MACHINERY DIVISION
OF
KLOECKNER FERROMATIK DESMA GMBH
SUBJECT TO THE PURCHASE AND SALE AGREEMENT
BETWEEN KLOECKNER FERROMATIK DESMA GMBH, KLOECKNER-WERKE AG
AND
CINCINNATI MILACRON INC.
Combined Statements of Operations
(DM in thousands)
Year Ended September 30, 1993 1992
---- ----
Note
----
Sales 17 152,645 233,145
Decrease in inventories 3,827 18,794
------- -------
Total output 148,818 214,351
Other operating income 18 5,298 6,342
Cost of materials and services 16 75,394 117,194
Personnel expenses 20 60,922 71,530
Depreciation and amortization 4-6 7,049 8,172
Other operating expenses 21 25,651 28,908
------- -------
Operating loss 14,900 5,111
Minority interest in equity of
associated entities 483 369
Interest expense, net 22 2,863 5,047
------- -------
Results from ordinary business
activities 17,280 9,789
Income taxes 1 110
Other taxes 878 1,273
------- -------
Net loss 18,159 11,172
======= =======
See notes to the combined financial statements.
MALTERDINGEN PLASTICS MACHINERY DIVISION
OF
KLOECKNER FERROMATIK DESMA GMBH
SUBJECT TO THE PURCHASE AND SALE AGREEMENT
BETWEEN KLOECKNER FERROMATIK DESMA GMBH, KLOECKNER-WERKE AG
AND
CINCINNATI MILACRON INC.
Combined Statements of Cash Flows
(DM in thousands)
Year Ended September 30, 1993 1992
---- ----
Cash flows from operating
activities:
Net loss 18,159 11,172
Adjustments to reconcile net loss
to net cash provided by
operating activities:
Depreciation and amortization 7,049 8,172
Increase in provisions 896 1,429
Changes in assets and liabilities:
Inventories 7,024 27,082
Receivables 6,984 13,193
Accounts payable and other
operating liabilities 3,516 (7,682)
Other operating assets (6) (372)
------- ------
Cash provided by operating
activities 7,304 30,650
------ ------
Cash flows from investing
activities:
Purchase of fixed assets (1,835) (5,962)
Disposals of fixed assets 648 553
------ ------
Cash used for investing activities (1,187) (5,409)
------ ------
Cash flows from financing
activities:
Proceeds from bank borrowings 8,487 1,771
Repayments of bank borrowings (15,998) (13,238)
Transfers from (to) Kloeckner, net 2,543 (16,604)
Other, net (45) 1,367
------ ------
Cash used for financing activities (5,013) (26,704)
------ ------
Net increase (decrease) in cash 1,104 (1,463)
Cash at beginning of year 2,158 3,621
------ ------
Cash at end of year 3,262 2,158
====== ======
See notes to combined financial statements.
MALTERDINGEN PLASTICS MACHINERY DIVISION
OF
KLOECKNER FERROMATIK DESMA GMBH
SUBJECT TO THE PURCHASE AND SALE AGREEMENT
BETWEEN KLOECKNER FERROMATIK DESMA GMBH, KLOECKNER-WERKE AG
AND
CINCINNATI MILACRON INC.
Years Ended September 30, 1993 and 1992
Notes to Combined Financial Statements
1. PURCHASE AND SALE OF THE ACQUIRED BUSINESS
On November 3, 1993, a Purchase and Sale Agreement ("the
Agreement") was entered into between Kloeckner Ferromatik Desma
GmbH ("Ferromatik"), Kloeckner-Werke AG ("Kloeckner"), both of
which are German companies, and Cincinnati Milacron Inc.
("Milacron"), a United States company. Ferromatik and Kloeckner
agreed to sell to Milacron the Malterdingen Division of
Ferromatik and certain Ferromatik foreign sales and service
subsidiaries, collectively referred to hereafter as the "Acquired
Business", and the related assets, liabilities and shareholdings
as specified in the Agreement.
The Agreement specifies that, effective October 1, 1993,
Ferromatik is to contribute most elements of the Acquired
Business to a wholly-owned subsidiary, FM Maschinenbau GmbH,
which has since been renamed Ferromatik Milacron GmbH, ("FM").
The shares of FM were transferred to Milacron on November 8,
1993; however, not all of the transactions as specified in the
Agreement have been completed.
The Acquired Business includes the design, manufacture,
production, reconditioning, rebuilding, sale or distribution of
1) hydraulic thermoplastic injection molding machines with a
clamping force up to 450 metric tons, and 2) any electrical
thermoplastic injection molding machines, and 3) certain other
machinery specified in the Agreement. They operate in one
segment, plastics machinery, but the machines are used in a wide
variety of industries.
2. SIGNIFICANT ACCOUNTING POLICIES
The financial statements of the Acquired Business have been
prepared in accordance with the Deutsches Handelsgesetzbuch (the
"German Commercial Code"), which represents generally accepted
accounting principles in Germany ("German GAAP") using the
significant accounting policies described hereunder. German GAAP
varies in certain significant respects from generally accepted
accounting principles in the United States ("US GAAP"). See Note
3 for a discussion of the significant difference between German
GAAP and US GAAP.
The accounting principles and valuation methods of the Acquired
Business have been consistently applied for both years presented.
ALL AMOUNTS HEREIN ARE SHOWN IN THOUSANDS OF DEUTSCHE MARKS
("DM").
Principles of Combination - The entities included in the
accompanying combined financial statements and the related equity
ownership interest of the Acquired Business at September 30, 1993
are as follows:
Name City/Country Ownership %
- ---- ------------ -----------
Kloeckner Ferromatik Desma
GmbH-Malterdingen Division Malterdingen/Germany 100
FM Maschinenbau GmbH Malterdingen/Germany 100
Kloeckner Ferromatik
France S.A. Maurepas/France 100
Kloeckner Ferromatik
Benelux B.V. Zeist/The Netherlands 100
Kloeckner Ferromatik
Desma S.A. Barcelona/Spain 100
Kloeckner Ferromatik
Desma Ltd. Chesterfield/England 100
KFD Sales and Service, Inc. Erlanger, Kentucky/USA 100
Kloeckner Ferromatik AG Huenenberg/Switzerland 49
Kloeckner Ferromatik
Desma A/S Copenhagen/Denmark 26
Kloeckner Ferromatik
Desma C.A. Caracas/Venezuela 26
FM was incorporated in fiscal year 1993. The ownership interest
in Kloeckner Ferromatik Desma C.A. at September 30, 1992 was
100%.
For all of the above listed entities, in which the Acquired
Business has more than a 50% equity ownership interest (the
"affiliated entities"), the full consolidation method has been
used. The Agreement specifies that Milacron will purchase one
third of the net book value of KFD Sales and Service, Inc. ("KFD
Inc."). Accordingly, one third of the assets, liabilities and
operations of KFD Inc. have been combined using the full
consolidation method. All material affiliated entity accounts and
transactions have been eliminated in combination.
Entities in which the Acquired Business has a 20% to 50% equity
interest (the "associated entities") have been combined using the
equity method.
Foreign Currency Translation - The foreign currency amounts
representing foreign affiliated or associated entities in the
combined statements of net assets have been translated into DM at
the fiscal year-end exchange rates. Amounts in the combined
statements of operations have been translated into DM using the
average exchange rates for the periods involved. Translation
gains or losses are included in net assets.
Intangible Assets - Intangible assets consist solely of purchased
computer software. Amortization is provided using the straight-
line method over five years.
Financial Assets - Financial assets consist primarily of
investments in the proportional equity of associated entities.
Fixed Assets - Fixed assets are valued at acquisition cost.
Depreciation is provided using the straight-line method over the
assets' useful lives as follows:
Buildings - 20 - 50 years
Site improvements - 10 - 20 years
Technical facilities
and machinery - 5 - 20 years
Facilities, factory
and office equipment - 5 - 25 years
Transportation
equipment - 4 years
Depreciation on additions during the first and second half of the
year are calculated using full or half-year rates, respectively.
Low cost additions are expensed in the year of acquisition.
Inventories - Raw materials, manufacturing supplies and goods
purchased for resale are valued at the lower of cost, determined
on an average or first-in, first-out method, or market. Finished
goods are valued at the lower of manufacturing cost, determined
on an average or first-in, first-out method, or net realizable
value and comprise direct material and labor and applicable
manufacturing overheads including depreciation charges.
Obsolescence provisions are made to the extent that inventory
risks are determinable.
Trade Accounts Receivable - Receivables are presented net of
allowances for doubtful accounts. Allowances are provided for
both the specific and general risks inherent in receivables. The
Acquired Business evaluates the credit worthiness of each
customer, but it does not normally require its trade accounts
receivable to be collateralized.
Income Taxes - Deferred taxes result from temporary differences
in the basis of assets and liabilities for tax and financial
reporting purposes and apply primarily to KFD Inc. The other
entities comprising the Acquired Business maintain substantially
the same tax and financial reporting bases for assets and
liabilities.
