=============================================================================
UNITED STATES
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 June 17, 1995
[ ] 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 July 25, 1995: 34,231,502
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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 12
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)
(In millions)
June 17, Dec. 31,
1995 1994
-------- -------
ASSETS
Current assets
Cash and cash equivalents . . . . . . . . . . . . $ 44.2 $ 21.5
Notes and accounts receivable, less allowances
of $15.7 in 1995 and $8.7 in 1994 . . . . . . . 234.6 188.0
Inventories
Raw materials . . . . . . . . . . . . . . . . . 39.1 25.4
Work-in-process and finished parts. . . . . . . 209.6 162.8
Finished products . . . . . . . . . . . . . . . 114.2 79.0
-------- ------
Total inventories . . . . . . . . . . . . . . 362.9 267.2
Other current assets. . . . . . . . . . . . . . . 38.4 38.0
-------- ------
Total current assets. . . . . . . . . . . . . . 680.1 514.7
-------- ------
Property, plant and equipment . . . . . . . . . . . 530.6 449.3
Less accumulated depreciation . . . . . . . . . . 272.5 250.5
-------- ------
Property, plant and equipment - net . . . . . . 258.1 198.8
Other noncurrent assets . . . . . . . . . . . . . . 116.0 74.1
-------- ------
TOTAL ASSETS. . . . . . . . . . . . . . . . . . . $1,054.2 $787.6
======== ======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Amounts payable to banks and current
portion of long-term debt . . . . . . . . . . . $ 18.5 $ 83.9
Trade accounts payable. . . . . . . . . . . . . . 112.1 99.2
Advance billings and deposits . . . . . . . . . . 40.8 39.6
Accrued and other current liabilities . . . . . . 209.5 140.6
-------- ------
Total current liabilities . . . . . . . . . . . 380.9 363.3
Long-term accrued liabilities . . . . . . . . . . . 172.9 123.5
Long-term debt and lease obligations. . . . . . . . 307.8 143.0
-------- ------
TOTAL LIABILITIES . . . . . . . . . . . . . . . . 861.6 629.8
-------- ------
Commitments and contingencies . . . . . . . . . . . - -
SHAREHOLDERS' EQUITY
Preferred shares. . . . . . . . . . . . . . . . . 6.0 6.0
Common shares (outstanding: 34.0 in 1995
and 33.7 in 1994) . . . . . . . . . . . . . . . 292.9 289.2
Accumulated deficit . . . . . . . . . . . . . . . (110.7) (125.9)
Cumulative foreign currency translation
adjustments . . . . . . . . . . . . . . . . . . 4.4 (11.5)
-------- ------
TOTAL SHAREHOLDERS' EQUITY. . . . . . . . . . 192.6 157.8
-------- ------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY. . . . . $1,054.2 $787.6
======== ======
See notes to consolidated condensed financial statements.
CINCINNATI MILACRON INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF EARNINGS
(UNAUDITED)
(In millions, except share
and per-share amounts)
<TABLE>
<CAPTION>
12 Weeks Ended 24 Weeks Ended
------------------- -------------------
June 17, June 18, June 17, June 18,
1995 1994 1995 1994
------- ------- ------- -------
<S> <C> <C> <C> <C>
Sales . . . . . . . . . . . . . . . . . $413.5 $269.3 $744.9 $514.8
Cost of products sold . . . . . . . . . 310.0 203.9 560.2 390.5
------ ------ ------ ------
Manufacturing margins . . . . . . . . 103.5 65.4 184.7 124.3
------ ------ ------ ------
Other costs and expenses
Selling and administrative. . . . . . 73.9 49.8 135.9 97.7
Integration charge. . . . . . . . . . 9.8 - 9.8 -
Gain on disposition of subsidiary . . - - (5.0) -
Other - net . . . . . . . . . . . . . 3.0 1.7 6.0 2.9
------ ------ ------ ------
Total other costs and expenses. . . 86.7 51.5 146.7 100.6
------ ------ ------ ------
Operating earnings. . . . . . . . . . . 16.8 13.9 38.0 23.7
Interest
Income. . . . . . . . . . . . . . . . 1.0 .5 1.5 .9
Expense . . . . . . . . . . . . . . . (6.8) (3.9) (11.9) (7.5)
------ ------ ------ ------
Interest - net. . . . . . . . . . . (5.8) (3.4) (10.4) (6.6)
------ ------ ------ ------
Earnings before income taxes. . . . . . 11.0 10.5 27.6 17.1
Provision for income taxes. . . . . . . 2.6 2.6 6.2 4.2
------ ------ ------ ------
Net earnings. . . . . . . . . . . . . . $ 8.4 $ 7.9 $ 21.4 $ 12.9
====== ====== ====== ======
Earnings per common share . . . . . . . $ .24 $ .23 $ .62 $ .37
====== ====== ====== ======
Dividends per common share. . . . . . . $.09 $.09 $.18 $.18
Weighted average number of shares
and common share equivalents
outstanding (in thousands). . . . . . 34,487 33,989 34,311 34,002
</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 24 Weeks Ended
-------------------- -------------------
June 17, June 18, June 17, June 18,
1995 1994 1995 1994
------- ------- ------- -------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
OPERATING ACTIVITIES CASH FLOWS
<S> <C> <C> <C> <C>
Net earnings. . . . . . . . . . . . . $ 8.4 $ 7.9 $ 21.4 $ 12.9
Operating activities providing
(using) cash
Depreciation and amortization . . 10.2 7.2 17.5 14.0
Integration charge. . . . . . . . 9.8 - 9.8 -
Gain on disposition
of subsidiary . . . . . . . . . - - (5.0) -
Deferred income taxes . . . . . . .2 .8 .2 1.8
Working capital changes
Notes and accounts receivable . 10.7 (11.2) 12.4 1.3
Inventories . . . . . . . . . . (11.5) (7.8) (24.5) (18.4)
Other current assets. . . . . . (.4) (2.0) (5.7) (1.7)
Trade accounts payable and
other current liabilities . . (19.9) 8.6 1.5 (2.4)
(Increase) decrease in other
noncurrent assets . . . . . . . (1.7) .2 (2.3) (2.9)
Increase (decrease) in long-term
accrued liabilities . . . . . . 2.2 .1 3.3 (1.6)
Other - net . . . . . . . . . . . (.3) .4 (.2) (2.1)
------ ------ ------ ------
Net cash provided by
operating activities. . . . . 7.7 4.2 28.4 .9
------ ------ ------ ------
INVESTING ACTIVITIES CASH FLOWS
Capital expenditures. . . . . . . . . (11.0) (6.4) (19.9) (11.9)
