=============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
___________
FORM 10-Q
[x] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the quarter ended October 8, 1994
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the transition period from __________ to __________
Commission file number 1-8485
CINCINNATI MILACRON INC.
(Exact name of registrant as specified in its charter)
Delaware 31-1062125
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4701 Marburg Avenue
Cincinnati, Ohio 45209
(Address of principal executive offices)
(513)841-8100
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [x] No [ ]
Number of shares of Common Stock, $1.00 par value, outstanding as
of November 17, 1994: 33,738,585
============================================================================
CINCINNATI MILACRON INC. AND SUBSIDIARIES
INDEX
PAGE NO.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Balance Sheet 3
Consolidated Condensed Statement of Earnings 4
Consolidated Condensed Statement of Cash Flows 5
Notes to Consolidated Condensed Financial
Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 11
PART II. OTHER INFORMATION
Item 6. (a) Exhibits 17
(b) Reports on Form 8-K 17
Signatures 18
Index to Exhibits 19
PART I. FINANCIAL INFORMATION
CINCINNATI MILACRON INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
(IN MILLIONS)
OCT. 8, JAN. 1,
1994 1994
<S> <C> <C>
------ ------
ASSETS
Current assets
Cash and cash equivalents . . . . . . . . . . . . . . . $ 19.8 $ 18.8
Notes and accounts receivable, less allowances
of $9.1 in 1994 and $7.9 in 1993. . . . . . . . . . . 175.3 188.3
Inventories
Raw materials . . . . . . . . . . . . . . . . . . . . 32.9 21.5
Work-in-process and finished parts. . . . . . . . . . 187.6 155.7
Finished products . . . . . . . . . . . . . . . . . . 71.7 70.0
------ ------
Total inventories . . . . . . . . . . . . . . . . . 292.2 247.2
Other current assets. . . . . . . . . . . . . . . . . . 34.6 29.3
------ ------
Total current assets. . . . . . . . . . . . . . . . . 521.9 483.6
------ ------
Property, plant and equipment . . . . . . . . . . . . . . 450.9 431.3
Less accumulated amortization and allowances for
depreciation. . . . . . . . . . . . . . . . . . . . . 258.7 247.3
------ ------
Property, plant and equipment - net . . . . . . . . 192.2 184.0
Other noncurrent assets . . . . . . . . . . . . . . . . . 65.2 62.0
------ ------
TOTAL ASSETS. . . . . . . . . . . . . . . . . . . . . $779.3 $729.6
====== ======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Amounts payable to banks and current portion of
long term debt. . . . . . . . . . . . . . . . . . . . $ 72.4 $ 77.6
Trade accounts payable. . . . . . . . . . . . . . . . . 94.6 84.6
Advance billings and deposits . . . . . . . . . . . . . 47.1 36.9
Accrued and other current liabilities . . . . . . . . . 142.1 170.2
------ ------
Total current liabilities . . . . . . . . . . . . . . 356.2 369.3
Long-term accrued liabilities . . . . . . . . . . . . . . 128.3 128.6
Long-term debt and lease obligations. . . . . . . . . . . 143.3 107.6
------ ------
TOTAL LIABILITIES . . . . . . . . . . . . . . . . . . . 627.8 605.5
------ ------
Commitments and contingencies . . . . . . . . . . . . . . - -
SHAREHOLDERS' EQUITY
Preferred shares. . . . . . . . . . . . . . . . . . . . 6.0 6.0
Common shares (outstanding: 33.7 in 1994 and 33.5
in 1993). . . . . . . . . . . . . . . . . . . . . . 287.9 284.8
Accumulated deficit . . . . . . . . . . . . . . . . . . (135.7) (151.2)
Cumulative foreign currency translation adjustments . . (6.7) (15.5)
------ ------
TOTAL SHAREHOLDERS' EQUITY. . . . . . . . . . . . . . 151.5 124.1
------ ------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY. . . . . . . . $779.3 $729.6
====== ======
</TABLE>
See notes to consolidated condensed financial statements.
CINCINNATI MILACRON INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF EARNINGS
(UNAUDITED)
<TABLE>
<CAPTION>
(IN MILLIONS, EXCEPT PER-SHARE AMOUNTS)
16 WEEKS ENDED 40 WEEKS ENDED
------------------ ------------------
OCT. 8, OCT. 9, OCT. 8, OCT. 9,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
------ ------ ------ ------
Sales . . . . . . . . . . . . . . . . . $361.2 $300.7 $876.0 $756.6
Cost of products sold . . . . . . . . . 271.4 229.4 661.9 575.7
------ ------ ------ ------
Manufacturing margins . . . . . . . . 89.8 71.3 214.1 180.9
------ ------ ------ ------
Other costs and expenses
Selling and administrative. . . . . . 68.5 56.7 166.2 143.1
Write-down of subsidiary. . . . . . . - 18.1 - 18.1
Other - net . . . . . . . . . . . . . 1.1 (.6) 4.1 .8
------ ------ ------ ------
Total other costs and expenses. . . 69.6 74.2 170.3 162.0
------ ------ ------ ------
Operating earnings (loss) . . . . . . . 20.2 (2.9) 43.8 18.9
Interest
Income. . . . . . . . . . . . . . . . .7 .5 1.6 1.6
Expense . . . . . . . . . . . . . . . (5.3) (3.7) (12.8) (12.5)
------ ------ ------ ------
Interest - net. . . . . . . . . . . (4.6) (3.2) (11.2) (10.9)
------ ------ ------ ------
Earnings (loss) before income taxes,
extraordinary item and cumulative
effect of changes in methods of
accounting. . . . . . . . . . . . . . 15.6 (6.1) 32.6 8.0
Provision for income taxes. . . . . . . 3.7 1.8 7.8 6.1
------ ------ ------ ------
Earnings (loss) before extraordinary
item and cumulative effect of
changes in methods of accounting. . . 11.9 (7.9) 24.8 1.9
Extraordinary loss on early
extinguishment of debt. . . . . . . . - - - (4.4)
Cumulative effect of changes
in methods of accounting. . . . . . . - - - (52.1)
------ ------ ------ ------
Net earnings (loss) . . . . . . . . . . $ 11.9 $ (7.9) $ 24.8 $(54.6)
====== ====== ====== ======
Earnings (loss) per common share
Earnings (loss) before extraordinary
item and cumulative effect of
changes in methods of accounting. . $.35 $(.23) $.72 $ .06
Extraordinary loss on early
extinguishment of debt. . . . . . . - - - (.14)
Cumulative effect of changes
in methods of accounting. . . . . . - - - (1.64)
---- ----- ---- ------
Net earnings (loss) . . . . . . . . . $.35 $(.23) $.72 $(1.72)
==== ===== ==== ======
Dividends per common share. . . . . . . $.09 $.09 $.27 $.27
Weighted average number of shares
and common share equivalents
outstanding (in thousands). . . . . . 34,040 34,019 34,017 31,867
</TABLE>
See notes to consolidated condensed financial statements.