Pension Obligations - Accruals and provisions for pensions and
similar obligations are actuarially determined and are based on
discounted amounts.
Liabilities - Liabilities are presented at their repayment
amounts.
Other Accruals - Accruals for employee termination indemnity are
based on contractual agreements between management and the
Workers' Council. Accruals and provisions for estimated costs
related to product warranty are made at the time the products are
sold. Provisions for losses on open sales contracts are made
based on the estimated excess of direct costs over the contract
price.
Revenue Recognition - Revenue is recognized when title passes or
services are rendered, net of discounts and rebates granted.
Foreign Currency Transactions - Foreign currency receivables and
payables are recorded at historical rates unless using the
exchange rate at the fiscal year-end would result in an
unrealized foreign currency exchange loss. This results in
unrealized losses being recognized currently and unrealized gains
being deferred until they are realized. Unrealized gains on
foreign exchange forward contracts are deferred and recognized as
part of the specific transaction hedged, but unrealized losses
are recognized currently.
Total Cost Method - The statements of operations have been
presented using the total cost (or type of expenditure) method
which is the most common German GAAP method in use. In this
format, production and all other expenses incurred during the
period are classified by type of expense. Sales for the period,
and the net decrease in finished goods and work in process are
classified as Total Output.
3. SIGNIFICANT DIFFERENCE BETWEEN GERMAN GAAP AND US GAAP
The combined financial statements of the Acquired Business comply
with German GAAP as prescribed by the German Commercial Code, which
differs in certain significant respects from US GAAP. The
significant difference which affects the combined net loss and
combined net assets of the Acquired Business is as follows:
Pensions - The Acquired Business provides for pension costs based
on actuarial studies using the entry age method as defined in the
German tax code. US GAAP, as defined by SFAS No. 87, "Employers'
Accounting for Pensions", is more prescriptive, particularly as
to the use of actuarial assumptions, and requires that a
different actuarial method (the projected unit credit method) be
used.
Reconciliation to US GAAP - The following is a summary of the
significant adjustments to net loss for the years ended September
30, 1993 and 1992 and to net assets as of September 30, 1993 and
1992, which would be required if US GAAP had been applied instead
of German GAAP.
Note 1993 1992
---- ---- ----
Net loss as reported in the
combined statements of opera-
tions under German GAAP 18,159 11,172
Adjustment required to conform
with US GAAP - Pensions 9 (552) (9)
------ ------
NET LOSS IN ACCORDANCE WITH US GAAP 17,607 11,163
====== ======
Net assets as reported in the
combined statements of net
assets under German GAAP 45,208 60,943
Adjustment required to conform
with US GAAP - Pensions 9 406 132
------ ------
NET ASSETS IN ACCORDANCE WITH US GAAP 45,614 61,075
====== ======
New US accounting standards - not yet adopted
SFAS No. 109 - "Accounting for Income Taxes" establishes an
accounting standard whereby deferred taxes are provided for all
temporary differences using the liability method based on enacted
rates. This Statement was issued in February 1992 and is
effective for fiscal years beginning after December 15, 1992.
SFAS No. 112 - "Employers' Accounting for Postemployment
Benefits" establishes an accounting standard for employers who
provide benefits to former or inactive employees after employment
but before retirement. The Statement was issued in November 1992
and is effective for fiscal years beginning after December 15,
1993.
The Acquired Business has not yet addressed the impact of the
above Statements on its combined net assets or combined results
of operations and has not yet determined the period in which SFAS
No. 112 will be adopted.
4. INTANGIBLE ASSETS
1993 1992
---- ----
Balance at beginning of year 1,920 2,674
Additions 89 267
Reclassifications (140)
Disposals (882)
----- -----
Balance at end of year 2,009 1,919
Accumulated amortization 1,364 972
----- -----
Net Book Value 645 947
===== =====
Amortization for the year 391 1,199
===== =====
5. FIXED ASSETS
<TABLE>
<CAPTION>
Other
equipment Advance
Technical factory payments
equipment and and
Land and and office construction
buildings machinery equipment in progress Total
--------- --------- --------- ----------- -----
<S> <C> <C> <C> <C> <C>
Balance at
October 1, 1991 20,636 16,751 23,357 999 61,743
Additions 71 2,307 2,441 506 5,325
Reclassifications 60 917 140 (977) 140
Disposals 401 1,001 1,402
Translation (213) (14) (339) (566)
------ ------ ------ --- ------
20,554 19,560 24,598 528 65,240
Accumulated
depreciation 4,044 10,254 15,294 29,592
------ ------ ------ --- ------
Net Book Value at
September 30, 1992 16,510 9,306 9,304 528 35,648
====== ===== ===== === ======
Depreciation for
the year 1,134 1,863 3,976 6,973
====== ===== ===== ======
Balance at
October 1, 1992 20,554 19,560 24,598 528 65,240
Additions 27 588 1,084 1,699
Reclassifications 216 287 25 (528)
Disposals 1,402 1,019 2,421
Translation (54) 8 3 (43)
------ ------ ------ --- ------
20,743 19,041 24,691 64,475
Accumulated
depreciation 5,170 11,092 18,119 34,381
------ ------ ------ --- ------
Net Book Value at
September 30, 1993 15,573 7,949 6,572 30,094
====== ===== ===== === ======
Depreciation for
the year 1,132 1,915 3,609 6,656
===== ===== ===== === =====
</TABLE>
6. FINANCIAL ASSETS
Investments
in
associated Long-term
entities receivables Total
----------- ----------- -----
Balance at
October 1, 1991 1,292 360 1,652
Additions 369 44 413
Disposals 402 169 571
Translation (18) 1 (17)
----- --- -----
1,241 236 1,477
Accumulated interest
discount 7 7
----- --- -----
Net Book Value at
September 30, 1992 1,241 229 1,470
===== === =====
Balance at
October 1, 1992 1,241 236 1,477
Additions 526 2 528
Disposals 365 92 457
Translation (63) (1) (64)
----- --- -----
1,339 145 1,484
Accumulated interest
discount 8 8
----- --- -----
Net Book Value at
September 30, 1993 1,339 137 1,476
===== === =====
Interest discount expense
for the year 2 2
=== = =
7. INVENTORIES
1993 1992
---- ----
Raw materials and manufacturing supplies 17,032 17,565
Work in process 14,906 20,308
Finished goods, parts and goods purchased
for resale 17,887 17,424
Advance payments to suppliers 405 1,681
------ ------
50,230 56,978
====== ======
8. RECEIVABLES AND OTHER ASSETS
1993 1992
---- ----
Trade receivables, of which maturing
after more than one year 917
(1992: nil) 26,578 31,762
Receivables from related entities 7,397 8,677
Receivables from associated and
other related entities 1,370 1,700
------ ------
35,345 42,139
====== ======
Related entities are those in which the Kloeckner Group has more
than a 50% equity ownership interest. Other related entities are
those in which the Kloeckner Group has less than a 50% equity
ownership interest.
Other assets consist primarily of non-trade receivables, of which
amounts maturing after more than one year are 811 (1992: 740).
9. PENSION OBLIGATIONS
The Acquired Business operates two defined benefit pension plans
in Germany, both based on years of service, to substantially all
employees. One plan, which is for the benefit of non-exempt
employees, is based on a combination of fixed DM amounts plus
salary based benefits. The other plan is for exempt employees
and is based on fixed DM amounts only.
Some of the foreign affiliated and associated entities operate
immaterial defined benefit and defined contribution pension
plans.
Pension benefit obligations are determined based on an assumed
interest rate of 6% using the entry age actuarial cost method.
Pension plan obligations are accrued for in the financial
statements. All of the material pension plans are unfunded.
The following information for the Acquired Business' material
pension plans is provided on a US GAAP basis (see Note 3) in
accordance with the US GAAP disclosure requirements of SFAS No.
87.
The net periodic pension cost for the retirement plans comprised:
1993 1992
---- ----
Service cost: present value of benefits
earned during the year 820 784
Interest cost on projected benefit
obligation 1,025 867
Amortization of transition amount 267 267
Curtailment gain (1,230)
----- ----
Total Pension Cost 882 1,918
=== =====
The status of the Acquired Business' retirement plans is as
follows:
1993 1992
---- ----
Actuarial present value of benefits:
Vested 8,960 8,584
Nonvested 1,858 1,979
----- -----
Accumulated benefit obligation 10,818 10,563
Effect of projected future salary increase 3,213 3,363
------ ------
Projected benefit obligation 14,031 13,926
Unrecognized transition amount (2,446) (2,931)
------ ------
Total Pension Liability 11,585 10,995
====== ======
For both 1993 and 1992, the assumed discount rate and rates of
increase in remuneration and post-retirement pension increases
used in calculating the projected benefit obligation were 7%, 4%,
and 3%, respectively.
The Acquired Business' reduction in work force (see Note 20) re-
sulted in a significant decrease in the German pension plans'
parti-cipants in 1993. The decrease in participants resulted in
a de-crease of 2,304 in the projected benefit obligation, a
decrease in the unrecognized net gain of 856, and a decrease in
the unrecognized transition amount of 218 for a net curtailment
gain of 1,230.
