=============================================================================
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 March 25, 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 May 1, 1995: 33,875,604
============================================================================
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 15
(b) Reports on Form 8-K 15
Signatures 16
Index to Exhibits 17
PART I. FINANCIAL INFORMATION
CINCINNATI MILACRON INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEET
(UNAUDITED)
(In millions)
Mar. 25, Dec. 31,
1995 1994
-------- -------
Assets
Current assets
Cash and cash equivalents. . . . . . . . . . . $ 14.9 $ 21.5
Notes and accounts receivable, less allowances
of $14.4 in 1995 and $8.7 in 1994. . . . . . 243.6 188.0
Inventories
Raw materials. . . . . . . . . . . . . . . . 47.4 25.4
Work-in-process and finished parts . . . . . 195.1 162.8
Finished products. . . . . . . . . . . . . . 108.4 79.0
-------- ------
Total inventories. . . . . . . . . . . . . 350.9 267.2
Other current assets . . . . . . . . . . . . . 38.3 38.0
-------- ------
Total current assets . . . . . . . . . . . . 647.7 514.7
-------- ------
Property, plant and equipment. . . . . . . . . . 525.7 449.3
Less accumulated depreciation. . . . . . . . . 263.0 250.5
-------- ------
Property, plant and equipment - net. . . . . 262.7 198.8
Other noncurrent assets. . . . . . . . . . . . . 110.6 74.1
-------- ------
Total assets . . . . . . . . . . . . . . . . . . $1,021.0 $787.6
======== ======
Liabilities and Shareholders' Equity
Current liabilities
Amounts payable to banks and current
portion of long term debt. . . .. . . . . . . $ 61.0 $ 83.9
Trade accounts payable . . . . . . . . . . . . 122.1 99.2
Advance billings and deposits. . . . . . . . . 51.3 39.6
Accrued and other current liabilities. . . . . 197.4 140.6
-------- ------
Total current liabilities. . . . . . . . . . 431.8 363.3
Long-term accrued liabilities. . . . . . . . . . 170.4 123.5
Long-term debt and lease obligations . . . . . . 236.4 143.0
-------- ------
Total liabilities. . . . . . . . . . . . . . . 838.6 629.8
-------- ------
Commitments and contingencies. . . . . . . . . . - -
Shareholders' equity
Preferred shares . . . . . . . . . . . . . . . 6.0 6.0
Common shares (outstanding: 33.8 in 1995
and 33.7 in 1994). . . . . . . . . . . . . . 289.9 289.2
Accumulated deficit. . . . . . . . . . . . . . (115.9) (125.9)
Cumulative foreign currency translation
adjustments . . . . . . . . . . . . . . . . . 2.4 (11.5)
-------- ------
Total shareholders' equity . . . . . . . . 182.4 157.8
-------- ------
Total liabilities and shareholders' equity . . . $1,021.0 $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)
12 Weeks Ended
-------------------------
March 25, March 26,
1995 1994
-------- --------
Sales. . . . . . . . . . . . . . . . . . . . . . $331.4 $245.5
Cost of products sold. . . . . . . . . . . . .. . 250.2 186.6
------ ------
Manufacturing margins. . . . . . . . . . . . . . 81.2 58.9
------ ------
Other costs and expenses
Selling and administrative . . . . . . . . . . 62.0 47.9
Gain on disposition of subsidiary . . . . . . . (5.0) -
Other - net. . . . . . . . . . . . . . . . . .. 3.0 1.2
------ ------
Total other costs and expenses . . . . . . .. 60.0 49.1
------ ------
Operating earnings . . . . . . . . . . . . . . .. 21.2 9.8
Interest
Income . . . . . . . . . . . . . . . . . . . .. .5 .4
Expense. . . . . . . . . . . . . . . . . . . . (5.1) (3.6)
------ ------
Interest - net . . . . . . . . . . . . . . . (4.6) (3.2)
------ ------
Earnings before income taxes . . . . . . . . . . 16.6 6.6
Provision for income taxes . . . . . . . . . . . 3.6 1.6
------ ------
Net earnings . . . . . . . . . . . . . . . . . . $ 13.0 $ 5.0
====== ======
Earnings per common share. . . . . . . . . . . . $ .38 $ .14
====== ======
Dividends per common share . . . . . . . . . . . $ .09 $ .09
Weighted average number of shares and common share
equivalents outstanding (in thousands) . . . . 34,136 34,014
See notes to consolidated condensed financial statements.