CINCINNATI MILACRON INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
(IN MILLIONS)
16 WEEKS ENDED 40 WEEKS ENDED
------------------- ------------------
OCT. 8, OCT. 9, OCT. 8, OCT. 9,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
------ ------ ------ ------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
OPERATING ACTIVITIES CASH FLOWS
Net earnings (loss) . . . . . . . . . $ 11.9 $ (7.9) $ 24.8 $(54.6)
Extraordinary loss on early
extinguishment of debt. . . . . . . - - - 4.4
Cumulative effect of changes in
methods of accounting . . . . . . . - - - 52.1
Operating activities providing
(using) cash
Depreciation. . . . . . . . . . . 8.7 8.3 21.6 20.3
Write-down of subsidiary. . . . . - 18.1 - 18.1
Deferred income taxes . . . . . . - 1.0 1.8 2.4
Working capital changes
Notes and accounts receivable . 18.9 6.0 20.2 28.4
Inventories . . . . . . . . . . (23.8) (2.4) (42.3) (.5)
Other current assets. . . . . . (2.5) 3.5 (4.2) 5.6
Trade accounts payable and
other current liabilities . . (16.4) (33.2) (18.8) (71.1)
(Increase) decrease in other
noncurrent assets . . . . . . .8 11.6 (1.0) 11.4
Decrease in long-term
accrued liabilities . . . . . . (.3) (1.3) (1.8) (1.6)
Other - net . . . . . . . . . . . .6 (1.6) (1.5) (3.0)
------ ------ ------ ------
Net cash provided (used) by
operating activities. . . . . (2.1) 2.1 (1.2) 11.9
------ ------ ------ ------
INVESTING ACTIVITIES CASH FLOWS
Capital expenditures. . . . . . . . . (14.3) (7.9) (26.2) (14.5)
Net disposals of property, plant
and equipment . . . . . . . . . . . 1.0 3.7 3.3 17.3
Acquisition of Valenite . . . . . . . - - - (73.6)
Cash received on disposition
of subsidiaries . . . . . . . . . . .4 5.0 2.7 5.0
------ ------ ------ ------
Net cash provided (used) by
investing activities. . . . . . (12.9) .8 (20.2) (65.8)
------ ------ ------ ------
FINANCING ACTIVITIES CASH FLOWS
Dividends paid. . . . . . . . . . . . (3.1) (3.1) (9.3) (8.7)
Issuance of long-term debt. . . . . . - - 115.4 -
Repayments of long-term debt and
lease obligations . . . . . . . . . (2.0) (1.2) (62.5) (61.5)
Increase (decrease) in amounts
payable to banks. . . . . . . . . . 23.7 9.9 (24.3) 23.9
Net issuance of common shares . . . . .5 .4 3.1 113.7
Redemption premium on early
extinguishment of debt. . . . . . . - - - (4.7)
------ ------ ------ ------
Net cash provided by
financing activities. . . . . . 19.1 6.0 22.4 62.7
------ ------ ------ ------
Increase in cash and cash equivalents . 4.1 8.9 1.0 8.8
Cash and cash equivalents at
beginning of period . . . . . . . . . 15.7 14.8 18.8 14.9
------ ------ ------ ------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD . . . . . . . . . . . . $ 19.8 $ 23.7 $ 19.8 $ 23.7
====== ====== ====== ======
</TABLE>
See notes to consolidated condensed financial statements.
CINCINNATI MILACRON INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
BASIS OF PRESENTATION
- ---------------------
In the opinion of management, the accompanying unaudited consolidated condensed
financial statements contain all adjustments, including only normal recurring
adjustments except as indicated below, necessary to present fairly the company's
financial position, results of operations and cash flows.
The Consolidated Condensed Balance Sheet at January 1, 1994, has been derived
from the audited consolidated financial statements at that date.
The accounting policies followed by the company are set forth in the "Summary
of Significant Accounting Policies" note to the consolidated financial
statements included in the company's Annual Report on Form 10-K for the year
ended January 1, 1994, as amended by the company's Form 10-K/A relating thereto
dated July 8, 1994.
CUMULATIVE EFFECT OF CHANGES IN METHODS OF ACCOUNTING
- -----------------------------------------------------
Effective January 3, 1993, the company adopted Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes". This standard requires the
use of the liability method, under which deferred income tax assets and
liabilities related to cumulative differences between an entity's financial
reporting and tax basis balance sheets are recognized using expected future tax
rates. Previously, the company had used the deferred method, under which
deferred income tax assets and liabilities were based on historical differences
between financial reporting income and taxable income and recognized using
historical income tax rates.
The company's domestic operations also adopted Statement of Financial Accounting
Standards No. 106, "Employer's Accounting for Postretirement Benefits Other Than
Pensions", effective January 3, 1993. This standard requires that the expected
cost of postretirement benefits other than pensions, such as health care
benefits, that are provided to retirees be recognized on the accrual method
during the years that employees render service. The company provides health
care benefits to U.S. retirees and previously recognized the related cost as
these benefits were paid. Certain of the company's foreign operations also
provide postretirement health care benefits to their employees. The effect of
adopting the standard for these operations in 1995 will not be material.