In accordance with SFAS No. 88 "Employers' Accounting for
Settlements and Curtailments of Defined Benefit Plans and for
Termination Benefits", the net curtailment gain is included in
the combined results of operations for 1993.
10. TAX ACCRUALS
Tax accruals include both income and other taxes and relate
primarily to taxes payable in countries other than Germany. Cash
paid for income taxes totalled 115 (1992: 346).
11. OTHER ACCRUALS
1993 1992
---- ----
Employee termination indemnity 6,594 4,461
Product warranties 6,260 6,849
Wages, salaries, bonuses, vacation pay
and related social benefit costs 4,742 4,967
Estimated future losses on open sales
contracts 1,187 1,417
Other 2,547 2,085
------ ------
21,330 19,779
====== ======
12. LIABILITIES
1993 1992
---- ----
Bank borrowings, of which due within one
year 7,830 (1992: 17,699); in more than
five years 1,700 (1992: 2,900) 19,247 26,759
Customer deposits, all due within one year 1,840 2,860
Trade payables, all due within one year 9,683 4,623
Bills of exchange, all due within one year 1,390 1,497
Payables to related entities, all due
within one year 5,624 7,538
Other liabilities, of which due within
one year 5,580 (1992: 5,791); in more
than five years nil (1992: 28), in-
cluding taxes 1,579 (1992: 1,153), and
social benefits 1,221 (1992: 1,475) 5,612 5,888
------ ------
43,396 49,165
====== ======
Total liabilities include amounts due within one year of 31,947
(1992: 40,008); in more than five years 1,700 (1992: 2,928).
Maturities of long-term bank borrowings by year after September
30, 1993 are 1994: 5,680; 1995: 3,435; 1996: 2,999; 1997: 2,057;
1998: 1,676; after 1998: 1,700. Weighted average interest rates
on bank borrowings were 7.2% (1992: 7.9%). Bank borrowings of
10,139 (1992: 15,748) are secured by mortgage conveyances and
assignment of fixed assets with net book values totalling 12,973
(1992: 16,295). Cash paid for interest totalled 2,975 (1992:
4,915).
Not included in balances with related entities for both years in
the accompanying combined statements of net assets is a central
account with Kloeckner which was used to finance other Ferromatik
Divisions for which related receivables were recorded in
Malterdingen's accounting records. Malterdingen's divisional
operating earnings and losses were also transferred to this
clearing account. Interest was charged by Kloeckner on the
outstanding balance, and Malterdingen charged interest to the
other divisions based on the related receivables. These interest
charges are also excluded from the accompanying combined
statements of operations.
The following is an analysis of these excluded intercompany
balances and the related excluded effects on operations:
1993 1992
---- ----
Balances at September 30:
Payables to Kloeckner 16,943 76,664
Receivables from other divisions, net 1,801 45,060
Average balances for the year:
Payables to Kloeckner 88,837 118,726
Receivables from other divisions, net 23,431 50,479
Average interest rate charged by Kloeckner
during the year 8.6% 9.5%
Interest (income) expense for the year:
Kloeckner 7,640 11,222
Other divisions, net (6,413) (8,100)
13. NET ASSETS
1993 1992
---- ----
Balance at beginning of year 60,943 88,203
Transfers from (to) Kloeckner, net 2,543 (15,562)
Net (loss) for the year (18,159) (11,172)
Translation differences (119) (526)
------ ------
Balance at end of year 45,208 60,943
====== ======
14. CONTINGENT LIABILITIES
1993 1992
---- ----
Issuance and transfer of bills of exchange 1,952 2,743
Guarantees 832 1,539
Warranties 210
Security for third party liabilities 26
----- -----
2,810 4,492
===== =====
Various lawsuits arising during the normal course of business are
pending against the Acquired Business. In the opinion of the
Acquired Business' management, the ultimate liability, if any,
resulting from these matters will have no significant effect on
the Acquired Business' combined net assets. The significance of
these matters on the Acquired Business' future operating results
depends on the level of future results of operations as well as
on the timing and amount of the ultimate outcomes.
15. COMMITMENTS
Commitments to purchase fixed assets were 151 (1992: 875)
The Acquired Business leases certain machinery and office
equipment under operating leases, some of which include varying
renewal and purchase options. Included in the combined state-
ments of operations are operating lease expenses totalling 1,668
(1992: 1,068). At September 30, 1993, future operating lease
commitments with initial ar remaining terms of more than one year
are 1994: 1,160, 1995: 738; 1996: 519; 1997: 139; 1998: 241;
after 1998: 22.
16. COST OF MATERIALS AND SERVICES
1993 1992
---- ----
Raw materials, consumables, supplies
and merchandise 74,239 115,949
Purchased services 1,155 1,245
------ -------
75,394 117,194
====== =======
17. GEOGRAPHIC INFORMATION
An analysis of operations by geographic region is as follows:
<TABLE>
<CAPTION>
1993 Germany Europe USA Other Total 1993
---- ------- ------ --- ----- -----
<S> <C> <C> <C> <C> <C>
Net sales 70,475 51,976 22,873 7,321 152,645
Inter-regional sales 60,995 (47,832) (5,842) (7,321)
Operating loss 6,879 5,073 2,233 715 14,900
Identifiable assets 89,374 25,798 5,770 120,942
Depreciation and
amortization 6,476 483 88 7,047
Capital expenditures 1,483 307 45 1,835
1992
----
Net sales 119,059 84,073 16,346 13,667 233,145
Inter-regional sales 71,300 (51,796) (5,837)(13,667)
Operating loss 2,610 1,843 358 300 5,111
Identifiable assets 104,021 30,881 4,360 645 139,907
Depreciation and
amortization 7,622 442 92 16 8,172
Capital expenditures 5,649 257 9 47 5,962
</TABLE>
The Acquired Business' sole manufacturing facility is located in
Malterdingen Germany, and it operates in other countries through
affiliated or associated entities as described in Note 2. For
all other countries, sales are made directly from Germany. The
above sales are to unaffiliated customers, and the net loss is
allocated to the geographic regions based on sales.
18. OTHER OPERATING INCOME
1993 1992
---- ----
Reversal of accruals 1,024 2,693
Services to third parties 737 148
Reversal of allowance for doubtful
accounts 348 687
Exchange gains 1,504 459
Other, net 1,685 2,355
----- -----
5,298 6,342
===== =====
19. RESEARCH AND DEVELOPMENT
Costs incurred for product research and development were 7,116
(1992: 6,888).
20. PERSONNEL EXPENSES\EMPLOYMENT
1993 1992
---- ----
Wages and salaries 49,856 58,662
Social levies and pensions, of which for
pensions 1,434 (1992: 1,927) 11,066 12,868
------ ------
60,922 71,530
====== ======
Employment (weighted monthly average number of employees):
Wage earners 342 451
Salaried employees 424 469
--- ---
766 920
=== ===
The above employment includes those at foreign affiliated and
associated entities totalling 117 (1992: 122).
21. OTHER OPERATING EXPENSES
1993 1992
---- ----
Termination indemnity 6,281 6,453
Sales commissions 4,296 6,617
Management fees charged by Kloeckner 3,300 4,000
Travel and entertainment 2,623 2,637
Office expense 1,775 1,844
Bad debt expense 1,347 466
Insurance 1,345 1,342
Other 4,684 5,549
------ -----
25,651 28,908
====== ======
22. INTEREST EXPENSE, NET
1993 1992
---- ----
Interest income from long-term loans 10 76
Other interest and similar income, of which
from related entities 22 (1992: 379) 1,171 1,124
Interest and similar expense 4,044 6,247
----- -----
2,863 5,047
===== =====
23. FOREIGN EXCHANGE CONTRACTS
The Acquired Business enters into foreign exchange contracts to
hedge foreign currency transactions on a continuing basis for
periods commensurate with its known or expected exposures,
primarily related to machinery sales and purchase of production
materials denominated in foreign currencies. The purpose of this
practice is to minimize the effect of foreign currency exchange
rate fluctuations on operating results. The Acquired Business
does not engage in speculation.
At September 30, 1993, the Acquired Business had outstanding
foreign exchange contracts totalling 9,588, which generally
mature in periods of one year or less. These contracts require
the Acquired Business to exchange currencies at the maturity
dates at exchange rates agreed upon at inception.
ITEM 7(b)
PRO FORMA FINANCIAL INFORMATION
(In millions, except per share data)
(Unaudited)
On February 1, 1993, Cincinnati Milacron Inc. (the "Company") completed the
acquisition of GTE Valenite Corporation ("Valenite") for approximately $69
million in cash (of which approximately $3 million was subsequently repaid
to the Company as a post-closing purchase price adjustment) and $11 million
of assumed debt. The acquisition was financed principally through the sale
of an interest in certain of the Company's accounts receivable to an
independent issuer of receivables-backed commercial paper (resulting in
proceeds of $50 million), and through borrowings from the Company's exist-
ing bank group under a new $85 million committed revolving credit facility.