CINCINNATI MILACRON INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
(UNAUDITED)
(In millions)
12 Weeks Ended
------------------------
March 25, March 26,
1995 1994
-------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
OPERATING ACTIVITIES CASH FLOWS
Net earnings . . . . . . . . . . . . . . . . . $ 13.0 $ 5.0
Operating activities providing (using) cash
Depreciation and amortization. . . . . . . . 7.3 6.8
Gain on disposition of subsidiary. . . . . . (5.0) -
Deferred income taxes. . . . . . . . . . . . - 1.0
Working capital changes
Notes and accounts receivable. . . . . . . 1.7 12.5
Inventories. . . . . . . . . . . . . . . . (13.0) (10.6)
Other current assets . . . . . . . . . . . (5.3) .3
Trade accounts payable and
other current liabilities. . . . . . . . 21.4 (11.0)
Increase in other noncurrent assets. . . . . (.6) (3.1)
Increase (decrease) in long-term
accrued liabilities. . . . . . . . . . . . 1.1 (1.7)
Other - net. . . . . . . . . . . . . . . . . .1 (2.5)
------ ------
Net cash provided (used) by
operating activities . . . . . . . . . . 20.7 (3.3)
------ ------
INVESTING ACTIVITIES CASH FLOWS
Capital expenditures . . . . . . . . . . . . . (8.9) (5.5)
Net disposals of property, plant and equipment .3 1.3
Acquisition. . . . . . . . . . . . . . . . . . (79.2) -
Cash received on disposition of subsidiaries . 15.0 2.0
------ ------
Net cash used by investing activities. . . . (72.8) (2.2)
------ ------
FINANCING ACTIVITIES CASH FLOWS
Dividends paid . . . . . . . . . . . . . . . . (3.1) (3.1)
Issuance of long-term debt . . . . . . . . . . 82.2 115.4
Repayments of long-term debt
and lease obligations. . . . . . . . . . . . (8.6) (60.0)
Decrease in amounts payable to banks . . . . . (25.7) (51.0)
Net issuance of common shares. . . . . . . . . .7 2.2
------ ------
Net cash provided by financing activities. . 45.5 3.5
------ ------
DECREASE IN CASH AND CASH EQUIVALENTS. . . . . . (6.6) (2.0)
Cash and cash equivalents at beginning of period . 21.5 18.8
------ ------
CASH AND CASH EQUIVALENTS AT END OF PERIOD . . . $ 14.9 $ 16.8
====== ======
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, 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. . . . . . . . . . . . . . . . . 50.3
Other noncurrent assets. . . . . . . . . . . . . . . . . . . . 29.2
------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . 188.6
Amounts payable to banks and current
portion of long-term debt. . . . . . . . . . . . . . . . . . (9.1)
Intercompany payables to seller. . . . . . . . . . . . . . . . (4.7)
Trade accounts payable . . . . . . . . . . . . . . . . . . . . (14.6)
Other current liabilities. . . . . . . . . . . . . . . . . . . (39.3)
Long-term accrued liabilities. . . . . . . . . . . . . . . . . (40.6)
Long-term debt and lease obligations . . . . . . . . . . . . . (3.9)
------
Total acquisition costs. . . . . . . . . . . . . . . . . . . $ 76.4
======
As presented above, other current liabilities includes a reserve of $6.6
million for the further restructuring of Widia. 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. The company has identified additional restructuring actions that are
intended to improve Widia's profitability in the future. It is expected that
these additional actions, which are intended to complement the actions
already taken prior to the acquisition, will be substantially completed
during 1995.
