<PAGE>
ELECTRONICALLY TRANSMITTED TO THE SECURITIES AND EXCHANGE COMMISSION ON
APRIL 4, 1996
REGISTRATION NO. 333-01739
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
CINCINNATI MILACRON INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
----------------
DELAWARE 31-1062125
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION
INCORPORATION OR ORGANIZATION) NUMBER)
4701 MARBURG AVENUE
CINCINNATI, OH 45209
(513) 841-8100
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
WAYNE F. TAYLOR
VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
CINCINNATI MILACRON INC.
CINCINNATI, OH 45209
(513) 841-8100
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
----------------
Copies to:
DANIEL P. CUNNINGHAM JOHN R. SAGAN
CRAVATH, SWAINE & MOORE MAYER, BROWN & PLATT
825 EIGHTH AVENUE 190 SOUTH LASALLE STREET
NEW YORK, NEW YORK 10019 CHICAGO, ILLINOIS 60603
(212) 474-1000 (312) 782-0600
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
----------------
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box: [_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, please check the following box: [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [_]
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION
8(a), MAY DETERMINE.
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- -------------------------------------------------------------------------------
<PAGE>
EXPLANATORY NOTE
THIS REGISTRATION STATEMENT CONTAINS TWO FORMS OF PROSPECTUS: ONE TO BE USED
IN CONNECTION WITH AN OFFERING IN THE UNITED STATES AND CANADA (THE "U.S.
PROSPECTUS") AND ONE TO BE USED IN A CONCURRENT INTERNATIONAL OFFERING OUTSIDE
THE UNITED STATES AND CANADA (THE "INTERNATIONAL PROSPECTUS"). THE COMPLETE
INTERNATIONAL PROSPECTUS INCLUDES AN ALTERNATE FRONT COVER PAGE, ALTERNATE
PAGE 2 AND AN ALTERNATE UNDERWRITING SECTION ENTITLED SUBSCRIPTION AND SALE.
EACH OF SUCH PAGES INCLUDED HEREIN IS LABELED "ALTERNATE PAGE FOR
INTERNATIONAL PROSPECTUS". THE INTERNATIONAL PROSPECTUS DOES NOT INCLUDE THE
SECTION ENTITLED NOTICE TO CANADIAN RESIDENTS, WHICH IS INCLUDED IN THE U.S.
PROSPECTUS. EXCEPT AS INDICATED HEREIN, ALL OTHER PAGES OF THE U.S. PROSPECTUS
AND THE INTERNATIONAL PROSPECTUS ARE IDENTICAL.
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED APRIL 4, 1996
5,500,000 Shares
CINCINNATI
MILACRON
Common Stock
($1.00 par value)
-------
All the shares of Common Stock, $1.00 par value ("Common Stock"), of
Cincinnati Milacron Inc. ("the Company") offered hereby are being sold by the
Company. Of the 5,500,000 shares of Common Stock being offered, 4,400,000
shares are initially being offered in the United States and Canada (the
"U.S. Shares") by the U.S. Underwriters (the "U.S. Offering") and
1,100,000 shares are initially being concurrently offered outside the
United States and Canada (the "International Shares") by the Managers
(the "International Offering" and, together with the U.S. Offering, the
"Common Stock Offering"). The offering price and underwriting
discounts and commissions of the U.S. Offering and the International
Offering are identical.
The Common Stock is listed on the New York Stock Exchange under the symbol
CMZ. With some exceptions, the holder of record of a share of Common Stock
is entitled to ten votes on each matter submitted to a vote of
stockholders, if the beneficial owner of such share has been the
continuous beneficial owner thereof for at least 36 consecutive calendar
months, and is entitled to one vote per share in all other
circumstances. On April 3, 1996, the reported last sale price of the
Common Stock on the New York Stock Exchange Composite Tape was $26
5/8 per share.
-------
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION
WITH AN
INVESTMENT IN THE COMMON STOCK, SEE "RISK FACTORS" ON PAGE 6 HEREIN.
-------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURI-
TIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
Underwriting
Price to Discounts and Proceeds to
Public Commissions Company(1)
------------- ------------- -------------
<S> <C> <C> <C>
Per Share.................................. $ $ $
Total(2)................................... $ $ $
</TABLE>
(1) Before deduction of expenses payable by the Company estimated at $ .
(2) The Company has granted the U.S. Underwriters and the Managers an option,
exercisable by CS First Boston Corporation for 30 days from the date of
this Prospectus, to purchase a maximum of 825,000 additional shares to
cover over-allotments of shares. If the option is exercised in full, the
total Price to Public will be $ , Underwriting Discounts and Commissions
will be $ , and Proceeds to Company will be $ .
-------
The U.S. Shares are offered by the several U.S. Underwriters when, as and if
issued by the Company, delivered to and accepted by the U.S. Underwriters and
subject to their right to reject orders in whole or in part. It is expected
that the U.S. Shares will be ready for delivery on or about , 1996.
CS First Boston
BT Securities Corporation
Merrill Lynch & Co.
J.P. Morgan & Co.
The date of this Prospectus is , 1996.
<PAGE>
IN CONNECTION WITH THE COMMON STOCK OFFERING, CS FIRST BOSTON CORPORATION ON
BEHALF OF THE U.S. UNDERWRITERS AND MANAGERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK, CINCINNATI, BOSTON, PACIFIC,
PHILADELPHIA AND MIDWEST STOCK EXCHANGES OR OTHERWISE. SUCH STABILIZING, IF
COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
DURING THIS OFFERING, CERTAIN PERSONS AFFILIATED WITH PERSONS PARTICIPATING
IN THE DISTRIBUTION MAY ENGAGE IN TRANSACTIONS FOR THEIR OWN ACCOUNTS OR FOR
THE ACCOUNTS OF OTHERS IN THE COMMON STOCK PURSUANT TO EXEMPTIONS FROM RULES
10B-6, 10B-7 AND 10B-8 UNDER THE SECURITIES EXCHANGE ACT OF 1934.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information concerning the Company may be inspected and
copied at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at the Commission's
regional offices located at Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661, and 7 World Trade Center, 13th Floor, New York,
New York, 10048; and copies of such material can be obtained from the Public
Reference Section of the Commission, Washington, D.C. 20549, at prescribed
rates. The Common Stock is listed on the New York Stock Exchange, and reports,
proxy material and other information concerning the Company may be inspected
at the offices of the New York Stock Exchange, Inc., 20 Broad Street, 7th
Floor, New York, New York 10005.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Annual Report of the Company on Form 10-K for the fiscal year ended
December 30, 1995 (the "Company's 1995 Form 10-K"), the Current Report of the
Company on Form 8-K dated December 30, 1995 (as amended by the Company's Form
8-K/A relating thereto filed March 14, 1996) and the Current Report of the
Company on Form 8-K dated January 26, 1996 (as amended by the Company's Form
8-K/A relating thereto filed April 4, 1996) (such Current Reports on Form 8-K,
the "Company's Form 8-Ks"), each filed previously with the Commission pursuant
to the Exchange Act, are incorporated by reference into this Prospectus.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior
to the termination of the Common Stock Offering shall be deemed to be
incorporated by reference herein and to be a part hereof from the date of the
filing of such reports and documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed
to be modified or superseded for purposes of this Prospectus to the extent
that a statement contained herein or in any other subsequently filed document
which also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any statement so modified or superseded shall not
be deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
The Company will provide a copy of any or all documents incorporated by
reference herein (exclusive of exhibits unless such exhibits are specifically
incorporated by reference therein), without charge, to each person to whom
this Prospectus is delivered, upon written or oral request to Wayne F. Taylor,
Vice President, General Counsel and Secretary, Cincinnati Milacron Inc., 4701
Marburg Avenue, Cincinnati, Ohio 45209 (telephone (513) 841-8100).
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the detailed
information and financial statements found elsewhere in this Prospectus and in
the Company's 1995 Form 10-K and the Company's Form 8-Ks, each referred to
herein under "Incorporation of Certain Documents by Reference".
THE COMPANY
Cincinnati Milacron Inc. (together with its consolidated subsidiaries, except
where the context otherwise requires, the "Company" or "Cincinnati Milacron")
is a leading global manufacturer of products and provider of services and
technology used to process engineered materials. Incorporated in Delaware in
1983, the Company is a successor to a business established in 1884. Cincinnati
Milacron's principal executive office is located at 4701 Marburg Avenue,
Cincinnati, Ohio 45209, and its telephone number is (513) 841-8100.
The Company has three business segments: plastics machinery, machine tools
and industrial products. The Company's plastics machinery business includes
injection molding machines, extrusion systems, blow molding machines, mold
bases and auxiliary equipment. The Company's machine tool business consists of
turning and machining centers, grinding machines, flexible manufacturing cells,
and advanced systems primarily for the aerospace industry. The Company's
industrial products business includes metalcutting tools, metalworking fluids,
grinding wheels, carbide wear parts and industrial magnets.
The Company has gone through a major transformation over the last three
years, primarily through strategic acquisitions, accelerated new product
development, expanded distribution, and the consolidation of its U.S. machine
tool operations. As a result, the Company has achieved a more equal balance
among its segments' sales, and between its U.S. and non-U.S. sales. From 1992
to 1995, the Company's consolidated sales have grown at a compound annual rate
of 28% from $789 million to $1.6 billion.
In 1995, more than 40% of sales came from the industrial products segment,
making it the Company's largest business segment in that year. The plastics
machinery segment was the second-largest business segment in 1995, with
approximately 35% of sales, while the machine tools segment contributed about
25% of sales. The Company expects the growth in industrial products and
plastics machinery sales will make it less susceptible to the historically
severe business cycles and lower margins characteristic of the machine tool
business.
Today, the Company sells products and provides services to industrial
customers throughout the world. Sales to customers outside the U.S. increased
from $298 million in 1993, representing 29% of total sales, to $784 million in
1995, representing 48% of total sales. The Company has been successful in
penetrating international markets through acquisitions, expanded distribution,
increased exports, and license and joint venture agreements. The Company
believes its current geographic sales balance helps compensate for varying
economic cycles around the world and that its increased presence outside the
U.S. will reduce its dependence upon the U.S. economy. The Company has a long-
standing reputation for quality and technological leadership.
STRATEGIC ACQUISITIONS AND DIVESTITURES
The Company continually explores acquisition, divestiture and consolidation
opportunities when it believes such actions could expand markets, enhance
product synergies or improve earnings potential for the long term. Over the
last three years, the Company has completed several strategic acquisitions and
divestitures which the Company believes will increase its potential for further
growth. In its plastics machinery segment, the Company acquired FM Maschinenbau
GmbH ("Ferromatik"), the plastics injection molding machine business of
Kloeckner-Werke AG, in 1993 and the D-M-E business ("D-M-E") of The Fairchild
Corporation in 1996.
In the past three years, the Company has made three strategic acquisitions in
its industrial products segment: GTE Valenite Corporation ("Valenite"), Krupp
Widia GmbH ("Widia") and Talbot Holdings, Ltd. ("Talbot"),
3
<PAGE>
all of which have metalcutting tools as their primary product line. Valenite
was acquired early in 1993, while Widia and Talbot were acquired in 1995. The
Company believes that it is now the second-largest U.S. and third-largest
worldwide producer of carbide metalcutting tool systems.
In its machine tools segment, the Company sold its Electronic Systems
Division ("ESD") in December 1995 for $105 million. ESD's 1995 sales to
unaffiliated customers were approximately $30 million. ESD was sold to redeploy
assets to more strategic businesses. In 1994, the Company completed a major
consolidation of its U.S. machine tool operations, closing two plants in South
Carolina and moving all of its U.S. production to its main machine tool
facilities in Cincinnati, Ohio.
PRODUCT DEVELOPMENT AND CAPITAL EXPENDITURES
As part of its objective to enhance its growth potential and global
competitiveness, the Company in recent years has undertaken a major program for
product development, process improvement and modernization. Research and
development investment in 1995 totaled $58 million or 3.5% of sales, much of
which was spent as a result of the Company's "Wolfpack" product development
process. In 1995, the Company invested $52 million for capital additions,
primarily to install highly advanced systems throughout its operations
worldwide. For 1996, the Company is budgeting an increase in capital
expenditures to a total of $86 million.
THE COMMON STOCK OFFERING
<TABLE>
<C> <S>
Common Stock Offered:
U.S. Offering.................... 4,400,000
International Offering........... 1,100,000
---------
Total(1)..................... 5,500,000
=========
Common Stock to be Outstanding after
the offering....................... 39,855,262 shares(1)(2)(3)
Dividends on Common Stock........... The Company is currently paying quarterly
cash dividends of $.09 per share on its
Common Stock. See "Dividends on and
Market Price of Common Stock".
Use of Proceeds..................... The Company intends to use the net
proceeds of the Common Stock Offering to
prepay a portion of a promissory note
issued by the Company in connection with
the acquisition of D-M-E. See "Use of
Proceeds".
NYSE Symbol......................... CMZ
</TABLE>
- --------
(1) Excluding 825,000 shares issuable upon exercise of the over-allotment
option granted by the Company to the U.S. Underwriters and the Managers,
exercisable on their behalf by CS First Boston Corporation. See
"Underwriting".
(2) Does not include (i) 2,739,415 shares reserved for issuance upon exercise
of outstanding options, and (ii) 187,254 shares available for future grants
under the Company's stock option plans.
(3) With some exceptions, the holder of record of a share of Common Stock is
entitled to 10 votes on each matter submitted to a vote of the
stockholders, if the beneficial owner of such share has been the continuous
beneficial owner thereof for at least 36 consecutive calendar months, and
is entitled to one vote per share in all other circumstances. See
"Description of Capital Stock--Common Stock".
4
<PAGE>
SUMMARY SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA
<TABLE>
<CAPTION>
FISCAL YEAR(a)
----------------------------------------------------------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
PRO
FORMA
1995(b) 1995 1994 1993 1992 1991
-------- -------- -------- -------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Sales................... $1,834.8 $1,649.3 $1,197.1 $1,029.4 $789.2 $ 754.0
Manufacturing
profit(c).............. 459.4 411.0 292.3 238.1 176.6 150.8
Percent of sales...... 25.0% 24.9% 24.4% 23.1% 22.4% 20.0%
Earnings (loss) from
continuing operations
before extraordinary
items and cumulative
effect of changes in
methods of accounting.. $ 111.7(d) $ 105.6(d) $ 37.7 $ (45.4)(e) $ 16.1 $ (83.1)(f)
Per common share........ 2.78 3.04 1.10 (1.41) .58 (3.04)
Net earnings (loss)..... 111.7(d) 105.6(d) 37.7 (101.9)(e) 21.5 (100.2)(f)
Per common share........ 2.78 3.04 1.10 (3.16) .77 (3.67)
BALANCE SHEET DATA (AT
YEAR-END)
Working capital......... 352.4 392.7 151.4 114.3 191.8 188.0
Total assets............ 1,396.6 1,197.1 787.6 729.6 578.9 598.4
Total debt.............. 380.1 355.8 226.9 185.2 175.6 162.8
Shareholders' equity.... 417.8 270.7 157.8 124.1 134.4 129.0
OTHER DATA
Capital expenditures.... 55.6 52.3 43.0 23.4 17.6 15.5
Research and development
expenditures........... 56.0 57.8 46.8 41.9 34.1 35.8
Backlog of unfilled
orders at year-end..... 349.6 344.2 287.1 246.0 249.6 277.3
</TABLE>
- --------
(a) 1992 includes 53 weeks as compared to 52 weeks included in 1995, 1994, 1993
and 1991.
(b) The pro forma consolidated statement of earnings data reflected in the
summary of operations above gives effect to the acquisitions of Widia,
Talbot and D-M-E, the disposition of ESD, and to the Common Stock Offering
and the application of the Estimated Net Proceeds (as defined below) as
described in "Use of Proceeds", assuming each occurred on the first day of
the Company's 1995 fiscal year. Such pro forma data reflects certain
assumptions described in the notes accompanying the information presented
in the "Pro Forma Consolidated Statement of Earnings". The pro forma
consolidated balance sheet data gives effect to the acquisition of D-M-E,
and to the Common Stock Offering and the application of the Estimated Net
Proceeds as described under "Use of Proceeds", assuming each occurred on
the last day of the Company's 1995 fiscal year. The effects of the Widia
and Talbot acquisitions and the sale of ESD are reflected in the Company's
historical 1995 balance sheet. The pro forma financial information does not
purport to present what the Company's financial position and results of
operations would actually have been had the acquisitions of Widia, Talbot
and D-M-E, the disposition of ESD, and the Common Stock Offering and the
application of the Estimated Net Proceeds as described under "Use of
Proceeds" occurred on the first or last day of the Company's 1995 fiscal
year, or purport to project the Company's results of operations for any
future period.
(c) Represents gross profit, which is sales less cost of products sold.
(d) Earnings (loss) from continuing operations before extraordinary items and
cumulative effect of changes in methods of accounting for fiscal year 1995
includes a gain of $66.0 million ($52.4 million after tax) from the sale of
ESD, a gain of $5.0 million ($4.0 million after tax) from the sale of the
Company's American Mine Tool business, and a charge of $9.8 million ($7.8
million after tax) for the integration of certain Valenite and Widia
operations. Excluding these items, the Company's historical earnings from
continuing operations before extraordinary items and cumulative effect of
changes in methods of accounting for 1995 would have been $57.0 million, or
$1.64 per share, and pro forma earnings from continuing operations before
extraordinary items and cumulative effect of changes in methods of
accounting would have been $63.1 million, or $1.57 per share.
(e) Earnings (loss) from continuing operations before extraordinary items and
cumulative effect of changes in methods of accounting for fiscal year 1993
includes a charge of $47.1 million (with no current tax effect) for the
consolidation of U.S. machine tool manufacturing operations and charges
totaling $22.8 million (with no current tax effect) for the disposition of
the Company's Sano business. Excluding these items, the Company would have
had earnings from continuing operations before extraordinary items and
cumulative effect of changes in methods of accounting for 1993 of $24.5
million, or $.75 per share. In addition, charges totaling $52.1 million
related to the adoption of S.F.A.S. 109, "Accounting for Income Taxes"
("SFAS 109") and S.F.A.S. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions" ("SFAS 106"), as well as an extraordinary
loss of $4.4 million related to the early extinguishment of debt, are
included in the net loss for 1993.
(f) Earnings (loss) from continuing operations before extraordinary items and
cumulative effect of changes in methods of accounting for fiscal year 1991
includes a charge of $75.1 million (with no current tax effect) for plant
closing and the relocation of certain machine tool manufacturing
operations. Excluding this item, the Company's loss from continuing
operations before extraordinary items and cumulative effect of changes in
methods of accounting for 1991 would have been $8.0 million or $.30 per
share. In addition, a charge of $14.9 million (with no current tax effect)
related to the revaluation for sale of LK Tool is included in the net loss
for 1991.
5
<PAGE>
RISK FACTORS
The following matters, as well as other information contained elsewhere or
incorporated by reference in this Prospectus, should be considered carefully
before investing in the Common Stock.
SIGNIFICANT INTERNATIONAL OPERATIONS
The Company operates numerous manufacturing plants in Europe and also
operates (in some cases, through joint ventures) manufacturing plants in India
and Japan. The Company derived 48% of its revenue in 1995 from products sold
outside the United States. International operations generally are subject to
various risks that are not present in domestic operations, including export
duties, import controls and trade barriers (including quotas). Various foreign
jurisdictions have laws limiting the right and ability of foreign subsidiaries
to pay dividends and remit earnings to affiliated companies unless specified
conditions are met. Further, sales in foreign jurisdictions typically are made
in local currencies and transactions with foreign affiliates customarily are
accounted for in the local currency of the selling company. While the Company
regularly takes steps to reduce its currency exposure, to the extent the
Company does not fully mitigate the effect of changes in the relative value of
the U.S. dollar and foreign currencies, the Company's results of operations
and financial condition (which are reported in U.S. dollars) could be affected
adversely by negative changes in these relative values.
EFFECT OF ACQUISITIONS ON LEVERAGE
The Company has made a number of acquisitions since the beginning of 1993
and intends to continue to pursue appropriate acquisitions for its existing
business segments in the future. These acquisitions are often financed with
debt, causing the Company's total debt to total capital ratio to increase
substantially. The Company intends to use the proceeds of the Common Stock
Offering to prepay a portion of a promissory note issued to a subsidiary of
The Fairchild Corporation thereby reducing the Company's total debt to total
capital ratio to approximately 48% (assuming no exercise of the over-allotment
option and an offering price of $28.00 per share). However, as a result of
either a renegotiation of the terms of the Company's revolving credit facility
or additional acquisitions, either of which the Company may pursue, the level
of the Company's financial leverage may approach the maximum levels allowed
under the restrictive conditions of the Company's indebtedness. In addition,
the Company has entered into a receivables purchase agreement whereby it can
sell up to $75 million of accounts receivable to third parties. At December
30, 1995, the amount of accounts receivable sold was $69 million. Operating
with significant degrees of financial leverage could have important
consequences to the Company and owners of the Common Stock, including the
following: (i) the ability of the Company to obtain additional financing for
working capital, capital expenditures, debt service requirements or other
purposes may be impaired; (ii) a substantial portion of the Company's cash
flow from operations will be required to be applied to the payment of the
Company's interest expense; (iii) the Company may be more highly leveraged
than companies with which it competes, which may place it at a competitive
disadvantage; and (iv) the Company may be more vulnerable in the event of a
downturn in its businesses.
6
<PAGE>
USE OF PROCEEDS
The Company intends to use the net proceeds of the Common Stock Offering to
prepay, when permitted by the terms of the promissory note described hereby, a
portion of the 8% promissory note in an aggregate principal amount of
$166,000,000 which was issued by the Company to a subsidiary of The Fairchild
Corporation in connection with the Company's acquisition of D-M-E and which is
secured by a letter of credit issued pursuant to the Company's revolving
credit facility. While the promissory note matures on January 26, 1997, the
terms of the promissory note provide that The Fairchild Corporation may
require prepayment of, and the Company may at its option prepay, such
promissory note after July 26, 1996. The Company intends to prepay the balance
of the promissory note using borrowings under its revolving credit facility.
Pending its application, the net proceeds of the Common Stock Offering will be
used in part to reduce amounts payable to banks with the balance invested in
short-term investments.
7
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company at December
30, 1995, and as adjusted to give effect to (i) the acquisition of D-M-E and
(ii) the consummation of the Common Stock Offering (assuming no exercise of
the over-allotment option and an offering price of $28.00 per share, and after
deduction of estimated underwriting discounts and offering expenses, the
estimated net proceeds to the Company based upon such assumptions and
estimated deductions being referred to herein as the "Estimated Net Proceeds")
and the application of the Estimated Net Proceeds as described under "Use of
Proceeds".