On March 2, 1993, the Company announced a major restructuring program,
developed with Valenite's management, designed to improve Valenite's
profitability by lowering working capital requirements, reducing overall
expenses, increasing the level of plant modernization and improving capaci-
ty utilization. This restructuring, which includes the consolidation of
production through the closing of eleven production facilities, the down-
sizing of two production facilities and a net employee reduction in excess
of 500, is expected to result in annual cost savings between $15.6 million
and $18.8 million and is expected to be substantially completed in early
1994.
On November 8, 1993 (the "Closing Date"), the Company purchased (1) 100% of
the outstanding capital stock of FM Maschinenbau GmbH, a newly formed
corporation to which substantially all of the plastics injection molding
business of Kloeckner-Werke AG and its subsidiary, Kloeckner Ferromatik
Desma GmbH, including product lines, plant and distribution network, had
previously been contributed, and (2) the other assets and liabilities of
that business (collectively, "Ferromatik"). The total purchase price,
including assumed debt of approximately 11 million DM, was approximately 94
million DM (approximately $56 million using the exchange rate of $1 = 1.68
DM in effect on the Closing Date). The Company financed the purchase by
drawing upon its revolving credit facility with its existing bank group,
which was amended prior to the Closing Date to increase the total revolving
loan commitment available thereunder from $75 million to $130 million, and
certain other existing overseas lines of credit.
Due principally to general economic conditions in Europe, including reduced
demand for plastics injection molding machinery, the manufacturing
operations of Ferromatik's Malterdingen plant were restructured during the
fiscal years ended September 30, 1993 and 1992 to improve efficiency and
reduce personnel levels. The Company and Ferromatik have identified
additional restructuring actions, including the introduction of advanced
manufacturing technologies, to improve Ferromatik's profitability in the
future. It is expected that these additional actions, which are intended
to complement the actions already taken prior to the acquisition, will be
substantially completed during 1994. The Company estimates that the annual
savings that will result from all of these actions will be no less than
$4.2 million.
The following pro forma consolidated balance sheet and statement of
earnings (collectively the "pro forma consolidated statements") are based
on the historical financial statements of the Company, Valenite, and
Ferromatik adjusted to give effect to the acquisitions (and, in the case of
the pro forma consolidated statement of earnings, the restructurings) of
Valenite and Ferromatik. The pro forma consolidated statements of earnings
assume that both the acquisitions and the restructurings of Valenite and
Ferromatik occurred as of the first day of the Company's 1992 fiscal year,
and the pro forma consolidated balance sheet assumes that the acquisition
(but not the restructuring) of Ferromatik occurred on the last day of the
Company's 1993 fiscal third quarter.
The pro forma consolidated statements reflect the purchase method of
accounting for the acquisitions of Valenite and Ferromatik using estimated
purchase accounting adjustments which are subject to revision once
appraisals, actuarial reviews and other studies of the fair value of the
assets price and liabilities of Valenite and Ferromatik are completed. The
purchase price of Ferromatik is also subject to post-closing adjustments
which may also affect the purchase accounting adjustments reflected herein.
Final purchase accounting adjustments may differ from the pro forma
adjustments presented herein and described in the accompanying notes.
The pro forma consolidated statements do not purport to present what the
Company's financial position and results of operations would actually have
been had the acquisitions and restructurings of Valenite and Ferromatik
occurred on the first day of the Company's 1992 fiscal year or on the last
day of the Company's 1993 fiscal third quarter, as specified above, or
purport to project the Company's results of operations for any future
period. The pro forma consolidated statements reflect certain assumptions
described in the accompanying notes, including the Company's expectations
of anticipated cost savings from the restructurings of Valenite and
Ferromatik. The actual savings may vary from these expectations. The pro
forma consolidated statements and accompanying notes should be read in
conjunction with the audited consolidated financial statements of the
Company and the related notes thereto which are included in the Company's
Annual Report on Form 10-K, as amended, for its fiscal year ended January
2, 1993, the unaudited consolidated financial statements of the Company and
related notes thereto which are included in the Company's 1993 Forms 10-Q,
Amendment No. 2 to the Company's Current Report on Form 8-K dated February
1, 1993, the Company's Current Report on Form 8-K dated November 8, 1993
(each filed with the Securities and Exchange Commission), and the audited
consolidated financial statements of Ferromatik that are filed herewith as
Item 7(a).
CINCINNATI MILACRON INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEET
(In millions)
<TABLE>
<CAPTION>
Historical Cincinnati
Cincinnati Milacron
Milacron Acquisition and
Oct. 9, Historical Pro Forma Ferromatik
1993 Ferromatik (a) Adjustments Consolidated
---------- -------------- ----------- ------------
<S> <C> <C> <C> <C>
Assets
Current assets
Cash and cash equivalents. . . . . $ 23.7 $ 2.0 $ 52.9 (b) $ 29.3
(49.3)(c)
Notes and accounts receivable,
less allowances . . . . . . . . 175.5 15.8 191.3
Inventories. . . . . . . . . . . . 255.0 30.2 285.2
Other current assets . . . . . . . 38.6 6.5 45.1
------ ----- ------ -------
Total current assets . . . . . . 492.8 54.5 3.6 550.9
Property, plant and
equipment - net. . . . . . . . . . 151.8 19.0 19.4 (d) 190.2
Other noncurrent assets. . . . . . . 46.8 2.0 .2 (b) 49.6
.6 (d)
------ ----- ------ -------
Total assets . . . . . . . . . . . $691.4 $75.5 $ 23.8 $ 790.7
====== ===== ====== =======
Liabilities and Shareholders' Equity
Current liabilities
Amounts payable to banks
and current portion of
long-term debt . . . . . . . . . $ 44.6 $ 4.8 $ (2.6)(e) $ 99.9
53.1 (b)
Trade accounts payable . . . . . . 87.8 6.0 93.8
Advance billings and deposits. . . 39.6 1.1 40.7
Accrued and other
current liabilities. . . . . . . 96.4 21.2 (4.1)(e) 125.2
1.7 (c)
10.0 (d)
Accrued income taxes . . . . . . . 15.2 15.2
------ ----- ------ -------
Total current liabilities. . . 283.6 33.1 58.1 374.8
Long-term accrued liabilities. . . . 126.5 7.2 (3.5)(e) 130.2
Long-term debt and
lease obligations. . . . . . . . . 103.9 7.0 (2.6)(e) 108.3
------ ----- ------ -------
Total liabilities. . . . . . . . . 514.0 47.3 52.0 613.3
Commitments and contingencies. . . . -
Shareholders' equity
Preferred shares . . . . . . . . . 6.0 6.0
Common shares and net
assets purchased . . . . . . . . 284.6 28.2 12.8 (e) 284.6
(51.0)(c)
10.0 (d)
Accumulated deficit. . . . . . . . (101.0) (101.0)
Cumulative foreign currency
translation adjustments. . . . . (12.2) (12.2)
------ ----- ------ -------
Total shareholders' equity . . . . 177.4 28.2 (28.2) 177.4
------ ----- ------ -------
Total liabilities and
shareholders' equity . . . . . . . $691.4 $75.5 $ 23.8 $ 790.7
====== ===== ====== =======
</TABLE>
See notes to Pro Forma Consolidated Balance Sheet.
CINCINNATI MILACRON INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEET
October 9, 1993
(In millions)
(a) The amounts in the "Historical Ferromatik" column are derived from
the audited combined statement of net assets of the Malterdingen
Plastics Machinery Division of Kloeckner Ferromatik Desma GmbH as
of September 30, 1993 which was prepared based on accounting
principles generally accepted in the Federal Republic of Germany.
The balance sheet of Ferromatik presented herein reflects all
adjustments necessary to present Ferromatik's financial position in
conformity with accounting principles generally accepted in the
United States.
(b) The acquisition of Ferromatik was financed as shown in the
following table.
Funds provided:
Borrowings under revolving
credit facility. . . . . . . . . . . . . . $ 30.0
Other bank borrowings. . . . . . . . . . . . 23.1
Payment of financing fees. . . . . . . . . . (.2)
------
Total funds provided. . . . . . . . . . . $ 52.9
======
(c) The following tables depict the calculation of the Company's
purchase price and its preliminary allocation to Ferromatik's
assets using estimated purchase accounting adjustments, which are
subject to post-closing adjustments and to further revision once
appraisals, actuarial reviews and other studies of the fair value
of Ferromatik's assets and liabilities are completed. Final
purchase accounting adjustments may differ from the amounts shown
below. Under the terms of the purchase agreement, the estimated
cash purchase price of Ferromatik as of November 8, 1993 was $49.3
million. The Company also assumed existing Ferromatik debt of $6.3
million based on the exchange rate in effect as of the date of the
transaction. In the Pro Forma Consolidated Balance Sheet, such
assumed debt is valued at $6.5 million based on the exchange rate
as of September 30, 1993.
