SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K/A
AMENDMENT NO. 1
CURRENT REPORT
Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
Date of Report (date of earliest event reported) February 1, 1995
----------------
CINCINNATI MILACRON INC.
(Exact name of registrant as specified in charter)
Delaware 1-8475 31-1062125
(State or other jurisdiction (Commission File (I.R.S. Employer
of incorporation) Number) Identification No.)
4701 Marburg Avenue, Cincinnati, Ohio 45209
- -------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (513) 841-8100
-------------
NONE
-------------------------------------------------------
(Former name or former address, if changed since last report)
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
------------------------------------
On February 1, 1995 (the "Closing Date") pursuant to the Stock
Purchase Agreement dated as of November 28, 1994 (the "Purchase
Agreement"), Cincinnati Milacron Inc. (the "Registrant")
indirectly acquired the capital stock of Krupp Widia GmbH, a
German corporation ("Widia") from Fried. Krupp AG Hoesch-Krupp, a
German corporation (the "Seller"). (The Registrant indirectly
acquired 99.92% of Widia's capital stock and B.T. Foreign
Investment Corp. holds the remainder.) The purchase includes
Widia's 51% interest in Widia (India), Ltd., a public company
("Widia-India") and wholly-owned Widia subsidiaries in eleven
other countries. A copy of the Purchase Agreement is filed
herewith as Exhibit 2.1 and reference is made thereto for the
complete terms and conditions thereof.
The total purchase price, including assumed debt and liabilities
of approximately 33,000,000 DM, is approximately 154,000,000 DM
(approximately $99,000,000 using the exchange rate in effect on
the Closing Date). Included in the assumed debt and liabilities
is approximately 19,000,000 DM (approximately $12,000,000) of
debt owed by Widia-India. The Registrant obtained the funds for
the purchase through, or in connection with, an amendment to its
revolving credit facility with its existing bank group, which was
amended prior to the Closing Date to increase the Total Revolving
Loan Commitment from $130,000,000 to $200,000,000 and to allow up
to $100,000,000 of such amount to be drawn in Deutsch Marks (a
copy of the Amended and Restated Revolving Credit Agreement dated
as of December 31, 1994, is filed herewith as Exhibit 99.1 and
reference is made thereto for the complete terms and conditions
thereof (including the identity of the parties thereto)).
125,000,000 DM (approximately $80,000,000) of the Total Revolving
Loan Commitment was drawn in connection with the acquisition.
No material relationship exists between the Seller and the
Registrant or any of its affiliates, directors or officers, or
any associate of any such directors or officers.
Widia is one of the world's leading producers of metalcutting
products including carbide inserts and steel insert holders.
Widia is also a leading supplier of carbide die and wear products
and industrial magnets. The Registrant intends to operate Widia
as a wholly-owned subsidiary of the Registrant and to have Widia
continue to use a majority of its plant, equipment and other
physical property substantially as it did prior to the Closing
Date.
The Press Release of the Registrant dated February 1, 1995,
announcing the completion of the acquisition described above is
filed herewith as Exhibit 99.2 and is incorporated herein by
reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
---------------------------------
(a) Financial statements of business acquired
The following financial statements of Widia GmbH are filed
herewith as Item 7 (a):
Report of Independent Auditors
Combined statements of net assets as of December 31, 1994
and 1993
Combined statements of operations for the years ended
December 31, 1994 and 1993
Combined statements of cash flows for the years ended
December 31, 1994 and 1993
Notes to combined financial statements
(b) Pro forma financial information
The Pro Forma Consolidated Balance Sheet as of December 31, 1994,
and the related Pro Forma Consolidated Statement of Earnings for
the fiscal year ended December 31, 1994 reflecting, on a pro
forma basis, the acquisition of Widia GmbH are filed herewith as
Item 7 (b)
ITEM 7(A)
COMBINED FINANCIAL STATEMENTS
WIDIA GMBH
OF
FRIED. KRUPP AG HOESCH-KRUPP
SUBJECT TO THE STOCK PURCHASE AGREEMENT
BETWEEN FRIED. KRUPP AG HOESCH-KRUPP
AND
CINCINNATI MILACRON INC.
YEARS ENDED DECEMBER 31, 1994 AND 1993
WITH REPORT OF INDEPENDENT AUDITORS
COMBINED FINANCIAL STATEMENTS
WIDIA GMBH
SUBJECT TO THE STOCK PURCHASE AGREEMENT
BETWEEN FRIED. KRUPP AG HOESCH-KRUPP
AND
CINCINNATI MILACRON INC.
CONTENTS
Page
----
Report of Independent Auditors 6
Combined Financial Statements:
Combined statements of net assets 7
Combined statements of operations 8
Combined statements of cash flows 9
Notes to combined financial statements 10-28
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors
Cincinnati Milacron Inc.
We have audited the accompanying combined statements of net assets of
Widia GmbH (the "Acquired Business", see Note 1) subject to the Stock
Purchase Agreement between Fried. Krupp AG Hoesch-Krupp and Cincinnati
Milacron Inc. as of December 31, 1994 and 1993, and the related
combined statements of operations, and cash flows for the years then
ended. These financial statements are the responsibility of the
Acquired Business' Management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards in Germany and the United States. Those standards require
that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the combined net assets of the
Acquired Business as of December 31, 1994 and 1993, and the combined
results of their operations and their cash flows for the years then
ended in conformity with generally accepted accounting principles in
Germany.
Generally accepted accounting principles in Germany vary in certain
significant respects from generally accepted accounting principles in
the United States. Application of generally accepted accounting
principles in the United States would have affected the results of
operations for the years ended December 31, 1994 and 1993, and net
assets as of December 31, 1994 and 1993, to the extent summarized in
Note 3 to the combined financial statements.
Dusseldorf, Germany COOPERS & LYBRAND GMBH
February 28, 1995 Wirtschaftsprufungsgesellschaft
Buiting Wiegand
Wirtschaftsprufer Wirtschaftsprufer and
Certified Public Accountant
WIDIA GMBH
SUBJECT TO THE STOCK PURCHASE AGREEMENT
BETWEEN FRIED. KRUPP AG HOESCH-KRUPP
AND
CINCINNATI MILACRON INC.
Combined Statements of Net Assets
(DM in thousands)
December 31, 1994 1993
---- ----
ASSETS Note
----
Non-current assets:
Intangible assets 4 4,607 5,389
Fixed assets 5 115,161 133,026
Financial assets 6 1,431 4,333
------- -------
Total non-current assets 121,199 142,748
------- -------
Current assets:
Inventories 7 93,913 98,165
Less payments received on orders 2,486 1,307
------- -------
91,427 96,858
Trade receivables 8 69,002 69,299
Receivables from related entities 7,813 36,644
Other assets 8 3,672 5,832
Cash 4,426 6,219
------- -------
Total current assets 176,340 214,852
------- -------
Prepaid expenses 844 1,034
------- -------
Total assets 298,383 358,634
======= =======
LIABILITIES
Accruals:
Accruals for pensions and similar
obligations 9 44,170 57,627
Tax accruals 10 2,251 3,480
Other accruals 11 23,221 32,752
------- -------
69,642 93,859
------- -------
Other liabilities: 12
Bank borrowings 8,816 14,342
Trade payables 22,154 15,297
Bills of exchange 666 932
Payables to related entities 9,494 11,340
Other liabilities 34,413 41,088
------- -------
75,543 82,999
------- -------
Total liabilities 145,185 176,858
======= =======
Minority interest 10,108 9,487
Reserve for special depreciation 26,922 28,397
------- -------
37,030 37,884
------- -------
Net Assets 13 116,168 143,892
======= =======
See notes to combined financial statements.