<TABLE>
<CAPTION>
AS ADJUSTED
FOR D-M-E
ACQUISITION
AS ADJUSTED AND THE
FOR D-M-E COMMON STOCK
ACTUAL ACQUISITION(1) OFFERING(1)
--------------- ------------------- -----------------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
Amounts payable to
banks.................. $ 20.3 $ 20.3 $ 20.3
Long-term debt and lease
obligations:
7 7/8% Notes due
2000................. 100.0 100.0 100.0
8 3/8% Notes due
2004................. 115.0 115.0 115.0
12% Sinking Fund
Debentures due 2010.. 10.8 10.8 10.8
8% Secured Promissory
Note due 1997........ -- 166.0 --
8% Unsecured
Promissory Note due
1997................. -- 5.4 5.4
Revolving Credit
Facility............. 87.1 87.1 106.0
Other long-term debt
and capital lease
obligations.......... 22.6 22.6 22.6
--------------- --------------- ---------------
Total long-term debt
and capital lease
obligations........ 335.5 506.9 359.8
--------------- --------------- ---------------
Total debt........ 355.8 527.2 380.1
--------------- --------------- ---------------
Shareholders' equity:
4% Cumulative
Preferred Shares--
60,000 shares
authorized, issued
and outstanding, $100
par value per share,
redeemable at $105 a
share................ 6.0 6.0 6.0
Common Shares--
50,000,000 shares
authorized,
34,270,304 shares
outstanding, $1.00
par value per share,
and 39,770,304 shares
outstanding as
adjusted(2).......... 34.3 34.3 39.8
Capital in excess of
par value............ 266.0 266.0 407.6
Accumulated deficit... (32.8) (32.8) (32.8)
Cumulative foreign
currency translation
adjustments.......... (2.8) (2.8) (2.8)
--------------- --------------- ---------------
Total shareholders'
equity............. 270.7 270.7 417.8
--------------- --------------- ---------------
Total
capitalization..... $ 626.5 $ 797.9 $ 797.9
=============== =============== ===============
</TABLE>
- --------
(1) Does not include an 8% unsecured promissory note in the amount of $11.7
million issued to the seller of D-M-E in lieu of the payment of cash at
closing pending receipt of certain approvals from the Belgian Competition
Council. Such approvals were received and the promissory note was repaid
in February, 1996.
(2) Does not include (i) 2,131,563 shares reserved for issuance upon exercise
of outstanding options and (ii) 871,150 shares available for future grants
under the Company's stock option plans.
8
<PAGE>
DIVIDENDS ON AND MARKET PRICE OF COMMON STOCK
The Common Stock is listed on the New York Stock Exchange. The Common Stock
is also traded on the Cincinnati, Boston, Pacific, Philadelphia and Midwest
Stock Exchanges, and options on the Common Stock are traded on the
Philadelphia Stock Exchange. Cash dividends of $.09 per share of Common Stock
were paid in the first quarter of 1996 and in each quarter of 1995, 1994, 1993
and 1992. Cash dividends of $1.00 per share per quarter on 4% Cumulative
Preferred Stock were paid in the first quarter of 1996 and in each quarter of
1995, 1994, 1993 and 1992.
The following table sets forth the high and low intra-day sales prices of
the Common Stock on the New York Stock Exchange composite tape during the
indicated fiscal quarters. For the closing price of the Common Stock as of a
recent date, see the cover page of this Prospectus.
<TABLE>
<CAPTION>
HIGH LOW
------- -------
<S> <C> <C>
1992
First Quarter.......................................... $17 1/2 $10 7/8
Second Quarter......................................... 18 1/4 13 7/8
Third Quarter.......................................... 15 1/2 12 1/4
Fourth Quarter......................................... 17 5/8 13 3/8
1993
First Quarter.......................................... 22 1/4 16 1/4
Second Quarter......................................... 29 5/8 19 1/2
Third Quarter.......................................... 26 20 3/4
Fourth Quarter......................................... 24 3/4 19 1/4
1994
First Quarter.......................................... 25 5/8 21 3/4
Second Quarter......................................... 24 1/4 19 1/2
Third Quarter.......................................... 27 18 5/8
Fourth Quarter......................................... 27 5/8 22 1/4
1995
First Quarter.......................................... 25 19 7/8
Second Quarter......................................... 28 22 3/4
Third Quarter.......................................... 33 5/8 26 3/4
Fourth Quarter......................................... 27 5/8 23
1996
First Quarter.......................................... 29 1/4 20 3/4
Second Quarter (through April 3, 1996)................. 27 7/8 26 1/8
</TABLE>
9
<PAGE>
PRO FORMA FINANCIAL INFORMATION
The following "Pro Forma Consolidated Statement of Earnings" and the pro
forma data included in "Selected Historical and Pro Forma Financial Data",
"Selected Historical and Pro Forma Segment Information" and "Selected
Historical and Pro Forma Geographic Information" (collectively, the "pro forma
financial information") are based on the historical financial statements of
the Company, Widia, Talbot and D-M-E, adjusted to give effect to the
acquisitions of Widia, Talbot and D-M-E by the Company, the disposition of ESD
by the Company, the Common Stock Offering and the application of the Estimated
Net Proceeds as described under "Use of Proceeds". The "Pro Forma Consolidated
Statement of Earnings" and the related data in the pro forma financial
information assume that the acquisitions of Widia, Talbot and D-M-E by the
Company, the disposition of ESD, and the Common Stock Offering and the
application of the Estimated Net Proceeds occurred on the first day of the
Company's 1995 fiscal year. The pro forma consolidated balance sheet data in
the pro forma financial information assume that the acquisition of D-M-E, the
Common Stock Offering and the application of the Estimated Net Proceeds
occurred on the last day of the Company's 1995 fiscal year. The acquisitions
of Widia and Talbot and the disposition of ESD are reflected in the Company's
historical 1995 balance sheet.
The pro forma financial information reflects the purchase method of
accounting for the acquisitions of Widia, Talbot and D-M-E. The pro forma
financial information with respect to the acquisition of D-M-E uses estimated
purchase accounting adjustments and is subject to post-closing adjustments and
to further revision once appraisals, actuarial reviews and other studies of
the fair value of D-M-E's assets and liabilities are completed. Final purchase
accounting adjustments for D-M-E may differ from the pro forma adjustments
presented herein and described in the accompanying notes.
The Company filed a Current Report on Form 8-K dated February 1, 1995
relating to the acquisition of Widia, which was amended by a filing on Form 8-
K/A, Amendment No. 1. The amended filing included audited financial statements
of Widia and pro forma financial statements giving effect to the acquisition
of Widia as of and for the year ended December 31, 1994. A Current Report on
Form 8-K for the Talbot acquisition was not required to be filed.
The pro forma financial information does not purport to present what the
Company's financial position and results of operations would actually have
been had the acquisitions of Widia, Talbot and D-M-E, the disposition of ESD,
and the Common Stock Offering and the application of the Estimated Net
Proceeds occurred on the first or last day of the Company's 1995 fiscal year,
as specified above, or purport to project the Company's results of operations
for any future period. The pro forma financial information reflects certain
assumptions described in the accompanying notes. The pro forma financial
information and accompanying notes should be read in conjunction with the
audited consolidated financial statements of the Company and related notes
thereto which are included herein, the Company's Form 8-Ks and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere in this Prospectus.
10
<PAGE>
PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS
<TABLE>
<CAPTION>
FISCAL YEAR 1995
--------------------------------------------------------------------------------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
ACQUISITIONS COMMON
& STOCK
HISTORICAL HISTORICAL DIVESTITURE OFFERING
CINCINNATI WIDIA & HISTORICAL HISTORICAL PRO FORMA PRO FORMA PRO FORMA
MILACRON(a) TALBOT(b) ESD(c) D-M-E(d) ADJUSTMENTS ADJUSTMENTS 1995
----------- ---------- ---------- ---------- ------------ ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Sales................... $1,649.3 $45.2 $(90.7) $170.3 $60.7 (e) $ -- $1,834.8
Cost of products sold... 1,238.3 31.5 (71.6) 112.5 64.7 (f) -- 1,375.4
-------- ----- ------ ------ ----- ----- --------
Manufacturing margins... 411.0 13.7 (19.1) 57.8 (4.0) -- 459.4
Other costs and expenses
Selling and
administrative....... 301.4 9.0 (5.2) 33.0 (1.0)(g) -- 337.2
(Gain) on disposition
of businesses........ (71.0) -- -- -- -- -- (71.0)
Integration charge.... 9.8 -- -- -- -- -- 9.8
Minority shareholders'
interests in earnings
of subsidiaries...... 2.3 -- -- .2 -- -- 2.5
Other-net............. 9.4 1.7 -- -- .1 (h) -- 11.2
-------- ----- ------ ------ ----- ----- --------
Total other costs and
expenses............. 251.9 10.7 (5.2) 33.2 (.9) -- 289.7
-------- ----- ------ ------ ----- ----- --------
Operating earnings...... 159.1 3.0 (13.9) 24.6 (3.1) -- 169.7
Interest
Income................ 3.2 .2 -- -- -- -- 3.4
Expense............... (28.0) (.2) -- (.1) (13.6)(i) 11.8(k) (30.1)
-------- ----- ------ ------ ----- ----- --------
Interest-net.......... (24.8) -- -- (.1) (13.6) 11.8 (26.7)
-------- ----- ------ ------ ----- ----- --------
Earnings before income
taxes.................. 134.3 3.0 (13.9) 24.5 (16.7) 11.8 143.0
Provision for income
taxes.................. 28.7 1.0 -- 10.3 (10.9)(j) 2.2(l) 31.3
-------- ----- ------ ------ ----- ----- --------
Net earnings............ $ 105.6 $ 2.0 $(13.9) $ 14.2 $(5.8) $ 9.6 $ 111.7
======== ===== ====== ====== ===== ===== ========
Net earnings per common
share.................. $ 3.04 $ 2.78
======== ========
Weighted average number
of common shares and
common share
equivalents
outstanding............ 34.6 40.1
======== ========
</TABLE>
- -------
(a) In the "Historical Cincinnati Milacron" column, the gain on the sale of
ESD of $66.0 million ($52.4 million after tax) is included on the line
captioned "(Gain) on disposition of businesses".
(b) The amounts in the "Historical Widia & Talbot" column represent the
unaudited historical results of operations of Widia for the month of
January, 1995 and the unaudited historical results of operations of Talbot
for the first seven months of 1995. The historical results operations of
Widia and Talbot for the remainder of 1995 are included in the "Historical
Cincinnati Milacron" column. Both acquisitions were accounted for under
the purchase method.
(c) The amounts in the "Historical ESD" column are derived from the audited
combined statement of revenues and direct operating expenses of ESD for
the fiscal year ended December 30, 1995.
(d) The amounts in the "Historical D-M-E" column represent D-M-E's historical
results of operations for the year ended December 31, 1995. Such amounts
include the historical results of operations of D-M-E for the first six
months of 1995, which were derived from the audited combined financial
statements of D-M-E for the fiscal year ended June 30, 1995, and the
historical results of operations of D-M-E for the last six months of 1995,
which were derived from D-M-E's unaudited combined internal financial
statements for the six months ended December 31, 1995. The acquisition of
D-M-E is being accounted for under the purchase method.
(e) Adjustment to eliminate the effects of intercompany sales by ESD to other
divisions and subsidiaries of the Company. In the "Historical Cincinnati
Milacron" column, the effects of intercompany transactions have been
eliminated, but they are included in the amounts in the "Historical ESD"
column.
11
<PAGE>
(f) Adjustments to cost of products sold include:
<TABLE>
<CAPTION>
INCREASE
(DECREASE)
----------
<S> <C>
Amortization of goodwill related to the acquisitions of Widia,
Talbot and D-M-E on the straight-line method over forty
years........................................................ $ 4.7
Additional depreciation expense related to the adjustment of
Talbot's property, plant and equipment to fair value......... .1
Elimination of the cost of ESD's sales to other divisions and
subsidiaries of the Company and the related intercompany
profit....................................................... 61.3
Reversal of direct corporate charges by the Company to ESD for
the use of certain centralized services, the cost of which
will not be eliminated as a result of the sale of ESD........ .4
Elimination of charges to earnings for amortization of D-M-E's
historical (preacquisition) goodwill......................... (1.6)
Elimination of charges to earnings related to D-M-E's use of
the LIFO inventory method.................................... (.6)
Amortization of covenant not to compete received in connection
with the acquisition
of D-M-E..................................................... .4
-----
$64.7
=====
</TABLE>
(g)Elimination of overhead allocations to D-M-E by its former parent.
(h) Amortization of additional financing fees related to the amendment of the
Company's revolving credit facility in connection with the acquisition of
D-M-E.
(i) Adjustments to interest expense include:
<TABLE>
<CAPTION>
DECREASE
(INCREASE)
----------
<S> <C>
Interest for one month on borrowings of $80.6 million incurred
to finance the acquisition of Widia.......................... $ (.4)
Interest for seven months on borrowings of $34.4 million in-
curred to finance the acquisition of Talbot.................. (1.1)
Reduction of historical interest expense assuming that the
proceeds from the sale of ESD were utilized to repay existing
bank borrowings.............................................. 7.1
Interest for one year on assumed bank borrowings and promis-
sory notes issued to the seller in connection with the acqui-
sition of D-M-E.............................................. (19.2)
------
$(13.6)
======
</TABLE>
(j) Adjustment of the provision for income taxes related to the pretax amounts
in the "Acquisitions & Divestiture Pro Forma Adjustments" column and to
reflect the consolidation of Widia, Talbot and D-M-E based on the Company's
pro forma effective tax rate.
(k) Reduction of interest expense from the assumed use of the Estimated Net
Proceeds to repay a portion of the 8% secured promissory note issued to the
seller in connection with the acquisition of D-M-E.
(l) Adjustment to increase the provision for income taxes as a result of the
assumed decrease in interest expense.
12
<PAGE>
SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA
<TABLE>
<CAPTION>
FISCAL YEAR(a)
-----------------------------------------------------------------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
PRO FORMA
1995(b) 1995 1994 1993 1992 1991
--------- -------- -------- -------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF EARNINGS
Sales..................... $1,834.8 $1,649.3 $1,197.1 $1,029.4 $789.2 $ 754.0
Cost of products sold..... 1,375.4 1,238.3 904.8 791.3 612.6 603.2
-------- -------- -------- -------- ------ -------
Manufacturing margins.... 459.4 411.0 292.3 238.1 176.6 150.8
Other costs and expenses
Selling and
administrative.......... 337.2 301.4 222.2 191.3 133.6 132.2
(Gain) loss on
disposition of
businesses.............. (71.0)(c) (71.0)(c) -- 22.8 (d) -- --
Integration charge,
consolidation charge and
closing and relocation
charge.................. 9.8 (c) 9.8 (c) -- 47.1 (d) -- 75.1(e)
Minority shareholders'
interests in earnings of
subsidiaries............ 2.5 2.3 -- -- -- --
Other-net................ 11.2 9.4 5.9 .7 (.2) 1.8
-------- -------- -------- -------- ------ -------
Total other costs and
expenses............... 289.7 251.9 228.1 261.9 133.4 209.1
-------- -------- -------- -------- ------ -------
Operating earnings
(loss)................... 169.7 159.1 64.2 (23.8) 43.2 (58.3)
Interest
Income................... 3.4 3.2 2.6 2.3 2.9 4.0
Expense.................. (30.1) (28.0) (17.9) (15.7) (19.1) (19.1)
-------- -------- -------- -------- ------ -------
Interest-net............ (26.7) (24.8) (15.3) (13.4) (16.2) (15.1)
-------- -------- -------- -------- ------ -------
Earnings (loss) from
continuing operations
before income taxes,
extraordinary items and
cumulative effect of
changes in methods of
accounting............... 143.0 134.3 48.9 (37.2) 27.0 (73.4)
Provision for income
taxes.................... 31.3 28.7 11.2 8.2 10.9 9.7
-------- -------- -------- -------- ------ -------
Earnings (loss) from
continuing operations
before extraordinary
items and cumulative
effect of changes in
methods of accounting.... 111.7 (c) 105.6 (c) 37.7 (45.4)(d) 16.1 (83.1)(e)
Discontinued operations
net of income taxes...... -- -- -- -- -- (17.1)
Extraordinary items
Tax benefit from loss
carryforward............ -- -- -- -- 5.4 --
Loss on early
extinguishment of debt.. -- -- -- (4.4) -- --
Cumulative effect of
changes in methods of
accounting............... -- -- -- (52.1) -- --
-------- -------- -------- -------- ------ -------
Net earnings (loss)....... $ 111.7 $ 105.6 $ 37.7 $ (101.9) $ 21.5 $(100.2)
======== ======== ======== ======== ====== =======
Earnings (loss) per common
share
Earnings (loss) from
continuing operations
before extraordinary
items and cumulative
effect of changes in
methods of accounting... $ 2.78 $ 3.04 $ 1.10 $ (1.41) $ .58 $ (3.04)
Discontinued operations
net of income taxes..... -- -- -- -- -- (.63)
Extraordinary items
Tax benefit from loss
carryforward........... -- -- -- -- .19 --
Loss on early
extinguishment of
debt................... -- -- -- (.14) -- --
Cumulative effect of
changes in methods of
accounting.............. -- -- -- (1.61) -- --
-------- -------- -------- -------- ------ -------
Net earnings (loss) per
common share............ $ 2.78 $ 3.04 $ 1.10 $ (3.16) $ .77 $ (3.67)
======== ======== ======== ======== ====== =======
BALANCE SHEET DATA (AT
YEAR-END)
Working capital........... $ 352.4 $ 392.7 $ 151.4 $ 114.3 $191.8 $ 188.0
Property, plant and
equipment--net........... 300.9 265.5 198.8 184.0 121.1 129.7
Total assets.............. 1,396.6 1,197.1 787.6 729.6 578.9 598.4
Long-term debt and lease
obligations.............. 356.5 332.2 143.0 107.6 154.4 155.9
Total debt................ 380.1 355.8 226.9 185.2 175.6 162.8
Shareholders' equity...... 417.8 270.7 157.8 124.1 134.4 129.0
OTHER DATA
Total debt to total
capital ratio............ 48% 57% 59% 60% 57% 56%
Dividends paid to common
shareholders............. $ 14.3 $ 12.3 $ 12.2 $ 11.6 $ 10.0 $ 17.3
Capital expenditures...... 55.6 52.3 43.0 23.4 17.6 15.5
Backlog of unfilled orders
at year end.............. 349.6 344.2 287.1 246.0 249.6 277.3
</TABLE>
- -------
(a) 1992 includes 53 weeks as compared to 52 weeks included in 1995, 1994,
1993 and 1991.
(b) The pro forma consolidated statement of earnings data gives effect to the
acquisitions of Widia, Talbot and D-M-E, the disposition of ESD, and to
the Common Stock Offering and the application of the Estimated Net
Proceeds as described in "Use of Proceeds", assuming each occurred on the
first day of the Company's 1995 fiscal year. Such pro forma data reflects
certain assumptions described in the notes accompanying the information
presented in the "Pro Forma Consolidated Statement of Earnings". The pro
forma consolidated balance sheet data gives effect to the acquisition of
D-M-E and to the Common Stock Offering and the application of the
Estimated Net Proceeds as described under "Use of Proceeds", assuming each
occurred on the last day of the Company's 1995 fiscal year. The effects of
the Widia and Talbot acquisitions and the sale of ESD are reflected in the
Company's historical 1995 balance sheet. The pro forma financial
information does not purport to present what the Company's financial
position and results of operations would actually have been had the
acquisitions of Widia, Talbot and D-M-E, the disposition of ESD, and the
Common Stock Offering and the application of the Estimated Net Proceeds as
described under "Use of Proceeds" occurred on the first or last day of the
Company's 1995 fiscal year, or purport to project the Company's results of
operations for any future period.
(c) Earnings (loss) from continuing operations before extraordinary items and
cumulative effect of changes in methods of accounting for fiscal year 1995
includes a gain of $66.0 million ($52.4 million after tax) from the sale
of ESD, a gain of $5.0 million ($4.0 million after tax) from the sale of
the Company's American Mine Tool business, and a charge of $9.8 million
($7.8 million after tax) for the integration of certain Valenite and Widia
operations. Excluding these items, the Company's historical earnings from
continuing operations before extraordinary items and cumulative effect of
changes in methods of accounting for 1995 would have been $57.0 million,
or $1.64 per share, and pro forma earnings from continuing operations
before extraordinary items and cumulative effect of changes in methods of
accounting would have been $63.1 million, or $1.57 per share.
(d) Earnings (loss) from continuing operations before extraordinary items and
cumulative effect of changes in methods of accounting for fiscal year 1993
includes a charge of $47.1 million (with no current tax effect) for the
consolidation of U.S. machine tool manufacturing operations and charges
totaling $22.8 million (with no current tax effect) for the disposition of
the Company's Sano business. Excluding these items, the Company would have
had earnings from continuing operations before extraordinary items and
cumulative effect of changes in methods of accounting for 1993 of $24.5
million, or $.75 per share.
(e) Earnings (loss) from continuing operations before extraordinary items and
cumulative effect of changes in methods of accounting for fiscal year 1991
includes a charge of $75.1 million (with no current tax effect) for plant
closing and the relocation of certain machine tool manufacturing
operations. Excluding this item, the Company's loss from continuing
operations before extraordinary items and cumulative effect of changes in
methods of accounting for 1991 would have been $8.0 million, or $.30 per
share.