Unaudited pro forma sales and earnings information for the first quarters of
1995 and 1994 prepared under the assumption that the acquisition had been
completed at the beginning of those years is as follows:
(In millions, except
per-share amounts)
12 Weeks Ended
----------------------
March 25, March 26,
1995 1994
-------- --------
Sales. . . . . . . . . . . . . . . . . . . . . . . $ 351.6 $ 281.1
======= =======
Net earnings . . . . . . . . . . . . . . . . . . . $ 13.4 $ 4.6
======= =======
Per common share . . . . . . . . . . . . . . . . . $ .39 $ .13
======= =======
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 those that will
be completed in 1995 will be no less than $9.0 million per year. This amount
is based principally on the savings that will be realized from known
reductions in Widia's employment level that have already occurred during 1995
and those that will occur later in the year. The proforma earnings amounts
for the first quarter of 1994 presented above include estimates of these
expected cost savings totaling $1.5 million. In addition, restructuring
charges of $.3 million that were incurred by Widia on a historical basis have
been eliminated. The actual annual savings from all of the restructuring
actions completed to date (including those that occurred in 1994) and the
additional actions that will be completed in the future are expected to be
considerably higher than $9.0 million. However, these additional savings
have not been included in the amounts presented above because the company
cannot accurately and precisely quantify them at this time.
The company is currently evaluating certain actions to integrate Valenite and
Widia to improve future profitability, which could result in incremental
costs and expenses in 1995, including a possible restructuring charge which
is not expected to exceed $10 million.
DISPOSITION OF SUBSIDIARIES
- ---------------------------
On January 27, 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 12 weeks ended March 25,
1995 and March 26, 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%.
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 March 25, 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)
March 25, Dec. 31,
1995 1994
-------- -------
ACCRUED AND OTHER CURRENT LIABILITIES
Accrued salaries, wages and
other compensation . . . . . . . . . . . . . $ 37.6 $ 29.9
Accrued and deferred income taxes. . . . . . . 32.2 21.5
Other accrued expenses . . . . . . . . . . . . . 127.6 89.2
------- ------
$ 197.4 $140.6
======= ======
LONG-TERM ACCRUED LIABILITIES
Accrued pension and other compensation . . . . . $ 66.4 $ 27.3
Accrued postretirement health
care benefits . . . . . . . . . . . . . . . . 44.1 44.0
Accrued and deferred income taxes. . . . . . . 26.9 25.8
Other. . . . . . . . . . . . . . . . . . . . . 33.0 26.4
------- ------
$ 170.4 $123.5
======= ======
LONG-TERM DEBT AND LEASE OBLIGATIONS
- ------------------------------------
Long-term debt and lease obligations are shown in the following table.
(In millions)
March 25, Dec. 31,
1995 1994
-------- -------
Long-term debt
8-3/8% Notes due 2004. . . . . . . . . . . . . . . $115.0 $115.0
12% Sinking Fund Debentures due 2010 . . . . . . . 10.8 10.8
Industrial Development Revenue
Bonds due 2008 . . . . . . . . . . . . . . . . . 10.0 10.0
Revolving credit facility. . . . . . . . . . . . . 99.1 10.0
Other. . . . . . . . . . . . . . . . . . . . . . . 12.1 8.1
------ ------
247.0 153.9
------ ------
Capital lease obligations
6-3/4% Bonds due 2004. . . . . . . . . . . . . . . - 7.6
6-3/8% Bonds due 1995- 1997. . . . . . . . . . . . 2.6 2.6
------ ------
2.6 10.2
------ ------
Total long-term debt and lease obligations . . . . . 249.6 164.1
Less current maturities. . . . . . . . . . . . . . . (13.2) (21.1)
------ ------
$236.4 $143.0
====== ======
At March 25, 1995 and December 31, 1994, current maturities includes the
Industrial Development Revenue Bonds due 2008 which are expected to become
payable within one year 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.
At March 25, 1995 and December 31, 1994, borrowings under the revolving
credit facility totaling $99.1 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
- ---------------
At March 25, 1995, the company had lines of credit with various U.S. and non-
U.S. banks of approximately $381 million, including a $200 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, which allows borrowings through July, 1996,
imposes restrictions on total indebtedness in relation to total capital (debt
plus tangible net worth, the latter being approximately equal to
shareholders' equity). The company has remained in compliance with the
restrictions imposed by the facility since its inception. A portion of this
facility was utilized to finance the acquisition of Widia on February 1, 1995
(see Acquisition). Under the provisions of the facility, the company's
additional borrowing capacity totaled approximately $67 million at March 25,
1995.