WIDIA GMBH
SUBJECT TO THE STOCK PURCHASE AGREEMENT
BETWEEN FRIED. KRUPP AG HOESCH-KRUPP
AND
CINCINNATI MILACRON INC.
Combined Statements of Operations
(DM in thousands)
Year Ended December 31, 1994 1993
---- ----
Note
----
Sales 17 364,036 371,137
Decrease in inventories 3,376 14,333
-------- --------
Total output 360,660 356,804
Other operating income 18 13,202 10,548
Cost of materials and services 16 93,436 101,189
Personnel expenses 20 173,999 185,874
Depreciation and amortization 4-5 22,188 29,377
Other operating expenses 21 82,116 84,686
-------- -------
Operating profit/loss 2,123 (33,774)
Minority interest in earnings of
affiliated entities 1,909 1,658
Interest expense, net 22 2,078 6,628
-------- --------
Loss from ordinary business
activities 1,864 42,060
(Loss) profit transfer from Krupp
Medizintechnik GmbH (2,401) 808
Extraordinary income 23 20,468
Extraordinary expenses 24 11,217 20,068
Income taxes 2,218 2,110
Other taxes 8,362 8,093
-------- --------
Net loss before loss transfer
agreement with Krupp 26,062 51,055
Loss transfer to Krupp 50,161
-------- --------
Net loss 26,062 894
======== ========
See notes to the combined financial statements.
WIDIA GMBH
SUBJECT TO THE STOCK PURCHASE AGREEMENT
BETWEEN FRIED. KRUPP AG HOESCH-KRUPP
AND
CINCINNATI MILACRON INC.
Combined Statements of Cash Flows
(DM in thousands)
Year Ended December 31, 1994 1993
---- ----
Cash flows from operating activities:
Net loss before loss transfer agreement
with Krupp 26,062 51,055
Adjustments to reconcile net loss
to net cash provided by
operating activities:
Depreciation and amortization 23,463 39,145
Change in special depreciation (1,475) (5,081)
Net gain on disposals
of non-current assets (1,012) (565)
Changes in assets and liabilities:
Inventories 5,431 33,978
Trade receivables 297 7,197
Trade payables 6,857 (5,609)
Accrued liabilities (11,867) (13,871)
Other liabilities (6,941) 341
Other assets 2,271 1,128
-------- --------
Cash (used for) provided by
operating activities (9,038) 3,650
Cash flows from investing activities:
Purchases of fixed assets (8,747) (11,469)
Disposals of fixed assets 2,751 1,283
Net cash provided by financial
investments 2,890 2,604
Change in minority interest 621 1,128
-------- --------
Cash provided by
investing activities (2,485) (6,454)
Cash flows from financing activities:
Loss transfer to Krupp 50,161
Proceeds from bank borrowings 7,642
Repayments of bank borrowings (13,168) (53,850)
Proceeds from related entities, net 16,481 15,498
Payments to related entities, net (1,846) (11,680)
-------- --------
Cash provided
by financing activities 9,109 129
Exchange rate impacts on cash 621 848
-------- --------
Net decrease in cash (1,793) (1,827)
Cash at beginning of year 6,219 8,046
-------- --------
Cash at end of year 4,426 6,219
======== ========
See notes to combined financial statements.
WIDIA GMBH
SUBJECT TO THE STOCK PURCHASE AGREEMENT
BETWEEN FRIED. KRUPP AG HOESCH-KRUPP
AND
CINCINNATI MILACRON INC.
Years Ended December 31, 1994 and 1993
Notes to Combined Financial Statements
1. PURCHASE AND SALE OF THE ACQUIRED BUSINESS
On November 28, 1994, a Stock Purchase Agreement ("the Agreement") was
entered into between Fried. Krupp AG Hoesch-Krupp ("Krupp"), a German
company, and Cincinnati Milacron Inc. ("Milacron"), a United States
company. Krupp agreed to sell to Milacron the Widia GmbH entity and
certain Widia GmbH foreign sales and service subsidiaries, collectively
referred to hereafter as the "Acquired Business", and the related
assets, liabilities and shareholdings as specified in the Agreement.
The Agreement specifies that, among other things, effective on or prior
to the closing date, Krupp is to contribute the elements of the
Acquired Business to the wholly-owned subsidiary, Widia GmbH, which
will then be transferred to Milacron. As of December 31, 1994, not all
of the transactions as specified in the agreement have been completed.
The Acquired Business includes the manufacturing, assembling, selling
and distributing tools and wear parts of sintered carbide and other
hard materials and magnets. These operations are accounted for in one
industry segment, Industrial Products.
Due to the organization and reporting structure of Krupp, summarized
financial records of the acquired business were not maintained as one
consolidated group. Further, certain services such as financing and
administration were provided by Krupp to the acquired business.
Therefore, the accompanying financial statements do not purport to
present the net assets or results of operations and cash flows of the
acquired business as if it had been operated as a separate,
unaffiliated entity, but rather as a component of Krupp's overall
business during the periods presented.
2. SIGNIFICANT ACCOUNTING POLICIES
The accounting principles and valuation methods of the Acquired
Business have been consistently applied for both years presented.
ALL MONETARY AMOUNTS HEREIN ARE SHOWN IN THOUSANDS OF DEUTSCHE MARKS.
Principles of Combination - The entities included in the accompanying
combined financial statements and the related equity ownership interest
of the Acquired Business at December 31, 1994 are as follows:
Name City, Country Ownership %
---- ------------- -----------
Widia Heinlein GmbH Lichtenau, Germany 100
Meturit AG Zug, Switzerland 100
Krupp Widia
Nederland B.V. Woerden, Netherlands 100
Widia Iberica S.A. Vitoria, Spain * 100
(former division of
Krupp Hispania S.A.)
Herko Vitoria S.A. Vitoria, Spain * 100
Krupp Widia U.K. Limited High Wycombe, UK * 100
Krupp Widia S.P.A. Milan, Italy 100
Krupp Widia Vertriebs-
gesellschaft m.b.H. Perchtoldsdorf, Austria 100
Krupp Widia Svenska A.B. Stockholm, Sweden 100
Krupp Widia S.E. Asia
(Pte.) Limited Singapore, Singapore 100
Krupp Widia Korea Limited Seoul, Korea 100
Krupp Widia Japan Limited Kobe, Japan 100
Krupp Widia France S.A. Vernouileet, France * 100
Widia (India) Limited Bangalore, India 51
Widaroc India Limited Bangalore, India 100
(shares held by Widia
(India) Limited
Widaroc India Limited in the process of being merged
upon Widia (India) Limited without affecting the
shareholding of Meturit AG in Widia (India) Limited.
