=============================================================================
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 March 26, 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 May 2, 1994: 33,620,326
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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 14
(b) Reports on Form 8-K 14
Signatures 15
Index to Exhibits 16
CINCINNATI MILACRON INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
(IN MILLIONS)
MARCH 26, JANUARY 1,
1994 1994
<S> <C> <C>
--------- ---------
ASSETS
Current assets
Cash and cash equivalents. . . . . . . . . . . . . . . . $ 16.8 $ 18.8
Notes and accounts receivable, less allowances
of $8.4 in 1994 and $7.9 in 1993 . . . . . . . . . . . 177.7 188.3
Inventories
Raw materials. . . . . . . . . . . . . . . . . . . . . 23.9 21.5
Work-in-process and finished parts . . . . . . . . . . 165.9 155.7
Finished products. . . . . . . . . . . . . . . . . . . 64.1 70.0
------ ------
Total inventories. . . . . . . . . . . . . . . . . . 253.9 247.2
Other current assets . . . . . . . . . . . . . . . . . . 29.2 29.3
------ ------
Total current assets . . . . . . . . . . . . . . . . . 477.6 483.6
------ ------
Property, plant and equipment. . . . . . . . . . . . . . . 433.6 431.3
Less accumulated amortization and allowances for
depreciation . . . . . . . . . . . . . . . . . . . . . 249.8 247.3
------ ------
Property, plant and equipment - net. . . . . . . . . 183.8 184.0
Other noncurrent assets. . . . . . . . . . . . . . . . . . 64.6 62.0
------ ------
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . $726.0 $729.6
====== ======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Amounts payable to banks and current portion of
long term debt . . . . . . . . . . . . . . . . . . . . $ 45.1 $ 77.6
Trade accounts payable . . . . . . . . . . . . . . . . . 77.6 84.6
Advance billings and deposits. . . . . . . . . . . . . . 37.9 36.9
Accrued and other current liabilities. . . . . . . . . . 164.6 170.2
------ ------
Total current liabilities. . . . . . . . . . . . . . . 325.2 369.3
Long-term accrued liabilities. . . . . . . . . . . . . . . 127.1 128.6
Long-term debt and lease obligations . . . . . . . . . . . 144.8 107.6
------ ------
TOTAL LIABILITIES. . . . . . . . . . . . . . . . . . . . 597.1 605.5
====== ======
Commitments and contingencies. . . . . . . . . . . . . . . - -
SHAREHOLDERS' EQUITY
Preferred shares . . . . . . . . . . . . . . . . . . . . 6.0 6.0
Common shares (outstanding: 33.6 in 1994 and 33.5
in 1993) . . . . . . . . . . . . . . . . . . . . . . . 287.0 284.8
Accumulated deficit. . . . . . . . . . . . . . . . . . . (149.3) (151.2)
Cumulative foreign currency translation adjustments. . . (14.8) (15.5)
------ ------
TOTAL SHAREHOLDERS' EQUITY . . . . . . . . . . . . . . 128.9 124.1
------ ------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY . . . . . . . . $726.0 $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
SHARE AND PER-SHARE
AMOUNTS)
12 WEEKS ENDED
-----------------------
MARCH 26, MARCH 27,
1994 1993
<S> <C> <C>
-------- --------
Sales. . . . . . . . . . . . . . . . . . . . . . . . . . . $245.5 $219.3
Cost of products sold. . . . . . . . . . . . . . . . . . . 186.6 166.9
------ ------
Manufacturing margins. . . . . . . . . . . . . . . . . . 58.9 52.4
------ ------
Other costs and expenses
Selling and administrative . . . . . . . . . . . . . . . 47.9 41.5
Other - net. . . . . . . . . . . . . . . . . . . . . . . 1.2 .9
------ ------
Total other costs and expenses . . . . . . . . . . . . 49.1 42.4
------ ------
Operating earnings . . . . . . . . . . . . . . . . . . . . 9.8 10.0
Interest