The company recorded the cumulative effect (to January 2, 1993) of adopting
these standards as a charge to earnings in the first quarter of 1993, as
follows:
40 Weeks Ended
Charge to Oct. 9, 1993
Earnings Per Common
(In millions) Share
------------- --------------
Cumulative effect (to January 2, 1993)
of changes in methods of accounting:
Income taxes. . . . . . . . . . . . $ (4.2) $ (.13)
Retiree health care benefits
(with no current tax effect). . . (47.9) (1.51)
------ ------
$(52.1) $(1.64)
====== ======
The new standard for accounting for income taxes imposes significant limitations
in the recognition of deferred tax assets related to future tax deductions
previously recognized for financial reporting purposes and to net operating loss
carryforwards. Because of these limitations, and because the company entered
1993 with a U.S. net operating loss carryforward of approximately $36 million,
no income tax benefit could be recognized on a net basis for the cumulative
effect of adopting the new accounting rules for postretirement health care
benefits.
ACQUISITIONS
- ------------
On February 1, 1993, the company completed the acquisition of GTE Valenite
Corporation (Valenite) for $66 million in cash and $11 million of assumed debt.
Valenite is a leading producer of consumable industrial metalcutting products.
The acquisition, which was accounted for under the purchase method, was financed
principally through the sale of $50 million of accounts receivable and
borrowings under the company's committed revolving credit facility.
On November 8, 1993, the company completed the acquisition of Ferromatik, the
plastics injection molding machine business of Kloeckner-Werke AG, for DM 82.8
million (approximately $50 million) in cash and DM 10.6 million (approximately
$6 million) in assumed debt. Approximately $4 million of the cash purchase
price was subsequently refunded in a post-closing adjustment. The acquisition,
which is being accounted for under the purchase method, was financed primarily
through borrowings under the company's existing lines of credit, including its
committed revolving credit facility. Ferromatik, which is headquartered in
Germany, is one of the world's leading producers of injection molding machines
and is recognized for high-end technology and other specialty applications.
Unaudited pro forma sales and earnings information for the third quarter of 1993
and for the 40 weeks ended October 9, 1993, prepared under the assumption that
the acquisitions had been completed at the beginning of 1993, is as follows:
(In millions, except
per-share amounts)
<TABLE>
<CAPTION>
16 Weeks 40 Weeks
Ended Ended
Oct. 9, Oct. 9,
1993 1993
<S> <C> <C>
-------- --------
Sales . . . . . . . . . . . . . . . . . . . . . . . $328.7 $843.8
====== ======
Loss before extraordinary item
and cumulative effect of changes
in methods of accounting. . . . . . . . . . . . . $ (9.6) $ (1.2)
Extraordinary loss on early
extinguishment of debt. . . . . . . . . . . . . . - (4.4)
Cumulative effect of changes
in methods of accounting. . . . . . . . . . . . . - (52.1)
------ ------
Net loss. . . . . . . . . . . . . . . . . . . . . . $ (9.6) $(57.7)
====== ======
Loss per common share
Earnings before extraordinary item and
cumulative effect of changes in
methods of accounting . . . . . . . . . . . . . $ (.28) $ (.04)
Extraordinary loss on early
extinguishment of debt. . . . . . . . . . . . . - (.14)
Cumulative effect of changes
in methods of accounting. . . . . . . . . . . . - (1.64)
------ ------
Net loss. . . . . . . . . . . . . . . . . . . . . $ (.28) $(1.82)
====== ======
</TABLE>
DISPOSITION OF SUBSIDIARIES
- ---------------------------
During the third quarter of 1993, the company completed the previously announced
sale of its coordinate measurement and inspection machine business, LK Tool, for
$5 million in cash. In 1991, the company had announced its intention to sell LK
Tool and, at that time, recorded a provision of $14.9 million for the
anticipated loss on the sale. The completion of the transaction did not
affect the company's financial results for the third quarter of 1993 or
the 40 weeks ended October 9, 1993.
In November, 1993, the company announced its decision to sell its Sano
business. Accordingly, the company recorded a write-down in the third quarter
of 1993 in the amount of $18.1 million to adjust its investment in Sano to
estimated net realizable value. The decision to sell Sano was due in part
to its continuing operating losses. In addition, the Sano business did not
serve a major global market with good long-term growth a profit potential and
as a result, did not meet the company's criteria for a core business.
The sale was completed in February, 1994 resulting in initial cash proceeds
of $2.0 million. The remainder of the approximately $7 million gross sales
price, which is subject to adjustment in certain circumstances, is being
received through the collection of trade receivables and in varying
installments through 1999.
INCOME TAXES
- ------------
Based on its 1993 U.S. federal income tax return, the company entered 1994
with a net operating loss carryforward of $17 million. The company also had
net operating loss carryforwards in certain non-U.S. jurisdictions. Under the
accounting rules adopted by the company in 1993, tax benefits related to the
realization of net operating loss carryforwards are applied as a reduction of
the provision for income taxes. As a result, the company's effective tax
rate for the third quarter of 1994 and the 40 weeks ended October 8, 1994,
which includes provisions for U.S. state and local and certain non-U.S.
income taxes, is less than the U.S. federal statutory rate of 35%.
In the third quarter of 1993 and for the 40 weeks ended October 9, 1993,
the company's provision for income taxes consisted principally of U.S. state
and local and certain non-U.S. income taxes. In both periods, the effective
tax rate exceeded the U.S. federal statutory rate of 35% due in part to
the aforementioned state and local income taxes and to certain non-U.S.
losses for which income tax benefits were not currently available.
In addition, a charge to write down the company's investment in its
Sano business to net realizable value resulted in a domestic operating
loss in the third quarter for which only minimal tax benefits could be
recognized based on the company's effective U.S. federal tax rate for
financial reporting purposes.