13
<PAGE>
SELECTED HISTORICAL AND PRO FORMA SEGMENT INFORMATION
<TABLE>
<CAPTION>
FISCAL YEAR(a)
-------------------------------------------------------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
PRO FORMA
1995(b) 1995 1994 1993 1992 1991
--------- -------- -------- -------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Sales
Plastics
machinery(c)......... $ 740.4 $ 570.1 $ 503.8 $ 357.2 $301.4 $267.6
Machine tools(d)...... 379.0 409.0 338.5 355.0 379.7 383.7
Industrial
products(e).......... 715.4 670.2 354.8 317.2 108.1 102.7
-------- -------- -------- -------- ------ ------
Total sales......... $1,834.8 $1,649.3 $1,197.1 $1,029.4 $789.2 $754.0
======== ======== ======== ======== ====== ======
Backlog of unfilled or-
ders at year end
Plastics
machinery(c)......... $ 113.5 $ 108.1 $ 122.3 $ 85.5 $ 56.1 $ 53.3
Machine tools......... 118.1 118.1 117.4 123.9 188.8 219.7
Industrial
products(e).......... 118.0 118.0 47.4 36.6 4.7 4.3
-------- -------- -------- -------- ------ ------
Total backlog....... $ 349.6 $ 344.2 $ 287.1 $ 246.0 $249.6 $277.3
======== ======== ======== ======== ====== ======
Operating earnings
(loss)(f)
Plastics
machinery(c)......... $ 77.5 $ 54.3 $ 45.9 $ 29.2 $ 25.7 $ 16.6
Machine tools(d)...... (7.2) 7.7 6.8 7.9 14.3 (3.1)
Industrial
products(e).......... 64.7 62.1 36.3 29.0 18.7 19.0
Disposition of
businesses(g)........ 71.0 71.0 -- (22.8) -- --
Integration charge,
consolidation charge
and closing and
relocation
charge(h)............ (9.8) (9.8) -- (47.1) -- (75.1)
Corporate expenses.... (15.7) (15.7) (18.0) (15.8) (15.1) (15.5)
Other unallocated
expenses(i).......... (10.8) (10.5) (6.8) (4.2) (.4) (.2)
-------- -------- -------- -------- ------ ------
Operating earnings
(loss)............... 169.7 159.1 64.2 (23.8) 43.2 (58.3)
Interest-net.......... (26.7) (24.8) (15.3) (13.4) (16.2) (15.1)
-------- -------- -------- -------- ------ ------
Earnings (loss) from
continuing operations
before income taxes,
extraordinary items
and cumulative effect
of changes in methods
of accounting........ $ 143.0 $ 134.3 $ 48.9 $ (37.2) $ 27.0 $(73.4)
======== ======== ======== ======== ====== ======
Capital expenditures
Plastics
machinery(c)......... $ 20.1 $ 16.6 $ 13.8 $ 4.2 $ 6.2 $ 6.5
Machine tools(d)...... 6.8 8.6 11.6 8.8 7.1 7.5
Industrial
products(e).......... 28.7 27.1 17.6 10.4 4.3 1.5
-------- -------- -------- -------- ------ ------
Total capital
expenditures....... $ 55.6 $ 52.3 $ 43.0 $ 23.4 $ 17.6 $ 15.5
======== ======== ======== ======== ====== ======
Identifiable assets
Plastics
machinery(c)......... $ 614.5 $ 342.9 $ 295.0 $ 289.0 $219.9 $202.9
Machine tools......... 238.1 238.1 270.8 243.1 282.8 310.9
Industrial
products(e).......... 478.6 478.6 195.0 174.4 56.8 63.7
Unallocated corporate
assets(j)............ 65.4 137.5 26.8 23.1 19.4 20.9
-------- -------- -------- -------- ------ ------
Total assets........ $1,396.6 $1,197.1 $ 787.6 $ 729.6 $578.9 $598.4
======== ======== ======== ======== ====== ======
</TABLE>
- -------
(a) 1992 includes 53 weeks as compared 52 to weeks included in 1995, 1994,
1993 and 1991.
(b) The pro forma consolidated statement of earnings data gives effect to the
acquisitions of Widia, Talbot and D-M-E, the disposition of ESD, and to
the Common Stock Offering and the application of the Estimated Net
Proceeds as described in "Use of Proceeds", assuming each occurred on the
first day of the Company's 1995 fiscal year. Such pro forma data reflects
certain assumptions described in the notes accompanying the information
presented in the "Pro Forma Consolidated Statement of Earnings". The pro
forma consolidated balance sheet data gives effect to the acquisition of
D-M-E and to the Common Stock Offering and the application of the
Estimated Net Proceeds as described under "Use of Proceeds", assuming each
occurred on the last day of the Company's 1995 fiscal year. The effects of
the Widia and Talbot acquisitions and the sale of ESD are reflected in the
Company's historical 1995 balance sheet. The pro forma financial
information does not purport to present what the Company's financial
position and results of operations would actually have been had the
acquisitions of Widia, Talbot and D-M-E, the disposition of ESD, and the
Common Stock Offering and the application of the Estimated Net Proceeds as
described under "Use of Proceeds" occurred on the first or last day of the
Company's 1995 fiscal year, or purport to project the Company's results of
operations for any future period.
(c) The 1995 and 1994 increases in the plastics machinery segment are
partially attributable to the inclusion of Ferromatik as of November 8,
1993. The increases in the "Pro Forma 1995" column are attributable to the
acquisition of D-M-E.
(d) The decreases in the machine tools segment in the "Pro Forma 1995" column
are attributable to the disposition of ESD.
(e) The increases in the industrial products segment are largely attributable
to the inclusion of Valenite as of February 1, 1993, Widia as of February
1, 1995 and Talbot as of July 20, 1995.
(f) 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 classified as unallocated corporate expenses.
Amounts for years prior to 1995 have been restated to conform to the 1995
presentation.
(g) In 1995, $66.0 million relates to the machine tools segment and $5.0
million relates to the industrial products segment. The 1993 amount
relates to the plastics machinery segment.
(h) The 1995 amount relates to the industrial products segment and the 1993
and 1991 amounts relate to the machine tools segment.
(i) Includes financing costs related to the sale of accounts receivable and
minority shareholders' interests in earnings of subsidiaries.
(j) Includes cash and cash equivalents and the assets of the Company's
insurance and utility subsidiaries.
14
<PAGE>
SELECTED HISTORICAL AND PRO FORMA GEOGRAPHIC INFORMATION
<TABLE>
<CAPTION>
FISCAL YEAR(a)
-----------------------------------------------------------------
(DOLLARS IN MILLIONS)
PRO
FORMA
1995(b) 1995 1994 1993 1992 1991
-------- -------- -------- -------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Sales
U.S. operations....... $1,051.2 $ 938.3 $ 873.9 $ 831.9 $654.1 $613.0
Non-U.S. operations... 783.6 711.0 323.2 197.5 135.1 141.0
-------- -------- -------- -------- ------ ------
Total sales......... $1,834.8 $1,649.3 $1,197.1 $1,029.4 $789.2 $754.0
======== ======== ======== ======== ====== ======
Operating earnings
(loss)(c)
U.S. operations....... $ 80.1 $ 71.8 $ 67.9(d) $ 58.1 $ 57.2 $ 29.5
Non-U.S. operations... 54.9 52.3 21.1(d) 8.0 1.5 3.0
Disposition of
businesses........... 71.0 (e) 71.0 (e) -- (22.8)(e) -- --
Integration charge,
consolidation charge
and closing and
relocation charge.... (9.8)(f) (9.8)(f) -- (47.1)(f) -- (75.1)(f)
Corporate expenses.... (15.7) (15.7) (18.0) (15.8) (15.1) (15.5)
Other unallocated
expenses(g).......... (10.8) (10.5) (6.8) (4.2) (.4) (.2)
-------- -------- -------- -------- ------ ------
Operating earnings
(loss)............. $ 169.7 $ 159.1 $ 64.2 $ (23.8) $ 43.2 $(58.3)
======== ======== ======== ======== ====== ======
</TABLE>
- --------
Note: Sales of U.S. operations include export sales of $166.9 million in 1995,
$142.0 million in 1994, $118.7 million in 1993, $111.7 million in 1992
and $98.6 million in 1991. Total sales of the Company's U.S. and non-U.S.
operations to unaffiliated customers outside the U.S. were $784.2
million, $417.6 million, $298.4 million, $242.6 million, and $236.0
million in 1995, 1994, 1993, 1992 and 1991, respectively.
(a) 1992 includes 53 weeks as compared to 52 weeks in 1995, 1994, 1993 and
1991.
(b) The pro forma consolidated statement of earnings data gives effect to the
acquisitions of Widia, Talbot and D-M-E, the disposition of ESD, and to
the Common Stock Offering and the application of the Estimated Net
Proceeds as described in "Use of Proceeds", assuming each occurred on the
first day of the Company's 1995 fiscal year. Such pro forma data reflects
certain assumptions described in the notes accompanying the information
presented in the "Pro Forma Consolidated Statement of Earnings". The pro
forma consolidated balance sheet data gives effect to the acquisition of
D-M-E, and to the Common Stock Offering and the application of the
Estimated Net Proceeds as described under "Use of Proceeds", assuming each
occurred on the last day of the Company's 1995 fiscal year. The effects of
the Widia and Talbot acquisitions and the sale of ESD are reflected in the
Company's historical 1995 balance sheet. The pro forma financial
information does not purport to present what the Company's financial
position and results of operation would actually have been had the
acquisitions of Widia, Talbot and D-M-E, the disposition of ESD, and the
Common Stock Offering and the application of the Estimated Net Proceeds as
described under "Use of Proceeds" occurred on the first or last day of the
Company's 1995 fiscal year, or purport to project the Company's results of
operations for any future period.
(c) In 1995, the Company's method of allocating corporate costs in its U.S.
operations was refined to exclude costs for certain services not directly
assignable to U.S. operations. This change results in additional costs
being classified as unallocated corporate expenses. Amounts for years
prior to 1995 have been restated to conform to the 1995 presentation.
(d) These amounts have been restated to exclude the effects of the forgiveness
of certain intercompany obligations.
(e) In 1995, $62.1 million relates to U.S. operations and $8.9 million relates
to non-U.S. operations. The 1993 amount relates to U.S. operations.
(f) In 1995, $2.9 million relates to U.S. operations and $6.9 million relates
to non-U.S. operations. The 1993 and 1991 amounts relate to U.S.
operations.
(g) Includes financing costs related to the sale of accounts receivable and
minority shareholders' interests in earnings of subsidiaries.
15
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The Company operates in three principal business segments: plastics
machinery, machine tools and industrial products. In the last year, all three
segments experienced internal growth. Machine tools' sales increased largely
because of growth in sales of Wolfpack designed standard products. In the last
three years, the plastics machinery and industrial products segments have
experienced more rapid growth, primarily as a result of four major
acquisitions.
On July 20, 1995, the Company acquired Talbot for approximately $38 million
in cash and assumed debt. Talbot operates primarily in the U.S. and is a major
supplier of round metalcutting tools. With 1995 sales of about $40 million, it
is included in the industrial products segment. The Company's consolidated
1995 sales includes five months of Talbot's sales.
On February 1, 1995, the Company acquired Widia for approximately $88
million of cash and assumed debt. Headquartered in Germany, Widia is one of
the world's leading producers of metalcutting products and industrial magnets
and is also being operated as part of the industrial products segment. Widia's
1995 sales approximated $300 million, although the Company's consolidated 1995
sales include only the eleven months in which the Company owned Widia.
On November 8, 1993, the Company acquired Ferromatik, the plastics injection
molding machine business of Kloeckner-Werke AG, for approximately $50 million
in cash and assumed debt. Ferromatik is also headquartered in Germany, and is
one of the world's leading producers of injection molding machines; it is part
of the Company's plastics machinery segment. Its 1995 annual sales
approximated $150 million. All twelve months' sales were included in 1995 and
1994 results, while only two months' sales were included in consolidated 1993
results.
On February 1, 1993, the Company acquired Valenite for $77 million of cash
and assumed debt. Valenite, with its principal operations in the U.S. and
Canada, is a leading U.S. producer of consumable industrial metalcutting
tools. Part of the industrial products segment, Valenite's 1995 sales
approximated $235 million, excluding about $40 million of European sales now
managed by Widia. Except for one month in 1993, Valenite's results are
included for all of the years shown in the accompanying Consolidated Statement
of Earnings.
Also in the last three years, the Company has completed three divestitures.
The 1995 divestitures of ESD and American Mine Tool ("AMT") resulted in gains,
while the 1993 disposition of the Company's Sano business resulted in a loss,
as described below. Except for these gains and the loss, these divestitures
did not otherwise have a material effect on the comparability of the Company's
Consolidated Statement of Earnings.
Because of the Company's recent acquisitions, as well as the Company's
internal growth in non-U.S. markets, close to half of the Company's 1995 sales
and operating earnings were generated outside the U.S. Foreign currency
exchange rate fluctuations affect the translation of non-U.S. sales and
earnings, as well as consolidated shareholders' equity. However, the Company's
major foreign operations are in European countries which have not experienced
significant currency exchange rate fluctuations in recent years. In 1995, the
generally stronger European currencies had the translation effect of
increasing 1995 new orders and sales by approximately $40 million and net
earnings by $1.9 million. In addition, in 1995 there was an increase in
shareholders' equity due to a $9 million reduction in the cumulative foreign
currency translation adjustment.
1995 COMPARED TO 1994
New Orders and Backlog
New orders for 1995 were $1,635 million, which represented a $397 million,
or 32%, increase over 1994. Of the $397 million increase, $271 million
resulted from the Widia and Talbot acquisitions. Orders for plastics
16
<PAGE>
machinery increased $16 million or 3%, primarily due to increased orders for
German-built injection molding machines. Although the segment experienced
increased orders for the year, new business in the fourth quarter decreased
compared to the exceptionally strong order level in the fourth quarter of
1994. Machine tool orders increased in 1995 by $84 million, or 25%, as all
major U.K. and U.S. product lines, including aerospace products, showed
increases. Machine tool orders in the fourth quarter of 1995 were $85 million,
up 14% over the fourth quarter of 1994; however, the $85 million was not as
strong as earlier 1995 quarters. This decline is expected to affect sales in
the first quarter of 1996. Orders for industrial products, excluding the
acquisitions, increased by $26 million, or 7%, primarily as a result of
increased industrial activity in the U.S. and Europe.
U.S. export orders approximated $171 million in 1995 compared to $124
million in 1994. This represents a 38% increase, which was primarily
attributable to increased machine tool orders from European customers.
At December 30, 1995, the backlog of unfilled orders was $344 million. This
figure has been reduced by ESD's backlog of unfilled orders from non-Milacron
customers as a result of the ESD sale in December, 1995. Despite this
reduction, the backlog increased in 1995 by $57 million, primarily as a result
of the Widia acquisition.
Sales
Sales in 1995 were $1,649 million, which represented a $452 million, or 38%,
increase over 1994. Of the $452 million increase, $276 million represented
sales from the 1995 acquisitions, Widia and Talbot. The rest of the increase
was attributable to: (i) a $66 million, or 13%, increase in sales of plastics
machinery resulting primarily from growth in the Company's European injection
molding and extrusion businesses; (ii) a $71 million, or 21%, increase in
sales of machine tools resulting primarily from increased sales of U.K.-built
vertical machining centers; and (iii) excluding the acquisitions, a $39
million, or 11%, increase in industrial products' sales due to increased sales
in all businesses: cutting fluids, grinding wheels and Valenite cutting tools.
Sales of all segments to non-U.S. markets totaled $784 million, an increase
in 1995 of $367 million primarily due to the Widia acquisition. Export sales
totaled $167 million, an increase of $25 million, or 18%, primarily due to
increased sales of machine tools in Europe. In 1995, products manufactured
outside the U.S. constituted 43% of consolidated sales as compared to 27% in
1994, while products sold outside the U.S. were 48% of consolidated sales as
compared to 35% in 1994.
Margins, Costs and Expenses
Manufacturing margins increased to 24.9% in 1995 compared to 24.4% in 1994,
due primarily to the increased proportion of industrial products' sales which
have higher margins than the machinery businesses. Plastics machinery margins
were unchanged for the year although they were lower in the last half of 1995,
largely due to increased exports and reduced automotive sales. Machine tools
experienced a slight decline largely due to phasing out some older product
lines. Industrial products' margins declined slightly because of the mix of
product sales.
Selling and administrative expense increased due to the acquisitions and
increased sales. As a percent of sales, selling expense increased from 16.1%
to 16.3% due to the higher proportion of industrial products' sales which have
higher selling costs. Administrative expense increased because the
administrative costs of the newly acquired subsidiaries exceeded a reduction
in corporate overhead expenses, although the 1995 total was less than 2% of
sales.
The $71.0 million gain on disposition of businesses resulted from the $66.0
million before tax gain on the sale of ESD, which was sold in the fourth
quarter of 1995, and the $5.0 million before tax gain on the sale of AMT,
which was sold in the first quarter of 1995. These transactions had the effect
of increasing 1995 net earnings by $56.4 million, or $1.63 per share. The ESD
sale is expected to have a material effect on the Company's future operating
results; its 1995 sales to non-Milacron customers approximated $30 million and
its
17
<PAGE>
before tax operating profit totaled approximately $14 million. However, the
proceeds from the sale were used in January, 1996, to repay bank borrowings
and to partially fund the D-M-E acquisition which is expected to increase 1996
earnings. See "--Subsequent Events".
The $9.8 million pretax integration charge ($7.8 million after tax) relates
to the Company's February, 1995, acquisition of Widia. The Widia acquisition
allows the Company to capitalize on synergistic opportunities with Valenite,
an existing subsidiary which manufactures similar products. Accordingly, in
May, 1995, management formally approved a plan to integrate certain operations
of these businesses at an expected cost of $17.1 million which was increased
to $28.1 million ($21.0 million in cash) in December, 1995, to include
additional actions at Widia. That portion of the cost directly related to
Widia, totaling $18.3 million, has been recorded as a purchase accounting
adjustment, while the remaining $9.8 million, which is directly related to
Valenite, was recorded as a charge to earnings. The $28.1 million plan
involves the closing or downsizing of three manufacturing plants and the
consolidation of numerous sales, service and warehouse operations in Europe
and Asia. The $9.8 million integration charge includes $5.8 million for
severance and other termination benefits and $4.0 million for facility exit
costs and asset write downs. As a result of the actions included in the $28.1
million plan, which were started in 1995 and all of which are expected to be
substantially completed in the first half of 1996 except for certain personnel
reductions at Widia, the Company expects annual cost savings of approximately
$19 million. The total cash cost of $21.0 million will be funded by operations
and bank borrowings.
Other-net increased by $3.5 million due to a $1.5 million increase in
financing fees on the sale of receivables, as well as the effects of the
acquisitions.
Minority shareholders' interests in earnings of subsidiaries relates
principally to Widia's 51% interest in a public company in India.
Interest expense, net of interest income, was $24.8 million in 1995 compared
to $15.3 million in 1994. The primary cause of the increase was higher
borrowing levels to support the Widia and Talbot acquisitions.
Income Taxes
The provision for income taxes in both 1995 and 1994 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 $38 million and $17 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.
Earnings
Net earnings in 1995 were $105.6 million, or $3.04 per share, compared to
$37.7 million, or $1.10 per share in 1994. The net earnings in 1995 included
$48.6 million, or $1.40 per share, resulting from the combined effects of the
gain on the disposition of two businesses, offset by the integration charge.
Excluding these items, net earnings increased from 1994 by $19.3 million, or
$.54 per share.
1994 COMPARED TO 1993
New Orders and Backlog
New orders for 1994 were $1,238 million, which represented a $268 million,
or 28%, increase over 1993. Orders for plastics machinery increased $174
million, or 48%. Approximately $100 million of the increase resulted from the
acquisition of Ferromatik late in 1993. Other contributing factors included
higher demand for U.S.-built injection molding machines and a single $17
million European order. Machine tool new orders increased $47 million, or 16%,
due to a greater demand for Wolfpack-designed products, primarily vertical
18
<PAGE>
machining centers. Orders for industrial products increased $48 million, or
15%, due primarily to the timing of the Valenite acquisition and strengthening
demand in the U.S.
U.S. export orders approximated $124 million in 1994 compared to $100
million in 1993. The increase in export orders was primarily attributable to
the plastics machinery segment.
At December 31, 1994, the backlog of unfilled orders was $287 million
compared with $246 million at the beginning of 1994. The increase in backlog
was primarily attributable to greater demand for Ferromatik plastics machinery
and vertical machining centers.
Sales
Sales in 1994 were $1,197 million, which represented a $168 million, or 16%,
increase over 1993. The sales increase was primarily attributable to: (i) a
$147 million, or 41%, increase in plastics machinery sales, which included an
approximate $80 million increase resulting from the acquisition of Ferromatik
in late 1993, with the rest of the plastics machinery increase coming from
injection molding machines and (ii) a $38 million increase in industrial
products sales, of which about half resulted from the inclusion of Valenite's
sales for twelve months in 1994 versus eleven months in 1993. Machine tool
sales declined by $17 million, or 5%, resulting primarily from a decline in
demand from the aerospace market.
Sales of all segments to non-U.S. markets increased in 1994 by $119 million,
or 40%, primarily due to the effect of the Ferromatik acquisition. Export
shipments increased by $23 million, or 20%, primarily due to increases in
exports of injection molding machines to Mexico. In 1994, products
manufactured outside the U.S. were 27% of consolidated sales as compared to
19% in 1993, while products sold outside the U.S. were 35% of consolidated
sales as compared to 29% in 1993.
Margins, Costs and Expenses
Manufacturing margins increased to 24.4% in 1994 from 23.1% in 1993. Margins
for all three segments improved. Plastics machinery benefited from increased
volume and more stable pricing; machine tools reduced its costs due to the
consolidation (see "--Consolidation Charge"); and industrial products achieved
benefits from increased U.S. sales of grinding wheels, metalworking fluids and
cutting tools.
Selling and administrative expense as a percent of sales was 19% in both
1994 and 1993.
The $22.8 million disposition of a business in 1993 resulted from the
decision to sell Sano, due in part to continuing operating losses. Sano was
included in the plastics machinery segment.
Other-net increased by $5.2 million due to: (i) a $2.8 million increase in
financing fees, principally attributed to the sale of receivables and (ii) the
inclusion in 1993 of a $2.5 million gain on the sale of surplus land.
Interest expense, net of interest income, was $15.3 million in 1994 compared
to $13.4 million in 1993. The increase was due to higher borrowing levels as
well as higher interest rates.
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. Production at the Company's two machine tool
facilities in Fountain Inn and Greenwood, South Carolina, was phased out
during 1994 and the plants were closed in the fourth quarter of 1994.
The consolidation plan included a provision for the phase out of production
in South Carolina offset by a simultaneous ramp up of production in Cincinnati
to minimize the effect of the consolidation on 1994 sales.
19
<PAGE>
However, two important factors necessitated adjustments to the original plan.
First, the favorable job market in South Carolina resulted in an unexpectedly
high early attrition rate affecting both production employees and certain
other employees who were key to the execution of the production phase-out
plan. The early attrition was particularly acute in parts manufacturing and
resulted in an earlier than expected loss of capability in this area, slowing
the phase out of production in South Carolina and hampering the ramp up of
production in Cincinnati. To offset some of the lost capability, the Company
had to temporarily utilize more costly subcontract sources. Second, market
demand for machine tool products, including products previously manufactured
in South Carolina, was strong in 1994. This temporarily strained key
suppliers, causing parts shortages and further slowing the ramp up of
production in Cincinnati. These production delays and inefficiencies during
the consolidation process contributed to lower than expected operating
earnings in the machine tools segment and resulted in an estimated $20 million
to $30 million reduction in 1994 sales of products previously manufactured in
South Carolina.
Completion of the consolidation was originally expected to result in a net
employee reduction of 235 in U.S. machine tool operations. However, increased
customer demand for machine tool products, including the products being
transferred from South Carolina, resulted in a net employee reduction of 150.
As a result of the larger than expected number of voluntary terminations and
transfers to Cincinnati, the cost for severance and other fringe benefits was
approximately $6 million less than anticipated. Simultaneously, the delay in
the phase out of production in South Carolina resulted in additional operating
losses of approximately $2 million through the closure date of the two plants.
The net $4 million reduction in the cost of the consolidation was utilized to
absorb incremental costs arising from the 1990 and 1991 machine tool
restructurings, including the lower estimated net proceeds from the sale of
the Heald facility, the closure of certain overseas sales offices and the
restructuring of U.S. machine tool operations.