Net disposals of property, plant
and equipment . . . . . . . . . . . 5.6 1.0 5.9 2.3
Acquisition . . . . . . . . . . . . . - - (79.2) -
Cash received on disposition
of subsidiaries . . . . . . . . . . .3 .3 15.3 2.3
------ ------ ------ ------
Net cash used by
investing activities. . . . . . (5.1) (5.1) (77.9) (7.3)
------ ------ ------ ------
FINANCING ACTIVITIES CASH FLOWS
Dividends paid. . . . . . . . . . . . (3.1) (3.1) (6.2) (6.2)
Issuance of long-term debt. . . . . . 98.3 - 180.5 115.4
Repayments of long-term debt and
lease obligations . . . . . . . . . (38.8) (.5) (47.4) (60.5)
Increase (decrease) in amounts
payable to banks. . . . . . . . . . (32.7) 3.0 (58.4) (48.0)
Net issuance of common shares . . . . 3.0 .4 3.7 2.6
------ ------ ------ ------
Net cash provided (used) by
financing activities. . . . . . . 26.7 (.2) 72.2 3.3
------ ------ ------ ------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS. . . . . . . . . . . 29.3 (1.1) 22.7 (3.1)
Cash and cash equivalents at
beginning of period . . . . . . . . . 14.9 16.8 21.5 18.8
------ ------ ------ ------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD . . . . . . . . . . . . $ 44.2 $ 15.7 $ 44.2 $ 15.7
====== ====== ====== ======
</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 December 31, 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 December 31, 1994.
ACQUISITION
- -----------
On February 1, 1995, the company completed the acquisition of Krupp Widia GmbH
(Widia) for DM 120.8 million ($79.5 million based on the exchange rate in effect
on the closing date), which included DM 7.1 million ($4.6 million) for the
settlement of all intercompany liabilities to the seller as of the closing
date. Headquartered in Germany, Widia had sales of approximately $225 million
in 1994 and is one of the world's leading producers of industrial
metalcutting products. The company financed the acquisition, which is being
accounted for under the purchase method, by drawing on its revolving credit
facility with its existing bank group which had been amended in December,
1994, to increase the amount of borrowings available thereunder from $130.0
million to $200.0 million, including borrowings denominated in German marks
up to an equivalent of $100.0 million.
The company's investment in Widia, including professional fees and other costs
related to the acquisition, totaled $76.4 million. The preliminary allocation
of the acquisition cost to the assets acquired and the liabilities assumed is
presented in the table that follows. The amounts shown therein are estimates
and are subject to revision once appraisals, actuarial reviews and other studies
of fair value are completed. Estimated goodwill resulting from the acquisition,
which is included in other noncurrent assets, is approximately $25 million.
(In millions)
February 1,
1995
----------
Cash and cash equivalents . . . . . . . . . . . . . . . . . . $ 1.8
Accounts receivable . . . . . . . . . . . . . . . . . . . . . 47.3
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . 59.0
Other current assets. . . . . . . . . . . . . . . . . . . . . 1.0
Property, plant and equipment - net . . . . . . . . . . . . . 50.3
Other noncurrent assets . . . . . . . . . . . . . . . . . . . 29.9
------
Total assets. . . . . . . . . . . . . . . . . . . . . . . . 189.3
Amounts payable to banks and current
portion of long-term debt . . . . . . . . . . . . . . . . . (9.1)
Intercompany payables to seller . . . . . . . . . . . . . . . (4.6)
Trade accounts payable. . . . . . . . . . . . . . . . . . . . (14.7)
Accrued and other current liabilities . . . . . . . . . . . . (40.0)
Long-term accrued liabilities . . . . . . . . . . . . . . . . (40.6)
Long-term debt and lease obligations. . . . . . . . . . . . . (3.9)
------
Total acquisition costs . . . . . . . . . . . . . . . . . . $ 76.4
======
As presented above, accrued and other current liabilities includes a reserve of
$6.1 million that was established in the allocation of acquisition cost for the
further restructuring of Widia and its integration with Valenite, a subsidiary
which also manufactures metalcutting products. Certain of Widia's worldwide
operations, including its principal European plant located in Essen, Germany,
were restructured by the seller during 1993 and 1994 to improve manufacturing
efficiency, divest marginal business and product lines and reduce personnel
levels. Prior to the acquisition, the company began to develop a plan for the
integration of Widia and Valenite and identified additional actions that are
intended to further improve Widia's profitability. The overall plan, which will
have a total cost of $17.1 million, was formally approved by management in May,
1995. That portion of the $17.1 million cost directly related to Valenite has
been recorded as a $9.8 million pretax charge to earnings in the second quarter
of 1995 (see Integration Charge). As it relates to Widia, the management plan
involves the downsizing of one manufacturing plant and the consolidation of
numerous sales, customer service and warehouse operations in Europe and Asia at
a total cost of $7.3 million, including write downs of certain assets to net
realizable value totaling $1.2 million. The $6.1 million reserve that is
included in accrued and other current liabilities includes $5.9 million for
severance and other termination benefits related to the elimination of
approximately eighty production and sales personnel and $.2 million for facility
exit costs. It is expected that the actions contemplated by the integration
plan, which are intended to complement the actions already taken prior to the
acquisition, will be substantially completed during 1995. Charges against the
reserve through the end of the second quarter were not material.