Calculation of acquisition cost:
Purchase of Ferromatik . . . . . . . . . . . $ 49.3
Accrual for transaction fees . . . . . . . . 1.7
------
Total acquisition cost. . . . . . . . . . $ 51.0
======
Allocation of acquisition cost:
Cash and cash equivalents. . . . . . . . . . $ 2.0
Accounts receivable. . . . . . . . . . . . . 15.8
Inventories. . . . . . . . . . . . . . . . . 30.2
Other current assets . . . . . . . . . . . . 6.5
Property, plant and equipment. . . . . . . . 38.4
Other noncurrent assets. . . . . . . . . . . 2.6
Historical liabilities assumed . . . . . . . (34.5)
Accrual for future restructuring costs . . . (10.0)
------
Total acquisition cost. . . . . . . . . . $ 51.0
======
(d) Purchase accounting adjustments to Ferromatik's historical asset
values as follows:
Recording of a five year agreement not to compete of $.6
million.
Write-up of the historical value of Ferromatik's property,
plant and equipment by $19.4 million to reflect estimated
fair market value.
Recording of reserves for the restructuring of Ferromatik
of $10.0 million.
Due principally to general economic conditions in Europe, including
reduced demand for plastics injection molding machinery, the
manufacturing operations of Ferromatik's Malterdingen plant were
restructured during the fiscal years ended September 30, 1993 and
1992, to improve efficiency and reduce personnel levels. The
restructuring included additional outsourcing of parts and
components that were previously manufactured at Malterdingen. As a
result of this program, the number of full time employees of the
Malterdingen plant was reduced from approximately 825 as of
September 30, 1991, to approximately 650 one year later. During
fiscal year 1993, the plant's employment level was further reduced
to approximately 585. Significant charges for severance and other
related costs are included in Ferromatik's historical results of
operations for the year ended September 30, 1992 and for the nine
months ended September 30, 1993. In September, 1993, Ferromatik
and the Works Council agreed to a Social Plan that permits further
personnel reductions based on future sales volume to as low as 450.
Based on the Social Plan approximately eighty additional employees
have been terminated or will be terminated no later than June 30,
1994. Under the terms of the purchase agreement, the severance
costs for these employees will be reimbursed by the sellers.
The Company and Ferromatik have identified additional restructuring
actions, including the introduction of advanced manufacturing
technologies, that are intended to improve Ferromatik's
profitability in the future. It is expected that these additional
actions, which are intended to complement the actions already taken
prior to the acquisition, will be substantially completed during
1994. The estimated cost of the further restructuring of
Ferromatik of $10.0 million is included as a purchase accounting
adjustment in the Pro Forma Consolidated Balance Sheet.
(e) Adjustment of Ferromatik's historical balance sheet to exclude
certain liabilities not assumed by the Company under the terms of
the purchase agreement with Kloeckner-Werke AG and its subsidiary,
Kloeckner Ferromatik Desma GmbH.
CINCINNATI MILACRON INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS
(In millions, except per share amounts)
<TABLE>
<CAPTION>
Year ended January 2, 1993
--------------------------------------------------------
Valenite Cincinnati
Historical Acquisition Milacron and
Cincinnati Historical Pro Forma Valenite
Milacron Valenite(a) Adjustments Consolidated
--------- --------- --------- ----------
<S> <C> <C> <C> <C>
Sales. . . . . . . . . . . . . . . . . . $789.2 $262.2 $(11.3)(f) $1,040.1
Cost of products sold. . . . . . . . . . 612.6 193.4 (17.5)(f) 792.0
3.5 (h)
------ ------ ------ --------
Manufacturing margins. . . . . . . . . 176.6 68.8 2.7 248.1
Other costs and expenses
Selling and administrative . . . . . . 133.6 80.3 (5.2)(e) 201.1
(6.7)(f)
(.9)(h)
Other - net. . . . . . . . . . . . . . (.2) (5.5) 2.1 (b) (3.5)
.7 (d)
2.0 (f)
(2.6)(e)
------ ------ ------ -------
Total other costs and expenses . . . 133.4 74.8 (10.6) 197.6
------ ------ ------ -------
Operating earnings (loss). . . . . . . . 43.2 (6.0) 13.3 50.5
Interest
Income . . . . . . . . . . . . . . . . 2.9 1.1 (.7)(f) 3.3
Expense. . . . . . . . . . . . . . . . (19.1) (9.9) (.8)(c) (23.2)
2.5 (e)
5.4 (f)
(1.3)(g)
------ ------ ------ -------
Interest - net . . . . . . . . . . . (16.2) (8.8) 5.1 (19.9)
------ ------ ------ -------
Earnings (loss) before
income taxes and
extraordinary item . . . . . . . . . . 27.0 (14.8) 18.4 30.6
Provision for income taxes . . . . . . . 10.9 1.6 .6(i) 13.1
------ ------ ------ -------
Earnings (loss) before
extraordinary item . . . . . . . . . . $ 16.1 $(16.4) $ 17.8 $ 17.5
====== ====== ====== =======
Earnings per common share
before extraordinary item. . . . . . . $.58 $.62
==== ====
Weighted average number of
common shares and common
share equivalents
outstanding. . . . . . . . . . . . . . 27.6 27.6
==== ====
</TABLE>
See Notes to Pro Forma Consolidated Statement of Earnings.
CINCINNATI MILACRON INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS (Continued)
(In millions, except per share amounts)
<TABLE>
<CAPTION>
Year ended January 2, 1993
--------------------------------------------------------
Cincinnati Ferromatik
Milacron and Acquisition
Valenite Historical Pro Forma Total
Consolidated Ferromatik(j) Adjustments Consolidated
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Sales. . . . . . . . . . . . . . . . . . $1,040.1 $147.4 $1,187.5
Cost of products sold. . . . . . . . . . 792.0 119.7 $ (3.8) (m) 908.5
.6 (n)
-------- ------ ------ --------
Manufacturing margins. . . . . . . . . 248.1 27.7 3.2 279.0
Other costs and expenses
Selling and administrative . . . . . . 201.1 27.1 (.4) (m) 228.0
.2 (n)
Other - net. . . . . . . . . . . . . . (3.5) 4.4 .1 (l) (3.0)
.1 (o)
(4.1)(p)
-------- ------ ------ --------
Total other costs and expenses . . . 197.6 31.5 (4.1) 225.0
-------- ------ ------ --------
Operating earnings (loss). . . . . . . . 50.5 (3.8) 7.3 54.0
Interest
Income . . . . . . . . . . . . . . . . 3.3 .8 4.1
Expense. . . . . . . . . . . . . . . . (23.2) (4.0) (3.0)(k) (26.8)
3.4 (q)
-------- ------ ------ --------
Interest - net . . . . . . . . . . . (19.9) (3.2) .4 (22.7)
-------- ------ ------ --------
Earnings (loss) before
income taxes and
extraordinary item . . . . . . . . . . 30.6 (7.0) 7.7 31.3
Provision for income taxes . . . . . . . 13.1 .1 (1.2)(r) 12.0
-------- ------ ------ --------
Earnings (loss) before
extraordinary item . . . . . . . . . . $ 17.5 $ (7.1) $ 8.9 $ 19.3
======== ====== ====== ========
Earnings per common share
before extraordinary item . . . . . . $.62 $.69
==== ====
Weighted average number of
common shares and common
share equivalents
outstanding. . . . . . . . . . . . . . 27.6 27.6
==== ====
</TABLE>
See Notes to Pro Forma Consolidated Statement of Earnings.
CINCINNATI MILACRON INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS
Year Ended January 2, 1993
(In millions)
(a) Certain amounts in the "Historical Valenite" column have been
reclassified to conform to the Company's basis of presentation
reflected in the "Historical Cincinnati Milacron" column.
Valenite's historical 1992 statement of operations includes certain
nonrecurring income and expense items that are also included in the
Pro Forma Consolidated Statement of Earnings. These include a gain
of $5.9 million on the favorable outcome of a lawsuit and a
provision for income taxes related to 1991 of $2.7 million.
Valenite's historical results also include the amortization of
preacquisition goodwill of $.4 million. The effect of these items
and certain other nonrecurring expenses on Valenite's historical
1992 statement of operations is as follows:
Increase
(Decrease)
----------
Cost of products sold . . . . . . . . . . . . $ .3
-----
Manufacturing margins . . . . . . . . . . . (.3)
Other costs and expenses
Selling and administrative. . . . . . . . . 2.2
Other - net . . . . . . . . . . . . . . . . (5.5)
-----
Total other costs and expenses . . . . . . (3.3)
-----
Earnings (loss) before income taxes
and extraordinary item. . . . . . . . . . . 3.0
Provision for income taxes. . . . . . . . . . 2.7
-----
Earnings (loss) before extraordinary item . . $ .3
=====
The effect of the inclusion of these items in the Pro Forma
Consolidated Statement of Earnings is to increase earnings (loss)
before extraordinary item by $2.1 million (using the Company's pro
forma effective tax rate (see note (i) below)), or $.06 per share.