The consolidation was originally expected to result in annual cost savings
of approximately $16 million. Approximately $12 million of the $16 million in
anticipated savings related to the planned net employee reduction of 235
people. As a result of the lower than expected reduction, the actual annual
cost savings were $4 million less than originally anticipated. However, higher
margins associated with increased sales offset this reduction.
The consolidation plan was essentially completed by year-end, 1994, although
the Company experienced some production difficulties in early 1995 which were
related to the consolidation and a simultaneous increase in customer demand.
Income Taxes
The provision for income taxes in both 1994 and 1993 consists primarily of
U.S. state and local income taxes and non-U.S. income taxes in certain
profitable jurisdictions.
Income taxes were minimal in 1994 because benefits from the utilization of
the Company's U.S. and non-U.S. net operating loss carryforwards were applied
as a reduction of the provision for income taxes.
Current tax benefits were not offset against the U.S. loss in 1993 in
accordance with the income tax accounting rules that became effective January
3, 1993. In addition, current tax benefits could not be recognized for losses
in certain non-U.S. jurisdictions.
Earnings
Earnings before extraordinary item and cumulative effect of changes in
methods of accounting improved to $37.7 million, or $1.10 per share, in 1994
compared to a loss of $45.4 million, or $1.41 per share, in 1993. The 1993
loss was caused by the $47.1 million consolidation charge described above and
the $22.8 million charge for the disposition of a business described above.
20
<PAGE>
The net loss for 1993 included the effect of an extraordinary charge of $4.4
million, or $.14 per share, related to the early extinguishment of $60 million
of 12% debentures.
The net loss for 1993 also included the effect of adopting SFAS No. 109,
"Accounting for Income Taxes", and SFAS No. 106, "Employer's Accounting for
Postretirement Benefits Other Than Pensions", effective January 3, 1993,
resulting in charges to earnings totaling $52.1 million, or $1.61 per share.
Except for the cumulative effect, the new rules regarding postretirement
medical benefits did not significantly affect the Company's earnings in any of
the years presented, while the new rules regarding income taxes had the effect
of reducing the Company's effective tax rate in all the years presented due to
the realization of net operating loss carryforwards.
Net earnings were $37.7 million, or $1.10 per share, in 1994, compared to a
net loss of $101.9 million, or $3.16 per share, in 1993. The 1993 net loss was
caused by the aforementioned charges, the extraordinary item and the
cumulative effect of changes in methods of accounting that totaled $126.4
million.
LIQUIDITY AND SOURCES OF CAPITAL
At December 30, 1995, the Company had cash and cash equivalents of $133
million, an increase of $112 million during the year. The increase resulted
primarily from the sale of ESD near the end of 1995.
Operating activities provided $41 million of cash in 1995 after deducting
incremental cash costs of the industrial products integration and the U.S.
machine tool consolidation of $11 million. Operating activities provided $8
million in 1994. Working capital improved by $241 million in 1995 and the
current ratio improved to 2.0. These improvements resulted primarily from the
acquisitions and divestitures.
Expenditures for new property, plant and equipment in 1995 were $52 million,
compared to $43 million in 1994. Proceeds from the disposal of property, plant
and equipment for 1995 were $10 million compared to $4 million in 1994.
Proceeds during both years included amounts related to the sale of surplus
assets and the sale and operating leaseback of certain manufacturing
equipment. The 1996 capital budget is $86 million, some of which may be
financed through operating leases.
In 1995, the acquisitions of Widia and Talbot resulted in cash payments of
$114 million, including the related professional fees. Also in 1995, the
Company realized proceeds of $120 million on the disposition of ESD and AMT.
While a portion of the proceeds from the ESD sale were used to partially repay
existing bank borrowings before year-end 1995, the majority is included in
cash and cash equivalents in the accompanying Consolidated Balance Sheet.
The Widia acquisition was financed by borrowing $87 million under the
Company's revolving credit facility, that portion of which is classified as
long-term debt. Also in 1995, the Company issued $100 million of 7 7/8% notes.
The proceeds were used principally to pay down other long-term debt and to
reduce amounts payable to banks. The subsequent acquisition of Talbot was
financed by available cash and increasing amounts payable to banks.
The Company had a number of short-term intercompany loans and advances
denominated in various currencies totaling approximately $61 million at
December 30, 1995, that were subject to foreign currency 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 short-term 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. The Company is currently not involved with any
additional derivative financial instruments.
At year-end 1995, the Company had lines of credit with various U.S. and non-
U.S. banks of approximately $370 million, including a $150 million committed
revolving credit facility. These credit facilities support letters
21
<PAGE>
of credit and leases in addition to providing borrowings under varying terms.
The revolving credit facility was amended in May, 1995, to allow for the
purchase of Talbot, to extend the debt maturity to 1998, and, at the Company's
request, to reduce the amount of the facility to $150 million to reduce
facility fees. The facility imposes a number of restrictions, including
restrictions on total indebtedness in relation to total capital. The Company
has remained in compliance with the restrictions imposed by the facility since
its inception. Under the provisions of the amended facility, the Company's
additional borrowing capacity totaled approximately $192 million at year-end
1995.
The interest rates on the lines of credit and the financing fees on the
receivables purchase agreement fluctuate based on changes in prevailing
interest rates in the countries in which amounts are borrowed or receivables
are sold. At December 30, 1995, approximately $180 million was subject to the
effects of fluctuations in interest rates under these arrangements. Future
changes in interest rates will affect the Company's interest expense and other
financing costs.
Total debt was $356 million at December 30, 1995, an increase of $129
million over 1994. The ratio of total debt to total capital (debt plus equity)
was 57% at December 30, 1995, down from 59% at year-end 1994. The Company
believes that its cash flow from operations and available credit lines will be
sufficient to meet its debt service, capital expenditures and other operating
requirements, including those associated with the acquisition of D-M-E (see
"--Subsequent Events").
SUBSEQUENT EVENTS
On January 26, 1996, the Company completed the acquisition of D-M-E. With
1995 sales of approximately $175 million, D-M-E is the largest U.S. producer
of mold bases, standard components and supplies for the plastics injection
mold-making industry. The acquisition was financed initially through the
execution of $183 million of notes payable to the seller along with $62
million of cash. One promissory note of $12 million was subsequently paid. The
other notes mature on January 26, 1997, but are subject to prepayment at the
option of either the buyer or the seller at any time after July 26, 1996. To
finance the acquisition, the Company completed an amendment to its revolving
credit facility that increased the facility to $300 million and extended the
debt maturity to January 31, 2000. After giving effect to the acquisition on a
pro forma basis, as if the transaction had been completed by year-end 1995,
the Company's unused borrowing capacity would be approximately $30 million and
its debt to capital ratio would be 66%. The Company intends to use the net
proceeds of the Common Stock Offering to refinance a portion of the
acquisition. See "Use of Proceeds".
OUTLOOK
As for the future, the slowdown in the North American and European
economies, which began in mid-1995, is likely to persist and the Company is
planning on only modest economic growth in the second half of the year. Even
in this environment, however, due to new product introductions and
productivity improvements, the Company expects good improvements in sales and
earnings in 1996, compared with 1995 results after excluding the effect of
dispositions and the integration charge. These forward-looking statements by
their nature involve risks and uncertainties that could significantly impact
expected results, as described more fully in the Cautionary Statement below.
22
<PAGE>
Cautionary Statement
The Company wishes to caution readers that all its forward-looking
statements in the "Outlook" section above and elsewhere, which include all
statements which, at the time made, speak about the future, are based upon its
interpretation of what it believes are significant factors affecting its
businesses. The Company believes the following important factors, among
others, in some cases have affected, and, in the future, could affect, the
Company's actual results and could cause the Company's actual consolidated
results for 1996, and beyond, to differ materially from those expressed in any
forward-looking statements made by, or on behalf of, the Company:
. global economic conditions, consumer spending and industrial production
in the United States and Europe, particularly in segments related to the
level of automotive production and spending in the aerospace and
construction industries;
. fluctuations in the exchange rates of U.S. and foreign currencies,
particularly those of countries in Europe where the Company has several
principal manufacturing facilities;
. production and pricing levels of important raw materials, including
plastic resins, which are a key raw material used by purchasers of the
Company's plastics machinery products, and steel, cobalt, tungsten and
industrial grains used in the production of metalworking products;
. lower than anticipated levels of plant utilization resulting in
production inefficiencies and higher costs, whether related to the delay
of new product introductions, improved production processes or
equipment, or labor relation issues;
. any major disruption in production at key customer or supplier
facilities;
. alterations in trade conditions in and between the U.S. and non-U.S.
countries where the Company does business, including export duties,
import controls, quotas and other trade barriers; and
. changes in tax, environmental and other laws and regulations in the U.S.
and non-U.S. countries where the Company does business.
23
<PAGE>
BUSINESS
GENERAL
The Company is a leading global manufacturer of products and provider of
services and technology used to process engineered materials. Incorporated in
Delaware in 1983, the Company is a successor to a business established in
1884.
The Company has three business segments: plastics machinery, machine tools
and industrial products. The Company's plastics machinery business includes
injection molding machines, extrusion systems, blow molding machines, mold
bases and auxiliary equipment. The Company's machine tool business consists of
turning and machining centers, grinding machines, flexible manufacturing
cells, and advanced systems primarily for the aerospace industry. The
Company's industrial products business includes metalcutting tools,
metalworking fluids, grinding wheels, carbide wear parts and industrial
magnets.
The Company has gone through a major transformation over the last three
years, primarily through strategic acquisitions, accelerated new product
development, expanded distribution, and the consolidation of its U.S. machine
tool operations. As a result, the Company has achieved a more equal balance
among its segments' sales, and between its U.S. and non-U.S. sales. From 1992
to 1995, the Company's consolidated sales have grown at a compound annual rate
of 28% from $789 million to $1.6 billion.
In 1995, more than 40% of sales came from the industrial products segment,
making it the Company's largest business segment in that year. The plastics
machinery segment was the second-largest business segment in 1995, with
approximately 35% of sales, while the machine tool segment contributed about
25% of sales. The Company expects plastics machinery segment sales to increase
significantly as a result of the acquisition of D-M-E in January of 1996, as
described below. The Company expects the growth in industrial products and
plastics machinery sales will make it less susceptible to the historically
severe business cycles and lower margins characteristic of the machine tool
business.
Today, the Company sells products and provides services to industrial
customers throughout the world. Sales to customers outside the U.S. increased
from $298 million in 1993, representing 29% of total sales, to $784 million in
1995, representing 48% of total sales. The Company has been successful in
penetrating international markets through acquisitions, expanded distribution,
increased exports, and license and joint venture agreements. The Company
believes its current geographic sales balance helps compensate for varying
economic cycles around the world and that its increased presence outside the
U.S. will reduce its dependence upon the U.S. economy.
The Company has a long-standing reputation for quality and technological
leadership. Virtually all of the Company's plastics machinery products and
machine tools are computer controlled. Many of these machines are sold with
advanced application software, like software to control machine tools that
fabricate aircraft parts from composite materials. In plastics machinery, the
Company believes its new all-electric machine is revolutionizing the injection
molding process by greatly improving quality and productivity. The Company
also believes it is a leader in providing programs to manage all of the wet
chemistry in customers' metalworking plants.
STRATEGIC ACQUISITIONS AND DIVESTITURES
The Company continually explores acquisition, divestiture and consolidation
opportunities when it believes such actions could expand markets, enhance
product synergies or improve earnings potential for the long term. Over the
last three years, the Company has completed several strategic acquisitions and
divestitures which the Company believes will increase its potential for
further growth. In its plastics machinery segment, the Company acquired
Ferromatik, the injection molding machine business of Kloeckner-Werke AG, in
1993 and D-M-E from The Fairchild Corporation in 1996.
Ferromatik is one of Europe's leading manufacturers of plastics injection
molding machines. With annual sales now in excess of $150 million, Ferromatik
expanded the Company's plastics processing technology base
24
<PAGE>
and product line and enabled the Company to achieve its objective of
establishing a plastics machinery manufacturing and distribution base in
Germany to serve Europe and other markets.
D-M-E is the largest U.S. producer of mold bases, components and supplies
for the plastic injection moldmaking industry. With 1995 sales of
approximately $175 million, D-M-E serves customers throughout the world with
ten major manufacturing facilities, plus several international joint-venture
operations. The Company believes D-M-E will enhance its plastics machinery
business because it provides the mold bases, supplies and components used in
the mold apparatus inside an injection molding machine. D-M-E is the market
leader with a well-established reputation for high quality.
In 1993, the Company disposed of its Sano plastics machinery business, due
in part to continuing operating losses. In addition, the Sano business did not
serve a major global market with good long-term growth potential.
In the past three years, the Company has made three strategic acquisitions
in its industrial products segment: Valenite, Widia and Talbot, all of which
have metalcutting tools as their primary product line. The Company believes
that it is now the second-largest U.S. and third-largest worldwide producer of
carbide metalcutting tool systems.
Valenite was acquired in February, 1993. With principal operations in the
U.S. and Canada, it is a leading producer of consumable industrial
metalcutting tools. Part of the industrial products segment, Valenite's 1995
sales approximated $235 million, excluding about $40 million of European sales
now managed by Widia.
Widia, acquired in February, 1995, is one of the world's leading producers
of industrial metalworking products, with 1995 sales approximating $300
million. Widia's strong presence in Europe and India complements Valenite's
strengths in the U.S. and Japanese markets. Widia also enhances the Company's
technological base, diversifies its industrial consumable product line and
expands its worldwide sales and distribution network. During 1995, the Company
implemented an integration plan to maximize the synergies between Valenite and
Widia worldwide. The plan will be substantially completed in 1996, and it is
expected to generate $19 million of cost savings, some of which began to be
realized in 1995.
The Company acquired Talbot in July, 1995. With 1995 sales of approximately
$40 million, Talbot is a major supplier of round high-speed steel and carbide
metalcutting tools, such as mills and taps, and is the largest U.S. producer
of end mills. These cutting tools, which are not produced by either Valenite
or Widia, will be sold through their independent distributors and a direct
sales force. The Talbot acquisition enabled the Company to increase its
product coverage from approximately 40% to 65% of the types of cutting tools
consumed by the world market.
In 1995 the Company sold AMT, a small business that was purchased as part of
the Valenite acquisition. Like Sano, this business did not serve a major
global market with good long-term growth potential.
In its machine tools segment, the Company sold ESD in December, 1995 for
$105 million. ESD's 1995 sales to unaffiliated customers were approximately
$30 million. ESD was sold to redeploy assets to more strategic businesses. To
maintain control system continuity and development, the Company entered into a
long-term supply and services agreement with the purchaser of ESD to continue
to provide the Company's machine tool and plastics machinery businesses with
technologically advanced control systems.
In 1994, the Company completed a major consolidation of its U.S. machine
tool operations, closing two plants in South Carolina and moving all of its
U.S. production to its main machine tool facilities in Cincinnati, Ohio.
PRODUCT DEVELOPMENT AND CAPITAL EXPENDITURES
As part of its objective to enhance its growth potential and global
competitiveness, the Company continues to invest in research and development
and in new capital equipment. Research and development investment in 1995
totaled $58 million, or 3.5% of sales. In 1995, the Company invested $52
million for capital additions,
25
<PAGE>
primarily to install highly advanced systems throughout its operations
worldwide. For 1996, the Company is budgeting an increase in capital
expenditures to a total of $86 million.
To enhance its research and development effort, in recent years the Company
has undertaken a major program for product development, process improvement
and modernization. This program is named "Wolfpack" because of its emphasis on
teamwork and fierce competitiveness. The objectives of Wolfpack are to design
and produce new products at world-competitive levels of quality, performance,
efficiency and cost. Substantially all of the Company's current machine
designs have been developed using the Wolfpack methodology.
PLASTICS MACHINERY BUSINESS
The Company believes it is the largest U.S. producer of plastics machinery
and one of the three largest in the world. In 1995, the Company's plastics
machinery segment sales were $570.1 million and this amount is expected to
increase significantly in 1996 with the addition of D-M-E. The Company sells
plastics machinery to manufacturers in several key industries, including
automotive, construction, electronics, consumer goods and packaging. The
Company believes it offers more varieties of machinery to process plastic than
any other U.S. company.
One of the Company's strengths in the plastics machinery business stems from
having complete lines of machines for three major plastics processing
technologies: injection molding machines, systems for extrusion and blow
molding machinery. The Company also sells specialty equipment for plastics
processing and rebuilds and retrofits older injection molding equipment
manufactured by the Company or others.
The Company distributes all of its plastics machinery products through a
combination of a direct sales forces and independent agents who are
geographically spread throughout the key markets of the world.
Plastics Machinery Industry
The market for plastics machinery has grown steadily over the past four
decades, as plastics have continued to replace traditional materials such as
metal, wood, glass and paper in an increasing number of manufactured products,
particularly in the transportation, construction, housewares, electrical, and
medical industries. Advancements in both the development of materials, which
make plastic products more functional, and the capabilities of plastics
processing equipment have been major contributors to the steady growth in the
plastics machinery market. In addition, consumer demand for safer, more
convenient and recyclable products has increased the general demand for
plastic products. Like other capital goods markets, the plastics machinery
market is subject to economic cycles, but to a lesser degree than the machine
tool market. In particular, the market for injection molding machines is
driven by the consumer economy and the automotive industry. From 1992,
plastics machinery orders have been strong, although the Company began to
experience some softening of demand in the last half of 1995, but the Company
expects continued growth.
Custom molders, which produce a wide variety of components for many
industries, are the single largest group of plastics machinery buyers. Other
customer categories include the automotive industry, the electrical and
packaging industries, the construction industry, manufacturers of housewares
and appliances and producers of medical supplies. Among the factors that
affect the plastics machinery market are the health of the consumer economy,
residential and commercial construction and automotive production. Because of
intense competition from international plastics machinery producers, currency
exchange rates also have a significant impact. Fluctuations in the supply and
prices of petrochemical feed stocks for resin supply may affect the businesses
of the customers for plastics machinery and, in turn, the market for this
equipment.
Environmental concerns about plastics may have the potential to slow the
growth of the plastics machinery market. However, some plastics raw materials
suppliers, machinery makers and processors are developing methods of recycling
to address environmental issues. The Company believes that environmental
concerns have not had any discernible negative effect on the market to date.
Nevertheless, the Company, through its membership in The Society of Plastics
Industry (an industry trade association) and its affiliate, The American
Plastics Council, is working with other leading companies within the plastics
industry to address the role of plastics in the environment.
26
<PAGE>
The Company's Plastics Machinery Business
With the acquisition of D-M-E in January of 1996, the Company's plastics
machinery segment consists of four major products lines: injection molding
machines, extrusions systems and blow molding machines, as well as
standardized mold bases, components, and supplies for the plastics injection
moldmaking industry.
Injection Molding. The Company believes it is the largest U.S. producer of
injection molding machines. Injection molding is the most common and versatile
method of processing plastic, and it is used to make a wide variety of parts
and products ranging from housewares and consumer goods to medical supplies
and industrial components. The Company manufactures many types of injection
molding machines, most all of which were developed using Wolfpack principles.
The injection molding machine line includes machines powered conventionally
(with hydraulics) as well as ones that are driven by servo motors (fully
electric). Product standardization (which facilitates part commonality) and
the modernization of the Company's manufacturing facilities and methods, as
well as increased volumes, have enabled the Company to achieve significant
economies of scale for the production of injection molding machines. The
Company believes these factors have enabled it to become the lowest-cost U.S.
producer of these machines. Additionally, the Company believes its success in
injection molding machines has been due in large part to the development and
marketing of its Vista line. Beginning in 1995, the Vista line is being
modernized even further through the internationally designed and distributed
Magna series of fully hydraulically-driven machines. In addition, the Company
has enhanced and expanded its product offerings in 1995 with the Elektra line
of all electrically driven machines.
In November, 1993, the Company acquired Ferromatik, one of Europe's leading
producers of injection molding machines. Ferromatik is recognized for its
high-end technology, including multi-color machines, multi-component systems
and other specialty applications. The acquisition included the Ferromatik
lines of hydraulic and electric injection molding machines and a modern
manufacturing facility in Malterdingen, Germany, as well as Ferromatik's
worldwide marketing, sales and service network. The Ferromatik acquisition
expanded the Company's plastics processing technology base and product line
and enabled the Company to achieve its objective of establishing a plastics
machinery manufacturing and distribution base in Germany to serve Europe and
other markets. Ferromatik has provided a complementary fit with the Company's
other injection molding machine businesses.
The Company has completed a restructuring of Ferromatik to derive synergies
between Ferromatik and other Company operations and to improve Ferromatik
operations through implementation of manufacturing techniques and methods
currently being used in the Company's U.S. plastics machinery operations. The
Company believes that this restructuring has helped, and will continue to
help, it to achieve its cost reduction goals in both marketing and
manufacturing.
The Company sells several of its successful U.S. and Ferromatik plastics
machinery lines to European customers through Ferromatik's sales and
distribution network.
In May, 1995, the Company announced the startup of a joint venture with a
well-established plastics machinery maker in India. This operation builds
entry-level injection molding machines for Asian and South American markets.
Extrusion Systems. The Company's extrusion systems business consists of the
manufacture, sale and distribution of individual extruders and systems
comprised of multiple units which are tooled to extrude a specific product in
quantity. Such systems take longer to manufacture than injection molding
machines. Extrusion systems, which are manufactured in both the U.S. and
Austria, include twin-screw extruders and single-screw extruders. The Company
believes it has a strong competitive position in each of these lines, and is
the largest worldwide maker of twin-screw extruders. Twin-screw extruders are
used to produce continuous-flow products such as pipe, residential siding,
sheet lines and window frames. As a result, the business is closely tied to
construction market cycles. Single-screw extruders are used in a variety of
applications and systems such as blow molding, blown-film and cast-film
systems, pipe and profiles and wire and cable applications.
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<PAGE>
Blow Molding Machines. The Company's blow molding machine business consists
of the manufacture, sale and distribution of extrusion blow molding machines,
which are used to make a wide variety of products, including industrial parts,
outdoor furniture, refuse containers, toys, and packaging containers.
Mold Bases and Components. In January, 1996, the Company completed the
acquisition of D-M-E, which the Company believes is the largest U.S. producer
of mold bases, standard components and supplies for the moldmaking industry,
serving customers throughout the world with ten major manufacturing
facilities, plus several international joint venture operations. Its 1995
sales approximated $175 million. Like most of the Company's plastics business,
D-M-E serves the largest segment of the market, the injection molding process.
D-M-E complements the Company's other businesses because D-M-E provides the
mold bases, supplies and components used in the mold apparatus inside the
injection molding machines. The Company expects to achieve synergies in a
number of areas, including manufacturing process, technology, marketing and
distribution.
Specialty Equipment. The Company sells a variety of specialty equipment used
in the processing of plastics products, including peripheral auxiliary
equipment such as material management systems, heat exchangers and product
handling systems, all of which are manufactured by third parties to the
Company's specifications. The Company also sells a line of vertical injection
molding machines which are manufactured to the Company's specifications by a
third party. The Company also rebuilds and retrofits older types of injection
molding equipment sold by the Company or others, refitting them with new
controls and software.