Unaudited pro forma sales and earnings information for the second quarters of
1995 and 1994 and the 24 week periods ended June 17, 1995 and June 18, 1994
prepared under the assumption that the acquisition had been completed at the
beginning of those years is
as follows:
<TABLE>
<CAPTION>
(In millions, except per-share amounts)
12 Weeks Ended 24 Weeks Ended
------------------- -------------------
June 17, June 18, June 17, June 18,
1995 1994 1995 1994
------- ------- ------- -------
<S> <C> <C> <C> <C>
Sales . . . . . . . . . . . . . . . . $ 413.5 $ 324.0 $ 765.1 $ 605.0
======= ======= ======= =======
Net earnings. . . . . . . . . . . . . $ 8.4 $ 8.1 $ 21.8 $ 12.7
======= ======= ======= =======
Per common share. . . . . . . . . . . $ .24 $ .24 $ .63 $ .37
======= ======= ======= =======
</TABLE>
Based on a comprehensive analysis, the company estimates that the minimum annual
savings in relation to Widia's historical 1994 operations that will result from
the restructuring actions completed in 1994 and early 1995 prior to the
acquisition will be approximately $3.0 million. The additional actions
described above that will be completed in 1995 subsequent to the acquisition in
connection with the company's $17.1 million integration plan will generate
additional annual savings of approximately $6.0 million. These amounts are
based principally on the savings that will be realized from actual reductions
in Widia's employment level that have already occurred during 1995 and those
that will occur later in the year. The pro forma earnings amounts for the
second quarter of 1994 and the 24 weeks ended June 18, 1994 presented above
include estimates of these expected cost savings totaling $2.2 million and $3.7
million, respectively. In addition, restructuring charges of $.9 million in the
second quarter of 1994 and $1.2 million for the 24 weeks ended June 18, 1994
that were incurred by Widia on a historical basis have been eliminated. The
proforma amounts presented above do not reflect approximately $6.0 million of
annual profitability improvements that are expected to result from those
portions of the $17.1 million integration plan that are directly related to
Valenite's operations.
INTEGRATION CHARGE
- ------------------
In the second quarter of 1995, the company recorded a pretax charge of $9.8
million ($7.8 million after tax) to eliminate or downsize certain operations of
Valenite in connection with the acquisition of Widia earlier in the year. The
charge was recorded as a result of a plan formally approved by management in
May, 1995, which also involves the integration of certain Widia operations with
Valenite. The total cost of the plan will be $17.1 million. That portion of
the overall plan that relates directly to Widia has been recorded through
purchase accounting adjustments totaling $7.3 million. As it relates to
Valenite, the plan involves the closure of one manufacturing plant, the
downsizing of another and the consolidation of numerous sales, customer service
and warehousing operations in Europe and Japan. The $9.8 million charge
includes reserves for the cash costs of the integration of $7.0 million,
including $5.9 million for severance and other termination benefits related to
approximately ninety production and sales personnel and $1.1 million for
facility exit costs. The charge also includes $2.8 million to adjust the basis
of various assets to net realizable value. Charges against the $7.0 million
reserve for severance and other cash costs through the end of the second quarter
of 1995 were not material. The total cash cost of the $17.1 million plan will
be $13.1 million and will be funded by operations and bank borrowings. As a
result of the actions that are included in the integration plan, all of which
will be substantially completed during 1995, the company expects to improve its
annual profitability by approximately $12 million.
DISPOSITION OF SUBSIDIARIES
- ---------------------------
In January, 1995, the company completed the sale of its American Mine Tool
business for $15.0 million resulting in a gain of $5.0 million ($4.0 million
after tax, or $.12 per share). The sale will not have a significant effect on
future sales or earnings.
In February, 1994, the company completed the 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 is being received through the collection of
trade receivables and in varying installments through 1999.