Income . . . . . . . . . . . . . . . . . . . . . . . . . .4 .4
Expense. . . . . . . . . . . . . . . . . . . . . . . . . (3.6) (4.7)
------ ------
Interest - net . . . . . . . . . . . . . . . . . . . . (3.2) (3.4)
------ ------
EARNINGS BEFORE INCOME TAXES AND CUMULATIVE
EFFECT OF CHANGES IN METHODS OF ACCOUNTING . . . . . . . 6.6 5.7
Provision for income taxes . . . . . . . . . . . . . . . . 1.6 2.1
------ ------
EARNINGS BEFORE CUMULATIVE EFFECT OF CHANGES
IN METHODS OF ACCOUNTING . . . . . . . . . . . . . . . . 5.0 3.6
Cumulative effect of changes in methods of
accounting . . . . . . . . . . . . . . . . . . . . . . . - (52.1)
------ ------
NET EARNINGS (LOSS). . . . . . . . . . . . . . . . . . . . $ 5.0 $(48.5)
====== ======
Earnings (loss) per common share
Earnings before cumulative effect of
changes in methods of accounting . . . . . . . . . . . $ .14 $ .13
Cumulative effect of changes in methods
of accounting. . . . . . . . . . . . . . . . . . . . . - (1.86)
------ ------
NET EARNINGS (LOSS). . . . . . . . . . . . . . . . . . . $ .14 $(1.73)
====== ======
Dividends per common share . . . . . . . . . . . . . . . . $.09 $.09
Weighted average number of common shares and common
share equivalents outstanding (in thousands) . . . . . . 34,014 28,039
</TABLE>
See notes to consolidated condensed financial statements.
CINCINNATI MILACRON INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
(IN MILLIONS)
12 WEEKS ENDED
----------------------
MARCH 26, MARCH 27,
1994 1993
<S> <C> <C>
-------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
OPERATING ACTIVITIES CASH FLOWS
Net earnings (loss). . . . . . . . . . . . . . . . . . $ 5.0 $(48.5)
Cumulative effect of changes in
methods of accounting. . . . . . . . . . . . . . . . - 52.1
Operating activities providing (using) cash
Depreciation . . . . . . . . . . . . . . . . . . . . 6.3 5.7
Deferred income taxes. . . . . . . . . . . . . . . . 1.0 .8
Working capital changes
Notes and accounts receivable. . . . . . . . . . . 12.5 17.9
Inventories. . . . . . . . . . . . . . . . . . . . (10.6) 6.5
Other current assets . . . . . . . . . . . . . . . .3 (1.4)
Trade accounts payable and other
current liabilities. . . . . . . . . . . . . . . (11.0) (11.5)
Decrease (increase) in noncurrent assets . . . . . . (2.6) .6
Increase (decrease) in long-term accrued
liabilities. . . . . . . . . . . . . . . . . . . . (1.7) .6
Other - net. . . . . . . . . . . . . . . . . . . . . (2.5) (.8)
------ ------
Net cash provided (used) by operating activities . (3.3) 22.0
------ ------
INVESTING ACTIVITIES CASH FLOWS
Capital expenditures . . . . . . . . . . . . . . . . . (5.5) (2.9)
Net disposals of property plant and equipment. . . . . 1.3 8.7
Acquisition of Valenite. . . . . . . . . . . . . . . . - (73.6)
Initial cash received on disposition of subsidiary . . 2.0 -
------ ------
Net cash used by investing activities. . . . . . . . (2.2) (67.8)
------ ------
FINANCING ACTIVITIES CASH FLOWS
Dividends. . . . . . . . . . . . . . . . . . . . . . . (3.1) (2.7)
Issuance of long-term debt . . . . . . . . . . . . . . 115.4 -
Repayments of long-term debt and lease obligations . . (60.0) (.1)
Increase (decrease) in amounts payable to banks. . . . (51.0) 39.2
Net issuance of common shares. . . . . . . . . . . . . 2.2 2.9
------ ------
Net cash provided by financing activities. . . . . . 3.5 39.3
------ ------
DECREASE IN CASH AND CASH EQUIVALENTS. . . . . . . . . . (2.0) (6.5)
Cash and cash equivalents at beginning of period . . . . 18.8 14.9
------ ------
CASH AND CASH EQUIVALENTS AT END OF PERIOD . . . . . . . $ 16.8 $ 8.4
====== ======
</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.