LIABILITIES
- -----------
The components of accrued and other current liabilities and long-term accrued
liabilities are shown in the following tables.
(In millions)
Oct. 8, Jan. 1,
1994 1994
------- ------
ACCRUED AND OTHER CURRENT LIABILITIES
Accrued salaries, wages and
other compensation. . . . . . . . . . . . . $ 24.4 $ 21.5
Consolidation reserve . . . . . . . . . . . . 14.7 38.7
Restructuring reserves. . . . . . . . . . . . 3.2 17.1
Accrued and deferred income taxes . . . . . . 23.0 23.6
Other accrued expenses. . . . . . . . . . . . 76.8 69.3
------ ------
$142.1 $170.2
====== ======
LONG-TERM ACCRUED LIABILITIES
Accrued pension and other compensation. . . . $ 27.0 $ 24.1
Accrued postretirement health
care benefits . . . . . . . . . . . . . . . 45.2 46.9
Accrued and deferred income taxes . . . . . . 31.0 30.5
Other . . . . . . . . . . . . . . . . . . . . 25.1 27.1
------ ------
$128.3 $128.6
====== ======
LONG-TERM DEBT AND LEASE OBLIGATIONS
- ------------------------------------
Long-term debt and lease obligations are shown in the following table.
(In millions)
Oct. 8, Jan. 1,
1994 1994
------- ------
Long-term debt
8-3/8% Notes due 2004 . . . . . . . . . . . . $115.0 $ -
8-3/8% Senior Notes due 1997. . . . . . . . . - 60.0
12% Sinking Fund Debentures due 2010. . . . . 10.8 10.8
Industrial Development Revenue
Bonds due 2008. . . . . . . . . . . . . . . 10.0 10.0
Revolving credit facility . . . . . . . . . . 10.0 10.0
Other . . . . . . . . . . . . . . . . . . . . 7.7 8.8
------ ------
153.5 99.6
------ ------
Capital lease obligations
6-3/4% Bonds due 2004 . . . . . . . . . . . . 7.6 7.6
6-3/8% Bonds due 1994 - 1997. . . . . . . . . 3.4 3.4
6-1/2% Bonds due 1994 . . . . . . . . . . . . - .4
------ ------
11.0 11.4
====== ======
Total long-term debt and lease obligations. . . 164.5 111.0
Less current maturities . . . . . . . . . . . . (21.2) (3.4)
------ ------
$143.3 $107.6
====== ======
On March 16, 1994, the company completed a private financing involving the
placement of $115 million of 8-3/8% Notes due 2004. The proceeds were
used to redeem at par the company's outstanding 8-3/8% Senior Notes due 1997
and to repay borrowings under bank lines of credit. On July 8, 1994,
the company issued a prospectus offering to exchange the privately
financed 8-3/8% Notes due 2004, for an equal principal amount of new 8-3/8%
Notes due 2004 which have substantially identical terms but which have been
registered under the Securities Act of 1993. The exchange offering was
completed on September 12, 1994.
At October 8, 1994, $10.0 million of borrowings under the company's revolving
credit facility are included in long-term debt based on the expectation
that such amount will remain outstanding for more than one year.
At October 8, 1994, current maturities includes the Industrial Development
Revenue Bonds due 2008 and the 6-3/4% Bonds due 2004, both of which are
expected to become payable within one year due to the anticipated closure
of the company's two machine tool facilities in South Carolina.
LINES OF CREDIT
- ---------------
At October 8, 1994, the company had lines of credit with various U.S. and
non-U.S. banks of approximately $293 million, including committed lines
totaling $138 million. The committed lines include a $130 million revolving
credit facility which imposes restrictions on total indebtedness in
relation to total capital (debt plus tangible net worth, the latter
being approximately equal to shareholders' equity). In July, 1994, the
facility was amended to reduce the restrictions on total indebtednes and to
extend its maturity date to July, 1996. Under the provisions of the amended
facility, the company's additional borrowing capacity was approximately
$100 million at October 8, 1994.
SHAREHOLDERS' EQUITY
- --------------------
On April 15, 1993, the company completed the issuance of an additional
5.175 million common shares through a public offering, resulting in net
proceeds (after deducting issuance costs) of $100.6 million. The proceeds
of the offering were used to redeem $60.0 million of the company's 12%
Sinking Fund Debentures due 2010 and to repay borrowings under revolving
lines of credit and other bank debt. The redemption of the 12% Sinking
Fund Debentures due 2010 effective May 17, 1993 resulted in a pretax
extraordinary loss on early extinguishment of debt of $5.2 million
($4.4 million after tax) in the second quarter of 1993. The pretax
extraordinary loss included a cash call premium of $4.7 million and
the write-off of deferred financing fees of $.5 million.
CONTINGENCIES
- -------------
Various lawsuits arising during the normal course of business are pending
against the company and its consolidated subsidiaries. In the opinion
of management, the ultimate liability, if any, resulting from these
matters will have no significant effect on the company's consolidated
financial position or results of operations.
SEGMENT INFORMATION
- -------------------
The company has three business segments: plastics machinery, machine tools,
and industrial products. Financial information for each of these segments
for the third quarters of 1994 and 1993 and for the 40 weeks ended
October 8, 1994 and October 9, 1993 are presented below.