INCOME TAXES
- ------------
The company entered 1995 and 1994 with U.S. net operating loss carryforwards of
$41 million and $19 million, respectively. The company also had net operating
loss carryforwards in certain non-U.S. jurisdictions. U.S. federal income taxes
and taxes in certain non-U.S. jurisdictions are minimal in both years due to the
realization of certain fully reserved deferred tax assets, particularly the
aforementioned net operating loss carryforwards. As a result, the company's
effective tax rate for the second quarters of 1995 and 1994 and for the 24 weeks
ended June 17, 1995 and June 18, 1994, which in all periods 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%.
RECEIVABLES
- -----------
In 1993, the company sold $50 million of its U.S. accounts receivable. The sale
transaction 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. To
maintain the balance in the designated pools of accounts receivable sold, the
company is obligated to sell undivided percentage interests in new receivables
as existing receivables are collected. In March, 1994, the receivables purchase
agreement was amended and restated to provide for the sale of up to $65 million
of interests in accounts receivable through January, 1996, the termination date
of the agreement. The agreement was further amended in March, 1995, to
increase the amount from $65 million to $75 million. At June 17, 1995, and
December 31, 1994, the undivided interest in the company's gross accounts
receivable that had been sold to the purchaser aggregated $75 million and
$65 million, respectively. Costs related to these sales are included in
other costs and expenses - net in the Consolidated Condensed Statement of
Earnings. The proceeds are reported as providing operating
cash flow in the Consolidated Condensed Statement of Cash Flows.
LIABILITIES
- -----------
The components of accrued and other current liabilities and long-term accrued
liabilities are shown in the following tables.
(In millions)
June 17, Dec. 31,
1995 1994
------- -------
ACCRUED AND OTHER CURRENT LIABILITIES
Accrued salaries, wages and
other compensation. . . . . . . . . . . . . . . $ 48.2 $ 29.9
Accrued and deferred income taxes . . . . . . . . 17.4 21.5
Other accrued expenses. . . . . . . . . . . . . . 143.9 89.2
------ ------
$209.5 $140.6
====== ======
LONG-TERM ACCRUED LIABILITIES
Accrued pension and other compensation. . . . . . $ 68.6 $ 27.3
Accrued postretirement health
care benefits . . . . . . . . . . . . . . . . . 44.0 44.0
Accrued and deferred income taxes . . . . . . . . 27.1 25.8
Other . . . . . . . . . . . . . . . . . . . . . . 33.2 26.4
------ ------
$172.9 $123.5
====== ======
LONG-TERM DEBT AND LEASE OBLIGATIONS
- ------------------------------------
Long-term debt and lease obligations are shown in the following table.
(In millions)
June 17, Dec. 31,
1995 1994
------- -------
Long-term debt
7-7/8% Notes due 2000 . . . . . . . . . . . . . . $100.0 $ -
8-3/8% Notes due 2004 . . . . . . . . . . . . . . 115.0 115.0
12% Sinking Fund Debentures due 2010. . . . . . . 10.8 10.8
Revolving credit facility . . . . . . . . . . . . 66.9 10.0
Industrial Development Revenue
Bonds due 2008. . . . . . . . . . . . . . . . . - 10.0
Other . . . . . . . . . . . . . . . . . . . . . . 15.5 8.1
------ ------
308.2 153.9
------ ------
Capital lease obligations
6-3/8% Bonds due 1995- 1997 . . . . . . . . . . . 2.6 2.6
6-3/4% Bonds due 2004 . . . . . . . . . . . . . . - 7.6
------ ------
2.6 10.2
------ ------
Total long-term debt and lease obligations. . . . . 310.8 164.1
Less current maturities . . . . . . . . . . . . . . (3.0) (21.1)
------ ------
$307.8 $143.0
====== ======
In May, 1995, the company completed the private financing involving the
placement of $100 million of 7-7/8% Notes due 2000. The proceeds were or will
be used to repay outstanding indebtedness, including approximately $81 million
of indebtedness under the company's revolving credit facility. On July 21,
1995, the company issued a prospectus offering to exchange the privately
financed 7-7/8% Notes due 2000, for an equal principal amount of new 7-7/8%
Notes due 2000 which have substantially identical terms but which have been
registered under the Securities Act of 1933. The exchange offer will be
completed during the third quarter of 1995.
At December 31, 1994, current maturities includes the Industrial Development
Revenue Bonds due 2008 and the 6-3/4% Bonds due 2004, both of which were repaid
in 1995 due to the closure of the company's machine tool facilities in South
Carolina. The 6-3/4% Bonds due 2004 were defeased in the first quarter of 1995
and repaid early in the second quarter. The Industrial Development Revenue
Bonds due 2008 were repaid during the second quarter of 1995.
At June 17, 1995 and December 31, 1994, borrowings under the company's revolving
credit facility totaling $66.9 million and $10.0 million, respectively, are
included in long-term debt based on the expectation that such amounts will
remain outstanding for more than one year.
LINES OF CREDIT
- ---------------
On May 31, 1995, the company entered into an agreement with the lenders under
its revolving credit agreement facility to extend the term from July, 1996, to
June, 1998 and, at the company's request, to reduce the amount of credit
available thereunder to $150 million in order to reduce the amount of commitment
fees. The revolving credit facility imposes restrictions on total indebtedness
in relation to total capital. In connection with the extension, beginning in
January, 1996, certain required financial ratio levels imposed on the company
gradually will become more stringent. The company believes it will be able to
continue to comply with the restrictions throughout the extended term of the
facility. Under the provisions of the facility, the company's additional
borrowing capacity totaled approximately $45 million at June 17, 1995.