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 company will adopt the standard for these
operations in 1995.
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:
1993
-------------------------------
Charge to
Earnings Per common
(In millions) share
------------- ----------
Cumulative effect (to January 2, 1993)
of changes in methods of accounting:
Income taxes . . . . . . . . . . . . $( 4.2) $ (.15)
Retiree health care benefits
(with no current tax effect) . . . (47.9) (1.71)
------ ------
$(52.1) $(1.86)
====== ======
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 12 weeks ended
March 27, 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)
12 weeks ended
March 27,
1993
--------
Sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . $251.5
======
Earnings before cumulative
effect of changes in methods
of accounting. . . . . . . . . . . . . . . . . . . . . . . $ 2.7
Cumulative effect of changes
in methods of accounting . . . . . . . . . . . . . . . . . (52.1)
------
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . $(49.4)
======
Earnings (loss) per common share
Earnings before cumulative effect
of changes in methods of accounting. . . . . . . . . . . $ .10
Cumulative effect of changes
in methods of accounting . . . . . . . . . . . . . . . . (1.86)
------
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . $(1.76)
======
DISPOSITION OF SUBSIDIARY
- - -------------------------
In February, 1994, the company completed the previously announced sale of its
Sano business resulting in initial cash proceeds of $2.0 million. The
remainder of the gross sales price of approximately $7 million will be
received through collection of trade receivables and in varying installments
through 1999.
INCOME TAXES
- - ------------
The company entered 1994 with a net operating loss carryforward of $19 million
for U.S. tax reporting purposes. 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 expected effective tax rate for the first quarter
of 1994, which includes provisions for certain foreign and domestic state and
local income taxes, is less than the federal statutory rate of 35%.
In the first quarter of 1993, the company's provision for income taxes
consisted principally of domestic state and local and certain foreign income
taxes. Benefits from the realization of the company's domestic net operating
loss carryforward had the effect of lowering the effective tax rate, while
losses in certain foreign jurisdictions for which tax benefits were not
currently available had the opposite effect. As a result of these factors,
the company's overall effective tax rate approximated the federal statutory
rate.
LIABILITIES
- - -----------
The components of accrued and other current liabilities and long-term accrued
liabilities are shown in the following tables.
(In millions)
March 26, January 1,
1994 1994
-------- ---------
ACCRUED AND OTHER CURRENT LIABILITIES:
Accrued salaries, wages and
other compensation. . . . . . . . . . . . $ 30.8 $21.5
Consolidation reserve. . . . . . . . . . . 33.9 38.7
Restructuring reserves . . . . . . . . . . 15.7 17.1
Other accrued expenses . . . . . . . . . . 84.2 92.9
------ ------
$164.6 $170.2
====== ======
LONG-TERM ACCRUED LIABILITIES:
Accrued pension and other compensation . . $ 24.4 $24.1
Accrued postretirement health
care benefits. . . . . . . . . . . . . . 45.6 46.9
Accrued and deferred tax liabilities . . . 30.7 30.5
Other . . . . . . . . . . . . . . . . . . 26.4 27.1
------ ------
$127.1 $128.6
====== ======
LONG-TERM DEBT AND LEASE OBLIGATIONS
- - ------------------------------------
Long-term debt and lease obligations are shown in the following table.