(b) Costs of $2.1 million related to the sale of $50.0 million of
accounts receivable. The sale transaction involving the Company's
accounts receivable occurred under a three year receivables
purchase agreement with an independent issuer of receivables-backed
commercial paper, pursuant to which the Company agreed to sell on
an ongoing basis and without recourse, an undivided percentage
ownership interest in designated pools of accounts receivable. In
order to maintain the balance in the designated pools of accounts
receivable sold, the Company may sell undivided percentage
interests in new receivables (subject to a maximum of $50 million
of interests in uncollected receivables owned at any time by the
purchaser (plus certain reserves)) as existing receivables are
collected.
(c) Interest expense of $.8 million on borrowings of $18.0 million
under a new $85.0 million committed revolving credit facility,
which was subsequently increased to $130 million (see notes (k) and
(l) below).
(d) Amortization expense of $.7 million related to program and
commitment fees aggregating $1.7 million paid by the Company in
connection with the sale of an interest in certain accounts
receivable (see note (b) above) and the new revolving credit
facility (see note (c) above) on a straight line basis over two and
one half years.
(e) Elimination of charges for services (net of expected costs to
replace) and allocations from Valenite's former parent and
intercompany interest charged on debt forgiven by Valenite's former
parent. The effect on the Pro Forma Consolidated Statement of
Earnings is as follows:
Increase
(Decrease)
----------
Other costs and expenses
Selling and administrative . . . . . . . . $ (5.2)
Other - net. . . . . . . . . . . . . . . . (2.6)
------
Total other costs and expenses. . . . . (7.8)
------
Operating earnings (loss) . . . . . . . . . . 7.8
Interest - net. . . . . . . . . . . . . . . . (2.5)
------
Earnings (loss) before income taxes
and extraordinary item. . . . . . . . . . . $ 10.3
======
(f) On March 2, 1993, the Company announced a major restructuring
program, developed with Valenite's management, designed to improve
Valenite's profitability by lowering working capital requirements,
reducing overall expenses, increasing the level of plant
modernization and improving capacity utilization. The
restructuring, which includes the consolidation of production
through the closing of eleven production facilities, the downsizing
of two production facilities, and a net employee reduction in
excess of 500, will be completed in early 1994. The restructuring,
which was originally estimated to cost $42.8 million ($27.4 million
in cash), was reserved at the time of the Valenite acquisition and
the Company will not record any special charge to earnings. The
original reserve included amounts for severance ($15.4 million),
relocation, phase-out and start-up ($18.8 million), and losses on
the sale on other disposal of surplus inventory, machinery and
equipment and production facilities ($6.7 million), as well as for
legal and other miscellaneous costs related to the restructuring
plan ($1.9 million). Based on a comprehensive analysis, the
Company and Valenite originally estimated that the annual
improvement in pretax earnings that would result from the
completion of the restructuring plan would be approximately $15.6
million. Pro forma adjustments of this amount are included in the
Pro Forma Consolidated Statement of Earnings as follows:
Increase
(Decrease)
----------
Sales . . . . . . . . . . . . . . . . . . . . $(11.3)
Cost of products sold . . . . . . . . . . . . $(17.5)
------
Manufacturing margins . . . . . . . . . . . 6.2
Other costs and expenses
Selling and administrative . . . . . . . . ( 6.7)
Other - net. . . . . . . . . . . . . . . . 2.0
------
Total other costs and expenses. . . . . (4.7)
------
Operating earnings (loss) . . . . . . . . . . $ 10.9
Interest - net. . . . . . . . . . . . . . . . ( 4.7)
------
Earnings (loss) before income
taxes and extraordinary item. . . . . . . . $ 15.6
======
Since the original plan was developed, the Company has identified
additional opportunities for long-term cost savings and it is
currently estimated that the total cost of the plan, including
these additional actions, will be approximately $49 million.
However, these additional actions are expected to result in annual
savings in excess of the original $15.6 million by as much as 20%.
(g) Interest expense of $1.3 million related to estimated borrowings of
$27.4 million to finance cash expenditures related to the
restructuring of Valenite (see note (f) above).
(h) The acquisition of Valenite by the Company has resulted in certain
changes in the nature and the level of benefits provided to
Valenite's employees. The major earnings effects of these changes
are as follows:
Increase
(Decrease)
----------
Reduced pension income. . . . . . . . . . . . $ (1.2)
Savings from retention of postretirement
medical benefit obligation by the
former parent . . . . . . . . . . . . . . . 1.1
Cost of defined contribution plan to
replace former defined benefit
pension plan. . . . . . . . . . . . . . . . (2.5)
------
Total . . . . . . . . . . . . . . . . . $ (2.6)
======
The effect of these changes on the Pro Forma Consolidated Statement
of Earnings is as follows:
Increase
(Decrease)
----------
Cost of products sold . . . . . . . . . . . . $ 3.5
------
Manufacturing margins . . . . . . . . . . . (3.5)
Other costs and expenses
Selling and administrative . . . . . . . . (.9)
------
Total other costs and expenses. . . . . .9
------
Operating earnings (loss) . . . . . . . . . . $ (2.6)
======
(i) Adjustment to increase the consolidated provision for income taxes
by $.6 million based on the Company's pro forma effective tax rate
to reflect the consolidation of Valenite's operations.
(j) The amounts in the "Historical Ferromatik" column are derived from
the audited combined statement of operations of the Malterdingen
Plastics Machinery Division of Kloeckner Ferromatik Desma GmbH for
the fiscal year ended September 30, 1992 which was prepared based
on accounting principles generally accepted in the Federal Republic
of Germany. The statement of earnings of Ferromatik presented
herein reflects all adjustments necessary to present Ferromatik's
results of operations in conformity with accounting principles
generally accepted in the United States.
Ferromatik's historical statement of operations for the year ended
September 30, 1992 includes non-recurring charges totaling $4.1
million for severance and other costs incurred in connection with
the restructuring of its operations (see notes (m) and (p) below),
In the "Historical Ferromatik" column, this amount is included in
the line captioned "Other-net" in the Pro Forma Consolidated
Statement of Earnings.
(k) Interest expense of $3.0 million on borrowings totaling $53.1
million under the Company's $130.0 million committed revolving
credit facility (see note (l) below) and other lines of credit.
(l) Amortization expense on a straight line basis over two and one half
years of $.2 million of additional commitment fees incurred in
connection with the amendment of the Company's committed revolving
credit facility to increase the lines of credit available there
under to $130.0 million.
(m) Due principally to general economic conditions in Europe, including
reduced demand for plastics injection molding machinery, the
manufacturing operations of Ferromatik's Malterdingen plant were
restructured during the fiscal years ended September 30, 1993 and
1992 to improve efficiency and reduce personnel levels. The
restructuring included additional outsourcing of parts and
components that were previously manufactured at Malterdingen. As a
result of this program, the number of full time employees of the
Malterdingen plant was reduced from approximately 825 as of
September 30, 1991, to approximately 650 one year later. During
fiscal year 1993, the plant's employment level was further reduced
to approximately 585. In September, 1993, Ferromatik and the Works
Council agreed to a Social Plan that permits further personnel
reductions based on future sales volume to as low as 450. Based on
the Social Plan, approximately eighty additional employees have
been terminated or will be terminated no later than June 30, 1994.
Under the terms of the purchase agreement, the severance costs for
these employees will be reimbursed by the sellers.
The Company and Ferromatik have identified additional restructuring
actions, including the introduction of advanced manufacturing
technologies, that are intended to improve Ferromatik's
profitability in the future. It is expected that these additional
actions, which are intended to complement the actions already taken
prior to the acquisition, will be substantially completed during
1994. The estimated cost of the further restructuring of
Ferromatik of $10.0 million is included as a purchase accounting
adjustment in the Pro Forma Consolidated Balance Sheet.
Based on a comprehensive analysis, the Company estimates that the
minimum annual savings that will result from all of the actions
described above will be no less than $4.2 million. Accordingly,
pro forma adjustments of this amount are included in the Pro Forma
Consolidated Statement of Earnings for the year ended January 2,
1993 as follows:
Increase
(Decrease)
----------
Cost of products sold . . . . . . . . . . . . $ (3.8)
------
Manufacturing margins. . . . . . . . . . . 3.8
Other costs and expenses. . . . . . . . . . .
Selling and administration . . . . . . . . (.4)
------
Total other costs and expenses. . . . . (.4)
------
Operating earnings (loss) . . . . . . . . . . $ 4.2
======
The above amounts are based principally on the savings that will be
realized from the known reductions of the Malterdingen plant's
employment level that have already occurred since September 30,
1993 and that will occur by June 30, 1994. The actual annual
savings from all of the restructuring actions completed to date and
the additional actions that will be completed in the future are
expected to be considerably higher than $4.2 million. However,
these additional savings have not been included in the Pro Forma
Consolidated Statement of Earnings because the Company cannot
accurately and precisely quantify these additional savings at this
time.