At June 17, 1995, the company had lines of credit with various U.S. and non-U.S.
banks of approximately $346 million, including the $150 million committed
revolving credit facility. These credit facilities support letters of credit
and leases in addition to providing borrowings under varying terms. A portion
of the revolving credit facility was utilized to finance the acquisition of
Widia on February 1, 1995 (see Acquisition). In connection with the private
financing involving the placement of $100 million of 7-7/8% Notes due 2000, the
company repaid or will repay approximately $81 million of the revolving credit
facility (see Long-Term Debt and Lease Obligations).
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
second quarters of 1995 and 1994 and for the 24 weeks ended June 17, 1995 and
June 18, 1994 are presented below.
<TABLE>
<CAPTION>
(In millions)
12 Weeks Ended 24 Weeks Ended
----------------- -----------------
June 17, June 18, June 17, June 18,
1995 1994 1995 1994
------- ------- ------- -------
Sales
<S> <C> <C> <C> <C>
Plastics machinery. . . . . . . . . . $152.8 $121.4 $279.0 $217.7
Machine tools . . . . . . . . . . . . 93.7 67.2 180.4 136.0
Industrial products . . . . . . . . . 167.0 80.7 285.5 161.1
------ ------ ------ ------
$413.5 $269.3 $744.9 $514.8
====== ====== ====== ======
Operating earnings (loss) (a)
Plastics machinery. . . . . . . . . . $ 15.8 $ 10.3 $ 28.4 $ 17.9
Machine tools . . . . . . . . . . . . .5 .6 (1.9) .2
Industrial products . . . . . . . . . 16.2 8.6 27.4 16.0
Integration charge (b). . . . . . . . (9.8) - (9.8) -
Gain on disposition of subsidiary (c) - - 5.0 -
Unallocated corporate expenses (d). . (5.9) (5.6) (11.1) (10.4)
------ ------ ------ ------
$ 16.8 $ 13.9 $ 38.0 $ 23.7
====== ====== ====== ======
New orders
Plastics machinery. . . . . . . . . . $140.3 $134.2 $278.2 $239.9
Machine tools . . . . . . . . . . . . 95.0 85.9 200.9 161.7
Industrial products . . . . . . . . . 163.2 81.5 288.4 166.5
------ ------ ------ ------
$398.5 $301.6 $767.5 $568.1
====== ====== ====== ======
Ending backlog. . . . . . . . . . . . . $384.9 $299.3 $384.9 $299.3
====== ====== ====== ======
</TABLE>
(a) In 1995, the company's method of allocating corporate costs to its business
segments was refined to exclude costs for certain services not directly
assignable to the operations of the segments. Amounts for 1994 have been
restated to conform to the 1995 presentation.
(b) Represents a charge related to the industrial products segment to integrate
certain Valenite and Widia operations to improve future profitability.
(c) Represents a gain on the sale of the company's American Mine Tool business,
which was part of the industrial products segment.
(d) Includes financing costs related to the sale of accounts receivable and
corporate expenses.
EARNINGS PER SHARE
- ------------------
Earnings per common share are based on the weighted average number of common
shares and common share equivalents outstanding.
SUBSEQUENT EVENT
- ----------------
In July, 1995, the company completed the acquisition of Talbot Holdings, Ltd.
(Talbot). With annual sales of about $40 million, Talbot is a major supplier
of round high-speed steel and carbide metalcutting tools. The total
consideration, including debt assumed of approximately $5 million, was
approximately $38 million. The transaction will be accounted for under the
purchase method and was financed through available cash and existing credit
lines.
CINCINNATI MILACRON INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION
(UNAUDITED)
RESULTS OF OPERATIONS
- ---------------------
SALES
Sales in the second quarter of 1995 of $414 million increased by $144 million
over the second quarter of 1994, of which $74 million represents sales of a
newly acquired subsidiary, Widia, which is described below. Excluding Widia's
sales, the $70 million sales increase represents a 26% increase over the second
quarter of 1994. Contributing to the $70 million increase is $14 million caused
by foreign currency exchange rate fluctuations that resulted principally from
the increased value of the German mark.
Plastics machinery sales increased by $31 million, or 26%, over 1994 due
primarily to increased sales by the company's European plastics machinery
subsidiaries, as well as an increase in sales of U.S.-built injection molding
machines. Machine tools sales increased by $27 million, or 39%, due to
increased sales of standard machine tools in North America and Europe. Sales
of industrial products, excluding Widia's contribution, increased $12 million,
or 15%, due to increased sales of grinding wheels in North America, and
metalcutting tools and fluids in North America and Europe.
Sales of the 24 weeks ended June 17, 1995 were $745 million, which represents
a $230 million, or 45%, increase over the comparable period of 1994. This sales
increase is attributable to (i) a $61 million, or 28%, increase in plastics
machinery sales, mostly in the U.S. and European markets; (ii) a $44 million,
or 33%, increase in sales of Wolfpack-designed standard machine tools, and (iii)
a $124 million increase in sales of industrial products including Widia's sales
of $97 million. Included in the $230 million increase in sales is a $22 million
increase caused by foreign currency exchange rate fluctuations.
Export sales from the U.S. for the 24 weeks ended June 17, 1995 were $65
million, up from $61 million in the comparable period of 1994. In the same 1995
period, products manufactured outside of the U.S. constituted 41% of
consolidated sales as compared to 27% in 1994.