* As of December 31, 1994, these entities have not yet been obtained by
Widia GmbH.
For all of the above listed entities, in which the Acquired Business
has more than a 50% equity ownership interest (the "affiliated
entities"), the full consolidation method has been used, except that in
1994 the subsidiary in Kobe, Japan, Krupp Widia Japan Limited, is not
consolidated, but is effectively accounted for under the equity method
of accounting. This subsidiary represented in 1993 less than one-half
of one percent of the net loss before transfer to Krupp and less than
three percent of sales of the acquired business. In regard to net
assets, the subsidiary represented in 1994 and 1993 approximately one-
half of one percent of the net assets of the acquired business.
Management believes that in 1994, the results and net assets of Widia
Japan Limited, would again have an immaterial impact on the
consolidated accounts and therefore has deemed this presentation
appropriate due to the natural disasters in that area.
Profit and Loss Transfer Agreements - The acquired business maintained
a profit and loss transfer agreement with Krupp whereby the majority of
the losses of the acquired business were transferred to Krupp. This
agreement was terminated for the 1994 fiscal year. The acquired
business also maintained a profit and loss transfer agreement with
Krupp Medizintechnik GmbH, which is not part of the acquired business,
whereby the results of Krupp Medizintechnik GmbH were transferred to
the acquired business.
Foreign Currency Translation - The foreign currency amounts
representing foreign affiliated entities in the combined statements of
net assets have been translated into DM at the fiscal year-end exchange
rates. Amounts in the combined statements of operations have been
translated into DM using the average exchange rates for the periods
involved. Translation gains or losses are included in net assets.
Intangible Assets - Intangible assets consist mainly of goodwill
arising on the acquisition of Widia Heinlein GmbH and purchased
computer software. Amortization is provided using the straight-line
method over fifteen years for goodwill and generally four years for
computer software.
Fixed Assets - Fixed assets are valued at acquisition cost.
Depreciation is provided using the straight-line method over the
assets' useful lives as follows:
Fixed Assets
Buildings - 25 - 50 years
Technical facilities
and machinery - 3 - 10 years
Facilities, factory
and office equipment - 4 - 10 years
Inventories - Raw materials, manufacturing supplies and goods purchased
for resale are valued at the lower of cost, determined on an average,
or market. Finished goods are valued at the lower of manufacturing
cost, determined on an average or net realizable value and comprise
direct material and labor and applicable manufacturing overheads
including depreciation charges. Obsolescence provisions are made to
the extent that inventory risks are determinable.
Trade Accounts Receivable - Receivables are presented net of allowances
for doubtful accounts. Allowances are provided for both the specific
and general risks inherent in receivables. The Acquired Business
evaluates the credit worthiness of each customer, but it does not
normally require its trade accounts receivable to be collateralized.
Income Taxes - The entities comprising the Acquired Business maintain
substantially the same tax and financial reporting bases for assets and
liabilities and therefore deferred taxes generally do not result.
Pension Obligations - Accruals and provisions for pensions and similar
obligations are actuarially determined and are based on discounted
amounts.
Liabilities - Liabilities are presented at their repayment amounts.
Other Accruals - Accruals for employee termination indemnity are based
on contractual agreements between management and the Workers' Council.
Accruals and provisions for estimated costs related to product warranty
are made at the time the products are sold.
Revenue Recognition - Revenue is recognized when title passes or
services are rendered, net of discounts and rebates granted.
Foreign Currency Transactions - Foreign currency receivables and
payables are recorded at historical rates unless using the exchange
rate at the fiscal year-end would result in an unrealized foreign
currency exchange loss. This results in unrealized losses being
recognized currently and unrealized gains being deferred until they are
realized. Unrealized gains on foreign exchange forward contracts are
deferred and recognized as part of the specific transaction hedged, but
unrealized losses are recognized currently.
Total Cost Method - The statements of operations have been presented
using the total cost (or type of expenditure) method which is a common
German GAAP method in use. In this format, production and all other
expenses incurred during the period are classified by type of expense.
Sales for the period, and the net decrease in finished goods and work
in process are classified as Total Output.
3. SIGNIFICANT DIFFERENCES BETWEEN GERMAN GAAP AND US GAAP
The combined financial statements of the Acquired Business comply with
German GAAP as prescribed by the German Commercial Code, which differs
in certain significant respects from US GAAP. The significant
differences which affect the combined net loss and combined net assets
of the Acquired Business are as follows:
a. Pensions - The Acquired Business provides for pension costs based on
actuarial studies using the entry age method as defined in the German
tax code. US GAAP, as defined by SFAS No. 87, "Employers' Accounting
for Pensions", is more prescriptive, particularly as to the use of
actuarial assumptions, and requires that a different actuarial method
(the projected unit credit method) be used. The application of this
method is further described in Note 9.
b. Special Depreciation - As allowed by German GAAP, depreciation may
be calculated utilizing accelerated depreciation methods with the
difference resulting between the accelerated and straight-line method
being regarded as a special depreciation reserve. Under US GAAP, this
practice is not acceptable.
c. Financial Closing Accrual - In accordance with German GAAP, the
acquired business records an accrual at the end of the year for the
estimated future costs to be incurred in conjunction with the financial
close and reporting. This is not acceptable for US GAAP.
d. Loss Transfer - As allowed by German GAAP, the acquired business had
a profit and loss transfer agreement with Krupp whereby the majority of
the loss of the acquired business is transferred to Krupp. This
agreement was cancelled in 1994. This presentation is not acceptable
for US GAAP.
e. Profit Transfer - As allowed by German GAAP, the acquired business
also had a profit and loss transfer agreement with Krupp Medizintechnik
GmbH, which is not part of the acquired business, whereby the results
of Krupp Medizintechnik GmbH were transferred to the acquired business.
This presentation is not acceptable for US GAAP. In 1994, the results
of Krupp Medizintechnik GmbH were funded by Krupp and included with
other operating income (see Note 18) and therefore no adjustment is
required in 1994.
f. Investment Grants - As allowed by German GAAP, the acquired business
records investment grants as other income. In accordance with US GAAP,
investment grants of this nature are to be recorded as a reduction of
the cost of the related asset.
g. Deferred Taxes - Under German GAAP, deferred taxes are calculated on
the liability method, but are recognized only to the extent that
consolidated deferred tax liabilities exceed consolidated deferred tax
assets. Under US GAAP, as prescribed by SFAS No. 109 "Accounting for
Income Taxes", deferred taxes are provided for all temporary
differences using enacted tax rates. There is, however, no deferred tax
adjustment below as deferred tax assets exceed deferred tax liabilities
and that a valuation allowance has been recorded as of December 31,
1994 and 1993 to the extent that deferred tax assets exceed deferred
tax liabilities due to the past poor operating results and uncertainty
of the future profitability of the acquired business.