Production Facilities
For the plastics machinery segment, the Company maintains the following
principal production facilities:
<TABLE>
<CAPTION>
FACILITY PRODUCTS
-------- --------
<S> <C>
Ahmedabad, India....................... Injection molding machines.
Batavia, Ohio(a)....................... Injection and blow molding machines.
Charlevoix, Michigan................... Mold components.
Cincinnati, Ohio....................... Extrusion systems.
Hillside, New Jersey................... Special mold base components.
Lewistown, Pennsylvania................ Mold components.
Madison Heights, Michigan.............. Mold base components.
Malterdingen, Germany.................. Injection molding machines.
Mechelen, Belgium...................... Mold base components.
Melrose Park, Illinois................. Special mold base components.
Monterey Park, California.............. Special mold base components.
Mt. Orab, Ohio(a)...................... Plastics machinery parts.
Neuenstadt, Germany.................... Special mold base components.
Vienna, Austria........................ Extrusion systems.
Windsor, Ontario, Canada............... Special machinery for mold bases.
Youngwood, Pennsylvania................ Steel processing and mold components.
</TABLE>
--------
(a) The plant in Batavia, Ohio operates under a long-term lease, which was
financed by the sale of Clermont County Industrial Development Revenue
Bonds. The plant in Mt. Orab, Ohio operates under a long-term lease,
which was financed by the sale of State of Ohio Industrial Development
Revenue Bonds. At the expiration of the long-term leases, the Company
will acquire title to the leased properties at a nominal cost.
Sales, Marketing and Customer Service
The Company maintains a large direct sales force in the U.S. for its
plastics machinery segment, which it supplements with independent agents.
Internationally, the Company uses both a direct sales force and independent
agents. In the U.S., the plastics machinery business uses the Company's
Cincinnati, Ohio, headquarters, as well as sales and service centers in
Allentown, Pennsylvania; Charlotte, North Carolina; Chicago, Illinois; Dallas,
Texas; Detroit, Michigan; and Los Angeles, California to market its products
and
28
<PAGE>
provide customer support and training. Through its Austrian and Ferromatik
subsidiaries, the Company has an extensive sales, marketing, service and
distribution system throughout Europe.
Competition
The markets for plastics machinery in North America and worldwide are highly
competitive and are made up of a number of U.S., European and Asian
competitors. The Company believes it has a significant share of the U.S.
market for the type of products it produces, and, with the D-M-E acquisition,
the Company believes it is the broadest-line maker of equipment, supplies and
systems for plastics processing in the world. The Company's competitors vary
in size and resources; some are larger than the Company, many are smaller, and
only a few compete in more than one product category. Principal competitive
factors in the plastics machinery industry are: product features, technology,
quality, performance, reliability, speed of delivery, price and customer
service. The Wolfpack program is designed to maintain and enhance the
Company's competitive position worldwide with respect to each of these
competitive factors.
MACHINE TOOL BUSINESS
The Company is a leading U.S. producer of machine tools. A machine tool is a
power-driven machine that is used to cut, form or shape metal. Machine tools
are typically installed as capital equipment in metalworking industries. In
1995, the Company's machine tool segment sales were $409.0 million.
Machine Tool Industry
The primary customers for this $25-billion worldwide market for metalcutting
machine tools are the automotive industry; machine shops; producers of farm,
construction, off-road and power generation equipment; manufacturers of
bearings; the aerospace industry; the die and mold industry; and a variety of
other metalworking manufacturers. The machine tool industry has historically
been cyclical with relatively long lead times between orders and shipments.
Machine tool sales are affected by capital spending levels, interest rates,
tax and depreciation policies, international competition, currency exchange
rates and general economic conditions.
The Company's Machine Tool Business
The Company designs, builds and sells a variety of standard and advanced
computer numerically controlled ("CNC") metalcutting machine tools for various
industries, including industrial components, job shops, automotive and
aerospace. The Company's core machine tool operation, the standard machine
tool business, manufactures horizontal machining centers, vertical machining
centers, turning centers, centerless grinders and automated flexible
manufacturing cells for the metalworking industry. The products of the
Company's advanced machine tool systems business include large, multi-axis
metalcutting and composites processing systems for the aerospace industry;
large, multi-axis machines for manufacturers of farm, construction, off-road
vehicles and power generation equipment and for the die and mold industry.
ESD, which was formerly part of the Company's machine tool business,
manufactures computer controls for the Company's machine tools and plastics
machinery. ESD was sold in December, 1995, and the Company entered into an
extensive seven-year supply and services agreement with the purchaser.
Standard Machine Tool Products
Horizontal CNC Machining Centers. The Company produces CNC horizontal
machining centers for basic metalworking operations in a number of industries.
These machines are suited to the manufacture of prismatic components such as
transmission and gear casings, pump bodies or other box-like parts. Machines
are equipped with standard automatic parts and tool changers, and precision
rotary tables for multi-sided processing of a single or several parts. Typical
operations involve highly precise milling, drilling, boring, tapping, reaming
and routing.
Vertical CNC Machining Centers. Similar to the horizontal machining centers
in the basic types of metal removal operations performed, the vertical
machining centers are better suited to the manufacture of flat, plate-
29
<PAGE>
like parts for a broad spectrum of industries including mold and die
machining. All models utilize automatic tool interchange for efficient
processing. Add-on features can further enhance productivity by automating the
loading and unloading of parts.
CNC Turning Centers. Also called CNC lathes, turning centers shape
cylindrical parts which are rotated at high speed against a stationary tool to
perform metal removal operations. Typical examples of parts manufactured with
CNC lathes are shafts, pulleys, spindles or similar rotating parts. Though
primarily designed to provide a symmetrical cross-section, some models are
capable of applying rotating tools such as milling cutters or drills. This
expanded capability allows for more comprehensive part processing while the
part is still in the turning center, a feature that can eliminate additional
handling and processing on a separate machine.
CNC Grinding Machines. CNC precision grinding machines are used to bring a
part surface into a more precise dimension or surface. There are several kinds
of grinding processes. The Company specializes in centerless grinding
machines, which grind external diameters of cylindrical parts such as
compressor shafts and cam shafts. The Company believes that it has a long-
standing leadership position in the U.S. centerless grinding business with an
installed base of several thousand machines.
Automated Flexible Manufacturing Cells. Automated flexible manufacturing
cells consist of one or more processing machines (usually standard machine
tools), ancillary equipment for parts and tools handling and computer hardware
and software to automate and integrate all necessary functions, allowing for
lightly-manned or unattended operation. These systems are used widely
throughout the metalworking industry and generally feature a number of
computer-driven functions, such as work and tool scheduling and quality
control. Automated flexible manufacturing cells are a major focus of a number
of U.S. companies seeking to update plant and equipment to enhance their
productivity and international competitiveness. The Company believes that its
Wolfpack-developed cell control hardware and software have enabled it to
obtain a leadership position in the U.S. automated flexible manufacturing
cells market.
Advanced Systems
Metalcutting and Composites Processing Systems for Aerospace. The Company
believes it is one of the world's leading producers of large five-axis
machining centers and profilers. These machines are generally used to create
intricately contoured surfaces in components manufactured by the aerospace
industry. Typical materials machined include aluminum and high-strength alloys
such as titanium.
The Company is also a pioneer and world leader in the development of new
machines and systems to automate the manufacture of components made of
advanced composite materials, such as carbon or graphite fibers in combination
with epoxy. These systems are used by the aerospace industry to manufacture a
variety of high strength-to-weight ratio structural and air surface
components. The Company's unique fiber-placement machine was recently honored
by R&D Magazine as one of the most significant inventions in 1995.
Large Machine Tools. The Company makes large metalcutting machines and
systems for the manufacturers of heavy machinery such as farm and construction
implements and machinery, off-road vehicles and power generation equipment.
Applied Production Turning Centers and Centerless Grinding Machines. The
Company also specializes in the customized application of production turning
centers and centerless grinding machines designed to meet exacting
specifications and high volume parts production. The Company's applied CNC
turning centers are used by the automotive industry in a number of
applications, including those which require an extremely accurate finishing
process. Other significant users of these machines are precision bearing
manufacturers where machining tolerances are measured in millionths of an
inch.
Electronic Systems. In December, 1995, the Company sold its Electronic
Systems Division. To maintain control system continuity and development, the
Company entered into an extensive seven-year supply contract with the
purchaser for electronic controls used on the Company's machine tools and
plastics machinery. The
30
<PAGE>
Company continues to develop and maintain its own applications software. The
decision to sell ESD was made to redeploy assets to more strategic businesses.
ESD's 1995 sales to unaffiliated customers were approximately $30 million.
Production Facilities
For the machine tool segment, the Company maintains the following principal
production facilities:
<TABLE>
<CAPTION>
FACILITY PRODUCTS
-------- --------
<S> <C>
Birmingham, England..... Standard vertical machining centers.
Cincinnati, Ohio (4
plants)................ Standard machine tools products and advanced systems.
</TABLE>
Sales, Marketing and Customer Service
A strong distribution network is one of the cornerstones in the Company's
strategy to improve its position in the global market for standard machine
tools. The Company markets machine tools in North America through a
comprehensive network of independent distributors assisted by the Company's
factory support and direct sales force. Through these distributors, the
Company currently has approximately 275 sales people representing its machine
tool business in North America. In the past year, the Company has upgraded its
European distributor network by tripling the number of sales people to over
150.
The Company believes that applications expertise, field-service engineering
and customer support are important for all its products, especially for
grinding machines, aerospace and special machines and automated flexible
manufacturing cells. In addition to its marketing and service headquarters in
Cincinnati, Ohio, the Company maintains regional offices in Detroit, Michigan;
Birmingham, England; Offenbach, Germany; and Singapore.
Competition
The worldwide machine tool industry is made up of a number of competitors,
none of which has a dominant market share. The markets for the Company's
machine tools segment products are highly competitive in the U.S. and
internationally, with strong competition from U.S., European and Asian
companies in all markets. The Company's competitors vary in size and
resources; some are larger than the Company, many are smaller, and only a few
compete in more than one product category.
Principal competitive factors for products in the machine tool business are
product features or capabilities (including controls and software), quality,
performance, reliability, technology, speed of delivery, price and customer
service. The Wolfpack program is designed to enhance the Company's competitive
position with respect to each of these factors. In certain aerospace and
grinding machine lines, the Company has significant market positions and
relatively few competitors. However, in the case of standard machine tool
products and automated flexible manufacturing cells, there are many
competitors and no one company has market dominance.
INDUSTRIAL PRODUCTS BUSINESS
The Company produces five basic types of industrial products: metalcutting
tools, metalworking fluids, precision grinding wheels, carbide wear parts and
industrial magnets, representing over 140,000 different products. In 1995,
sales of the Company's industrial products segment were $670.2 million. The
Company believes it is a leader in many new product technologies, including
synthetic lubricants, use of synthetic ceramic abrasives, high-performance
cutting tool coatings, and product designs using computer modeling. Over 75%
of the Company's industrial products sales are of consumable products, which
means they are depleted during the process for which they are used, offering
the Company a continuous opportunity to sell replacement products to its
customers. The Company believes that its industrial products business
complements its plastics machinery and machine tool businesses, because the
industrial products business is exposed to less pronounced business cycles
and, therefore, generates more consistent cash flows.
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<PAGE>
Industrial Products Industry
The Company's industrial products business participates in a $35 billion
world market, which traditionally has grown at a rate approximating the growth
of the world GDP. The Company's products address approximately $20 billion of
the world market with heaviest market penetration in the U.S. and Europe, and
in the case of metalcutting tools, India. The Company serves customers in the
automotive, industrial components, and electrical industries, as well as job
shops.
The Company's Industrial Products Business
Metalcutting Tools. Metalcutting tools are made of carbide, steel and other
materials and include systems to hold these tools used on machine tools for
use in a wide variety of metalcutting operations. The Company believes that,
through its subsidiaries, Valenite, Widia and Talbot, it is the second-largest
producer of carbide metalcutting tool systems in the U.S. and the third-
largest worldwide. Valenite manufactures over 33,000 products, including an
extensive line of cutting tool inserts in a wide variety of materials and
geometries for turning, boring, milling and drilling, and standard and special
steel insert holders. Valenite has an excellent market position in the
automotive, off-road vehicle and truck industries and has strong market
positions in carbide wear parts for metalforming and in products requiring the
wear and corrosion-resistant properties of tungsten carbide.
In February, 1995, the Company completed the acquisition of Widia, a major
European metalcutting tool maker with key production facilities in Germany and
other Western European countries. Widia also owns a 51% interest in Widia
(India) Ltd., an Indian public company. Widia's product lines include tungsten
carbide cutting tool inserts and steel insert holders needed for metalcutting
operations, carbide wear parts used in forming and stamping metal, and both
soft and permanent industrial magnets, used in automotive and other
applications.
In 1995, the Company initiated a $28 million plan to integrate certain
Valenite and Widia operations, primarily in Europe and Japan. This plan
involves the closing of two manufacturing plants, the downsizing of another
plant, a reduction in employment levels at another plant and the headquarters
facility, as well as the consolidation of numerous sales, customer service and
warehousing operations in Europe and Japan. In total, the execution of the
plan is expected to result in the elimination of approximately 290 production,
sales and administrative personnel. As a result, the Company expects to
achieve annual cost reductions of approximately $19 million, a portion of
which has already been realized in 1995. The majority of the expected cost
reductions will be fully realized in 1996.
In July, 1995, the Company completed the acquisition of Talbot, a major
supplier of round high-speed steel and carbide metalcutting tools and the
largest U.S. producer of end mills, as well as a leading tap producer. Talbot,
with annual sales of approximately $40 million, enables the Company to enter
the market for round tools, including high-speed steel and carbide end mills,
taps, countersinks, counterbores and reamers. These products are highly
complementary to the products made by Valenite and Widia. The Company expects
to expand Talbot products into non-U.S. markets.
Metalworking Fluids. Metalworking fluids are proprietary chemical compounds
and emulsions used as lubricants, coolants and corrosion inhibitors in a wide
variety of metalcutting and metalforming operations. Major customers are
producers of precision metal components for many industries, including
manufacturers of automotive power trains, aerospace engines, and bearings as
well as general metalworking shops. The Company is a full-line supplier,
offering water-based fluids (synthetics), waterbased oil-bearing fluids (semi-
synthetics) and oil-based fluids. Over the last four years, the Company
expanded its lines of soluble oils, base oils and synthetic fluids. In 1993,
the Company developed a brand of fluid called Valcool designed to work with
all metalcutting tools that is being marketed through Valenite's market
channels. Valcool sales quadrupled in 1995. In 1996, the Company plans to
introduce a Widacool line of fluid in Europe.
The Company also is the leader in providing certain customers with
comprehensive fluid management programs. This involves the Company's engineers
working full-time on site at the customer's plant to oversee and optimize all
wet chemistry, including metalworking fluids used in the plant.
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<PAGE>
Grinding Wheels. Grinding wheels are rotating tools made of granular
abrasive materials bonded together with vitreous or resin materials, which are
used by manufacturers in the metalworking industry. The Company believes that
it is now the second-largest U.S. producer of grinding wheels. Major customers
are producers of precision metal components for many industries, including
manufacturers of automotive power trains, aerospace engines and bearings as
well as general metalworking machine shops. The Company designs and
manufactures a wide variety of precision abrasive grinding wheels, including
resin-bonded, vitrified, cubic boron nitride ("CBN"), diamond and synthetic
ceramic abrasive types.
The Company believes, based on tests in its laboratories, as well as in
customer plants, that the Company's proprietary formulae and modern production
equipment and techniques for the manufacture of precision grinding wheels give
it advantages in terms of product quality, lower production costs and faster
deliveries. The Company believes that it has also benefitted from technologies
common to both grinding wheels and metalcutting fluids. The Company achieves
lower production costs, in part, by finishing its wheels on CNC machines
designed and built by the Company's machine tool business.
Carbide Wear Parts. Carbide wear parts are various components made from
sintered tungsten carbides having physical properties of very high hardness,
wear resistance and resistance to chemical activity. Valenite and Widia
manufacture three types of carbide wear parts: tooling components for
metalforming, carbide rod for use in round tools, and metalforming and general
wear parts to resist frictional wear and chemical activity.
Industrial Magnets. Widia manufactures permanent industrial magnets and
magnetic circuits for automotive, electrical and other industrial
applications, as well as soft magnets for the telecommunications industry.
Production Facilities
For its industrial products segment, the Company maintains the following
principal production facilities:
<TABLE>
<CAPTION>
FACILITY PRODUCTS
-------- --------
<C> <S>
Andrezieux, France................................. Carbide inserts.
Bangalore, India................................... Carbide inserts, steel
insert holders, carbide
wear parts and special
machine tools.
Carlisle, Pennsylvania............................. Resin grinding wheels.
Cincinnati, Ohio................................... Metalworking fluids and
precision grinding
wheels.
Detroit, Michigan (metro area) (3 plants)(a)....... Carbide inserts, special
steel products and
gauging systems and
ceramic inserts.
Essen, Germany (3 plants).......................... Carbide inserts, magnets
and carbide rods.
Gainesville, Texas(a).............................. Turning tools, milling
cutters and boring
bars.
Hardenberg, The Netherlands........................ Carbide wear parts.
Lichtenau, Germany................................. Steel insert holders.
Millersburg, Pennsylvania (2 plants)............... End mills, taps and
counterbores.
Nogales, Mexico(a)................................. Resin grinding wheels.
Patancheru, India.................................. Rock tools.
Sinsheim, Germany(a)............................... Special steel tooling
products.
Tokyo, Japan....................................... Carbide inserts and
steel tools.
Valley View, Ohio(a)............................... End mills.
Vitoria, Spain..................................... Special braised tools.
Vlaardingen, The Netherlands....................... Metalworking fluids.
West Branch, Michigan (2 plants)................... Powder production and
carbide wear parts.
Westminster and Seneca, South Carolina (5 plants).. Carbide and diamond
inserts.
</TABLE>
--------
(a) The Gainesville, Texas plant, Nogales, Mexico plant, Tokyo, Japan
plant, Sinsheim, Germany plant, Valley View, Ohio plant and three
plants in the Detroit, Michigan (metro area) are leased from unrelated
third parties.
33
<PAGE>
Sales, Marketing and Customer Service
The Company generally sells its industrial products under multiple brands
through parallel market channels, using direct sales, industrial distributors,
agents and manufacturers' representatives, as well as industrial catalog
sales. Most of the Company's sales are of products manufactured by the Company
and sold under Company-owned brands. In addition, the Company sells its
products under the brand names of other companies through their market
channels, as well as products under Cincinnati Milacron's own brand names that
are made by other companies. For all of its industrial products, the Company
has 450 employees for direct sales and service and approximately 4,000
industrial distributors. Sales by distribution channel are summarized as
follows:
<TABLE>
<S> <C>
Valenite and Widia cutting tools and fluids 80% Direct
20% Distributor and Catalog
Cincinnati Milacron fluids and grinding wheels 20% Direct
80% Distributor and Catalog
Talbot tool brands 10% Direct
90% Distributor and Catalog
</TABLE>
Competition
The Company's main global competitors in its metalworking fluids business
are large petrochemical companies and smaller companies specializing in
similar fluids. There are a few large competitors in the U.S. grinding wheel
market, one of which is significantly larger than the Company. The Company has
many competitors for metalcutting tools but only two have higher worldwide
sales.
PATENTS
The Company holds a number of patents, none of which is material to any
business segment.
EMPLOYEES
During 1995, the Company employed an average of 11,701 people, of whom 5,340
were employed outside the U.S. As of year-end 1995, the Company employed
11,790 people.
BACKLOG
The backlog of unfilled orders was $344.2 million at the end of 1995 and
$287.1 million at the end of 1994. The backlog at year-end 1995 is believed to
be firm and, in general, is expected to be delivered in 1996 and early 1997.
34
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The following summary does not purport to be complete and is subject in all
respects to the applicable provisions of the General Corporation Law of the
State of Delaware and the Company's Restated Certificate of Incorporation and
By-laws. Reference to these documents is hereby made for a complete statement
of the provisions thereof, and the following summary is expressly qualified by
such reference.
The authorized capital stock of the Company consists of 50,000,000 shares of
Common Stock, $1.00 par value per share, 60,000 shares of 4% Cumulative
Preferred Stock, $100 par value per share (the "Preferred Stock"), and
10,000,000 shares of Serial Preference Stock, $1.00 par value per share (the
"Serial Preference Stock"). As of March 22, 1996, there were 34,355,262 shares
of Common Stock outstanding, held of record by approximately 6,000
stockholders. As of March 22, 1996, there were outstanding stock options to
purchase an aggregate of 2,739,415 shares of Common Stock under the Company's
employee option plans. As of April 4, 1996, there were 60,000 shares of
Preferred Stock outstanding and no shares of Serial Preference Stock
outstanding.
COMMON STOCK
A holder of Common Stock who has beneficially owned his or her shares for at
least 36 consecutive calendar months (a "long-term holder") is entitled to
exercise 10 votes for each share held of record on all matters submitted to a
vote of stockholders. Each holder of Common Stock who has held his or her
shares for fewer than 36 consecutive calendar months (a "short-term holder")
is entitled to exercise one vote for each share held of record on all matters
submitted to a vote of the stockholders. A stockholder may be both a long-term
holder and a short-term holder, in which case the stockholder is entitled to
ten votes for each share with respect to which the stockholder is a long-term
holder and one vote for each share with respect to which the stockholder is a
short-term holder. Shares held in "street" or "nominee" name or by a broker,
clearing agency, voting trustee, bank trust company or other nominee will be
subject to a presumption that they are held by short-term holders. Such
presumption may be rebutted by showing that each beneficial owner with respect
to such shares is a long-term holder. Beneficial ownership generally is
determined in accordance with Rule 13d-3, as in effect on April 22, 1986,
promulgated under the Exchange Act. A change in beneficial ownership of a
share of Common Stock will generally occur whenever there is a change in the
person or any one of the persons who have or direct voting or investment power
with respect to such share, unless the circumstances surrounding such transfer
clearly indicate otherwise.
A beneficial owner of any share of Common Stock acquired as a direct result
of any of the following circumstances will be deemed to have been the
continuous beneficial owner of such share from the date such share was
acquired by the prior beneficial owner thereof: (i) the transfer of the
beneficial ownership of a share of Common Stock by gift, bequest or otherwise
through the laws of descent and distribution to, or for the benefit of, a
member of the transferor's family or to a trust or custodianship for the
benefit of such a family member, including a charitable lead trust or a
charitable remainder trust where such a family member is the beneficiary of
the annual return of the remainder interest in such trust or by a trustee to a
trust beneficiary under the terms of the trust; (ii) the transfer of the
beneficial ownership of a share of Common Stock from one spouse to another
pursuant to divorce, separation or the laws of community property or other
similar laws; (iii) the transfer of the beneficial ownership of a share to a
committee, guardian, conservator, trustee in bankruptcy or other similar
legally appointed successor to a beneficial owner; (iv) the transfer of the
beneficial ownership of a share to a successor executor, trustee, guardian,
conservator, committee, custodian or similar fiduciary with respect to such
share; or (v) the transfer of a share from one employee benefit plan of the
Company to another employee benefit plan of the Company. For purposes of
clause (i) above, a family member shall include only a transferor's spouse,
ancestors, lineal descendants, siblings and their descendants, a legally
adopted child, aunts and uncles, mother-in-law, father-in-law, daughters-in-
law, brothers-in-law, sisters-in-law and first cousins.