(In Millions)
Mar. 26, 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 . . . . . . . . . . . . . . . . . . . . 9.2 8.8
------ ------
155.0 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 .4
------ ------
11.4 11.4
------ ------
Total long-term debt and capital lease
obligations. . . . . . . . . . . . . . . . . . 166.4 111.0
Less current maturities. . . . . . . . . . . . . (21.6) (3.4)
------ ------
$144.8 $107.6
====== ======
On March 17, 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. The new 8-3/8% Notes do not
impose any additional financial covenants.
On March 17, 1994, the company purchased U.S. Government securities totaling
$60 million and deposited them in an irrevocable trust for redemption of the
8-3/8% Senior Notes due 1997. In the Consolidated Condensed Balance Sheet,
this transaction has been treated as an in-substance defeasance of the Notes,
which were subsequently redeemed at par on April 14, 1994 using the assets of
the trust.
At March 26, 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.
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 first quarters of 1994 and 1993 is presented below.
(In millions)
12 Weeks Ended
---------------------
March 26, March 27,
1994 1993
-------- --------
Sales:
Plastics machinery.......................... $ 96.3 $ 68.8
Machine tools............................... 68.8 83.6
Industrial products......................... 80.4 66.9
------ ------
Total sales............................... $245.5 $219.3
====== ======
Operating earnings (loss):
Plastics machinery.......................... $ 7.0 $ 3.7
Machine tools............................... (1.5) 2.4
Industrial products......................... 6.9 6.4
Unallocated corporate expenses.............. (2.6) (2.5)
------ ------
Total operating earnings.................. $ 9.8 $ 10.0
====== ======
New orders:
Plastics machinery.......................... $105.7 $ 71.6
Machine tools............................... 75.8 75.7
Industrial products......................... 85.0 67.7
------ ------
Total new orders.......................... $266.5 $215.0
====== ======
Total ending backlog.......................... $267.0 $277.8
====== ======
Unallocated corporate expenses includes corporate research and development and
certain administrative expenses.
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 first quarter of 1994 of $245 million increased by $26 million,
or 12%, over the first quarter of 1993. The increase was mostly attributable
to the acquisitions of Valenite on February 1, 1993 and Ferromatik on November
8, 1993.
Plastics machinery sales increased by $27 million, or 40%, over 1993.
Excluding the effect of the Ferromatik acquisition, sales increased by more
than 15%, due primarily to increased sales of injection molding machines to
U.S. and export customers. Machine tools' sales declined $15 million, or 18%,
due to a $20 million decline in shipments of systems to the aerospace
industry. Sales of industrial products increased $13 million, or 20%, due in
large part to the inclusion of Valenite's sales for three months in 1994
versus two months in the first quarter of 1993. While U.S. sales of grinding
wheels improved in 1994, European sales of cutting fluids declined by
approximately 20%.
NEW ORDERS AND BACKLOG
New orders for the first quarter of 1994 of $267 million increased by $51
million, or 24%, over the first quarter of 1993. Approximately 70% of the
increase was attributable to the acquisitions.
Orders for plastics machinery increased by $34 million, or 48%, over 1993 due
in part to orders for Ferromatik. However, excluding the acquisition,
plastics machinery orders were up by more than 20%. Machine tool orders were
even with last year due to increased demand for Wolfpack-designed vertical
machining centers which offset reduced orders for cells and systems. Orders
for industrial products were up $17 million, or 26%, due primarily to the
effect of the Valenite acquisition.
MARGINS, COSTS AND EXPENSES
The consolidated manufacturing margin of 24.0% for the first quarter of 1994
is virtually unchanged from the 23.9% in the comparable period of 1993
although margins fluctuated within each of the company's business segments.
Margins for plastics machinery declined modestly due to continued price
pressures. Margins for machine tools declined more significantly because of
reduced sales to the aerospace industry. Margins for industrial products
increased as increased margins for Valenite products more than offset reduced
margins for European sales of cutting fluids.