Reconciliation to US GAAP - The following is a summary of the
significant adjustments to net loss for the years ended December 31,
1994 and 1993 and to net assets as of December 31, 1994 and 1993, which
would be required if US GAAP had been applied instead of German GAAP.
Note 1994 1993
---- ---- ----
Net loss as reported in the
combined statements of opera-
tions under German GAAP (26,062) (894)
Adjustment required to conform with
US GAAP - Pensions a (1,786) (1,822)
- Special
depreciation b (1,475) (3,017)
- Financial closing
accrual c (41) (85)
- Loss transfer d (50,161)
- Profit transfer e (808)
- Investment grants f (2,090) (190)
------- -------
NET LOSS IN ACCORDANCE WITH US GAAP (31,454) (56,977)
======== ========
Note 1994 1993
---- ---- ----
Net assets as reported in the
combined statements of net
assets under German GAAP 116,168 143,892
Adjustment required to conform with
US GAAP - Pensions a (3,944) (2,158)
- Special
depreciation b 26,922 28,397
- Financial closing
accrual c 881 965
- Investment grants f (1,520) (1,330)
-------- --------
NET ASSETS IN ACCORDANCE WITH US GAAP 138,507 169,766
======== ========
4. INTANGIBLE ASSETS
1994 1993
---- ----
Balance at beginning of year 9,993 10,443
Additions 241 78
Disposals 641 559
Translation (165) 31
-------- --------
Balance at end of year 9,428 9,993
Accumulated amortization 4,821 4,604
-------- --------
Net Book Value 4,607 5,389
======== ========
Amortization for the year 861 1,093
======== ========
5. FIXED ASSETS
<TABLE>
<CAPTION>
Other
equipment Advance
Technical factory payments
equipment and and
Land and and office construction
buildings machinery equipment in progress Total
--------- --------- --------- ----------- -----
<S> <C> <C> <C> <C> <C>
Balance at
January 1,1993 72,103 234,987 63,675 6,526 377,291
Additions 478 7,998 2,112 881 11,469
Reclassifications 1,091 3,399 456 (4,946)
Disposals 92 14,275 4,276 207 18,850
Translation (357) (843) (239) (130) (1,569)
------- -------- ------- ------- --------
73,223 231,266 62,728 2,124 368,341
Accumulated
depreciation 16,898 169,614 48,210 593 235,315
------- -------- ------- ------- --------
Net Book Value at
December 31, 1993 56,325 61,652 13,518 1,531 133,026
======= ======== ======= ======= ========
Depreciation for
the year 1,805 28,679 7,359 209 38,052
======= ======== ======= ======= ========
Balance at
January 1, 1994 73,223 231,266 61,728 2,124 368,341
Additions 277 7,011 1,190 269 8,747
Reclassifications 1,235 72 (1,307)
Disposals 283 26,707 5,241 330 32,561
Translation (426) (1,727) (75) (43) (2,271)
------- -------- ------- ------- --------
72,791 211,078 57,674 713 342,256
Accumulated
depreciation 19,192 159,768 47,621 514 227,095
------- -------- ------- ------ --------
Net Book Value at
December 31, 1994 53,599 51,310 10,053 199 115,161
======= ======== ======= ====== ========
Depreciation for
the year 2,562 15,617 4,279 144 22,602
======= ======== ======= ====== ========
</TABLE>
During 1993, write-downs of fixed assets of 11,020 were recorded.
Of this amount, 9,768 was recorded as extra-ordinary expense. These
amounts are shown with the depreciation for the year. During 1994,
write-downs of fixed assets of 1,275 were recorded, which are shown
as extra-ordinary expense.
6. FINANCIAL ASSETS
Investments
in
associated Long-term
entities receivables Total
-------- ----------- -----
Balance at
January 1, 1993 5,420 937 6,357
Additions 78 78
Write-down to fair
market value 1,155 1,155
Disposals 1,042 46 1,088
Translation 139 2 141
------- ----- ------
Net Book Value at
December 31, 1993 3,362 971 4,333
====== ===== ======
Balance at
January 31, 1994 3,362 971 4,333
Additions 461 45 506
Disposals 3,362 34 3,396
Translation (12) (12)
------- ------ ------
Net Book Value at
December 31, 1994 461 970 1,431
====== ======= =======
7. INVENTORIES
1994 1993
---- ----
Raw materials and manufacturing supplies 13,805 13,560
Work in process 27,143 30,309
Finished goods and goods purchased
for resale 52,297 53,603
Advance payments to suppliers 668 693
------ ------
93,913 98,165
====== ======
8. RECEIVABLES AND OTHER ASSETS
Trade receivables are due within one year (1993: 37 were due after one
year).
Receivables from related entities are all due within one year.
Other assets consist primarily of non-trade receivables of 3,165 (1993:
5,354), of which amounts maturing after more than one year are 14
(1993: 16).
9. PENSION OBLIGATIONS
The Acquired Business operates two defined benefit pension plans in
Germany, both based on years of service, to substantially all
employees. One plan is for the benefit of non-exempt employees while
the other plan is for exempt employees. Pensions are related to average
earnings near retirement or earlier death or disability as well as to
fixed amounts.
Some of the foreign affiliated entities operate immaterial defined
benefit and defined contribution pension plans.
Pension benefit obligations are determined based on actuarial studies
using the entry age method as defined in the German tax code and are
based on an assumed interest rate of 6%. All of the material pension
plans are unfunded.
The following information for the Acquired Business' material pension
plans is provided on a US GAAP basis (see Note 3) in accordance with
the US GAAP disclosure requirements of SFAS No. 87.
The net periodic pension cost of the Acquired Business for the
retirement plans comprised:
1994 1993
---- ----
Service cost: present value of benefits
earned during the year 1,150 1,263
Interest cost on projected benefit
obligation 4,387 4,461
Amortization of transition amount 562 562
------ ------
Total Pension Cost 6,099 6,286
====== ======
The status of the Acquired Business' retirement plans is as follows:
1994 1993
---- ----
Actuarial present value of benefits:
Vested 45,505 55,839
Nonvested 2,551 3,543
------- -------
Accumulated benefit obligation 48,056 59,382
Effect of projected future salary increase 9,532 5,408
------- -------
Projected benefit obligation 57,588 64,790
Unrecognized transition amount 7,308 7,870
Unrecognized net loss (gain) 1,239 (2,575)
------- -------
Pension Liability 49,041 59,495
======= =======
For both 1994 and 1993, the assumed discount rate and rates of increase
in remuneration and post-retirement pension increases used in
calculating the projected benefit obligation were 7%, 4%, and 3%,
respectively.