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 12 weeks ended March 25, 1995 and March 26, 1994 are presented below.
(In millions)
12 Weeks Ended
----------------------
March 25, March 26,
1995 1994
-------- --------
Sales
Plastics machinery . . . . . . . . . . . . . . . $126.2 $ 96.3
Machine tools. . . . . . . . . . . . . . . . . . 86.7 68.8
Industrial products. . . . . . . . . . . . . . . 118.5 80.4
------ ------
$331.4 $245.5
====== ======
Operating earnings (loss) (a)
Plastics machinery . . . . . . . . . . . . . . . $ 12.6 $ 7.6
Machine tools. . . . . . . . . . . . . . . . . (2.4) (.4)
Industrial products. . . . . . . . . . . . . . . 11.2 7.4
Gain on disposition of subsidiary (b). . . . . . 5.0 -
Unallocated corporate expenses (c) . . . . . . . (5.2) (4.8)
------ ------
$ 21.2 $ 9.8
====== ======
New orders
Plastics machinery . . . . . . . . . . . . . . . $137.9 $105.7
Machine tools. . . . . . . . . . . . . . . . . . 105.9 75.8
Industrial products. . . . . . . . . . . . . . . 125.2 85.0
------ ------
$369.0 $266.5
====== ======
Ending backlog . . . . . . . . . . . . . . . . . . $409.2 $267.0
====== ======
(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. This change
results in additional costs being retained as unallocated corporate
expenses. Amounts for 1994 have been restated to conform to the 1995
presentation.
(b) Represents a gain on the sale of the company's American Mine Tool
business, which was part of the industrial products segment.
(c) Unallocated corporate expenses 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.
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 first quarter of 1995 of $331 million increased by $86 million
over the first quarter of 1994, of which $23 million represents sales of a
newly acquired subsidiary, Widia, which is described below. Excluding
Widia's sales, the $63 million sales increase represents a 26% increase over
the first quarter of 1994. Also contributing to the $63 million increase is
an $8 million increase caused by foreign currency exchange rate fluctuations.
Plastics machinery sales increased by $30 million, or 31%, over 1994 due
primarily to increased sales of injection molding machines to North American
customers, as well as increased sales by the company's European plastics
machinery subsidiaries. Machine tools sales increased by $18 million, or
26%, primarily due to increased sales of standard machine tools in North
America and Europe. Sales of industrial products, excluding Widia's
contribution, increased $15 million, or 19%, due to increased sales of
grinding wheels in North America, and increased sales of metalcutting tools
and fluids in North America and Europe.
Export sales from the U.S. increased by $7 million over the first quarter of
1994 as all three groups recorded increases, most importantly to Canada,
Europe and Asia. Including sales from operations outside the U.S., almost
40% of the company's consolidated sales were to customers outside the U.S.,
up from about 30% in the first quarter of 1994.
NEW ORDERS AND BACKLOG
New orders for the first quarter of 1995 of $369 million increased by $103
million, or 38%, over the first quarter of 1994. Approximately $25 million
of the increase was attributable to the acquisition of Widia, and another $19
million of the increase was due to exchange rate fluctuations. Excluding
these two factors, new orders were up 22% over the first quarter of 1994.
Orders for plastics machinery increased by $32 million, or 30%, over 1994 due
to continued strong U.S. orders and strengthening European orders. Machine
tool orders increased $30 million, or 40%, as orders for standard machine
tools continued to increase and orders for aerospace machines increased
modestly. Orders for industrial products increased by $40 million, including
the Widia acquisition, and $15 million, or 18%, excluding the acquisition, 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.
The company's backlog of unfilled orders increased from $267 million at
December 31, 1994 to $409 million at March 25, 1995. Of this $122 million
increase, $84 million represents Widia's backlog at the date of its
acquisition, while $38 million represents the excess of new orders over sales
in the first quarter of 1995.