In addition to the expected savings from the restructuring of
Ferromatik, the Company's existing operations are also expected to
benefit from the synergistic opportunities created by the
acquisition. These opportunities fall into the general areas of
marketing, manufacturing technology, and product development. The
Company expects to significantly reduce or eliminate the annual
operating losses currently being incurred by its European plastics
machinery marketing operation through its integration with the
Ferromatik organization. In addition, Ferromatik's worldwide sales
and distribution network will be used to expand the markets for the
Company's existing plastics machinery products and the Company's
computer controls will be utilized in Ferromatik's machines. The
Pro Forma Consolidated Statement of Earnings does not give effect
to these and other potential earnings improvements from the
synergies that are expected to result from the acquisition.
(n) Additional depreciation expense related to the adjustment of the
historical value of Ferromatik's property, plant and equipment to
reflect fair market value (see note (d) to the Pro Forma
Consolidated Balance Sheet).
(o) Amortization of the covenant not to compete received from
Kloeckner-Werke AG and Kloeckner Ferromatik Desma GmbH in
connection with the purchase of Ferromatik on a straight line basis
over five years.
(p) Elimination of $4.1 million of non-recurring charges for severance
and other costs incurred during the fiscal year ended September 30,
1992 in connection with the restructuring of Ferromatik's
operations.
(q) Reduction in Ferromatik's historical interest expense to eliminate
interest on debt in excess of the $6.5 million of debt assumed by
the Company.
(r) Adjustment to reduce the consolidated provision for income taxes by
$1.2 million based on the Company's pro forma effective tax rate to
reflect the acquisition of Ferromatik and the related financing.
The Pro Forma Consolidated Statement of Earnings for the year ended January
2, 1993 does not reflect an extraordinary tax benefit from loss
carryforward of $5.4 million, or $.19 per share, recorded by the Company in
its historical Consolidated Statement of Earnings in 1992. After giving
effect to the Valenite and Ferromatik Acquisition Pro Forma Adjustments,
the amount of this extraordinary credit would be reduced to $4.0 million,
or $.15 per share.
CINCINNATI MILACRON INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS
(In millions, except per share amounts)
<TABLE>
<CAPTION>
Forty weeks ended October 9, 1993
--------------------------------------------------------
Valenite Cincinnati
Historical Acquisition Milacron and
Cincinnati Historical Pro Forma Valenite
Milacron Valenite(a) Adjustments Consolidated
---------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Sales. . . . . . . . . . . . . . . . . . $756.6 $18.9 $775.5
Cost of products sold. . . . . . . . . . 575.7 14.5 $(1.0)(c) 589.2
------ ----- ----- ------
Manufacturing margins. . . . . . . . . 180.9 4.4 1.0 186.3
Other costs and expenses
Selling and administrative . . . . . . 143.1 4.8 (.2)(c) 147.7
Write-down of subsidiary . . . . . . . 18.1 18.1
Other - net. . . . . . . . . . . . . . .8 .2 (b) 1.0
------ ----- ----- ------
Total other costs and expenses . . . 162.0 4.8 - 166.8
------ ----- ----- ------
Operating earnings (loss). . . . . . . . 18.9 (.4) 1.0 19.5
Interest
Income . . . . . . . . . . . . . . . . 1.6 1.6
Expense. . . . . . . . . . . . . . . . (12.5) (.1) (12.6)
------ ----- ----- ------
Interest - net . . . . . . . . . . . (10.9) (.1) - (11.0)
------ ----- ----- ------
Earnings (loss) before
income taxes and
extraordinary item . . . . . . . . . . 8.0 (.5) 1.0 8.5
Provision for income taxes . . . . . . . 6.1 .1 .1 (d) 6.3
------ ----- ----- ------
Earnings (loss) before
extraordinary item and
cumulative effect of
changes in methods
of accounting. . . . . . . . . . . . . $ 1.9 $ (.6) $ .9 $ 2.2
====== ===== ===== ======
Earnings (loss) per
common share before
extraordinary item
and cumulative effect
of changes in methods
of accounting. . . . . . . . . . . . $.06 $.06
==== ====
Weighted average number of
common shares and common
share equivalents
outstanding. . . . . . . . . . . . . . 31.9 31.9
==== ====
</TABLE>
See Notes to Pro Forma Consolidated Statement of Earnings.
CINCINNATI MILACRON INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS (Continued)
(In millions, except per share amounts)
<TABLE>
<CAPTION>
Forty weeks ended October 9, 1993
--------------------------------------------------------
Cincinnati Ferromatik
Milacron and Acquisition
Valenite Ferromatik Pro Forma Total
Consolidated Historical(e) Adjustments Consolidated
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Sales. . . . . . . . . . . . . . . . . . $775.5 $68.3 $843.8
Cost of products sold. . . . . . . . . . 589.2 55.1 $(2.7)(h) 642.0
.4 (i)
------ ----- ----- ------
Manufacturing margins. . . . . . . . . 186.3 13.2 2.3 201.8
Other costs and expenses
Selling and administrative . . . . . . 147.7 18.1 (.3)(h) 165.6
.1 (i)
Write-down of subsidiary . . . . . . . 18.1 18.1
Other - net. . . . . . . . . . . . . . 1.0 2.8 .1 (g) .4
.1 (j)
(3.6)(k)
------ ----- ----- ------
Total other costs and expenses . . . 166.8 20.9 (3.6) 184.1
------ ----- ----- ------
Operating earnings (loss). . . . . . . . 19.5 (7.7) 5.9 17.7
Interest
Income . . . . . . . . . . . . . . . . 1.6 .6 2.2
Expense. . . . . . . . . . . . . . . . (12.6) (1.9) (2.3)(f) (15.4)
1.4 (l)
------ ----- ----- ------
Interest - net . . . . . . . . . . . (11.0) (1.3) (.9) (13.2)
------ ----- ----- ------
Earnings (loss) before
income taxes extraordinary
item and cumulative effect
of changes in methods of
accounting . . . . . . . . . . . . . . 8.5 (9.0) 5.0 4.5
Provision for income taxes . . . . . . . 6.3 - (.6)(m) 5.7
------ ----- ----- ------
Earnings (loss) before
extraordinary item and
cumulative effect of
changes in methods
of accounting. . . . . . . . . . . . . $ 2.2 $(9.0) $ 5.6 $ (1.2)
====== ===== ===== ======
Earnings (loss) per
common share before
extraordinary item
and cumulative effect
of changes in methods
of accounting. . . . . . . . . . . . . $.06 $(.04)
==== =====
Weighted average number of
common shares and common
share equivalents
outstanding. . . . . . . . . . . . . . 31.9 31.9
==== =====
</TABLE>
See Notes to Pro Forma Consolidated Statement of Earnings.
CINCINNATI MILACRON INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS
FORTY WEEKS ENDED OCTOBER 9, 1993
(In millions)
(a) The amounts in the "Historical Valenite" column represent
Valenite's unaudited results of operations for the month of
January, 1993. Valenite's results of operations subsequent to
January 31, 1993, are consolidated in the "Historical Cincinnati
Milacron" column.
(b) Costs of $.2 million for one month related to the sale of $50.0
million of accounts receivable. The sale transaction involving the
Company's accounts receivable occurred under a three year
receivables purchase agreement with an independent issuer of
receivables-backed commercial paper, pursuant to which the Company
agreed to sell on an ongoing basis and without recourse, an
undivided percentage ownership interest in designated pools of
accounts receivable. In order to maintain the balance in the
designated pools of accounts receivable sold, the Company may sell
undivided percentage interests in new receivables (subject to a
maximum of $50 million of interests in uncollected receivables
owned at any time by the purchaser (plus certain reserves)) as
existing receivables are collected.
(c) On March 2, 1993, the Company announced a major restructuring
program, developed with Valenite's management, designed to improve
Valenite's profitability by lowering working capital requirements,
reducing overall expenses, increasing the level of plant
modernization and improving capacity utilization. The
restructuring, which includes the consolidation of production
through the closing of eleven production facilities, the downsizing
of two production facilities, and a net employee reduction in
excess of 500, will be completed in early 1994. The restructuring,
which was originally estimated to cost $42.8 million ($27.4 million
in cash), was reserved at the time of the Valenite acquisition and
the Company will not record any special charge to earnings. The
original reserve included amounts for severance ($15.4 million),
relocation, phase-out and start-up ($18.8 million), and losses on
the sale on other disposal of surplus inventory, machinery and
equipment and production facilities ($6.7 million), as well as for
legal and other miscellaneous costs related to the restructuring
plan ($1.9 million). Based on a comprehensive analysis, the
Company and Valenite originally estimated that the annual
improvement in pretax earnings that would result from the
completion of the restructuring plan would be approximately $15.6
million. Pro forma adjustments for one month based on this amount
are included in the Pro Forma Consolidated Statement of Earnings as
follows:
Increase
(Decrease)
----------
Cost of products sold. . . . . . . . . . . $ (1.0)
------
Manufacturing margins. . . . . . . . . . 1.0
Other costs and expenses
Selling and administrative . . . . . . . (.2)
------
Total other costs and expenses (.2)
------
Operating earnings (loss). . . . . . . . . $ 1.2
======
Since the original plan was developed, the Company has identified
additional opportunities for long-term cost savings and it is
currently estimated that the total cost of the plan, including
these additional actions, will be approximately $49 million.