As part of the sales agreement, Krupp agreed to maintain the liability
as of December 31, 1994 resulting from pension rights concerning those
employees who left the acquired business before June 1, 1983. This
amount of approximately 12,000 has therefore been excluded from the
total pension liability as of December 31, 1994 and decreased the
receivable from related entities as specified by the Agreement.
10. TAX ACCRUALS
Tax accruals include mainly income taxes and relate primarily to taxes
payable in countries other than Germany. Cash paid for income taxes
totalled 3,447 (1993: 2,162).
11. OTHER ACCRUALS
1994 1993
---- ----
Bonuses, vacation pay and
related social benefit costs 9,758 8,288
Employee termination indemnity 2,694 8,370
Product warranties 630 1,155
Outstanding invoices 2,066 2,209
Litigation 1,071 1,205
Sales commissions 1,179 268
Restructuring reserves 1,040 6,929
Other 4,783 4,328
------ ------
23,221 32,752
====== ======
12. LIABILITIES
1994 1993
---- ----
Bank borrowings, of which due within one
year 8,096 (1993: 13,168); in more than
one year and less than
five years 720 (1993: 1,174) 8,816 14,342
===== ======
Other liabilities:
Payroll withholding and value added
tax, all due within one year 5,688 5,212
Social benefits, all due within one year 5,074 5,301
Wages and salaries, all due within
one year 4,689 5,153
Other borrowings, due within one year
3,943 (1993: 6,515), in more than
one year and less than five years
7,568 (1993: 9,598), in more than
five years 510 (1993: 1,890) 12,029 18,003
Other, all due within one year 6,933 7,419
------ ------
Total other liabilities 34,413 41,088
====== ======
Maturities of long-term bank borrowings by year after December 31, 1994
are 1995: 180; 1996: 180; 1997: 180; 1998: 180; 1999: 180. Weighted
average interest rates on bank borrowings were 13.0% (1993: 12.1%).
Bank and other borrowings of 12,007 (1993: 14,087) are secured by
mortgages and hypothecations of fixed assets with net book values
totalling 37,088 (1993: 38,799). Cash paid for interest totalled 1,263
(1993: 3,390).
Trade payables, bills of exchange and payables to related entities are
all due within one year.
13. NET ASSETS
1994 1993
---- ----
Balance at beginning of year 143,892 145,248
Net loss before loss transfer
agreement with Krupp 51,055
Loss transfer to Krupp 50,161
Net loss for the year 26,062
Translation differences (1,662) (462)
-------- --------
Balance at end of year 116,168 143,892
======== ========
14. CONTINGENT LIABILITIES
1994 1993
---- ----
Issuance and transfer of bills of exchange 8,630 5,807
Guarantees 5,900 5,856
Security for third party liabilities 1,419 630
------- -------
15,949 12,293
======= =======
Various lawsuits arising during the normal course of business are
pending against the Acquired Business. In the opinion of the Acquired
Business' management, the ultimate liability, if any, resulting from
these matters will have no significant effect on the Acquired Business'
combined net assets. The significance of these matters on the Acquired
Business' future operating results depends on the level of future
results of operations as well as on the timing and amount of the
ultimate outcomes.
15. COMMITMENTS
Commitments to purchase fixed assets were 151 (1993: 875).
The Acquired Business leases certain property, machinery and office
equipment under operating leases, some of which include varying renewal
and purchase options. Included in the combined statements of
operations are operating lease expenses totalling 5,824 (1993: 7,635).
At December 31, 1994, future operating lease commitments with initial
remaining terms of more than one year are 1995: 2,991; 1996: 2,182;
1997: 1,758; 1998: 1,270; 1999: 1,012; after 1999: 15,978. Included in
these amounts are leases from related parties for the administration
building and hire of real estate with initial remaining terms of more
than one year as follows: 1995-1999: 708 each year; after 1999:
15,896. The leases from related parties are generally at below market
rates.
16. COST OF MATERIALS AND SERVICES
1994 1993
---- ----
Raw materials, consumables, supplies
and merchandise 72,739 83,584
Purchased services 20,697 17,605
------ -------
93,436 101,189
====== =======
17. GEOGRAPHIC INFORMATION
An analysis of operations by geographic region is as follows:
Rest of
Germany Europe Asia Other Total
------- ------ ---- ----- -----
1994
----
Net sales 171,485 110,044 63,066 19,441 364,036
Inter-regional sales 35,202 (34,443) (759)
Operating profit 1,000 642 368 113 2,123
Identifiable assets 200,173 45,661 52,549 298,383
Depreciation and
amortization 17,541 1,678 2,969 22,188
Capital expenditures 5,154 1,098 2,495 8,747
1993
----
Net sales 172,093 111,821 72,718 14,505 371,137
Inter-regional sales 26,825 (23,206) (3,619)
Operating loss (15,655) (10,179) (6,620) (1,320) (33,774)
Identifiable assets 244,685 58,731 54,757 461 358,634
Depreciation and
amortization 22,897 2,964 3,516 29,377
Capital expenditures 3,802 1,342 6,325 11,469
The Acquired Business' manufacturing facilities are located in Germany,
The Netherlands, Spain, France and India, and its operations in other
countries are carried out through the entities described in Note 2.
The operating profit/loss is allocated to the geographic regions based
on net sales.
18. OTHER OPERATING INCOME
1994 1993
---- ----
Release of special depreciation reserve 4,504 1,258
Transfer from Krupp for loss of
Krupp Medizintechnik GmbH 2,401
Government grant 1,900
Gain on sales of fixed assets 1,696 1,002
Gain on sale of financial investments 2,115
Reversal of accruals 559 1,038
Bad debt recoveries 363 2,020
Exchange gains 127 1,393
Other 1,652 1,722
------ ------
13,202 10,548
====== ======
19. RESEARCH AND DEVELOPMENT
Costs incurred for product research and development were 12,918 (1993:
11,931).
20. PERSONNEL EXPENSES\EMPLOYMENT
Personnel expenses: 1994 1993
---- ----
Wages and salaries 139,855 150,980
Social levies and pensions, of which for
pensions 5,675 (1993: 6,020) 34,144 34,894
------- -------
173,999 185,874
======= =======
Employment (as of the end of the year): 1994 1993
---- ----
Hourly employees 2,195 2,345
Salaried employees 1,132 1,306
------- -------
3,327 3,651
======= =======
The above employment figures include those at foreign affiliated and
associated entities totalling 1,978 (1993: 2,040) of which are employed
in India 1,509 (1993: 1,486). The total weighted average number of
employees was 3,533 (1993: 3,811).