Beneficial owners of shares issued by the Company as a direct result of a
stock split, stock dividend or other type of share distribution or
reclassification or rights offering will be deemed to have been the continuous
35
<PAGE>
beneficial owners of such shares from the date the original shares, with
respect to which the newer shares or rights were issued, were acquired.
Beneficial owners of shares acquired upon the exercise of employee stock
options will be deemed to have been the beneficial owner of such shares from
the dates on which the options were granted even if the options became
exercisable at a later date. Beneficial owners who acquire shares upon
distribution from employee benefit plans will be deemed to have been the
beneficial owners of such shares from the date on which the shares were
allocated to their accounts pursuant to such plans.
If at any two consecutive annual meetings of the Company's stockholders the
number of shares of Common Stock with respect to which holders have the right
to cast ten votes per share is less than 15% of the total number of
outstanding shares of the Common Stock (excluding from each such number shares
issued by the Company after April 22, 1986, other than shares issued as a
direct result of a stock split, stock dividend or other type of share
distribution or reclassification or rights offering), the holders of Common
Stock will have at each annual or special meeting of stockholders thereafter
one vote per share, and, without any action by the Board of Directors or the
holders of such shares, the provisions of the Restated Certificate of
Incorporation which provide for ten votes per share for long-term holders will
not be of any further effect.
Except with respect to these voting provisions, shares of Common Stock of
the Company are identical in all respects and constitute a single class of
stock. Except as otherwise required by law or the Restated Certificate of
Incorporation, the holders of the Preferred Stock vote together with the
holders of shares of the Common Stock as a single class, with holders of
shares of Preferred Stock having 24 votes per share.
As of April 3, 1996, the Company's employee benefit plans held approximately
7.6% of the shares of Common Stock outstanding and officers and directors of
the Company, their family members and other related holders held approximately
19.7% of such shares. The Company believes that the officers and directors of
the Company, their family members and other related holders hold sufficient
voting power to control the election of directors of the Company.
Subject to the preference that may be applicable to any outstanding
Preferred Stock and Serial Preference Stock, the holders of Common Stock will
be entitled to receive ratably such dividends as may be declared by the Board
of Directors out of funds legally available therefor. See "Dividends on and
Market Price of Common Stock". In the event of a liquidation, dissolution or
winding up of the Company, holders of the Common Stock are entitled to share
ratably in all assets remaining after payment of liabilities and the
liquidation preference of any outstanding Preferred Stock. Holders of Common
Stock have no preemptive rights and no rights to convert their Common Stock
into any other securities. The outstanding shares of Common Stock are, and the
Common Stock to be outstanding upon completion of the Common Stock Offering
will be, fully paid and non-assessable.
PREFERRED STOCK
Holders of the Company's Preferred Stock are entitled to receive quarterly
dividends in cash out of the net assets legally available for the payment of
dividends, at a rate of $4 per annum on the $100 par value thereof, and no
more. These dividends are cumulative, and they shall be paid prior to the
purchase or redemption by the Company of any Preferred Stock, any Serial
Preference Stock or any Common Stock. They shall also be paid prior to any
distribution in respect of the Common Stock or the Serial Preference Stock. In
the event of any liquidation, dissolution or winding up of the Company, the
holders of the Preferred Stock are entitled to receive out of the assets
available for distribution to its stockholders an amount equal to $105 per
share if the action is voluntary and $100 per share if it is not voluntary, in
each case in addition to all accrued dividends in arrears at the date of the
distribution, before any distributions of assets shall be made to the holders
of Serial Preference Stock or Common Stock. The holders of the Serial
Preference Stock and the Common Stock shall be entitled to share in any assets
then remaining to the exclusion of the holders of Preferred Stock.
The Preferred Stock may be redeemed by the Company at its election, by
resolution of the Company's Board of Directors, upon not less than 30 nor more
than 60 days' notice, for a redemption price of $105 per share plus all
accrued and unpaid dividends to the date of redemption. At meetings of
stockholders of the
36
<PAGE>
Company, each stockholder of Preferred Stock is entitled to 24 votes for each
share of Preferred Stock held by him; except that, in the event that a default
in dividends on the Preferred Stock shall be deemed to have occurred, the
holders of the Preferred Stock, voting separately as a class, shall have the
right at each stockholders' meeting thereafter at which 35% of the Preferred
Stock is represented to elect one-third of the members of the Board of
Directors to be elected at such meeting. A default in preferred dividends
shall be deemed to have occurred if at any time dividends accrued or in
arrears upon Preferred Stock shall amount to $4 per share or more.
A two-thirds vote of the holders of Preferred Stock is required to amend,
alter or repeal the terms of the Preferred Stock in any material respect; to
increase the authorized amount of Preferred Stock or authorize a new class of
stock having preference over or being in parity with the Preferred Stock as to
dividends or assets, to create any obligation or security of the Company which
is convertible into shares of any class having parity with, or a preference
over, the Preferred Stock as to dividend and assets; or to sell all or
substantially all of the assets of the Company or merge or consolidate the
Company with any corporation other than a wholly owned subsidiary of the
Company.
37
<PAGE>
CERTAIN UNITED STATES FEDERAL TAX CONSEQUENCES TO NON-UNITED STATES HOLDERS
The following is a general discussion of the principal United States Federal
tax consequences of the ownership and disposition of Common Stock by a holder
that, for United States Federal income tax purposes, is not a "United States
person" (a "Non-United States Holder"). This discussion is not intended to be
exhaustive and is based on statutes, regulations, rulings and court decisions
as currently in effect all of which may be changed either retroactively or
prospectively. This discussion does not consider any specific facts or
circumstances that may apply to a particular Non-United States Holder and
applies only to Non-United States Holders that hold Common Stock as a capital
asset. Prospective investors are urged to consult their tax advisors regarding
the United States Federal tax consequences of acquiring, holding and disposing
of Common Stock (including such investor's status as a United States person or
Non-United States Holder) as well as any tax consequences that may arise under
the laws of any state, municipality or other taxing jurisdiction.
For purposes of this discussion, "United States person" means a citizen or
resident of the United States, a corporation or partnership created or
organized in the United States or under the laws of the United States or of
any state, or an estate or trust whose income is includible in gross income
for United States Federal income tax purposes regardless of its source.
DIVIDENDS
Dividends paid to a Non-United States Holder generally will be subject to
withholding of United States Federal income tax at the rate of 30%, unless the
withholding rate is reduced under an applicable income tax treaty between the
United States and the country of tax residence of the Non-United States
Holder. No U.S. withholding will apply if the dividend is effectively
connected with a trade or business conducted or deemed to be conducted within
the United States by the Non-United States Holder (or, alternatively, where an
income tax treaty applies, if the dividend is attributable to a permanent
establishment maintained or deemed to be maintained within the United States
by the Non-United States Holder), but, instead, the dividend will be subject
to the United States Federal income tax on net income that applies to United
States persons. With respect to corporate holders, the dividend may also be
subject to the branch profits tax of 30% (or if applicable, a lower treaty
rate) imposed on "effectively connected earnings and profits" as defined for
purposes of the United States Federal income tax. A Non-United States Holder
may be required to satisfy certain certification requirements in order to
claim treaty benefits or to otherwise claim a reduction of or exemption from
withholding under the foregoing rules. A Non-United States Holder that is
eligible for a reduced rate of U.S. withholding tax pursuant to a tax treaty
may obtain a refund of any excess amounts currently withheld by filing an
appropriate claim for refund with the United States Internal Revenue Service
(the "Service").
GAIN ON DISPOSITION
Subject to special rules described below, a Non-United States Holder will
generally not be subject to United States Federal income tax on gain
recognized on a sale or other disposition of Common Stock unless the gain is
effectively connected with a trade or business conducted or deemed to be
conducted within the United States by the Non-United States Holder (or,
alternatively, where an income tax treaty applies, unless the gain is
attributable to a permanent establishment maintained or deemed to be
maintained within the United States by the Non-United States Holder). Any such
effectively connected gain would be subject to the United States Federal
income tax on net income that applies to United States persons (and, with
respect to corporate holders, may also be subject to the branch profits tax).
Such tax is not collected by withholding.
In addition, an individual Non-United States Holder who holds Common Stock
would generally be subject to tax at a 30% rate on any gain recognized on the
disposition of such Common Stock (which may be offset by capital losses
allocable to U.S. sources) if such individual is present in the United States
for 183 days or more in the taxable year of disposition and either (i) has a
"tax home" in the United States (as specifically defined for purposes of the
United States Federal income tax) or (ii) maintains an office or other fixed
place of business in
38
<PAGE>
the United States and the income from the sale of the stock is attributable to
such office or other fixed place of business. Individual Non-United States
Holders may also be subject to tax pursuant to provisions of United States
Federal income tax law applicable to certain United States expatriates. Non-
United States Holders should consult applicable income tax treaties, which may
provide for different rules.
Also, special rules apply to Non-United States Holders if the Company is or
becomes a "United States real property holding corporation" for United States
Federal income tax purposes. The Company believes that it has not been, is not
currently, and is not likely to become, a United States real property holding
corporation. If the Company were a United States real property holding
corporation, gain or loss on a sale of the Common Stock by any Non-United
States Holder (other than, in most cases, a Non-United States Holder that owns
or owned (directly or constructively) 5% or less of the Common Stock during
the five-year period ending on the date of such sale) would be treated as
income effectively connected with the conduct of a trade or business within
the United States by the holder and subject to the net income tax described
above.
UNITED STATES FEDERAL ESTATE TAXES
Common Stock owned or treated as owned by an individual who is not a citizen
or resident (as specially defined for United States Federal estate tax
purposes) of the United States at the date of death, or Common Stock subject
to certain lifetime transfers made by such an individual, will be included in
such individual's estate for United States Federal estate tax purposes and may
be subject to United States Federal estate tax, unless an applicable estate
tax treaty provides otherwise. Estates of nonresident aliens are generally
allowed a credit that is equivalent to an exclusion of $60,000 of assets from
the estate for United States Federal estate tax purposes, however, applicable
estate tax treaties may provide for a different credit.
LEGISLATIVE DEVELOPMENTS
Legislation has been proposed from time to time that, if enacted, would
result under certain circumstances in the imposition of United States Federal
income tax on gain realized from the disposition of Common Stock by certain
Non-U.S. Holders who own or owned 10% or more of the Common Stock.
It is impossible to predict whether or in what form any such legislation or
other legislation might be enacted and what the scope or effective date of any
such legislation might be.
INFORMATION REPORTING AND BACKUP WITHHOLDING
The Company must report annually to the Service and to each Non-United
States Holder the amount of dividends paid to, and the tax withheld with
respect to, such holder, regardless of whether any tax was actually withheld.
That information may also be made available to the tax authorities of the
country in which a Non-United States Holder resides.
United States Federal backup withholding tax (which, generally, is imposed
at the rate of 31% on certain payments to persons not otherwise exempt who
fail to furnish information required under United States information reporting
requirements) generally will not apply to dividends paid to a Non-United
States Holder either at an address outside the United States (provided that
the payor does not have actual knowledge that the payee is a United States
person) or if the dividends are subject to withholding at the 30% rate (or
lower treaty rate). As a general matter, information reporting and backup
withholding also will not apply to a payment of the proceeds of a sale of
Common Stock through a foreign office of a broker. However, information
reporting requirements (but not backup withholding) will apply to a payment of
the proceeds of a sale of Common Stock by or through a foreign office of a
broker that is a (i) United States person or (ii) a foreign broker that
derives 50% or more of its gross income for certain periods from the conduct
of a trade or business in the United States, or that is a "controlled foreign
corporation" for United States Federal income tax purposes, unless the broker
has documentary evidence in its records that the holder is a Non-United States
Holder and certain conditions are met, or the holder otherwise establishes an
exemption. Payment by a United States office of a United States or
39
<PAGE>
foreign broker of the proceeds of a sale of Common Stock of a Non-United
States Holder is subject to both backup withholding and information reporting
unless the holder certifies as to its name, address and non-United States
status under penalties of perjury or otherwise establishes an exemption (and
the broker has no actual knowledge to the contrary.) The backup withholding
tax is not an additional tax and may be credited against the Non-United States
Holder's United States Federal income tax liability or refunded to the extent
excess amounts are withheld, provided that the required information is
supplied to the Internal Revenue Service.
The backup withholding and information reporting rules are currently under
review by the Treasury Department and their application to the receipt of
payments attributable to the Common Stock is subject to change.
40
<PAGE>
UNDERWRITING
Under the terms and subject to the conditions contained in an Underwriting
Agreement dated , 1996, among the Company and the U.S. Underwriters (the
"U.S. Underwriting Agreement"), the underwriters named below (the "U.S.
Underwriters"), for whom CS First Boston Corporation, BT Securities
Corporation, Merrill Lynch, Pierce, Fenner & Smith Incorporated and J.P.
Morgan Securities Inc. are acting as representatives (the "Representatives"),
have severally but not jointly agreed to purchase from the Company the
following respective numbers of U.S. Shares:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER U.S. SHARES
----------- -----------
<S> <C>
CS First Boston Corporation .....................................
BT Securities Corporation .......................................
Merrill Lynch, Pierce, Fenner & Smith Incorporated ..............
J.P. Morgan Securities Inc. .....................................
---------
Total ....................................................... 4,400,000
=========
</TABLE>
The U.S. Underwriting Agreement provides that the obligations of the U.S.
Underwriters are subject to certain conditions precedent and that the U.S.
Underwriters will be obligated to purchase all of the U.S. Shares offered
hereby (other than those shares covered by the over-allotment option described
below) if any are purchased. The U.S. Underwriting Agreement provides that, in
the event of a default by a U.S. Underwriter in certain circumstances, the
purchase commitments of non-defaulting U.S. Underwriters may be increased or
the U.S. Underwriting Agreement may be terminated.
The Company has entered into a Subscription Agreement (the "Subscription
Agreement") with the Managers of the International Offering (the "Managers")
providing for the concurrent offer and sale of the International Shares
outside the United States and Canada. The closing of the U.S. Offering is a
condition to the closing of the International Offering and vice versa.
The Company has granted to the U.S. Underwriters and the Managers an option,
exercisable by CS First Boston Corporation, expiring at the close of business
on the 30th day after the date of this Prospectus to purchase up to an
additional 825,000 shares of Common Stock from the Company at the initial
public offering price, less the underwriting discounts and commissions, all as
set forth on the cover page of this Prospectus. Such option may be exercised
only to cover over-allotments in the sale of the shares of Common Stock
offered hereby. To the extent that this option to purchase is exercised, each
U.S. Underwriter and each Manager will become obligated, subject to certain
conditions, to purchase approximately the same percentage of additional shares
being sold to the U.S. Underwriters and the Managers as the number of U.S.
Shares set forth next to such U.S. Underwriter's name in the preceding table
and as the number set forth next to such Manager's name in the corresponding
table in the Prospectus relating to the International Offering bears to the
sum of the total number of shares of Common Stock in such tables.
The Company has been advised by the Representatives that the U.S.
Underwriters propose to offer the U.S. Shares in the United States and Canada
to the public initially at the offering price set forth on the cover page of
this Prospectus and, through the Representatives, to certain dealers at such
price less a concession of $ per share, and the U.S. Underwriters and such
dealers may allow a discount of $ per share on sales to certain other
dealers. After the public offering, the initial public offering price and
concession and discount to dealers may be changed by the Representatives.
The public offering price, the aggregate underwriting discounts and
commissions per share and per share concession and discount to dealers for the
U.S. Offering and the concurrent International Offering will be identical.
Pursuant to an Agreement between the U.S. Underwriters and the Managers (the
"Intersyndicate Agreement") relating to the Common Stock Offering, changes in
the public offering price, concession and discount to dealers will be made
only upon the mutual agreement of CS First Boston Corporation, as
representative of the U.S. Underwriters, and CS First Boston Limited
("CSFBL"), on behalf of the Managers.
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<PAGE>
Pursuant to the Intersyndicate Agreement, each of the U.S. Underwriters has
agreed that, as part of the distribution of the U.S. Shares and subject to
certain exceptions, it has not offered or sold, and will not offer or sell,
directly or indirectly, any shares of Common Stock or distribute any
prospectus relating to the Common Stock to any person outside the United
States or Canada or to any other dealer who does not so agree. Each of the
Managers has agreed or will agree that, as part of the distribution of the
International Shares and subject to certain exceptions, it has not offered or
sold, and will not offer or sell, directly or indirectly, any shares of Common
Stock or distribute any prospectus relating to the Common Stock in the United
States or Canada or to any other dealer who does not so agree. The foregoing
limitations do not apply to stabilization transactions or to transactions
between the U.S. Underwriters and the Managers pursuant to the Intersyndicate
Agreement. As used herein, "United States" means the United States of America
(including the States and the District of Columbia), its territories,
possessions and other areas subject to its jurisdiction. "Canada" means
Canada, its provinces, territories, possessions and other areas subject to its
jurisdiction, and an offer or sale shall be in the United States or Canada if
it is made to (i) any individual resident in the United States or Canada or
(ii) any corporation, partnership, pension, profit-sharing or other trust or
other entity (including any such entity acting as an investment adviser with
discretionary authority) whose office most directly involved with the purchase
is located in the United States or Canada.
Pursuant to the Intersyndicate Agreement, sales may be made between the U.S.
Underwriters and the Managers of such number of shares of Common Stock as may
be mutually agreed upon. The price of any shares so sold shall be the public
offering price, less such amount as may be mutually agreed upon by CS First
Boston Corporation, as representative of the U.S. Underwriters, and CSFBL, on
behalf of the Managers, but not exceeding the selling concession applicable to
such shares. To the extent there are sales between the U.S. Underwriters and
the Managers pursuant to the Intersyndicate Agreement, the number of shares of
Common Stock initially available for sale by the U.S. Underwriters or by the
Managers may be more or less than the amount appearing on the cover page of
the Prospectus. Neither the U.S. Underwriters nor the Managers are obligated
to purchase from the other any unsold shares of Common Stock.
This Prospectus may be used by underwriters and dealers in connection with
sales of International Shares to persons located in the United States to the
extent such sales are permitted by the contractual limitations on sales
described above.
The Company has agreed that it will not offer, sell, contract to sell,
announce its intention to sell, pledge or otherwise dispose of, directly or
indirectly, or file with the Commission a registration statement under the
Securities Act of 1933 (the "Securities Act") relating to, any additional
shares of its Common Stock or any securities convertible into, or exchangeable
or exercisable for, any shares of its Common Stock without the prior written
consent of CS First Boston Corporation for a period of 90 days after the date
of this Prospectus, provided, however, that the Company may issue Common Stock
pursuant to the exercise of options outstanding on the date hereof, grants of
employee stock options pursuant to the terms of a plan in effect on the date
hereof, and pursuant to the exercise of such options or issuances of Common
Stock in connection with the Company's dividend reinvestment plan.
The Company has agreed to indemnify the U.S. Underwriters and the Managers
against certain liabilities, including civil liabilities under the Securities
Act, or to contribute to payments that the U.S. Underwriters and the Managers
may be required to make in respect thereof.
Certain of the U.S. Underwriters and Managers and their affiliates have from
time to time performed, and continue to perform, various investment banking
and commercial banking services for the Company, for which customary
compensation has been received.
42
<PAGE>
NOTICE TO CANADIAN RESIDENTS
RESALE RESTRICTIONS
The distribution of the Common Stock in Canada is being made only on a
private placement basis exempt from the requirement that the Company prepare
and file a prospectus with the securities regulatory authorities in each
province where trades of Common Stock are effected. Accordingly, any resale of
the Common Stock in Canada must be made in accordance with applicable
securities laws which will vary depending on the relevant jurisdiction, and
which may require resales to be made in accordance with available statutory
exemptions or pursuant to a discretionary exemption granted by the applicable
Canadian securities regulatory authority. Purchasers are advised to seek legal
advice prior to any resale of the Common Stock.
REPRESENTATIONS OF PURCHASERS
Each purchaser of Common Stock in Canada who receives a purchase
confirmation will be deemed to represent to the Company and the dealer from
whom such purchase confirmation is received that (i) such purchaser is
entitled under applicable provincial securities laws to purchase such Common
Stock without the benefit of a prospectus qualified under such securities
laws, (ii) where required by law, that such purchaser is purchasing as
principal and not as agent, and (iii) such purchaser has reviewed the text
above under "Resale Restrictions".
RIGHTS OF ACTION AND ENFORCEMENT
The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
section 32 of the Regulation under the Securities Act (Ontario). As a result,
Ontario purchasers must rely on other remedies that may be available,
including common law rights of action for damages or rescission or rights of
action under the civil liability provisions of the U.S. federal securities
laws.
All of the issuer's directors and officers as well as the experts named
herein may be located outside of Canada and, as a result, it may not be
possible for Ontario purchasers to effect service of process within Canada
upon the issuer or such persons. All or a substantial portion of the assets of
the issuer and such persons may be located outside of Canada and, as a result,
it may not be possible to satisfy a judgment against the issuer or such
persons in Canada or to enforce a judgment obtained in Canadian courts against
such issuer or persons outside of Canada.
NOTICE TO BRITISH COLUMBIA RESIDENTS
A purchaser of Common Stock to whom the Securities Act (British Columbia)
applies is advised that such purchaser is required to file with the British
Columbia Securities Commission a report within ten days of the sale of any
Common Stock acquired by such purchaser pursuant to this offering. Such report
must be in the form attached to British Columbia Securities Commission Blanket
Order BOR #95/17, a copy of which may be obtained from the Company. Only one
such report must be filed in respect of Common Stock acquired on the same date
and under the same prospectus exemption.
43
<PAGE>
LEGAL MATTERS
The validity of the issuance of the shares offered hereby will be passed
upon for the Company by Cravath, Swaine & Moore, New York, New York. Certain
legal matters with respect to the Common Stock Offering will be passed upon
for the U.S. Underwriters and the Managers by Mayer, Brown & Platt, Chicago,
Illinois.
EXPERTS
The consolidated financial statements of the Company at December 30, 1995
and December 31, 1994, and for each of the three years in the period ended
December 30, 1995, appearing herein have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon appearing elsewhere
herein, and are included in reliance upon such report given upon the authority
of such firm as experts in accounting and auditing.