NEW ORDERS AND BACKLOG
New orders for the second quarter of 1995 of $399 million increased by $97
million, or 32%, over the second quarter of 1994. Approximately $74 million of
the increase was attributable to the acquisition of Widia, and another $13
million of the increase was due to exchange rate fluctuations. Excluding these
two factors, new orders were up 3% over the second quarter of 1994.
Orders for plastics machinery in the second quarter of 1994 increased by $6
million, or 5%, over 1994 due to continued strong U.S. and European demand for
injection molding machines. Machine tool orders increased $9 million, or 11%,
primarily due to increased orders for standard machine tools; orders for
aerospace machines increased modestly. Orders for industrial products increased
by $82 million including the Widia acquisition and $8 million, or 9%, excluding
the acquisition, primarily as a result of increased industrial production in the
U.S. and Europe. In general, the company continued to benefit from high levels
of automotive production in the U.S. and Europe, although some softening in the
U.S. has affected order levels in the second quarter of 1995.
New orders for the 24 weeks ended June 17, 1995 were $768 million, which
represents a $199 million, or 35%, increase over the comparable period of 1994.
This increase in new orders is attributable to (i) a $38 million, or 16%,
increase in orders for U.S. and European-built injection molding machines; (ii)
a $39 million, or 24%, increase in machine tools, primarily as a result of
increased orders for standard machine tools, along with a modest pick-up in
demand for aerospace machines and (iii) a $122 million increase in orders for
industrial products including Widia, or a $23 million, or 14%, increase
excluding Widia. Included in the $199 million increase in new orders is a $22
million increase caused by foreign currency exchange rate fluctuations.
The company's backlog of unfilled orders decreased from $409 million at March
25, 1995 to $385 million at June 17, 1995. This $24 million decrease was caused
in part by a $9 million adjustment to reduce Widia's backlog at date of
acquisition. Compared with the backlog at June 18, 1994, the backlog increased
by $86 million, most of which results from the Widia acquisition.
MARGINS, COSTS AND EXPENSES
The consolidated manufacturing margin percent of 25.0% and 24.8% for the second
quarter of 1995 and 24 weeks ended June 17, 1995, respectively, increased from
24.3% and 24.1% for the comparable periods of 1994. Currency exchange rate
fluctuations caused some increase in margin dollars but did not affect the
margin percent. In general, margin percents improved because of increased
volume and the acquisition of Widia which has higher margins than the company's
machinery businesses. Machine tool margins in 1995 have been held back as the
group liquidated significant inventories of discontinued, pre-Wolfpack product
lines.
Selling and administrative expenses in the second quarter of 1995 and for the
24 weeks ended June 17, 1995 increased in connection with higher sales and
currency exchange rate fluctuations compared with the same periods in 1994.
Selling expense declined modestly as a percent to sales for both periods,
primarily due to increased volume and despite the acquisition of Widia which has
higher selling costs than the machinery businesses. Administrative expense
increased due to the Widia acquisition and currency exchange rate fluctuations,
but declined as a percent to sales.
The $9.8 million pretax integration charge ($7.8 million after tax) relates to
the company's February 1995 acquisition of Krupp Widia GmbH (Widia), a Germany-
based manufacturer of metalcutting tools with 1994 sales of approximately $225
million. The Widia acquisition allows the company to capitalize on synergistic
opportunities with Valenite, an existing subsidiary which manufactures similar
products. Accordingly, in May, 1995 management formally approved a plan to
integrate certain operations of these businesses for a cost of $17.1 million.
The portion of the cost directly related to Widia, totaling $7.3 million, is
being recorded as a purchase accounting adjustment, while the remaining $9.8
million, which is directly related to Valenite, is being charged against
earnings in the second quarter of 1995. The $17.1 million plan involves the
closing or downsizing of three manufacturing plants and the consolidation of
numerous sales, service and warehouse operations in Europe and Asia. The $9.8
million integration charge includes $5.9 million for severance and other
termination benefits and $3.9 million for facility exit costs and asset write
downs. As a result of the actions included in the plan, all of which are
expected to be substantially completed during 1995, the company expects to
improve its annual profitability by approximately $12 million. The total cash
cost of $13.1 million will be funded by operations and bank borrowings.
Gain on disposition of subsidiary represents a $5.0 million before tax ($4.0
million after tax) gain on the sale of the company's American Mine Tool (AMT)
business, a small business in the industrial products segment. The business did
not serve a major global market with good long-term growth and profit potential
and, accordingly, did not meet the company's criteria for a core business. The
sale will not have a material effect on the company's future sales and earnings.
Other costs and expenses - net increased over the 1994 amounts due in part to
the Widia acquisition, increased financing costs related to sales of accounts
receivable and exchange rate fluctuations.
Interest expense - net increased over the 1994 amounts due primarily to higher
debt levels associated with debt incurred to finance the Widia acquisition and
the company's internal growth.
EARNINGS BEFORE INCOME TAXES
Earnings before income taxes increased from $10.5 million in the second quarter
of 1994 to $11.0 million in the second quarter of 1995. Excluding the effect
of the $9.8 million pretax integration charge, 1995 earnings increased by $10.3
million over 1994. Earnings before income taxes increased from $17.1 million
in the first 24 weeks of 1994 to $27.6 million in the first 24 weeks of 1995.