21. OTHER OPERATING EXPENSES
1994 1993
---- ----
Selling 11,432 10,603
Maintenance and repairs 10,715 10,037
External data processing 7,744 8,541
Travel 7,037 7,710
Rental 5,824 7,635
Related party administration fees 5,060 5,208
Other employee social 3,893 4,851
Mail 3,507 3,881
Advertising 3,385 3,525
Legal and consulting 2,396 1,038
Additions to special depreciation reserve 3,029 1,797
Bad debt 2,458 2,905
Insurance 2,207 2,554
Office supplies 1,538 1,873
Public levies and dues 1,210 1,352
Loss on disposals of fixed assets 684 876
Investment write-offs 1,155
Loss on disposals of financial assets 521
Other 9,997 8,624
------ ------
82,116 84,686
====== ======
22. INTEREST EXPENSE, NET
1994 1993
---- ----
Interest income from long-term loans 71 59
Other interest and similar income, of which
from related entities 1,558 (1993: 626) 2,139 1,221
Interest expense, of which
from related entities 265 (1993: 1,031) 4,288 7,908
------ ------
2,078 6,628
====== ======
23. EXTRAORDINARY INCOME
1993
----
Restructuring expense
transfer Krupp 13,910
Income related to special
depreciation write-offs 3,556
Reversal of accrual for
restructuring activities 3,002
------
20,468
======
24. EXTRAORDINARY EXPENSE
1994 1993
---- ----
Write-off fixed assets 1,275 9,768
Expense for restructuring
activities 9,942 10,300
------ ------
11,217 20,068
====== ======
25. FOREIGN EXCHANGE CONTRACTS
The Acquired Business enters into foreign exchange contracts to hedge
foreign currency transactions on a continuing basis for periods
commensurate with its known or expected exposures, primarily related to
machinery sales and purchase of production materials denominated in
foreign currencies. The purpose of this practice is to minimize the
effect of foreign currency exchange rate fluctuations on operating
results.
At December 31, 1994, the Acquired Business had outstanding foreign
exchange contracts totalling 9,246, which generally mature in periods
of one year or less. These foreign exchange contracts are legal
agreements between two parties to purchase and sell a foreign currency,
for a price specified at the contract date, with delivery and
settlement in the future.
The Acquired Business does not engage in speculation. Management does
not anticipate any material adverse effect on its financial position
resulting from its involvement in these instruments.
26. CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Acquired Business to
significant concentrations of credit risk consist principally of cash
and accounts receivable. The carrying amount of these items are a
reasonable estimate of their fair market value due to their short-term
nature.
Concentrations of credit risk with respect to accounts receivable are
generally diversified due to the large number of entities comprising
the customer base of the Acquired Business and their disposition across
many different industries and geographic locations. No single customer
accounted for a significant amount of the sales of the Acquired
Business and there was no significant accounts receivable from a single
customer.
ITEM 7(B)
CINCINNATI MILACRON INC. AND SUBSIDIARIES
PRO FORMA FINANCIAL INFORMATION
(In millions, except per share data)
(Unaudited)
On February 1, 1995 (the "Closing Date"), Cincinnati Milacron Inc. (the
"Company") completed the acquisition of 99.92% of the outstanding shares of
Krupp Widia GmbH ("Widia") from Fried. Krupp AG Hoesch-Krupp (the "seller")
for DM 120.8 million (approximately $80 million based on the exchange rate
in effect on the Closing Date), which included DM 7.1 million
(approximately $5 million) for the settlement of all intercompany
liabilities to the seller as of the Closing Date. The Company financed the
purchase 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.
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. The Company
estimates that the annual savings in relation to Widia's historical 1994
operations that will result from all of these actions will be no less than
$9.0 million (see note (d) to Pro Forma Consolidated Statement of
Earnings).
The following pro forma consolidated balance sheet and statement of
earnings (collectively the "pro forma consolidated statements") are based
on the historical financial statements of the Company and Widia adjusted to
give effect to the acquisition (and, in the case of the pro forma
consolidated statement of earnings, the restructuring) of Widia. The pro
forma consolidated statement of earnings assumes that the acquisition and
the restructuring of Widia occurred as of the first day of the Company's
1994 fiscal year, and the pro forma consolidated balance sheet assumes that
the acquisition (but not the restructuring) of Widia occurred on the last
day of the Company's 1994 fiscal year.
The pro forma consolidated statements reflect the purchase method of
accounting for the acquisition of Widia using estimated purchase accounting
adjustments which are subject to revision once appraisals, actuarial
reviews and other studies of the fair value of the assets and liabilities
of Widia are completed. Final purchase accounting adjustments may differ
from the pro forma adjustments presented herein and described in the
accompanying notes.
The pro forma consolidated statements do not purport to present what the
Company's financial position and results of operations would actually have
been had the acquisition and restructuring of Widia occurred on the first
day of the Company's 1994 fiscal year or on the last day of the Company's
1994 fiscal year, as specified above, or purport to project the Company's
results of operations for any future period. The pro forma consolidated
statements reflect certain assumptions described in the accompanying notes,
including the Company's expectations of anticipated cost savings from the
restructuring of Widia. The actual savings may vary from these
expectations. The pro forma consolidated statements and accompanying notes
should be read in conjunction with the audited consolidated financial
statements of the Company and the related notes thereto which are included
in the Company's Annual Report on Form 10-K for its fiscal year ended
December 31, 1994, the Company's Current Report on Form 8-K dated February
1, 1995 (both filed with the Securities and Exchange Commission), and the
audited combined financial statements of Widia that are filed herewith as
Item 7(a).
CINCINNATI MILACRON INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEET
(In millions)
<TABLE>
<CAPTION>
December 31, 1994
-------------------------------------------------------
Cincinnati
Historical Acquisition Milacron
Cincinnati Historical Pro Forma and Widia
Milacron Widia (a) Adjustments Consolidated
----------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Current assets
Cash and cash
equivalents . . . . . . . . . . . $ 21.5 $ 2.9 $ 80.4 (b) $ 24.1
(74.9)(c)
(5.8)(e)
Notes and accounts
receivable, less
allowances. . . . . . . . . . . . 188.0 44.5 232.5
Receivables from seller . . . . . . 5.0 4.8 (d) -
(9.8)(e)
Inventories. . . . . . . . . . . . . 267.2 60.2 (1.3)(f) 326.1
Other current assets. . . . . . . . 38.0 3.0 41.0
-----------------------------------------------------
Total current assets. . . . . . . 514.7 115.6 (6.6) 623.7
Property, plant and
equipment - net . . . . . . . . . . 198.8 73.3 (4.8)(d) 251.3
(16.0)(f)
Other noncurrent assets. . . . . . . . 74.1 4.2 .2 (b) 99.9
21.4 (f)
-----------------------------------------------------
Total assets. . . . . . . . . . . . $ 787.6 $ 193.1 $ (5.8) $ 974.9
=====================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Amounts payable to banks
and current portion
of long-term debt . . . . . . . $ 83.9 $ 8.0 $ 80.6 (b) $ 172.5
Trade accounts payable. . . . . . 99.2 14.7 113.9
Payables to seller. . . . . . . . 6.1 9.5 (d) -
(15.6)(e)
Advance billings
and deposits. . . . . . . . . . 39.6 39.6
Accrued and other
current liabilities . . . . . . 140.6 34.5 1.6 (c) 183.8
7.1 (f)
----------------------------------------------------
Total current
liabilities. . . . . . . . 363.3 63.3 83.2 509.8
Long-term accrued
liabilities . . . . . . . . . . . 123.5 34.8 .3 (f) 158.6
Long-term debt and
lease obligations . . . . . . . . 143.0 5.7 148.7
-----------------------------------------------------
Total liabilities . . . . . . . 629.8 103.8 83.5 817.1
Commitments and
contingencies . . . . . . . . . . - - - -
Shareholders' equity
Preferred shares. . . . . . . . . 6.0 6.0
Common shares and net
assets purchased. . . . . . . . 289.2 89.3 (76.5)(c) 289.2
(9.5)(d)
(3.3)(f)
Accumulated deficit . . . . . . . (125.9) (125.9)
Cumulative foreign
currency translation
adjustments . . . . . . . . . . (11.5) (11.5)
-----------------------------------------------------
Total shareholders'
equity . . . . . . . . . . . 157.8 89.3 (89.3) 157.8
-----------------------------------------------------
Total liabilities and
shareholders' equity. . . . . . $ 787.6 $ 193.1 $ (5.8) $ 974.9
=====================================================
</TABLE>
See notes to Pro Forma Consolidated Balance Sheet.