<TABLE>
<CAPTION>
(In millions)
16 Weeks Ended 40 Weeks Ended
--------------------- -------------------
Oct. 8, Oct. 9, Oct. 8, Oct. 9,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
------- ------- ------- -------
Sales
Plastics machinery. . . . . . . . . $147.9 $ 97.6 $365.6 $243.6
Machine tools . . . . . . . . . . . 102.5 106.2 238.5 267.7
Industrial products . . . . . . . . 110.8 96.9 271.9 245.3
------ ------ ------ ------
$361.2 $300.7 $876.0 $756.6
====== ====== ====== ======
Operating earnings (loss)
Plastics machinery. . . . . . . . . $ 14.2 $ 10.0 $ 30.9 $ 19.8
Machine tools . . . . . . . . . . . (1.0) 1.6 (3.4) 5.6
Industrial products . . . . . . . . 11.1 7.1 26.2 20.8
Write-down of subsidiary. . . . . . - (18.1) - (18.1)
Unallocated corporate expenses. . . (4.1) (3.5) (9.9) (9.2)
------ ------ ------ ------
$ 20.2 $ (2.9) $ 43.8 $ 18.9
====== ====== ====== ======
New orders
Plastics machinery. . . . . . . . . $155.1 $106.5 $395.0 $261.0
Machine tools . . . . . . . . . . . 98.0 61.7 259.7 207.5
Industrial products . . . . . . . . 114.6 100.4 281.1 247.0
------ ------ ------ ------
$367.7 $268.6 $935.8 $715.5
====== ====== ====== ======
Ending backlog. . . . . . . . . . . . . . . . . . . . . . . . $305.8 $241.0
====== ======
</TABLE>
Operating earnings for the plastics machinery segment for the third quarter of
1993 and the 40 weeks ended October 9, 1993 include a $2.5 million gain on the
sale of surplus land. The line captioned "Write-down of subsidiary" relates to
the plastics machinery segment.
Unallocated corporate expenses includes corporate research and development and
certain administrative expenses, including fees related to the sale of
receivables.
EARNINGS PER SHARE
- ------------------
Earnings per common share are based on the weighted average number of common
shares and common share equivalents outstanding.
CINCINNATI MILACRON INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(UNAUDITED)
RESULTS OF OPERATIONS
- ---------------------
SALES
Sales in the third quarter of 1994 were $361 million, which represented a $60
million or 20% increase over the third quarter of 1993. The increase was
primarily attributable to a $50 million or 52% increase in plastics machinery
sales and a $14 million or 14% increase in industrial products sales. These
increases more than offset a $4 million or 3% decrease in machine tools sales.
The plastics machinery sales increase was partially attributable to the
acquisition of Ferromatik on November 8, 1993, which accounted for $32 million
of the increase, and, more importantly, higher sales of U.S.-built injection
molding machines. Excluding the effect of the Ferromatik acquisition, plastics
machinery sales increased by 19%. The industrial products sales increase was
primarily due to improved sales to U.S. customers. Machine tools sales were off
slightly due to temporary production delays associated with the consolidation
of U.S. machine tool operations into facilities in Cincinnati.
Sales for the 40 weeks ended October 8, 1994 were $876 million, which
represented a $119 million or 16% increase over the comparable period of 1993.
The year-to-date sales increase is primarily attributable to (i) a $122 million
or 50% increase in plastics machinery sales, which includes an increase of
approximately $70 million in sales resulting from the acquisition of Ferromatik
and increased sales of U.S. built injection molding machines (ii) a $26 million
increase in industrial products sales resulting primarily from the inclusion of
Valenite's sales for ten periods in 1994 versus nine periods in 1993 and
internal growth of the existing businesses offset by (iii) a $29 million or 11%
decrease in machine tools sales due primarily to a decline in shipments of
systems to the aerospace industry.
Export sales were $42 million in the third quarter of 1994 and $103 million for
the 40 weeks ended October 8, 1994 compared to $46 million and $94 million in
the comparable periods of 1993. The increase in export sales for the 40 weeks
ended October 8, 1994 is primarily attributable to an increase in the plastics
machinery segment.
NEW ORDERS AND BACKLOG
New orders for the third quarter of 1994 were $368 million, which represented
a $99 million or 37% increase over the third quarter of 1993. Orders for
plastics machinery increased $49 million or 46% which primarily reflects the
strong market for U.S. built injection molding machines and the inclusion of
Ferromatik's new orders of about $37 million. Excluding the Ferromatik
acquisition, plastics machinery orders were up 11%. Machine tools orders
increased $36 million or 59% due to increased demand for Wolfpack-designed
products, primarily UK-built vertical machining centers, and orders that were
secured at the International Machine Tool Show in September. Orders for
industrial products increased $14 million or 14% due primarily to strengthening
demand in the U.S.
New orders for the 40 weeks ended October 8, 1994 were $936 million, which
represented a $220 million or 31% increase over the comparable period of 1993.
Orders for plastics machinery increased $134 million or 51% due principally to
increased demand for U.S. built injection molding machines and the inclusion of
Ferromatik's new orders of about $75 million. Machine tools new orders
increased $52 million or 25% due to a greater demand for Wolfpack-designed
products, primarily vertical machining centers. Orders for industrial products
increased $34 million or 14% due primarily to the timing of the Valenite
acquisition and strengthening demand in the U.S.
The backlog of unfilled orders was $306 million as of October 8, 1994 compared
to $241 million at the comparable date of 1993. The increase in backlog is
primarily attributable to the Russian order, the effect of the Ferromatik
acquisition, and greater demand for vertical machining centers.
MARGINS, COSTS AND EXPENSES
The consolidated manufacturing margin of 24.9% in the third quarter of 1994
compares favorably to the 23.7% in the comparable period of 1993. The increase
resulted from improvements in most plastics machinery and Valenite product lines
due in part to higher volumes. Margins for machine tools declined as the
consolidation of U.S. machine tool operations in Cincinnati has resulted in
unanticipated bottlenecks and inefficiencies that have adversely affected
margins. See "Consolidation Charge" below.
Selling expense in the third quarter of 1994 and for the 40 weeks ended October
8, 1994 increased as expected with increased sales compared with the same
periods of 1993. Selling expense as a percent of sales increased modestly for
the third quarter and the 40 weeks ended October 8, 1994 due to costs associated
with certain major trade shows and sales conferences and the higher mix of
Wolfpack-designed machines that are sold through distributors. Administrative
expense increased in the third quarter due primarily to the inclusion of
Ferromatik's administrative expense in 1994. Administrative expense for the 40
weeks ended October 8, 1994 compared with the same period of 1993 is virtually
unchanged due to a reduction in outside professional services, which offsets the
inclusion of Ferromatik's expenses.