Selling and administrative expense in the first quarter of 1994 increased as
expected with increased sales. As a percent to sales, selling expense
increased modestly due to the higher mix of Valenite sales. Administrative
expense in the first quarter of 1994 is virtually unchanged from 1993 first
quarter levels.
Other expense-net includes costs associated with the sale of accounts
receivable of $.7 million and $.6 million in the first quarters of 1994 and
1993, respectively.
Interest expense-net declined by $1.1 million in the first quarter of 1994 due
primarily to reduced debt levels. The reduced debt level was made possible by
the sale of 5.2 million additional common shares in April, 1993 and the
subsequent redemption of $60 million of 12% Sinking Fund Debentures.
INCOME TAXES
In both 1994 and 1993, the provision for income taxes consists principally of
domestic state and local income taxes and foreign income taxes in profitable
jurisdictions. U.S. federal income taxes are minimal in both periods because
benefits for the utilization of the company's net operating loss carryforwards
are applied as a reduction of the provision for income taxes.
The company's consolidated effective tax rate is 24% in the first quarter of
1994 compared to 37% in the first quarter of 1993. The lower effective rate
in the first quarter of 1994 results principally from reduced non-U.S.
operating losses for which tax benefits are not currently available.
EARNINGS
Earnings before cumulative effect of changes in methods of accounting improved
to $5.0 million, or $.14 per share, in 1994 compared with $3.6 million, or
$.13 per share, in 1993. The increase was largely the result of increased
sales and earnings of plastic machinery, as well as reduced interest expense.
In the first quarter of 1993, the company adopted two new accounting standards
resulting in non-recurring charges to earnings totaling $52.1 million, or
$1.86 per share. The first new standard, SFAS No. 109, significantly changed
existing methods of accounting for income taxes and resulted in a charge of
$4.2 million, or $.15 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 $1.71 per share, to record the accrued liability for retiree
health care benefits. Because of limitations on the recognition of deferred
tax assets under SFAS No. 109, no income tax benefit could be recorded on a
net basis 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 1993 and 1994 due to the expected realization of net
operating loss carryforwards.
Net earnings were $5.0 million, or $.14 per share, in the first quarter of
1994 compared with a net loss of $48.5 million, or $1.73 per share, in the
comparable period of 1993 which resulted from the aforementioned changes
in methods of accounting.
CONSOLIDATION CHARGE
- - --------------------
In the fourth quarter of 1993, the company recorded a nonrecurring charge of
$47.1 million (with no current tax effect) for the consolidation of all U.S.
machine tool manufacturing into its facilities in Cincinnati by the end of
1994. The purpose of the consolidation is to eliminate excess capacity that
resulted from the introduction of Wolfpack-designed products that require less
hours and manufacturing floor space and from reduced demand from customers in
the aerospace industry.
On February 10, 1994, the decision to phase out production of the company's
two machine tool facilities in South Carolina was announced to employees.
Subsequently, the company notified employees of their expected termination
dates, began adjusting production schedules to allow an orderly transition of
manufacturing from the South Carolina plants to the Cincinnati, Ohio
facilities, and began ramping up assembly of standard machine tools in
Cincinnati. To date, there have been no material changes to the consolidation
plan, its costs or its expected benefits. The company continues to believe
that the consolidation will be completed in 1994.
During the first quarter of 1994, costs totaling $6 million were charged
against the consolidation reserve.
LIQUIDITY AND SOURCES OF CAPITAL
- - --------------------------------
Cash and cash equivalents decreased by $2 million during the first quarter of
1994, from $19 million at year-end 1993 to $17 million. During the same
period, total debt increased by $5 million to $190 million. Working capital
increased by $38 million from $114 million at year-end 1993 to $152 million.