CINCINNATI MILACRON INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEET
(In millions)
(a) The amounts in the "Historical Widia" column are derived from the
audited combined statement of net assets of Widia GmbH as of December
31, 1994, which was prepared based on accounting principles generally
accepted in the Federal Republic of Germany. The balance sheet of
Widia presented herein reflects all material adjustments necessary to
present Widia's financial position in conformity with accounting
principles generally accepted in the United States.
(b) The acquisition of Widia was financed as shown in the following table.
Funds provided:
Borrowings under revolving
credit facility . . . . . . . . . . . . . . . . . . $ 80.6
Payment of facility transaction costs . . . . . . . . (.2)
------
Total funds provided . . . . . . . . . . . . . . . $ 80.4
======
(c) The following tables depict the calculation of the Company's purchase
price and its preliminary allocation to Widia's assets using estimated
purchase accounting adjustments which are subject to revision once
appraisals, actuarial reviews and other studies of the fair value of
the assets and liabilities of Widia are completed. Final purchase
accounting adjustments may differ from the amounts shown below. Under
the terms of the purchase agreement, the cash purchase price of the
shares of Widia as of February 1, 1995 was $74.9 million.
Calculation of acquisition cost:
Purchase of Widia . . . . . . . . . . . . . . . . . . $ 74.9
Accrual for transaction fees. . . . . . . . . . . . . 1.6
------
Total acquisition cost . . . . . . . . . . . . . . $ 76.5
======
Allocation of acquisition cost:
Cash and cash equivalents . . . . . . . . . . . . . . $ 2.9
Accounts receivable . . . . . . . . . . . . . . . . . 44.5
Receivables from seller . . . . . . . . . . . . . . . 9.8
Inventories . . . . . . . . . . . . . . . . . . . . . 58.9
Other current assets. . . . . . . . . . . . . . . . . 3.0
Property, plant and equipment . . . . . . . . . . . . 52.5
Other noncurrent assets . . . . . . . . . . . . . . . 25.6
Historical liabilities assumed
(including $.3 previously
not recorded) . . . . . . . . . . . . . . . . . . (98.0)
Payables to seller. . . . . . . . . . . . . . . . . . (15.6)
Accrual for future
restructuring costs . . . . . . . . . . . . . . . . (7.1)
------
Total acquisition cost . . . . . . . . . . . . . $ 76.5
======
(d) During January, 1995, certain intercompany transactions occurred
between the seller and Widia that were required to be completed prior
to the Closing Date under the terms of the purchase agreement. These
included the sale to the seller by Widia of two buildings and the
purchase from the seller by Widia of three subsidiaries that it had not
previously owned. The effects of these transactions are not included
in the "Receivables from seller" and "Payables to seller" balances that
are included in the "Historical Widia" column of the Pro Forma
Consolidated Balance Sheet.
(e) Under the terms of the purchase agreement, Widia's actual intercompany
liability to the seller (net of its intercompany receivables from the
seller) as of the Closing Date of $4.6 million was settled in cash.
Such intercompany receivables and payables as of December 31, 1994
(adjusted to include amounts related to the transactions described in
note (d), above), were as follows:
Payables to seller. . . . . . . . . . . . . . . . . . . $ 15.6
Receivables from seller . . . . . . . . . . . . . . . . (9.8)
------
Net additional cash to be paid
as of December 31, 1994 . . . . . . . . . . . . . . . $ (5.8)
======
(f) Purchase accounting adjustments to Widia's historical asset values as
follows:
Adjustment of inventory values to reflect the Company's valuation
methods.
Adjustment of property, plant and equipment to fair value.
Recording of goodwill arising from the purchase of Widia by the Company
of $24.0 million, partially offset by the elimination of historical
goodwill of $2.6 million.
Adjustment of the pension liability of one of Widia's subsidiaries by
$.3 million.
Recording of reserves for the further restructuring of Widia of $7.1
million.
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.
CINCINNATI MILACRON INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS
(In millions, except per share amounts)
<TABLE>
<CAPTION>
Year ended December 31, 1994
-------------------------------------------------------
Cincinnati
Historical Acquisition Milacron
Cincinnati Historical Pro Forma and Widia
Milacron Widia (a) Adjustments Consolidated
-------------------------------------------------------
<S> <C> <C> <C> <C>
Sales. . . . . . . . . . . . . . . . $1,197.1 $ 224.7 $1,421.8
Cost of products sold. . . . . . . . 904.8 171.7 $ (5.6)(d) 1,067.8
(1.0)(f)
(.8)(h)
(.5)(i)
(.8)(j)
-----------------------------------------------------
Manufacturing margins . . . . . . 292.3 53.0 8.7 354.0
Other costs and expenses
Selling and
administrative. . . . . . . . . 222.2 57.2 (3.4)(d) 275.3
(.3)(h)
(.3)(i)
(.1)(j)
Other - net . . . . . . . . . . . 5.9 12.5 .2 (c) 12.4
(6.8)(e)
(.3)(g)
.9 (k)
------------------------------------------------------
Total other costs
and expenses . . . . . . . . 228.1 69.7 (10.1) 287.7
------------------------------------------------------
Operating earnings (loss). . . . . . 64.2 (16.7) 18.8 66.3
Interest
Income. . . . . . . . . . . . . . 2.6 1.3 3.9
Expense . . . . . . . . . . . . . (17.9) (2.6) (4.8)(b) (25.6)
(.3)(l)
-------------------------------------------------------
Interest - net. . . . . . . . . (15.3) (1.3) (5.1) (21.7)
-------------------------------------------------------
Earnings (loss) before
income taxes. . . . . . . . . . . 48.9 (18.0) 13.7 44.6
Provision for
income taxes. . . . . . . . . . . 11.2 1.4 12.6
-------------------------------------------------------
Net earnings (loss). . . . . . . . . $ 37.7 $ (19.4) $ 13.7 $ 32.0
=======================================================
Net earnings (loss) per
common share . . . . . . . . . . $ 1.10 $ .93
========= =========
Weighted average number of
common shares and common
share equivalents
outstanding . . . . . . . . . . . 34.1 34.1
========= =========
</TABLE>
See Notes to Pro Forma Consolidated Statement of Earnings.