MARGINS, COSTS AND EXPENSES
The consolidated manufacturing margin percent of 24.5% for the first quarter
of 1995 increased from 24.0% in the first quarter of 1994. Currency exchange
rate fluctuations in the past year caused a $2 million increase in
manufacturing margins; these fluctuations did not affect the margin percent.
The plastics machinery margin percent improved with increased volume and more
stable pricing. The machine tool margin percent improved in the U.K. but
decreased in the U.S. due to production inefficiencies and temporarily
increased outsourcing and overtime costs. The industrial products margin
percent declined modestly due to the mix of Widia sales which have lower
margins than metalworking fluids.
Selling and administrative expense in the first quarter of 1995 increased as
expected with increased sales, the Widia acquisition, and currency exchange
rate fluctuations. As a percent to sales, however, selling expense decreased
modestly compared with the first quarter of 1994.
Gain on disposition of subsidiary represents a $5 million gain ($4.0 million
after-tax) on the sale of the company's American Mine Tool 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 by $1.8 million over the first
quarter of 1994 due in part to the Widia acquisition, increased financing
costs and exchange rate fluctuations.
Interest expense - net increased by $1.4 million in the first quarter of 1995
due primarily to higher debt levels associated with debt incurred to finance
the Widia acquisition and the company's internal sales growth, as well as
higher short-term borrowing costs.
EARNINGS BEFORE INCOME TAXES
Earnings before income taxes increased from $6.6 million in the first quarter
of 1994 to $16.6 million in the first quarter of 1995. Contributing to the
increase was the $5.0 million gain on the sale of the company's American
Mine Tool business and a $.7 million increase from 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 $13.0 million, or $.38 per share, in the first quarter of
1995 compared with $5.0 million, or $.14 per share, in the first quarter of
1994. Net earnings for the first quarter of 1995 included the $4.0 million
after-tax gain on the sale of American Mine Tool. Excluding the effect of
this gain, net earnings for the first quarter of 1995 would have been $9.0
million, or $.26 per share.
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. During the first quarter of 1994, costs
totaling $6 million were charged against the consolidation 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 continued to experience some production difficulties in early
1995 which were related to the consolidation and a simultaneous increase in
customer demand.
ACQUISITION
- -----------
In February, 1995, the company completed the acquisition of Germany-based
Krupp Widia GmbH (Widia) for approximately $80 million in cash. Widia, with
1994 sales of approximately $225 million, is one of the world's leading
producers of industrial metalcutting products. The acquisition was financed
principally through the company's revolving credit facility described below.
The company is currently evaluating certain actions to integrate Valenite and
Widia to improve future profitability, which could result in incremental
costs and expenses in 1995, including a possible restructuring charge which
is not expected to exceed $10 million.
LIQUIDITY AND SOURCES OF CAPITAL
- --------------------------------
At March 25, 1995, the company had cash and cash equivalents of $15 million,
a decrease of $7 million during the quarter. Operating activities provided
$21 million of cash in the first quarter of 1995, after including the net
proceeds from additional sales of accounts receivable of $10 million.
Operating activities used $3 million in the first quarter of 1994.
Total debt was $297 million at March 25, 1995, an increase of $70 million
over December 31, 1994, caused by the Widia acquisition. The ratio of total
debt to total capital (debt plus equity) was 62% at March 25, 1995, and 59%
at year-end 1994. Working capital increased by $65 million in the first
quarter of 1995 (including $45 million related to the acquisition of Widia)
and the current ratio improved to 1.5.
Expenditures for new property, plant and equipment in the first quarter of
1995 were $9 million, compared to $6 million in the first quarter of 1994.
The 1995 capital spending budget is $40 million. In addition, factory
equipment valued at approximately $16 million will be financed through
operating leases.
In the first quarter of 1995, the company acquired Widia for approximately
$80 million of cash financed with German marks available under the revolving
credit facility. Also during the quarter, the company sold American Mine
Tool resulting in proceeds of $15 million.
In the first quarter of 1994, the company completed an offering 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.