The line captioned "Write-down of subsidiary" in the Consolidated Condensed
Statement of Earnings represented a charge of $18.1 million to revalue the
company's Sano business in anticipation of its sale. The decision to sell Sano
was due in part to its continuing operating losses. In addition, the Sano
business did not serve a major global market with good long-term growth and
profit potential and as a result, did not meet the company's criteria for a core
business. In the fourth quarter of 1993, the company recorded an additional
charge of $4.7 million related to the disposition of Sano and the business was
subsequently sold in February, 1994.
Other expense-net primarily includes costs associated with the sale of accounts
receivable which are offset by a $2.5 million gain on the sale of surplus land
for the third quarter of 1993 and the 40 weeks ended October 9, 1993.
Interest expense-net was $4.6 in the third quarter of 1994 compared to $3.2
million with the third quarter of 1993 due to higher short-term borrowing levels
to finance current operations as well as higher interest rates.
INCOME TAXES
The provision for income taxes in both 1994 and 1993 consists primarily of U.S.
state and local income taxes and non-U.S. income taxes in certain profitable
jurisdictions. U.S. federal income taxes are minimal in both periods because
benefits from the utilization of the company's U.S. and non-U.S. net operating
loss carryforwards are applied as a reduction of the provision for income taxes.
The 24% effective tax rate for the third quarter of 1994 and for the 40 weeks
ended October 8, 1994 is less than the U.S. federal statutory rate of 35% due
principally to the utilization of the company's U.S. and non-U.S. operating loss
carryforwards. For the comparable periods of 1993, the effective tax rate
exceeded the statutory rate due principally to the effects of U.S. state and
local income taxes and non-U.S. operating losses with no current tax benefits.
Also, the company had a U.S. operating loss with minimal tax benefit in the
third quarter of 1993 due to the charge to write down its investment in its Sano
business.
EARNINGS
Earnings before extraordinary item and cumulative effect of changes in methods
of accounting improved to $11.9 million, or $.35 per share, during the third
quarter of 1994 compared to a loss of $7.9 million, or $.23 per share, in 1993.
The 1993 loss was caused by the $18.1 million pretax charge to write down the
company's Sano business to net realizable value. For the 40 weeks ended October
8, 1994, earnings before extraordinary item and cumulative effect of changes in
methods of accounting improved to $24.8 million, or $.72 per share, compared to
$1.9 million, or $.06 per share, in 1993.
The net loss for the 40 weeks ended October 9, 1993 includes the effect of an
extraordinary charge of $4.4 million after tax, or $.14 per share, related to
the early extinguishment of $60 million of 12% debentures.
The net loss for the 40 weeks ended October 9, 1993 also includes the effect of
adopting two new accounting standards resulting in charges to earnings totaling
$52.1 million, or $1.64 per share. The first new standard, SFAS No. 109,
significantly changes existing methods of accounting for income taxes and
resulted in a charge of $4.2 million, or $.13 per share. The second standard,
SFAS No. 106, requires that certain postretirement benefits such as health care,
be accounted for on the accrual method. The adoption of this standard resulted
in a charge of $47.9 million, or $1.51 per share, to record the accrued
liability for retiree health care benefits. Because of the limitations on the
recognition of deferred tax assets under SFAS No. 109, no income tax benefit
could be recorded in connection with the adoption of SFAS No. 106. Except for
the cumulative effect, the new rules regarding postretirement medical benefits
did not significantly affect the company's earnings in 1994 or 1993, while the
new rules regarding income taxes had the effect of reducing the company's
effective tax rate in 1994 and 1993 due to the realization of net operating loss
carryforwards.
Net earnings were $11.9 million, or $.35 per share, in the third quarter of 1994
compared to a net loss of $7.9 million, or $.23 per share, in the comparable
period of 1993 which includes the effect of the write-down of the Sano
business. Net earnings for the 40 weeks ended October 8, 1994
per share, compared with a net loss of $54.6 million , or $1.72 per share, for
the comparable period of 1993 which loss resulted from the aforementioned
extraordinary item and changes in methods of accounting that totaled $56.5
million.
CONSOLIDATION CHARGE
- --------------------
In December, 1993, management adopted a plan to reduce machine tool
manufacturing capacity by consolidating U.S. machine tool manufacturing into
facilities in Cincinnati and accordingly, recorded a charge of $47.1 million.
Production at the company's two machine tool facilities in Fountain Inn and
Greenwood, South Carolina is being phased out and the plants are expected to be
closed by year-end 1994. The consolidation addresses excess manufacturing
capacity created by two factors: the company's successful Wolfpack program,
which has significantly reduced the hours and floorspace required to manufacture
and assemble machine tool products; and the unusually steep recession in the
aerospace industry, which has dramatically lowered demand for the company's
advanced machine tool systems.
The consolidation plan includes a provision for the phase out of production in
South Carolina offset by a simultaneous ramp up of production in Cincinnati in
order to minimize the effect of the consolidation on 1994 sales. However, two
important factors have necessitated adjustments to the original plan. First,
the favorable job market in South Carolina resulted in an unexpectedly high
early attrition rate affecting both production employees and certain other
employees who were key to the execution of the production phase out plan. The
early attrition was particularly acute in parts manufacturing and resulted in
an earlier than expected loss of capability in this area. These factors have
both slowed the phase out of production in South Carolina and hampered the ramp
up of production in Cincinnati. Further, to offset some of the lost capability,
the company has had to temporarily utilize more costly subcontract sources
during the third quarter and expects to continue this in the fourth quarter.
Second, market demand for machine tool products, including the products
previously manufactured in the South Carolina, has been strong in 1994. This
has temporarily strained key suppliers, causing part shortages and further
slowing the ramp-up of production in Cincinnati. These production delays and
inefficiencies during the consolidation process contributed to the third quarter
loss in the machine tools segment and are expected to result in an estimated $20
million to $30 million reduction in 1994 sales of products previously
manufactured in South Carolina.