Excluding the effects of the $9.8 million pretax integration charge and the $5.0
million pretax gain on the sale of AMT in the first quarter of 1995, earnings
for the 24 weeks ended June 17, 1995 increased by $15.3 million over 1994. The
1995 increases reflect increased profit associated with higher volume and the
Widia acquisition, offset in part by increased borrowing costs. Also
contributing to the increased earnings in the second quarter of 1995 and 24
weeks ended June 17, 1995 are increases of $1.0 million and $1.7 million,
respectively, due to foreign currency exchange rate fluctuations.
INCOME TAXES
The provision for income taxes in both years consists primarily of U.S. state
and local income taxes and non-U.S. income taxes in certain profitable
jurisdictions. The company entered 1995 and 1994 with U.S. net operating loss
carryforwards of $41 million and $19 million, respectively. The company also
had net operating loss carryforwards in certain non-U.S. jurisdictions. As a
result, U.S. federal income taxes and taxes in certain non-U.S. jurisdictions
are minimal in both years due to the realization of certain fully reserved
deferred tax assets, particularly the aforementioned net operating loss
carryforwards.
NET EARNINGS
Net earnings were $8.4 million, or $.24 per share, in the second quarter of 1995
compared with $7.9 million, or $.23 per share, in the second quarter of 1994.
Excluding the $7.8 million after tax integration charge, 1995 net earnings
increased by $8.3 million over 1994. Net earnings increased from $12.9 million,
or $.37 per share, in the first 24 weeks of 1994 to $21.4 million, or $.62 per
share, in the first 24 weeks of 1995. Excluding the $7.8 million after tax
integration charge and the $4.0 million after tax gain on the sale of AMT in the
first quarter of 1995, net earnings for the first 24 weeks of 1995 increased by
$12.3 million, or $.36 per share, over 1994. The 1995 increases reflect the
effects of higher sales, the Widia acquisition and currency effects, offset in
part by increased borrowing costs and income taxes.
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 in
the fourth quarter of 1993. Costs totaling $6 million during the second quarter
of 1994 and $12 million for the 24 weeks ended June 18, 1994 were charged
against the reserve. Production at the company's two machine tool facilities
in Fountain Inn and Greenwood, South Carolina, was phased out during 1994 and
the facilities were closed in the fourth quarter of 1994.
The consolidation plan was essentially completed by year-end, 1994, although the
company experienced some production difficulties in early 1995 which were
related to the consolidation and a simultaneous increase in customer demand.
LIQUIDITY AND SOURCES OF CAPITAL
- --------------------------------
At June 17, 1995, the company had cash and cash equivalents of $44 million, an
increase of $29 million during the second quarter of 1995 and an increase of $22
million during the 24 weeks ended June 17, 1995. Operating activities provided
$8 million of cash in the second quarter of 1995 and $4 million in the second
quarter of 1994. For the 24 weeks ended June 17, 1995 operating activities
provided $28 million of cash compared to $1 million in the same period of 1994.
$10 million of the $28 million increase was due to the sale of receivables in
the first quarter of 1995.
Total debt was $326 million at June 17, 1995, an increase of $29 million over
March 25, 1995 and an increase of $99 million during the 24 weeks ended June 17,
1995 to finance the acquisition of Widia in February 1995. The ratio of total
debt to total capital (debt plus equity) was 63% at June 17, 1995, 62% at March
25, 1995 and 59% at year end 1994. Working capital increased by $83 million in
the second quarter of 1995 and $148 million in the 24 weeks ended June 17, 1995
(including $57 million related to the acquisition of Widia) and the current
ratio improved to 1.8 in the second quarter 1995 compared to 1.5 in the first
quarter of 1995 and 1.4 at year end 1994.
Expenditures for new property, plant and equipment in the second quarter of 1995
and for the 24 weeks ended June 17, 1995 were $11 million and $20 million
respectively, as compared to $6 million and $12 million in 1994. The 1995
capital expenditures budget has been increased to $52 million from $40 million
to reflect various adjustments including a decrease in the amount to be acquired
by operating leases from $16 million to $10 million. Proceeds from the disposal
of property, plant and equipment during the second quarter of 1995 of $6 million
primarily includes the sale and operating leaseback of certain manufacturing
equipment.
In the second quarter of 1995 the company issued $100 million of 7-7/8% notes
due in May 2000. The net proceeds of the offering, approximately $98 million,
was or will be used to repay outstanding indebtedness which had increased by $70
million in the first quarter of 1995 due principally to the Widia acquisition.
The company had a number of short-term intercompany loans and advances
denominated in various currencies totaling approximately $46 million at June 17,
1995 that were 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.
At June 17, 1995, the company had lines of credit with various U.S. and non-U.S.
banks of approximately $346 million, including a $150 million committed
revolving credit facility. These credit facilities support letters of credit
and leases in addition to providing borrowings under varying terms. The
revolving credit facility was renegotiated effective May 31, 1995 to extend its
term to June 1, 1998 and to reduce, at the request of the company, the amount
from $200 million to $150 million in order to reduce the amount of commitment
fees thereunder. The revolving credit facility imposes restrictions on total
indebtedness. Beginning in January, 1996, certain required financial ratio
levels imposed on the company gradually will become more stringent. The company
believes that it will be able to continue to comply with these covenants,
including all required ratio levels, through June 1, 1998. Under the provisions
of the facility, the company's additional borrowing capacity totaled
approximately $45 million at June 17, 1995.