The company had a number of short-term intercompany loans and advances
denominated in various currencies totaling approximately $42 million at March
25, 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 March 25, 1995, the company had lines of credit with various U.S. and non-
U.S. banks of approximately $381 million, including a $200 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, which presently allows borrowings through July,
1996, imposes restrictions on total indebtedness in relation to total capital
(debt plus tangible net worth, the latter being approximately equal to
shareholders' equity). The company has remained in compliance with the
restrictions imposed by the facility since its inception. Under the
provisions of the facility, the company's additional borrowing capacity
totaled approximately $67 million at March 25, 1995.
The company is currently in discussions with the lenders under the revolving
credit facility to extend its term from July 20, 1996 to June 1, 1998. The
amount of credit available under the revolving credit facility will remain at
$200 million, although, beginning in December, 1995, certain required
financial ratio levels imposed on the company gradually will become more
stringent. The company believes that it will be able to continue throughout
the extended term of the facility to comply with these covenants, including
all required ratio levels. Later in the second quarter, the company also
expects to reduce the amount of credit available under the revolving credit
facility to approximately $150 million in order to reduce commitment fees
thereunder.
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. However, the company currently plans to
refinance a portion of its bank borrowings through the issuance of $100
million of five year senior notes.
OUTLOOK
- -------
The company believes it will achieve sales growth in all three business
segments in 1995. Any slowdown in the U.S. economy, especially in the
automotive sector, would be a deterrent to future growth in all three
segments. The company continues to expect low machine tool sales and
operating results in the second quarter of 1995 compared with the second half
of the year.
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 February 1, 1995, was filed on February
14, 1995, regarding the completion of the acquisition 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: May 5, 1995 By:/s/Robert P. Lienesch
------------- --------------------------------
Robert P. Lienesch
Controller
Date: May 5, 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 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.
11 Statement Regarding Computation of
Earnings per Share 18
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 19
99 Additional Exhibits - Not Applicable.
EXHIBIT 11
CINCINNATI MILACRON INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(UNAUDITED)
(In thousands, except
per-share amounts)
12 Weeks Ended
----------------------
March 25, March 26,
1995 1994
-------- --------
Net earnings . . . . . . . . . . . . . . . . . . . . $13,044 $ 4,984
Less preferred dividends . . . . . . . . . . . . . . (60) (60)
------- -------
Net earnings available
to common shareholders . . . . . . . . . . . . . $12,984 $ 4,924
======= =======
Primary
Average number of shares outstanding . . . . . . . 33,757 33,562
Add dilutive effect of stock options
based on treasury stock method . . . . . . . . . 379 452
------- -------
Total. . . . . . . . . . . . . . . . . . . . . 34,136 34,014
======= =======
Per share amount . . . . . . . . . . . . . . $ .38 $ .14
======= =======
Fully diluted
Average number of shares outstanding . . . . . . . 33,757 33,562
Add dilutive effect of stock
options based on treasury
stock method . . . . . . . . . . . . . . . . . . 379 467
-------- -------
Total. . . . . . . . . . . . . . . . . . . . . 34,136 34,029
======== =======
Per share amount . . . . . . . . . . . . . . $ .38 $ .14
======== =======
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 12 weeks ended Mar-25-1995
Amounts rounded to tenths of millions, except per share data
</LEGEND>
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-30-1995
<PERIOD-END> MAR-25-1995
<CASH> 14,900,000
<SECURITIES> 0
<RECEIVABLES> 258,000,000
<ALLOWANCES> 14,400,000
<INVENTORY> 350,900,000
<CURRENT-ASSETS> 647,700,000
<PP&E> 525,700,000
<DEPRECIATION> (263,000,000)
<TOTAL-ASSETS> 1,021,000,000
<CURRENT-LIABILITIES> 431,800,000
<BONDS> 0
<COMMON> 289,900,000
0
6,000,000
<OTHER-SE> (113,500,000)
<TOTAL-LIABILITY-AND-EQUITY> 1,021,000,000
<SALES> 331,400,000
<TOTAL-REVENUES> 331,400,000
<CGS> 250,200,000
<TOTAL-COSTS> 250,200,000
<OTHER-EXPENSES> 60,000,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,600,000
<INCOME-PRETAX> 16,600,000
<INCOME-TAX> 3,600,000
<INCOME-CONTINUING> 13,000,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,000,000
<EPS-PRIMARY> .38
<EPS-DILUTED> .38
</TABLE>