Costs totaling $17 million during the third quarter of 1994 and $29 million for
the 40 weeks ended October 8, 1994 were charged against the $47.1 million of
consolidation reserves. For the latter period, approximately $2 million of
severance and related fringe benefits have been charged against the reserve and
78 employees have been terminated from the South Carolina facilities. The
company had originally expected a net employee reduction of 235 to result from
the consolidation but the increase in machine tool orders has caused this target
to be reduced to 145.
As a result of the aforementioned early attrition and the lower net employee
reduction, the cost for severance and other fringe benefits is expected to be
$5 million less than the company's original estimates. A portion of this
anticipated cost reduction is offset by a $2 million increase in South Carolina
operating losses through the closing dates. The remainder is being used to
offset incremental costs arising from actions included in the 1990 and 1991
machine tool restructurings, including lower than expected net proceeds on the
sale of the Heald facility ($2 million) and the closure of certain overseas
machine tool operations ($1 million).
The consolidation, once fully implemented, was originally expected to result in
annual cost savings of approximately $16 million. Approximately $12 million of
the $16 million in anticipated savings related to the planned net employee
reduction of 235 people. As a result of the aforementioned reduction of this
target, the actual annual cost savings are expected to be $4 million less than
originally anticipated. However, margins associated with increased sales should
offset this reduction.
Management has reevaluated the adequacy of the consolidation charge and believes
the net reserve balance of $18 million at October 8, 1994 is adequate for the
completion of remaining activities. Management believes that the consolidation
will be substantially completed by year-end, 1994.
OUTLOOK
- -------
The company expects plastics machinery sales and new orders to both exceed $500
million this year and the industrial products business should maintain a strong
pace. Demand for U.S.-built machine tools has continued at high levels. The
company expects the machine tools segment to achieve positive earnings in the
fourth quarter but its results will be lower than originally expected due to
delays and inefficiencies associated with the consolidation of U.S. machine tool
operations.
LIQUIDITY AND SOURCES OF CAPITAL
- --------------------------------
Cash and cash equivalents increased by $4 million during the third quarter of
1994 and increased $1 million from $19 million at year-end 1993 to $20 million
at October 8, 1994. Total debt increased $23 million during the third quarter
of 1994 and increased $31 million from $185 million at year-end 1993 to $216
million at October 8, 1994.
During the third quarter, working capital increased by $6 million, but the
current ratio remained unchanged at 1.5. For the 40 weeks ended October 8,
1994, working capital increased $52 million from $114 million at year-end 1993
to $166 million at October 8, 1994.
Operating activities used $2 million of cash in the third quarter of 1994 and
provided $2 million in the comparable period of 1993. Incremental cash costs
associated with the consolidation charge described above were approximately $4
million during the third quarter of 1994 and over $6 million for the 40 weeks
ended October 8, 1994. For the 40 weeks ended October 8, 1994, operating
activities used $1 million of cash and provided $12 million in 1993. For the
40 weeks ended October 9, 1993, operating activities include net cash proceeds
of $31 million related to the sale of certain U.S. accounts receivable;
comparable amounts for other periods are not material.
Expenditures for new property, plant and equipment in the third quarter of 1994
and for the 40 weeks ended October 8, 1994 were $14 million and $26 million,
respectively, as compared to $8 million and $15 million in 1993. Capital
expenditures for all of 1994 are expected to be approximately $38 million,
including approximately $7 million for the implementation of advanced
manufacturing technologies at Ferromatik and plant modernization at Valenite.
Proceeds from the disposal of property, plant and equipment during the third
quarter of 1994 and for the year-to-date period were $1 million and $3 million,
respectively, compared to $4 million and $17 million in the comparable periods
of 1993. Proceeds from the disposal of property, plant and equipment during the
third quarter of 1993 and for the year-to-date period include amounts related
to the sale of surplus assets (including surplus land in the third quarter) and
the sale and operating leaseback of certain manufacturing equipment.
The company had a number of short-term intercompany loans denominated in various
currencies totaling approximately $40 million at October 8, 1994 that are
subject to foreign exchange risk. The company also enters into various
transactions, in the ordinary course of business, for the purchase and sale of
goods and services in various currencies. The company hedges its exposure to
currency fluctuations related to intercompany loans and advances and the
purchase and sale of goods under firm commitments by entering into foreign
exchange contracts to minimize the effect of foreign currency exchange rate
fluctuations related to significant transactions.
On March 16, 1994, the company completed a private financing involving the
placement of $115 million of 8-3/8% notes due 2004. The proceeds were used to
redeem at par the company's outstanding 8-3/8% Senior Notes due 1997 and to
repay short-term debt. On September 12, 1994, the company completed an offering
to exchange the privately financed 8-3/8% Notes due 2004, for an equal principal
amount of 8-3/8% Notes due 2004 registered under the Securities Act of 1933 with
substantially identical terms.
The company's ratio of total debt to total capital (debt plus equity) was 59%
at October 8, 1994 compared to 59% at June 18, 1994 and 60% at year-end, 1993.
At October 8, 1994, the company had lines of credit of approximately $293
million with various U.S. and non-U.S. banks, including committed lines
totalling $138 million. These committed lines include a $130 million revolving
credit facility which imposes restrictions on total debt in relation to total
capital (debt and plus tangible net worth, the latter being approximately equal
to shareholders' equity). In July, 1994, the facility was amended to reduce the
restrictions imposed on total indebtedness and to extend its maturity to July,
1996. Under the provisions of the amended facility, the company's additional
borrowing capacity was approximately $100 million at October 8, 1994.
The company believes that its cash flow from operations and available credit
lines are sufficient to meet its debt service and operating requirements,
including necessary capital expenditures, in the foreseeable future.