The company believes that its cash flow from operations and available credit
lines will be sufficient to meet its debt service, capital expenditures and
other operating requirements, including the Talbot acquisition, described below.
SUBSEQUENT EVENT
- ----------------
In July, 1995, the company consummated the acquisition of Talbot Holdings, Ltd.
With annual sales of about $40 million, Talbot is a major supplier of round
high-speed steel and carbide metalcutting tools. The total consideration,
including debt assumed of approximately $5 million, was approximately $38
million. The transaction will be accounted for under the purchase method and
was financed through available cash and existing credit lines.
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
A report on Form 8-K dated May 17, 1995, was filed regarding the
completion of the sale of $100 million aggregate principal amount of
7-7/8% Notes due 2000.
A report on Form 8-K dated May 31, 1995, was filed regarding an
amendment to the company's Amended and Restated Revolving Credit
Agreement.
A report on Form 8-K/A was filed on April 14, 1995 amending a report
filed on Form 8-K dated February 1, 1995 regarding the acquisition
of the capital stock of Krupp Widia GmbH.
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: July 27, 1995 By:/s/ Robert P. Lienesch
--------------- ----------------------------------
Robert P. Lienesch
Controller
Date: July 27, 1995 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.
4.1 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).
4.2 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).
4.3 7-7/8% Notes due 2000
- Incorporated herein by reference to the company's
Registration Statement on Form S-4
(Registration No. 33-60081).
4.4 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 for the fiscal year ended December 31, 1994.
10.2 - Amendment Number One to the Amended and Restated Revolving
Credit Agreement dated as of May 31, 1995 among Cincinnati
Milacron Inc., Cincinnati Milacron Kunststoffmachinen Europa
GmbH, the lenders therein, and Bankers Trust Company, as agent.
- Incorporated herein by reference to the company's report
on Form 8-K dated May 31, 1995.
11 Statement Regarding Computation of Earnings per Share 20
15 Letter re Unaudited Interim Financial Information
- Not Applicable.
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 21
99 Additional Exhibits - Not Applicable.
CINCINNATI MILACRON INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(UNAUDITED)
<TABLE>
<CAPTION>
(In thousands, except per-share amounts)
12 Weeks Ended 24 Weeks Ended
------------------- ------------------
June 17, June 18, June 17, June 18,
1995 1994 1995 1994
------- ------- ------- --------
<S> <C> <C> <C> <C>
Net earnings (loss) . . . . . . . . . . $ 8,355 $ 7,879 $21,399 $12,863
Less preferred dividends. . . . . . . . (60) (60) (120) (120)
------- ------- ------- -------
Net earnings (loss) available
to common shareholders. . . . . . . $ 8,295 $ 7,819 $21,279 $12,743
======= ======= ======= =======
Primary
Average number of shares
outstanding . . . . . . . . . . . . 33,931 33,632 33,831 33,592
Add dilutive effect of
stock options based on
treasury stock method . . . . . . . 556 357 480 410
------- ------- ------- -------
Total . . . . . . . . . . . . . . . 34,487 33,989 34,311 34,002
======= ======= ======= =======
Per share amount . . . . . . . . $ .24 $ .23 $ .62 $ .37
======= ======= ======= =======
Fully diluted
Average number of shares
outstanding . . . . . . . . . . . . 33,931 33,632 33,831 33,592
Add dilutive effect of stock
options based on treasury
stock method. . . . . . . . . . . . 688 383 546 430
------- ------- ------- -------
Total . . . . . . . . . . . . . . . 34,619 34,015 34,377 34,022
======= ======= ======= =======
Per share amount . . . . . . . . $ .24 $ .23 $ .62 $ .37
======= ======= ======= =======
</TABLE>
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
CINCINNATI MILACRON INC. AND SUBSIDIARIES
FINANCIAL DATA SCHEDULE
(UNAUDITED)
<LEGEND>
Other column represents the 12 weeks ended Jun-17-1995
Amounts rounded to tenths of millions, except per share data
</LEGEND>
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-30-1995
<PERIOD-START> MAR-25-1995
<PERIOD-END> JUN-17-1995
<CASH> 44,200,000
<SECURITIES> 0
<RECEIVABLES> 250,300,000
<ALLOWANCES> 15,700,000
<INVENTORY> 362,900,000
<CURRENT-ASSETS> 680,100,000
<PP&E> 530,600,000
<DEPRECIATION> (272,500,000)
<TOTAL-ASSETS> 1,054,200,000
<CURRENT-LIABILITIES> 380,900,000
<BONDS> 0
<COMMON> 292,900,000
0
6,000,000
<OTHER-SE> (106,300,000)
<TOTAL-LIABILITY-AND-EQUITY> 1,054,200,000
<SALES> 413,500,000
<TOTAL-REVENUES> 413,500,000
<CGS> 310,000,000
<TOTAL-COSTS> 310,000,000
<OTHER-EXPENSES> 86,700,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,800,000
<INCOME-PRETAX> 11,000,000
<INCOME-TAX> 2,600,000
<INCOME-CONTINUING> 8,400,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,400,000
<EPS-PRIMARY> .24
<EPS-DILUTED> .24
</TABLE>