The combined financial statements of D-M-E incorporated by reference in this
Prospectus and Registration Statement have been audited by Arthur Andersen
LLP, independent public accountants, for the periods indicated in their report
thereon which is included in Amendment No. 1 to the Company's Current Report
on Form 8-K dated January 26, 1996. The financial statements audited by Arthur
Andersen LLP have been incorporated herein by reference in reliance upon the
authority of said firm as experts in accounting and auditing in giving said
reports. Reference is made to said report, which includes an explanatory
paragraph with respect to the change in the methods of accounting for
postretirement benefits other than pensions and income taxes as of July 1,
1993 as discussed in Notes 7 and 11 to the combined financial statements.
44
<PAGE>
CINCINNATI MILACRON INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
----------------
<TABLE>
<S> <C>
PAGE
NUMBER
------
Consolidated Statement of Earnings for the fiscal years ended the Sat-
urday closest to December 31 in fiscal years 1995, 1994 and 1993...... F-2
Consolidated Balance Sheet as of the Saturday closest to December 31 in
fiscal years 1995 and 1994............................................ F-3
Consolidated Statement of Changes in Shareholders' Equity for the fis-
cal years ended the Saturday closest to December 31 in fiscal years
1995, 1994 and 1993................................................... F-4
Consolidated Statement of Cash Flows for the fiscal years ended the
Saturday closest to December 31 in fiscal years 1995, 1994 and 1993... F-5
Notes to Consolidated Financial Statements............................. F-6
Report of Independent Auditors......................................... F-19
</TABLE>
F-1
<PAGE>
CONSOLIDATED STATEMENT OF EARNINGS
CINCINNATI MILACRON INC. AND SUBSIDIARIES
FISCAL YEAR ENDS ON SATURDAY CLOSEST TO DECEMBER 31.
(In millions, except per-share amounts)
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Sales............................................................... $1,649.3 $1,197.1 $1,029.4
Cost of products sold............................................... 1,238.3 904.8 791.3
--------- -------- --------
Manufacturing margins............................................. 411.0 292.3 238.1
Other costs and expenses
Selling and administrative........................................ 301.4 222.2 191.3
(Gain) loss on disposition of businesses.......................... (71.0) - 22.8
Integration and consolidation charges............................. 9.8 - 47.1
Minority shareholders' interests in earnings of subsidiaries...... 2.3 - -
Other - net ...................................................... 9.4 5.9 .7
-------- -------- --------
Total other costs and expenses.................................. 251.9 228.1 261.9
-------- -------- --------
Operating earnings (loss) .......................................... 159.1 64.2 (23.8)
Interest
Income ........................................................... 3.2 2.6 2.3
Expense .......................................................... (28.0) (17.9) (15.7)
-------- -------- --------
Interest - net ................................................. (24.8) (15.3) (13.4)
-------- -------- --------
EARNINGS (LOSS) BEFORE INCOME TAXES, EXTRAORDINARY ITEM AND
CUMULATIVE EFFECT OF CHANGES IN METHODS OF ACCOUNTING............. 134.3 48.9 (37.2)
Provision for income taxes.......................................... 28.7 11.2 8.2
-------- -------- --------
EARNINGS (LOSS) BEFORE EXTRAORDINARY ITEM AND
CUMULATIVE EFFECT OF CHANGES IN METHODS OF ACCOUNTING............. 105.6 37.7 (45.4)
Extraordinary loss on early extinguishment of debt.................. - - (4.4)
Cumulative effect of changes in methods of accounting - - (52.1)
-------- -------- --------
NET EARNINGS (LOSS)................................................. $ 105.6 $ 37.7 $ (101.9)
======== ======== ========
EARNINGS (LOSS) PER COMMON SHARE
Earnings (loss) before extraordinary item and cumulative
effect of changes in methods of accounting...................... $ 3.04 $ 1.10 $ (1.41)
Extraordinary loss on early extinguishment of debt ............... - - (.14)
Cumulative effect of changes in methods of accounting............. - - (1.61)
-------- -------- --------
NET EARNINGS (LOSS)............................................... $ 3.04 $ 1.10 $ (3.16)
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
F-2
<PAGE>
CONSOLIDATED BALANCE SHEET
CINCINNATI MILACRON INC. AND SUBSIDIARIES
FISCAL YEAR ENDS ON SATURDAY CLOSEST TO DECEMBER 31.
<TABLE>
<CAPTION>
(In millions) 1995 1994
-------- -------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents............ $ 133.1 $ 21.5
Notes and accounts receivable (less
allowances of $12.9 in 1995 and
$8.7 in 1994)...................... 242.8 188.0
Inventories
Raw materials ..................... 34.7 25.4
Work-in-process and finished parts. 188.2 162.8
Finished products ................. 128.8 79.0
-------- ------
Total inventories ............... 351.7 267.2
Other current assets................. 54.7 38.0
-------- ------
Total current assets .............. 782.3 514.7
Property, plant and equipment - net ... 265.5 198.8
Other noncurrent assets ............... 149.3 74.1
-------- ------
TOTAL ASSETS .......................... $1,197.1 $787.6
-------- ------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Amounts payable to banks ............ $ 20.3 $ 62.8
Long-term debt and lease obligations
due within one year................ 3.3 21.1
Trade accounts payable............... 109.9 99.2
Advance billings and deposits........ 42.7 39.6
Accrued and other current
liabilities........................ 213.4 140.6
-------- ------
Total current liabilities.......... 389.6 363.3
Long-term accrued liabilities............ 204.6 123.5
Long-term debt and lease obligations .. 332.2 143.0
-------- ------
TOTAL LIABILITIES.................... 926.4 629.8
-------- ------
Commitments and contingencies.......... - -
Shareholders' equity
4% Cumulative Preferred shares ...... 6.0 6.0
Common shares, $1 par value
(outstanding: 34.3 in 1995
and 33.7 in 1994) .................. 34.3 33.7
Capital in excess of par value ...... 266.0 255.5
Accumulated deficit.................. (32.8) (125.9)
Cumulative foreign currency
translation adjustments............ (2.8) (11.5)
-------- ------
TOTAL SHAREHOLDERS' EQUITY......... 270.7 157.8
-------- ------
TOTAL LIABILITIES AND
shareholders' equity................. $1,197.1 $787.6
======== ======
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
CINCINNATI MILACRON INC. AND SUBSIDIARIES
FISCAL YEAR ENDS ON SATURDAY CLOSEST TO DECEMBER 31.
<TABLE>
<CAPTION>
Cumulative
4% Foreign
Cumulative Common Capital in Currency Total
Preferred Shares, Excess of Accumulated Translation Shareholders'
In millions, except share amounts) Shares $1 Par Value Par Value Deficit Adjustments Equity
---------- ------------ ---------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT YEAR-END 1992................. $6.0 $27.5 $143.3 $(37.5) $(4.9) $134.4
Issuance of 5,175,000 common shares in
public offering........................ 5.2 95.4 100.6
Stock options exercised and restricted
stock awarded for 854,918
common shares.......................... .8 12.8 13.6
Net purchase of 3,967 treasury shares.... (.2) (.2)
Net loss for the year.................... (101.9) (101.9)
Cash dividends
Preferred shares ($4.00 per share)..... (.2) (.2)
Common shares ($.36 per share)......... (11.6) (11.6)
Foreign currency translation
adjustments............................ (10.6) (10.6)
- --------------------------------------------------------------------------------------------------------------------------
BALANCE AT YEAR-END 1993................. 6.0 33.5 251.3 (151.2) (15.5) 124.1
Stock options exercised and restricted
stock awarded for 203,404
common shares.......................... .2 4.1 4.3
Sale of 6,998 treasury shares .1 .1
Net earnings for the year 37.7 37.7
Cash dividends
Preferred shares ($4.00 per share)..... (.2) (.2)
Common shares ($.36 per share)......... (12.2) (12.2)
Foreign currency translation
adjustments............................ 4.0 4.0
- --------------------------------------------------------------------------------------------------------------------------
BALANCE AT YEAR-END 1994................. 6.0 33.7 255.5 (125.9) (11.5) 157.8
Contribution of 118,180 common shares
to pension plan........................ .1 3.3 3.4
Stock options exercised and restricted
stock awarded for 418,755
common shares.......................... .5 7.4 7.9
Net purchase of 8,756 treasury shares.... (.2) (.2)
Net earnings for the year................ 105.6 105.6
Cash dividends
Preferred shares ($4.00 per share)..... (.2) (.2)
Common shares ($.36 per share)......... (12.3) (12.3)
Foreign currency translation
adjustments............................ 8.7 8.7
- --------------------------------------------------------------------------------------------------------------------------
BALANCE AT YEAR-END 1995................. $6.0 $34.3 $266.0 $(32.8) $(2.8) $270.7
==========================================================================================================================
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
CONSOLIDATED STATEMENT OF CASH FLOWS
CINCINNATI MILACRON INC. AND SUBSIDIARIES
FISCAL YEAR ENDS ON SATURDAY CLOSEST TO DECEMBER 31.
<TABLE>
<CAPTION>
(In millions) 1995 1994 1993
------- ------ --------
<S> <C> <C> <C>
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
OPERATING ACTIVITIES CASH FLOWS
Net earnings (loss).......................................... $ 105.6 $ 37.7 $ (101.9)
Extraordinary loss on early extinguishment of debt........... - - 4.4
Cumulative effect of changes in methods of accounting........ - - 52.1
Other operating activities providing (using) cash
Depreciation and amortization............................. 43.6 28.6 26.1
Disposition of businesses.................................. (71.0) - 22.8
Integration and consolidation charges...................... 9.8 - 47.1
Deferred income taxes...................................... (25.3) .5 1.5
Working capital changes
Notes and accounts receivable............................ 3.9 4.8 31.6
Inventories.............................................. (27.3) (19.8) 24.2
Other current assets..................................... (1.4) (.4) 5.1
Trade accounts payable................................... 4.2 13.3 (8.3)
Other current liabilities................................ (1.3) (42.5) (61.5)
Increase in other noncurrent assets........................ (2.0) (3.6) (2.1)
Increase (decrease) in long-term accrued liabilities....... 9.6 (6.2) (10.1)
Other - net................................................ (7.5) (4.4) (8.8)
------- ------ --------
Net cash provided by operating activities................ 40.9 8.0 22.2
------- ------ --------
INVESTING ACTIVITIES CASH FLOWS
Capital expenditures......................................... (52.3) (43.0) (23.4)
Net disposals of property, plant and equipment............... 10.3 4.3 22.2
Acquisitions................................................. (113.5) (1.9) (112.5)
Disposition of businesses.................................... 120.4 3.2 5.0
------- ------ --------
Net cash used by investing activities...................... (35.1) (37.4) (108.7)
------- ------ --------
FINANCING ACTIVITIES CASH FLOWS
Dividends paid............................................... (12.5) (12.4) (11.8)
Increase in long-term debt................................... 190.0 115.4 -
Repayments of long-term debt and lease obligations........... (33.0) (62.8) (61.9)
Increase (decrease) in amounts payable to banks.............. (49.8) (12.5) 54.8
Net issuance of common shares................................ 11.1 4.4 114.0
Redemption premium on early extinguishment of debt........... - - (4.7)
------- ------ --------
Net cash provided by financing activities.................. 105.8 32.1 90.4
------- ------ --------
INCREASE IN CASH AND CASH EQUIVALENTS............................ 111.6 2.7 3.9
Cash and cash equivalents at beginning of year................... 21.5 18.8 14.9
------- ------ --------
CASH AND CASH EQUIVALENTS AT END OF YEAR......................... $ 133.1 $ 21.5 $ 18.8
======= ====== ========
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
FISCAL YEAR END
The company's fiscal year ends on the Saturday closest to December 31 of each
year. Fiscal year ends are as follows:
1995: December 30, 1995
1994: December 31, 1994
1993: January 1, 1994
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
CONSOLIDATION
The consolidated financial statements include the accounts of the company and
its subsidiaries. All significant intercompany transactions are eliminated.
FOREIGN CURRENCY TRANSLATION
Assets and liabilities of the company's non-U.S. operations are translated
into U.S. dollars at period-end exchange rates and income and expense accounts
are translated at weighted-average exchange rates for the period. Net exchange
gains or losses resulting from such translation are excluded from net earnings
(loss) and accumulated in a separate component of shareholders' equity. Gains
and losses from foreign currency transactions are included in other costs and
expenses - net in the Consolidated Statement of Earnings. Gains and losses on
forward exchange contracts that are designated as hedges of foreign currency
commitments are recognized as part of the specific transactions hedged.
CASH AND CASH EQUIVALENTS
The company considers all highly liquid investments with a maturity of three
months or less to be cash equivalents.
INVENTORY VALUATION
Inventories are stated at the lower of cost or market, including provisions
for obsolescence commensurate with known or estimated exposures. The principal
methods of determining costs are last-in, first-out (LIFO) for most U.S.
inventories and average or standard cost, which approximates first-in, first-out
(FIFO), for other inventories.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, including capital leases, are stated at cost
or, for assets acquired through business combinations, at fair value at the
dates of the respective acquisitions. Equipment leased to customers is accounted
for under the operating lease method. For financial reporting purposes,
depreciation is generally determined on the straight-line method using estimated
useful lives of the assets.
Property, plant and equipment currently idle and held for sale or identified
for sale in the future are valued at the lower of historical cost less
accumulated depreciation or estimated net realizable value. Carrying costs
through the expected disposal dates of such assets are accrued at the time
expected losses are recognized or, in the case of assets to be sold at a gain,
charged to expense as incurred.
GOODWILL
Goodwill, which represents the excess of acquisition cost over the net assets
acquired in business combinations, is amortized on the straight-line method over
periods ranging from 25 to 40 years and is included in other noncurrent assets
in the Consolidated Balance Sheet. Amortization charged to earnings amounted to
$1.5 million and $.4 million in 1995 and 1994, respectively. The amount for 1993
was not significant.
RETIREMENT BENEFIT PLANS
The company maintains various defined contribution and defined benefit pension
plans covering substantially all U.S. employees and certain non-U.S. employees.
For defined benefit plans, pension benefits are based primarily on length of
service and compensation. The company's policy is to fund the plans in
accordance with applicable laws and regulations.
INCOME TAXES
The company provides deferred income taxes for cumulative temporary
differences between the financial reporting basis and income tax basis of its
assets and liabilities. Provisions are made for all currently payable federal
and state and local income taxes at applicable tax rates. Provisions are also
made for any additional taxes on anticipated distributions from subsidiaries.
EARNINGS PER SHARE
Earnings per common share are based on the weighted-average number of common
shares and common share equivalents outstanding.
RECENTLY ISSUED PRONOUNCEMENTS
Statement of Financial Accounting Standards No. 121, "Impairment of Long-Lived
Assets and Long-Lived Assets to be Disposed Of," requires that long-lived assets
be reviewed for impairment whenever events or changes in circumstances indicate
that their carrying values may not be recoverable. The adoption of this standard
in 1996 is not expected to have a significant effect on the company's financial
condition or results of operations.
F-6
<PAGE>
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-
Based Compensation," requires the company to either adopt the fair value method
of accounting for stock options in its financial statements or to retain its
existing method and disclose the pro forma effects of using the fair value
method beginning in 1996. The company intends to retain its existing method of
accounting for stock options and to include pro forma disclosures in the notes
to its consolidated financial statements. Accordingly, the standard will have no
effect on the company's financial condition or results of operations.
CUMULATIVE EFFECT OF CHANGES IN METHODS OF ACCOUNTING
Effective January 3, 1993, the company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes." This standard
requires the use of the liability method, under which deferred income tax assets
and liabilities related to cumulative differences between an entity's financial
reporting and tax basis balance sheets are recognized using expected future tax
rates.
The company's U.S. operations also adopted Statement of Financial Accounting
Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions," effective January 3, 1993. This standard requires that the expected
cost of postretirement benefits other than pensions, such as health care
benefits, that are provided to retirees be recognized on the accrual method
during the years that employees render service.
The company recorded the cumulative effect (to January 2, 1993) of adopting
these standards as a charge to earnings in the first quarter of 1993, as
follows:
CUMULATIVE EFFECT OF CHANGES IN METHODS OF ACCOUNTING
(In millions, except per share amounts) 1993
-----------------------------
Charge to Per Common
Earnings Share
---------- ----------
Income taxes ............................. $ (4.2) $ (.13)
Retiree health care benefits
(with no current tax effect)............ (47.9) (1.48)
------- -------
$ (52.1) $ (1.61)
======= =======
The standard for accounting for income taxes imposes significant
limitations on the recognition and valuation of deferred tax assets related to
future tax deductions previously recognized for financial reporting purposes and
to net operating loss carryforwards. Because of these limitations, and because
the company entered 1993 with a U.S. net operating loss carryforward of
approximately $36 million, no income tax benefit could be recognized on a net
basis for the cumulative effect of adopting the accounting rules for
postretirement health care benefits.
DISPOSITION OF BUSINESSES
In December, 1995, the company completed the sale of its Electronic Systems
Division (ESD) for approximately $105 million in cash (subject to post-closing
adjustments) and recorded a fourth quarter pretax gain of $66.0 million ($52.4
million after tax). The company also entered into a seven year supply contract
with the purchaser for electronic controls used on the company's machine tools
and plastics machinery. The decision to sell ESD was made to redeploy assets to
more strategic businesses. ESD's 1995 sales to unaffiliated customers were
approximately $30 million.
In January, 1995, the company completed the sale of its American Mine Tool
business for $15.0 million resulting in a pretax gain of $5.0 million ($4.0
million after tax). The sale did not have a significant effect on the company's
ongoing sales or operating earnings.
In 1993, the company announced its decision to sell its Sano business.
Accordingly, the company recorded charges totaling $22.8 million (with no
current tax effect) to adjust its investment in Sano to net realizable value.
The decision to sell Sano was due in part to its continuing operating losses. In
addition, the Sano business did not serve a major global market with good long-
term growth and profit potential and, as a result, did not meet the company's
criteria for a core business. The company completed the sale early in 1994.
INTEGRATION CHARGE
In the second quarter of 1995, the company recorded a pretax charge of $9.8
million ($7.8 million after tax) to eliminate or downsize certain operations of
Valenite in connection with the acquisition of Widia earlier in the year. The
charge was recorded as a result of a plan formally approved by management in
May, 1995, and later revised in December, 1995, which also involves the
integration of certain Widia operations with Valenite. The total cost of the
plan will be $28.1 million (approximately $21.0 million in cash). That portion
of the overall plan that relates directly to Widia has been recorded through
purchase accounting adjustments totaling $18.3 million. As it relates to
Valenite, the plan involves the closure of one manufacturing plant, the
downsizing of another and the consolidation of numerous sales, customer service
and warehousing operations in Europe and Japan. The $9.8 million charge includes
reserves for the cash costs of the integration of $7.0 million, including $5.8
million for severance and other termination benefits related to approximately
eighty production and sales personnel and $1.2 million for facility exit costs.
The charge also includes $2.8 million to adjust the basis of various assets to
net realizable value. Charges against the $7.0 million reserve for severance and
other cash costs totaled $4.6 million in 1995. The total cash cost of the $28.1
million plan will be approximately $21.0 million and is being funded by
operations and bank borrowings. As a result of the actions that
F-7
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
are included in the integration plan, the company expects to achieve annual cost
reductions of approximately $19 million, a portion of which has already been
realized in 1995. A majority of the expected cost reductions will be fully
realized in 1996.
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
(with no current tax effect). Production at the company's two machine tool
facilities in Fountain Inn and Greenwood, South Carolina was phased out during
1994 and the plants were closed by year-end 1994. The consolidation addressed
excess manufacturing capacity created by two factors: the company's successful
Wolfpack program, which significantly reduced the hours and floorspace required
to manufacture and assemble machine tool products, and the unusually steep
recession in the aerospace industry, which had dramatically lowered demand for
the company's advanced machine tool systems.
Major components of the charge are reflected in the following table.
CONSOLIDATION CHARGE
(In millions) 1993
-----
Severance and other fringe benefits.................. $ 9.1
Costs to relocate key employees and production....... 10.0
Write-downs of inventory of discontinued products ... 6.1
Loss on disposal of plant and equipment.............. 4.9
Accrual for operating losses through plant
closing dates....................................... 13.6
Other................................................ 3.4
-----
$47.1
=====
The entire remaining reserve balance at year-end 1994 of $2.6 million was
fully utilized in 1995.
Completion of the consolidation was originally expected to result in a net
employee reduction of 235 in U.S. machine tool operations. However, increased
customer demand for machine tool products, including the products being
transferred from South Carolina, resulted in a net employee reduction of 150. In
addition, the favorable job market in South Carolina resulted in an unexpectedly
high early attrition rate at the facilities to be closed. As a result of these
factors, the cost for severance and other fringe benefits was approximately $6
million less than the original estimate reflected above. Simultaneously, the
higher than expected number of voluntary terminations slowed the phase out of
production in South Carolina, and as a result, operating losses through the
closure date of the two plants were approximately $2 million higher than
originally expected. The net $4 million reduction in the cost of the
consolidation was utilized to absorb incremental costs arising from the 1990 and
1991 machine tool restructurings, including lower estimated net proceeds from
the sale of the Heald facility, the closure of certain overseas sales offices
and the restructuring of domestic machine tool operations.
ACQUISITIONS
On February 1, 1993, the company completed the acquisition of GTE Valenite
Corporation (Valenite) for $66 million in cash and $11 million of assumed debt.
Valenite is a leading producer of consumable industrial metalcutting products.
The acquisition was financed principally through the sale of $50 million of
accounts receivable and borrowings under the company's committed revolving
credit facility.
On November 8, 1993, the company completed the acquisition of Ferromatik, the
plastics injection molding machine business of Kloeckner-Werke AG, for DM 74.8
million (approximately $44 million) in cash and DM 10.6 million (approximately
$6 million) of assumed debt. The acquisition was financed primarily through
borrowings under the company's existing lines of credit. Ferromatik, which is
headquartered in Germany, is one of the world's leading producers of injection
molding machines.
On February 1, 1995, the company completed the acquisition of Krupp Widia GmbH
(Widia) for DM 120.8 million in cash (approximately $79 million), which included
DM 7.1 million (approximately $4 million) for the settlement of all intercompany
liabilities to the seller as of the closing date, and $13 million of assumed
debt. Headquartered in Germany, Widia is one of the world's leading producers of
industrial metalcutting products. The company financed the acquisition by
borrowing German marks under its revolving credit facility.
On July 20, 1995, the company completed the acquisition of Talbot Holdings,
Ltd. (Talbot) for approximately $33 million in cash and $5 million of assumed
debt. Talbot is a major supplier of round high-speed steel and carbide
metalcutting tools. The transaction was financed through available cash and
existing credit lines.
All of the acquisitions discussed above were accounted for under the purchase
method. The aggregate cost of the acquisitions, including professional fees and
other costs related thereto, was approximately $111.8 million in 1995 and $115.5
million in 1993. The following table presents the allocation of the aggregate
acquisition cost to the assets acquired and liabilities assumed. Goodwill, which
is included in other noncurrent assets, totaled $51.4 million and $15.6 million
for the 1995 and 1993 acquisitions, respectively.