PART II. OTHER INFORMATION
CINCINNATI MILACRON INC. AND SUBSIDIARIES
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- -----------------------------------------
(a) Exhibits
Exhibit (4) - Instruments Defining the Rights of Security
Holders, Including Indentures
Exhibit (10) - Material Contracts
Exhibit (11) - Statement Regarding Computation of Earnings
Per Share - filed as a part of Part I.
Exhibit (27) - Financial Data Schedule - filed as part of Part I.
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the quarter ended
October 8, 1994.
CINCINNATI MILACRON INC. AND SUBSIDIARIES
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 thereunto duly authorized.
Cincinnati Milacron Inc.
Date: November 21, 1994 By:/s/Robert P. Lienesch
------------------ ---------------------------------------
Robert P. Lienesch
Controller
Date: November 21, 1994 By:/s/Ronald D. Brown
------------------ ---------------------------------------
Ronald D. Brown
Vice President - Finance
and Chief Financial Officer
CINCINNATI MILACRON INC. AND SUBSIDIARIES
INDEX TO EXHIBITS
EXHIBIT NO. PAGE NO.
- ----------- --------
2 Plan of Acquisition, Reorganization, Arrangement,
Liquidation or Succession - Not Applicable.
4 Instruments Defining the Rights of Security
Holders, Including Indentures.
4(a) 12% Sinking Fund Debentures due July 15, 2010
- Incorporated herein by reference to the
company's Registration Statement on Form
S-3 (Registration No. 2-98653).
4(b) 8-3/8% Notes due 2004
- Incorporated herein by reference to the
company's Amendment No. 3 to Form S-4
Registration Statement
(registration No. 33-53009).
4(c) Cincinnati Milacron Inc. hereby agrees to
furnish to the Securities and Exchange
Commission, upon its request, the
instruments with respect to the long-term
debt for securities authorized thereunder
which do not exceed 10% of the registrant's
total consolidated assets.
10 Material Contracts
10.1 - Incorporated herein by reference to the
company's annual report on Form 10-K/A
Amendment No. 2 for the fiscal year ended
January 1, 1994.
10.2 - Amendment Number Three, dated as of July 20,
1994 to the Amended and Restated Revolving
Credit Agreement dated as of January 28, 1993,
as amended and restated as of December 31, 1993,
among Cincinnati Milacron Inc., the Lenders
listed therein and Bankers Trust Company, as Agent.
- Incorporated herein by reference to the company's
Quarterly Report on Form 10-Q for the quarter
ended June 18, 1994.
11 Statement Regarding Computation of
Earnings per Share 20
18 Letter Regarding Change in Accounting
Principles - Not Applicable.
19 Report Furnished to Security Holders
- Not Applicable.
22 Published Report Regarding Matters Submitted
To Vote of Security Holders - Not Applicable.
23 Consents of Experts and Counsel - Not Applicable.
24 Power of Attorney - Not Applicable.
27 Financial Data Schedule - Filed Herewith.
99 Additional Exhibits - Not Applicable.
EXHIBIT 11
CINCINNATI MILACRON INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(UNAUDITED)
<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT PER-SHARE AMOUNTS)
16 WEEKS ENDED 40 WEEKS ENDED
------------------- ------------------
OCT. 8, OCT. 9, OCT. 8, OCT. 9,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
------- ------- ------- --------
Net earnings (loss) . . . . . . . . . . $11,890 $(7,811) $24,753 $(54,580)
Less preferred dividends. . . . . . . . (60) (60) (180) (180)
------- ------- ------- --------
Net earnings (loss) available
to common shareholders. . . . . . . $11,830 $(7,871) $24,573 $(54,760)
======= ======= ======= ========
Primary
Average number of shares
outstanding . . . . . . . . . . . . 33,656 33,492 33,615 30,993
Add dilutive effect of
stock options based on
treasury stock method . . . . . . . 384 527 402 874
------- ------- ------- --------
Total . . . . . . . . . . . . . . . 34,040 34,019 34,017 31,867
======= ======= ======= ========
Per share amount . . . . . . . . $ .35 $ (.23) $ .72 $ (1.72)
======= ======= ======= ========
Fully diluted (a)
Average number of shares
outstanding . . . . . . . . . . . . 33,656 33,492 33,615
Add dilutive effect of stock
options based on treasury
stock method. . . . . . . . . . . . 510 527 465
------- ------- -------
Total . . . . . . . . . . . . . . . 34,166 34,019 34,080
======= ======= =======
Per share amount . . . . . . . . $ .35 $ (.23) $ .72
======= ======= =======
</TABLE>
(a) Fully diluted earnings per common share is not presented for the 40
weeks ended October 9, 1993 because the effect would be anti-dilutive.
Note: This computation is required by Regulation S-K, Item 601, and is filed
as an exhibit under Item 6 of Form 10-Q.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Other Column represents the 40 weeks ended Oct-08-1994
Amounts rounded to tenths of millions, except per share data
</LEGEND>
<CIK> 0000716823
<NAME> CINCINNATI MILACRON INC
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-02-1994
<PERIOD-END> OCT-08-1994
<CASH> 19,800,000
<SECURITIES> 0
<RECEIVABLES> 184,400,000
<ALLOWANCES> 9,100,000
<INVENTORY> 292,200,000
<CURRENT-ASSETS> 521,900,000
<PP&E> 192,200,000
<DEPRECIATION> 8,700,000
<TOTAL-ASSETS> 779,300,000
<CURRENT-LIABILITIES> 356,200,000
<BONDS> 0
<COMMON> 287,900,000
0
6,000,000
<OTHER-SE> (142,400,000)
<TOTAL-LIABILITY-AND-EQUITY> 779,300,000
<SALES> 876,000,000
<TOTAL-REVENUES> 876,000,000
<CGS> 661,900,000
<TOTAL-COSTS> 661,900,000
<OTHER-EXPENSES> 170,300,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,200,000
<INCOME-PRETAX> 32,600,000
<INCOME-TAX> 7,800,000
<INCOME-CONTINUING> 24,800,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 24,800,000
<EPS-PRIMARY> .72
<EPS-DILUTED> .72
</TABLE>