CINCINNATI MILACRON INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS
YEAR ENDED DECEMBER 31, 1994
(In millions)
(a) The amounts in the "Historical Widia" column are derived from the
audited combined statement of operations of Widia GmbH for the fiscal
year ended December 31, 1994, which was prepared based on accounting
principles generally accepted in the Federal Republic of Germany. The
statement of earnings of Widia for the fiscal year ended December 31,
1994 presented herein reflects all material adjustments necessary to
present Widia's results of operations for that period in conformity
with accounting principles generally accepted in the United States.
Widia's historical statement of operations for the fiscal year ended
December 31, 1994, includes nonrecurring charges totaling $6.8 million
for severance and other costs incurred in connection with the
restructuring of its operations (see notes (d) and (e) below). In the
"Historical Widia" column of the Pro Forma Consolidated Statement of
Earnings, this amount is included in the line captioned "Other - net"
and it is eliminated in the column captioned "Acquisition Pro Forma
Adjustments. Widia's historical statement of operations also includes
nonrecurring charges for inventory obsolescence and a charge from the
seller for the write off of its EDP center of $2.2 million and $.9
million, respectively. These charges are not eliminated in the
"Acquisition Pro Forma Adjustments" column and have the effect of
decreasing consolidated pro forma net earnings by $3.1 million, or $.09
per share.
(b) Interest expense of $4.8 million on borrowings totaling $80.6 million
under the Company's $200.0 million committed revolving credit facility
(see note (c) below).
(c) Amortization expense on straight line basis over one and one half years
of $.2 million of additional commitment fees incurred in connection
with the amendment of the Company's committed revolving credit facility
to increase the lines of credit available thereunder to $200.0 million
(see note (b) to Pro Forma Consolidated Balance Sheet).
(d) 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.
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 all of the actions described above
will be no less than $9.0 million. Accordingly, pro forma adjustments
of this amount are included in the Pro Forma Consolidated Statement of
Earnings for the fiscal year ended December 31, 1994 as follows:
Increase
(Decrease)
----------
Cost of products sold . . . . . . . . . . . . . . . . . $ (5.6)
---------
Manufacturing margins . . . . . . . . . . . . . . . . 5.6
Other costs and expenses. . . . . . . . . . . . . . . .
Selling and administrative. . . . . . . . . . . . . . (3.4)
---------
Total other costs and expenses . . . . . . . . . . (3.4)
---------
Operating earnings (loss) . . . . . . . . . . . . . . . $ 9.0
=========
The above amounts are based principally on the savings that will be
realized from the known reductions of Widia's employment level that
have already occurred during 1995 and those that will occur later in
the year. 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 Pro Forma Consolidated
Statement of Earnings because the Company cannot accurately and
precisely quantify them at this time. In addition, certain
nonrecurring charges recorded by Widia during 1994 totaling $3.1
million have not been eliminated in the "Acquisition Pro Forma
Adjustments" column. As a result, the Pro Forma Consolidated Statement
of Earnings" reflects a reduction in net earnings in relation to the
Company's historical results for 1994. However, management expects
that Widia will generate sufficient pretax earnings in 1995 to cover
the interest expense the Company will incur to finance the acquisition.
(e) Elimination of $6.8 million nonrecurring charges for severance and
other costs incurred in connection with the restructuring of Widia's
operations during 1994.
(f) Elimination of depreciation expense and other costs totaling $1.0
million related to two buildings that were retained by the seller (see
note (d) to Pro Forma Consolidated Balance Sheet).
(g) Elimination of charges to earnings of $.3 million for amortization of
historical (preacquisition) goodwill.
(h) Reduction of pension expense by $1.1 million to reflect the retention
of pension obligations related to certain retirees by the seller.
(i) Elimination of charges for services (net of cost to replace) and
allocations from Widia's former parent totaling $.8 million.
(j) Reduction in depreciation expense by $.9 million to reflect the
adjustment of the historical value of Widia's property, plant and
equipment to fair value (see note (f) to Pro Forma Consolidated Balance
Sheet).
(k) Amortization charge of $.9 million related to acquisition-basis
goodwill (see note (f) to Pro Forma Consolidated Balance Sheet).
(l) Interest expense of $.3 million related to estimated borrowings of $5.3
million to finance cash expenditures related to the further
restructuring of Widia (see note (d) above).
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Cincinnati Milacron Inc.
------------------------
(Registrant)
By: /s/ Ronald D. Brown
------------------------
Ronald D. Brown
Vice President - Finance
and Chief Financial Officer
Date: April 14, 1995
--------------
CINCINNATI MILACRON INC. AND SUBSIDIARIES
INDEX TO EXHIBITS
The following Exhibits are included with this Form 8-K/A.
Sequential
Exhibit Page
Number Description of Exhibit Number
- ------ ----------------------------------- ----------
2.1 Stock Purchase Agreement dated as *
of November 28, 1994, between
Cincinnati Milacron B.V., a Dutch
corporation, Cincinnati Milacron
Kunststoffmaschinen Europe GmbH, a
Germany corporation and Fried.
Krupp A.G. Hoesch-Krupp, a German
corporation (Schedules and
Exhibits have been omitted
pursuant to Rule 6.01(b) (2) of
Regulation S-K. Such Schedules
and Exhibits are listed and
described in the Stock Purchase
Agreement. The Registrant hereby
agrees to furnish to the
Securities and Exchange
Commission, upon its request, any
or all of such omitted Schedules
and Exhibits).
7.1 Consent of Coopers & Lybrand GmbH 41
99.1 Amended and Restated Revolving *
Credit Agreement dated as of
December 31, 1994 among Cincinnati
Milacron Inc., Cincinnati Milacron
Kunststoffmaschinen Europe GmbH,
the lenders listed therein and
Bankers Trust Company, as agent.
99.2 Press release of the Registrant *
dated February 1, 1995.
* Previously filed
CONSENT OF INDEPENDENT AUDITORS
As independent auditors, we hereby consent to the use of our report dated
February 28, 1995, relating the combined financial statements of Widia GmbH
of Friedr. Krupp AG Hoesch-Krupp, and all references to our Firm included
in or made a part of the Form 8-K/A (Amendment No. 1) of Cincinnati
Milacron Inc. dated April 14, 1995.
Dusseldorf, Germany
April 14, 1995
Wirschaftsprufungsgesellschaft
Buiting Wiegand
Wirtschaftsprufer Wirtschaftsprufer and
Certified Public Accountant