This increase is due mainly to the repayment of short-term borrowings under
the bank lines of credit with proceeds received from the private placement of
$115 million of 8-3/8% notes due 2004. As a result, the current ratio
improved from 1.3 at year-end 1993 to 1.5 at March 26, 1994.
Operating activities used $3 million of cash in the first quarter of 1994
compared to providing cash of $22 million in the comparable periods of 1993.
Incremental cash costs associated with the consolidation charge described
above were not significant in 1994. The 1993 amount included net proceeds
from sales of accounts receivable of $35 million.
Expenditures for new property, plant and equipment totaled $5.5 million in the
first quarter of 1994 compared to $2.9 million in the first quarter of 1993.
For all of 1994, the company expects to expend $38 million for plant and
equipment.
On March 17, 1994, the company completed a private placement of $115 million
of 8-3/8% Notes due 2004. The proceeds were used to redeem at par $60 million
of the company's 8-3/8% Senior Notes due 1997 and to repay bank debt under the
company's lines of credit, much of which was incurred in the acquisition of
Ferromatik in November, 1993. On April 7, 1994, the company filed a
registration statement with the Securities and Exchange Commission to exchange
the new private notes for public notes with substantially identical terms.
The company's ratio of debt to total capital (debt and equity) was 60% at
March 26, 1994, unchanged from year-end 1993.
At March 26, 1994, the company had lines of credit of approximately $284
million with various U.S. and foreign banks. Additional borrowing capacity
available under all lines of credit totaled approximately $44 million at March
26, 1994. The company believes that its cash flow from operations and
available credit lines are sufficient to meet operating requirements 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 (11) -Statement Regarding Computation of Earnings
Per Share - filed as a part of Part I.
(b) Reports on Form 8-K
A report on Form 8-K dated March 3, 1994, was filed which included
the company's audited consolidated balance sheet as of January 1,
1994 and January 2, 1993, and the related audited statements of
earnings, changes in shareholders' equity, and cash flows, for each
of the three fiscal years in the period ended January 1, 1994 (with
notes thereto), related management's discussion and analysis of
financial condition and results of operations, and additional pro
forma financial information regarding certain acquisitions completed
during 1993.
A report on Form 8-K/A was filed on January 24, 1994, amending a
report filed on Form 8-K dated November 8, 1993 regarding the
acquisition of Ferromatik.
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: May 9, 1994 By:/s/Robert P. Lienesch
-------------- ----------------------------------------
Robert P. Lienesch
Controller
Date: May 9, 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 registration statement on Form S-4
(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
- Incorporated herein by reference to the
company's annual report on Form 10-K for
the fiscal year ended January 1, 1994.
11 Statement Regarding Computation of
Earnings per Share 17
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 Schedules - Not Applicable.
99 Additional Exhibits - Not Applicable.
EXHIBIT 11
CINCINNATI MILACRON INC. AND SUBSIDIARIES
STATEMENT REGARDING COMPUTATION OF EARNINGS PER SHARE
(UNAUDITED)
(IN THOUSANDS, EXCEPT
PER-SHARE AMOUNTS)
12 WEEKS ENDED
----------------------
MARCH 26, MARCH 27,
1994 1993
-------- --------
Net earnings (loss).................................. $ 4,984 $(48,510)
Less preferred dividends............................. 60 60
-------- -------
Net earnings (loss) available to common
shareholders..................................... $ 4,924 $(48,570)
======== ========
Primary
Average number of shares outstanding............... 33,562 27,601
Add dilutive effect of stock options based on
treasury stock method............................ 452 438
-------- --------
Total.......................................... 34,014 28,039
======== ========
Per share amount............................. $ .14 $ (1.73)
======== ========
Fully diluted (a)
Average number of shares outstanding............... 33,562
Add dilutive effect of stock options based on
treasury stock method............................ 467
--------
Total.......................................... 34,029
========
Per share amount............................. $ .14
========
(a) Fully diluted earnings per common share is not presented for the first
quarter of 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.