However, these additional actions are expected to result in annual
savings in excess of the original $15.6 million by as much as 20%.
(d) Adjustment to increase the consolidated provision for income taxes
by $.1 million based on the Company's pro forma effective tax rate
to reflect the consolidation of Valenite's operations.
(e) The amounts in the "Historical Ferromatik" column are derived from
the audited combined statement of operations of the Malterdingen
Plastics Machinery Division of Kloeckner Ferromatik Desma GmbH for
the fiscal year ended September 30, 1993 which was prepared based
on accounting principles generally accepted in the Federal Republic
of Germany. The statement of earnings of Ferromatik for the nine
months ended September 30, 1993 presented herein reflects all
adjustments necessary to present Ferromatik's results of operations
for that period in conformity with accounting principles generally
accepted in the United States.
Ferromatik's historical statement of operations for the nine months
ended September 30, 1993 includes non-recurring charges totaling
$3.6 million for severance and other costs incurred in connection
with the downsizing of its operations (see notes (h) and (k)
below). In the "Historical Ferromatik" column, this amount is
included in the line captioned "Other-net" in the Pro Forma
Consolidated Statement of Earnings.
(f) Interest expense of $2.3 million on borrowings totaling $53.1
million under the Company's $130.0 million committed revolving
credit facility (see note (g) below) and other lines of credit.
(g) Amortization expense on a straight line basis over two and one half
years of $.2 million of additional commitment fees incurred in
connection with the amendment of the Company's committed revolving
credit facility to increase the lines of credit available
thereunder to $130.0 million.
(h) Due principally to general economic conditions in Europe, including
reduced demand for plastics injection molding machinery, the
manufacturing operations of Ferromatik's Malterdingen plant were
restructured during the fiscal years ended September 30, 1993 and
1992, to improve efficiency and reduce personnel levels. The
restructuring included additional outsourcing of parts and
components that were previously manufactured at Malterdingen. As a
result of this program, the number of full time employees of the
Malterdingen plant was reduced from approximately 825 as of
September 30, 1991, to approximately 650 one year later. During
fiscal year 1993, the plant's employment level was further reduced
to approximately 585. In September, 1993, Ferromatik and the Works
Council agreed to a Social Plan that permits further personnel
reductions based on future sales volume to as low as 450. Based on
the Social Plan, approximately eighty additional employees have
been terminated or will be terminated no later than June 30, 1994.
Under the terms of the purchase agreement, the severance costs for
these employees will be reimbursed by the sellers.
The Company and Ferromatik have identified additional restructuring
actions, including the introduction of advanced manufacturing
technologies, that are intended to improve Ferromatik's
profitability in the future. It is expected that these additional
actions, which are intended to complement the actions already taken
prior to the acquisition, will be substantially completed during
1994. The estimated cost of the further restructuring of
Ferromatik of $10.0 million is included as a purchase accounting
adjustment in the Pro Forma Consolidated Balance Sheet.
Based on a comprehensive analysis, the Company estimates that the
minimum annual savings that will result from all of the actions
described above will be no less than $4.2 million. Accordingly,
pro forma adjustments of approximately 75% of this amount, or $3.0
million, are included in the Pro Forma Consolidated Statement of
Earnings for the forty weeks ended October 9, 1993 as follows:
Increase
(Decrease)
----------
Cost of products sold . . . . . . . . . . . . $ (2.7)
------
Manufacturing margins. . . . . . . . . . . 2.7
Other costs and expenses. . . . . . . . . . .
Selling and administration . . . . . . . . (.3)
------
Total other costs and expenses. . . . . (.3)
------
Operating earnings (loss) . . . . . . . . . . $ 3.0
======
The above amounts are based principally on the savings that will be
realized from the known reductions of the Malterdingen plant's
employment level that have already occurred since September 30,
1993 and that will occur by June 30, 1994. The actual annual
savings from all of the restructuring actions completed to date and
the additional actions that will be completed in the future are
expected to be considerably higher than $4.2 million. However,
these additional savings have not been included in the Pro Forma
Consolidated Statement of Earnings because the Company cannot
accurately and precisely quantify these additional savings at this
time.
In addition to the expected savings from the restructuring of
Ferromatik, the Company's existing operations are also expected to
benefit from the synergistic opportunities created by the
acquisition. These opportunities fall into the general areas of
marketing, manufacturing technology, and product development. The
Company expects to significantly reduce or eliminate the annual
operating losses currently being incurred by its European plastics
machinery marketing operation through its integration with the
Ferromatik organization. In addition, Ferromatik's worldwide sales
and distribution network will be used to expand the markets for the
Company's existing plastics machinery products and the Company's
computer controls will be utilized in Ferromatik's machines. The
Pro Forma Consolidated Statement of Earnings does not give effect
to these and other potential earnings improvements from the
synergies that are expected to result from the acquisition.
(i) Additional depreciation expense related to the adjustment of the
historical value of Ferromatik's property, plant and equipment to
reflect fair market value (see note (d) to the Pro Forma
Consolidated Balance Sheet).
(j) Amortization of the covenant not to compete received from
Kloeckner-Werke AG and Kloeckner Ferromatik Desma GmbH in
connection with the purchase of Ferromatik on a straight line basis
over five years.
(k) Elimination of $3.6 million non-recurring charges for severance and
other costs incurred in connection with the restructuring of
Ferromatik's operations.
(l) Reduction in Ferromatik's historical interest expense to eliminate
interest on debt in excess of the $6.5 million of debt assumed by
the Company.
(m) Adjustment to reduce the consolidated provision for income taxes by
$.6 million based on the Company's pro forma effective tax rate to
reflect the acquisition of Ferromatik and the related financing.
The Pro Forma Consolidated Statement of Earnings for the forty weeks ended
October 9, 1993 does not reflect an extraordinary after tax charge of $4.4
million, or $.14 per share, related to the early extinguishment of debt on
a charge of $52.1 million, or $1.64 per share, for the cumulative effect of
changes in methods of accounting, both of which are included in the
Company's historical Consolidated Condensed Statement of Earnings for that
period. The acquisition of Ferromatik and the Acquisition Pro Forma
Adjustments reflected herein does not change these amounts.
The following Exhibits are included with this Form 8-K/A.
Exhibit Sequential
Number Description of Exhibit Page Number
2.1 Purchase Agreement dated as of *
November 2, 1993, between
Klockner Ferromatik Desma GmbH
and Klockner-Werke
Aktiengesellshaft and Cincinnati
Milacron Inc. (Schedules and
Exhibits to the Purchase
Agreement have been omitted
pursuant to Rule 6.01 (b) (2) of
Regulation S-K. Such Schedules
and Exhibits are listed and
described in the Purchase
Agreement. The Registrant hereby
agrees to furnish to the
Securities and Exchange
Commission, upon its request, any
or all of such omitted Schedules
and Exhibits)
2.2 Notarial Deed dated November 8, *
1993, between Klockner Ferromatik
Desma GmbH and Klockner-Werke
Aktiengesellshaft and Cincinnati
Milacron Inc. (including Exhibit 2
specifying an amendment to Clause
2.2.2 of the Purchase Agreement)
2.3 Letter Agreement dated as of *
November 8, 1993, between
Cincinnati Milacron Inc. and
Klockner Ferromatik Desma GmbH
7.1 Consent of BDO Binder GmbH 48
99.1 Amendment Number One dated as of *
October 26, 1993, to the Amended
and Restated Revolving Credit
Agreement dated as of January 28,
1993, and amended and restated as
of July 20, 1993, among
Cincinnati Milacron Inc., the
Lenders listed therein and Bankers
Trust Company, as Agent
99.2 Press Release of the Registrant *
dated November 2, 1993
99.3 Press Release of the Registrant *
dated November 2, 1993
* Previously filed
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Cincinnati Milacron Inc.
(Registrant)
By: /s/ Ronald D. Brown
-------------------
Ronald D. Brown
Vice President - Finance
and Chief Financial Officer
Date: January 24, 1994
----------------
ITEM 7.1 CONSENT OF INDEPENDENT AUDITORS
As independent auditors, we hereby consent to the use of our report dated
December 10, 1993, relating to the combined financial statements of the
Plastics Machinery Division of Klockner Ferromatik Desma GmbH, and to all
references to our Firm included in or made a part of the Form 8-K/A
(Amendment No. 1) of Cincinnati Milacron Inc. dated January 21, 1994.
Dusseldorf BDO Binder GmbH
January 21, 1994 Wirtschaftsprufungsgesellschaft
Dr. G. Kaulen J. Rolls
Wirtschaftsprufer Certified Public
Accountant