F-8
<PAGE>
ALLOCATION OF ACQUISITION COST
(In millions) 1995 1993
------ ------
Cash and cash equivalents............................ $ 3.1 $ 1.1
Accounts receivable.................................. 51.7 54.6
Inventories.......................................... 69.3 74.2
Other current assets................................. 1.3 19.5
Property, plant and equipment........................ 61.1 91.1
Other noncurrent assets.............................. 65.7 28.6
------ ------
Total assets........................................ 252.2 269.1
------ ------
Amounts payable to banks and
long-term debt due within one year.................. 9.3 13.1
Other current liabilities............................ 71.2 103.7
Long-term accrued liabilities........................ 50.5 31.6
Long-term debt and lease obligations................. 9.4 5.2
------ ------
Total liabilities................................... 140.4 153.6
------ ------
Total acquisition cost............................... $111.8 $115.5
====== ======
In the 1993 allocation, other current liabilities includes a reserve of $44.0
million for the restructuring of Valenite for future profitability. The
restructuring plan included the consolidation of production through the closing
of eleven production facilities, the downsizing of two production facilities and
a net employee reduction in excess of 500. The total cost of the restructuring,
to the extent reflected in the allocation of acquisition cost, was $53.7 million
($25.8 million in cash) and included amounts for severance, relocation and
losses on the sale of surplus inventory, machinery and equipment and production
facilities. Additional costs in 1993 and 1994 related to the overall
restructuring plan that were not reserved for in the allocation of acquisition
cost totaled $11.4 million, of which $7.9 million was recorded as capital
expenditures with the remaining $3.5 million being charged to expense as
incurred. The restructuring, which began March 2, 1993, was completed in 1994.
Other current liabilities for 1993 also includes a reserve of $6.5 million for
the restructuring of Ferromatik. Due to general economic conditions in Europe,
the operations of Ferromatik's manufacturing plant were restructured during 1992
and 1993 to improve efficiency and reduce personnel levels. Subsequent to the
acquisition, additional restructuring actions, including further personnel
reductions, were undertaken for the purpose of improving Ferromatik's future
profitability. These actions, which complemented the actions taken prior to the
acquisition, were substantially completed during 1994.
In the 1995 allocation, other current liabilities includes a reserve of $16.9
million for the further restructuring of Widia and its integration with
Valenite. Certain of Widia's worldwide operations, including its principal plant
in Essen, Germany, had already been restructured by the seller during 1993 and
1994. Prior to the acquisition, the company's management began to develop a plan
for the integration of certain operations of Widia and Valenite and for
additional restructuring actions to further improve Widia's profitability. In
May, 1995, the company's management formally approved this integration plan at
an expected total cost of $17.1 million. The portion directly related to
Valenite was recorded as a $9.8 million pretax charge to earnings in the second
quarter of 1995.
Immediately following the approval of the original plan, the management of
Widia began to develop a plan to further reduce personnel levels at its plant
and corporate headquarters in Essen. This revision of the original plan was
formally approved by the managements of the company and Widia early in December,
1995. As a result, the total cost of the integration plan is now expected to be
$28.1 million. As it relates to Widia, the revised plan involves the closure of
one manufacturing plant, the reduction of employment levels at the Essen plant
and headquarters, and the consolidation of numerous sales, customer service and
warehouse operations in Europe and Asia for $18.3 million, including write downs
of certain assets to net realizable value totaling $1.4 million. The $16.9
million reserve that is included in other current liabilities includes $14.6
million for severance and other termination benefits related to the expected
elimination of approximately 290 production, sales and administrative personnel
and $2.3 million for facility exit costs.
At year-end 1995, the balance of the $16.9 million reserve was $13.7 million,
which includes $12.0 million for severance and other termination benefits that
are expected to be paid to approximately 180 employees during 1996, and $1.7
million for additional cash costs related to the integration plan.
Unaudited pro forma sales and earnings information for 1995 and 1994 prepared
under the assumption that the acquisitions of Widia and Talbot had been
completed at the beginning of those years is as follows:
PRO FORMA INFORMATION
(In millions, except per-share amounts) 1995 1994
-------- --------
Sales................................................ $1,694.5 $1,457.4
======== ========
Net earnings......................................... $ 105.7 $ 31.8
======== ========
Earnings per common share............................ $ 3.05 $ .93
======== ========
Based on a comprehensive analysis, the company estimates that the annual cost
savings in relation to Widia's historical 1994 operations that have resulted
from the restructuring actions completed in 1994 and early 1995 prior to the
acquisition is approximately $3 million. The additional actions described above
that are being completed subsequent to the acquisition in connection with the
company's $28.1 million integration plan are expected to generate additional
annual savings of approximately $13 million. These amounts are based principally
on the
F-9
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
savings that will be realized from the reductions in Widia's employment
levels that occurred during 1995 and that will occur in 1996.
The pro forma net earnings amount for 1994 reflected above includes $9.0
million of estimated cost savings from the actions completed or substantially
completed through year-end 1995. In addition, restructuring charges of $6.8
million that were incurred by Widia prior to the acquisition have been
eliminated.
The pro forma net earnings amount for 1995 reflected above does not include
adjustments for cost savings because many of the restructuring actions were
taken early in 1995 and, accordingly, a majority of the savings are already
included in historical results. No adjustment has been made in either year for
approximately $7 million of incremental savings that are expected to result from
the additional actions to be completed in 1996 because they cannot be precisely
quantified at this time. In addition, no adjustment has been made for
approximately $6 million of annual cost savings that are expected to result from
the $9.8 million integration charge for Valenite.
RESEARCH AND DEVELOPMENT
Charges to operations for research and development activities are summarized
below. The amounts include expenses related to the company's Wolfpack product
development and process improvement program.
RESEARCH AND DEVELOPMENT
(In millions) 1995 1994 1993
----- ----- -----
Research and development......... $57.8 $46.8 $41.9
===== ===== =====
RETIREMENT BENEFIT PLANS
Pension costs for all defined benefit plans are summarized in the following
table. For all years presented, the table includes amounts for plans for certain
U.S. and United Kingdom (U.K.) employees. The 1995 column also includes amounts
for two plans for certain employees in Germany. These amounts are included as a
result of acquisitions.
PENSION COST (INCOME)
(In millions) 1995 1994 1993
------ ------ ------
Service cost (benefits earned
during the period).............. $ 7.6 $ 7.6 $ 6.3
Interest cost on projected
benefit obligation.............. 37.0 32.2 31.5
Actual (return) loss on
plan assets..................... (87.9) 4.8 (54.8)
Net amortization and deferral.... 46.3 (47.0) 14.3
------ ------ ------
Pension cost (income)............ $ 3.0 $ (2.4) $ (2.7)
====== ====== ======
The following table sets forth the funded status of the defined benefit
pension plans that cover certain U.S. and U.K. employees.
FUNDED STATUS AT YEAR-END
(In millions) 1995 1994
------- -------
Vested benefit obligation................... $(373.7) $(316.6)
======= =======
Accumulated benefit obligation.............. $(392.0) $(331.9)
======= =======
Projected benefit obligation................ $(462.4) $(383.7)
Plan assets at fair value................... 429.3 366.1
------- -------
Projected benefit obligation in
excess of plan assets...................... (33.1) (17.6)
Unrecognized net loss....................... 55.5 41.6
Unrecognized net transition asset........... (19.2) (24.8)
------- -------
Prepaid (accrued) pension cost.............. $ 3.2 $ (.8)
======= =======
The plans' assets consist principally of stocks, debt securities and mutual
funds. The U.S. plan also includes common shares of the company with a market
value of $19.8 million in 1995 and $14.9 million in 1994. Contributions of $3.4
million and $.1 million were made to the U.S. plan in 1995 and 1994,
respectively. Because of the funded status of the U.K. plan, no contributions
were required in the three year period ended December 30, 1995. At year-end
1995, the U.S. plan's assets exceeded the accumulated benefit obligation by
$14.5 million, although the projected benefit obligation exceeded the related
assets by $49.8 million.
The following table sets forth the status of the company's defined benefit
pension plans for certain employees in Germany. Consistent with customary
practice in Germany, these plans have not been funded. Benefit payments are
funded from current operations.
F-10
<PAGE>
STATUS AT YEAR-END
(In millions) 1995
-------
Vested benefit obligation................... $ (36.3)
=======
Accumulated benefit obligation.............. $ (39.2)
=======
Projected benefit obligation................ $ (43.2)
Unrecognized net gain....................... (1.0)
-------
Accrued pension cost........................ $ (44.2)
=======
The following table presents the weighted average actuarial assumptions used
for all defined benefit plans in 1995, 1994 and 1993.
ACTUARIAL ASSUMPTIONS
1995 1994 1993
---- ---- ----
Discount rate............................... 7.5% 9.0% 7.6%
Expected long-term rate
of return on plan assets................... 9.6% 9.6% 9.6%
Rate of increase in future
compensation levels........................ 4.3% 5.1% 4.7%
==== ==== ====
The company also sponsors certain defined contribution and 401(k) plans.
Participation in these plans is available to certain U.S. employees. Costs for
these plans were $6.4 million and $5.7 million in 1995 and 1994, respectively,
and were not significant in 1993.
In addition to pension benefits, the company also provides varying levels of
postretirement health care benefits to most U.S. employees who retire from
active service after having attained age 55 and ten years of service. The plan
is contributory in nature. For employees retiring prior to 1980, such
contributions are based on varying percentages of the current per-contract cost
of benefits, with the company funding any excess over these amounts. For
employees retiring after 1979, the dollar amount of the company's current and
future contributions is frozen based on specified percentages of the 1993 per-
contract cost.
The following table presents the components of the company's liability for
future retiree health care benefits.
ACCRUED POSTRETIREMENT HEALTH CARE BENEFITS
(In millions) 1995 1994
------ ------
Accumulated postretirement benefit obligation
Retirees................................... $(31.5) $(35.2)
Fully-eligible active participants......... (5.4) (5.4)
Other active participants.................. (7.4) (7.5)
------ ------
(44.3) (48.1)
Unrecognized net (gain) loss................ (.1) 2.6
------ ------
Accrued postretirement health care benefits. $(44.4) $(45.5)
====== ======
In the Consolidated Balance Sheet, accrued and other current liabilities
includes $1.4 million of the total liability for postretirement health care
benefits at year-end 1995 and $1.5 million at year-end 1994.
POSTRETIREMENT HEALTH CARE COST
(In millions) 1995 1994 1993
---- ---- ----
Service cost (benefits earned
during the period)......................... $ .3 $ .5 $ .3
Interest cost on accumulated
postretirement benefit
obligation................................. 3.9 4.0 4.2
Net amortization and deferral............... - .3 -
---- ---- ----
Postretirement health care cost............. $4.2 $4.8 $4.5
==== ==== ====
The discount rates used in calculating the accumulated postretirement benefit
obligation were 7 1/2% for 1995 and 8 1/2% for 1994. For 1996, the assumed rate
of increase in health care costs used to calculate the accumulated
postretirement benefit obligation is 9.4%. This rate is assumed to decrease to
varying degrees annually to 5.0% for years 2005 and thereafter. Because the
dollar amount of the company's contributions for most employees is frozen, a one
percent change in each year in relation to the above assumptions would not
significantly change the accumulated postretirement benefit obligation or the
total cost of the plan.
F-11
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. The significant
components of the company's deferred tax assets and liabilities as of year-end
1995 and 1994 are as follows:
COMPONENTS OF DEFERRED TAX ASSETS AND LIABILITIES
(In millions) 1995 1994
------- ------
Deferred tax assets
Net operating loss and tax credit
carryforwards............................. $ 62.8 $ 56.8
Accrued postretirement health
care benefits............................. 15.3 15.4
Inventories, principally due to
obsolescence reserves and additional
costs inventoried for tax purposes........ 9.5 7.1
Accrued employee benefits other
than pensions and retiree
health care benefits...................... 9.4 5.2
Accrued pension costs...................... 5.8 4.6
Accrued warranty costs..................... 3.8 3.2
Accrued taxes.............................. 3.1 2.7
Accounts receivable, principally
due to allowances for doubtful
accounts.................................. 2.2 1.8
Accrued liabilities and other.............. 19.9 16.5
------- ------
Total deferred tax assets ................ 131.8 113.3
Less valuation allowance.................. (66.1) (85.7)
------- ------
Net deferred tax assets.................. $ 65.7 $ 27.6
======= ======
Deferred tax liabilities
Property, plant and equipment,
principally due to differences in
depreciation methods...................... $ 27.4 $ 18.5
Accounts receivable and inventories........ 5.2 1.1
Pension assets............................. 3.7 3.5
Undistributed earnings of non-U.S.
subsidiaries.............................. 1.0 -
Other...................................... 7.8 6.5
------- ------
Total deferred tax liabilities............ $ 45.1 $ 29.6
------- ------
Net deferred tax asset (liability).......... $ 20.6 $ (2.0)
======= ======
Summarized in the following tables are the company's earnings (loss) before
income taxes, extraordinary item and cumulative effect of changes in methods of
accounting, its provision for income taxes, the components of the provision for
deferred income taxes, and a reconciliation of the U.S. statutory rate to the
tax provision rate.
EARNINGS (LOSS) BEFORE INCOME TAXES, EXTRAORDINARY ITEM AND CUMULATIVE EFFECT OF
CHANGES IN METHODS OF ACCOUNTING
(In millions) 1995 1994 1993
------ ----- ------
United States............................... $ 87.8 $32.7 $(41.5)
Non-U.S..................................... 46.5 16.2 4.3
------ ----- ------
$134.3 $48.9 $(37.2)
====== ===== ======
PROVISION FOR INCOME TAXES
(In millions) 1995 1994 1993
------ ----- -----
Current provision
United States.............................. $ 32.6 $ 4.1 $ -
State and local............................ 8.9 3.4 2.4
Non-U.S.................................... 12.5 3.2 4.3
------ ----- -----
54.0 10.7 6.7
------ ----- -----
Deferred provision
United States.............................. (23.0) - -
Non-U.S.................................... (2.3) .5 1.5
------ ----- -----
(25.3) .5 1.5
------ ----- -----
$ 28.7 $11.2 $ 8.2
====== ===== =====
COMPONENTS OF THE PROVISION FOR DEFERRED INCOME TAXES
(In millions) 1995 1994 1993
------- ------ ------
Tax effects of consolidation,
restructuring and other reserves........... $ 1.6 $ 32.8 $ (9.2)
Change in deferred revenue.................. (.1) (.2) (16.3)
Depreciation................................ 8.9 (7.6) 1.3
Change in valuation allowance............... (19.6) (10.0) 25.5
Change in deferred taxes related to
operating loss carryforwards............... (6.0) (16.0) (1.3)
Accrued pension and other
employee costs............................. (5.3) (1.5) .6
Other....................................... (4.8) 3.0 .9
------- ------ ------
$ (25.3) $ .5 $ 1.5
======= ====== ======
RECONCILIATION OF THE U.S. STATUTORY RATE TO THE TAX PROVISION RATE
(In percent) 1995 1994 1993
----- ----- -----
U.S. statutory tax rate..................... 35.0% 35.0% (35.0)%
Increase (decrease) resulting from
Losses without current tax
benefits.................................. 3.0 5.6 56.1
Tax benefits from net reversal
of U.S. temporary differences............. (15.8) (15.1) -
Effect of operations outside
the U.S................................... (7.3) (9.5) (5.5)
State and local taxes, net of
federal benefit........................... 6.6 7.0 6.5
Other...................................... (.1) (.1) (.1)
----- ----- -----
21.4% 22.9% 22.0%
===== ===== =====
At year-end 1995, certain of the company's non-U.S. subsidiaries had net
operating loss carryforwards aggregating approximately $144 million,
substantially all of which have no expiration dates. The U.S. net operating loss
carryforward at year-end 1994 was fully utilized in 1995.
Undistributed earnings of foreign subsidiaries which are intended to be
indefinitely reinvested aggregated $72 million at the end of 1995.
Income taxes of $21.0 million, $10.4 million and $16.1 million were paid in
1995, 1994 and 1993, respectively.
F-12
<PAGE>
RECEIVABLES
The acquisition of Valenite was financed in part through the sale of $50.0
million of the company's 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 1994, the agreement was amended to provide for the sale of up to $65.0
million of interests in accounts receivable through January, 1996. The agreement
was further amended in March, 1995, to increase the amount to $75.0 million. At
December 30, 1995, and December 31, 1994, the undivided interest in the
company's gross accounts receivable that had been sold aggregated $69.0 million
and $65.0 million, respectively. Increases in the amount sold are reported as
providing operating cash flow in the Consolidated Statement of Cash Flows. Costs
related to the sales are included in other costs and expenses - net in the
Consolidated Statement of Earnings.
In January, 1996, the original agreement expired and the company entered into
a similar agreement with a different purchaser that permits the sale of up to
$75.0 million of undivided interests in accounts receivable through January,
1999.
INVENTORIES
Inventories amounting to $130.6 million for 1995 and $136.1 million for 1994
are stated at LIFO cost. If stated at FIFO cost, such inventories would be
greater by approximately $69.5 million in 1995 and $59.5 million in 1994.
As presented in the Consolidated Balance Sheet, inventories are net of
reserves for obsolescence of $53.5 million and $38.6 million in 1995 and 1994,
respectively.
PROPERTY, PLANT AND EQUIPMENT
The components of property, plant and equipment are shown in the following
table.
PROPERTY, PLANT AND EQUIPMENT - NET
(In millions) 1995 1994
------ ------
Land........................................ $ 8.8 $ 8.1
Buildings................................... 165.2 139.4
Machinery and equipment..................... 353.0 301.8
------ ------
527.0 449.3
Less accumulated amortization and
allowances for depreciation................ 261.5 250.5
------ ------
$265.5 $198.8
====== ======
OTHER ASSETS
At year-end 1995 and 1994, other current assets includes $2.0 million and $2.8
million, respectively, representing the carrying value of certain idle
production facilities that are expected to be sold within one year. The $7.5
million net book value of the American Mine Tool business that was sold in
January, 1995, is also included in other current assets at year-end 1994.
Other noncurrent assets includes goodwill of $73.6 million at year-end 1995
and $19.8 million at year-end 1994. Other noncurrent assets also includes the
carrying value of certain assets held for sale, including idle production
facilities, totaling $4.0 million at year-end 1995, and $5.9 million at year-end
1994.
LIABILITIES
The components of accrued and other current liabilities and long-term accrued
liabilities are shown in the following tables.
ACCRUED AND OTHER CURRENT LIABILITIES
(In millions) 1995 1994
------ ------
Accrued salaries, wages and
other compensation......................... $ 37.8 $ 29.9
Restructuring and integration reserves...... 18.3 3.1
Accrued and deferred income taxes........... 33.5 21.5
Other accrued expenses...................... 123.8 86.1
------ ------
$213.4 $140.6
====== ======
LONG-TERM ACCRUED LIABILITIES
(In millions) 1995 1994
------ ------
Accrued pension and other compensation...... $ 65.3 $ 27.3
Accrued postretirement health care benefits. 43.0 44.0
Accrued and deferred income taxes........... 52.8 25.8
Minority shareholders' interests............ 8.7 -
Other....................................... 34.8 26.4
------ ------
$204.6 $123.5
====== ======
F-13
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
LONG-TERM DEBT AND LEASE OBLIGATIONS
Long-term debt and lease obligations are shown in the following table.
LONG-TERM DEBT AND LEASE OBLIGATIONS
(In millions) 1995 1994
------ ------
Long-term debt
7 7/8% Notes due 2000...................... $100.0 $ -
8 3/8% Notes due 2004...................... 115.0 115.0
12% Sinking Fund Debentures due 2010....... 10.8 10.8
Revolving credit facility.................. 87.1 10.0
Industrial Development Revenue
Bonds due 2008............................ - 10.0
Other...................................... 20.8 8.1
------ ------
333.7 153.9
------ ------
Capital lease obligations
6 3/8% Bonds due 1996 - 1997............... 1.8 2.6
6 3/4% Bonds due 2004...................... - 7.6
------ ------
1.8 10.2
------ ------
335.5 164.1
Current maturities.......................... (3.3) (21.1)
------ ------
$332.2 $143.0
====== ======
Except for the 7 7/8% Notes due 2000 and the 8 3/8% Notes due 2004, the
carrying amount of the company's long-term debt approximates fair value, which
is determined using discounted cash flow analysis based on the company's
incremental borrowing rate for similar types of financing arrangements. The fair
value of the 7 7/8% Notes due 2000 is $102.4 million and the fair value of the 8
3/8% Notes due 2004 is $119.5 million. Such amounts are based on recent trade
prices through registered securities brokers.
In 1995, the company completed a public offering involving the placement of
$100.0 million of 7 7/8% Notes due 2000. The proceeds were used principally to
repay outstanding indebtedness.
The 12% Sinking Fund Debentures due 2010 have annual sinking fund requirements
commencing in 1996. The 1996 requirement has been satisfied through redemptions
of these debentures in prior years. The debentures are redeemable at any time at
the company's option subject to possible premiums and other restrictions.
During 1995, the Industrial Development Revenue Bonds due 2008 and the 6 3/4%
Bonds due 2004 were repaid due to the closure of the company's machine tool
facilities in South Carolina.
Certain of the above long-term debt obligations contain various restrictions
and financial covenants relating principally to additional secured indebtedness.
At year-end 1995 and 1994, $87.1 million and $10.0 million, respectively, of
borrowings under the company's revolving credit facility are included in long-
term debt based on the expectation that such amounts will remain outstanding for
more than one year.
Interest paid was $27.7 million in 1995, $17.1 million in 1994 and $19.0
million in 1993.
Maturities of long-term debt for the five years after 1995 are:
1996: $ 2.4 million
1997: 4.0 million
1998: 89.4 million
1999: 3.1 million
2000: $101.7 million
The capitalized lease assets are included in property, plant and equipment.
Amortization of leased properties is included in depreciation and interest on
lease obligations is included in interest expense.
Future minimum payments for principal and interest on capitalized leases are:
1996: $1.0 million
1997: 1.0 million
The company also leases certain equipment under operating leases, some of
which include varying renewal and purchase options. Future minimum rental
payments applicable to noncancelable operating leases during the next five years
and in the aggregate thereafter are:
1996: $17.1 million
1997: 13.6 million
1998: 7.9 million
1999: 6.0 million
2000: 6.0 million
After 2000: 15.4 million
Rent expense was $19.8 million, $17.4 million and $14.7 million in 1995, 1994
and 1993, respectively.
LINES OF CREDIT
At year-end 1995, the company had lines of credit with various U.S. and non-
U.S. banks of approximately $370 million, including a $150 million committed
revolving credit facility. These credit facilities support letters of credit and
leases in addition to providing borrowings under varying terms. In May, 1995,
the term of the revolving credit facility was extended from July, 1996, to June,
1998, and, at the company's request, the amount of credit available thereunder
was reduced from $200 million to $150 million in order to reduce the amount of
commitment fees payable by the company. As amended, the facility required a
facility fee of 1/2% per annum on the total $150 million revolving loan
commitment and imposed restrictions on total indebtedness in relation to total
capital. Based on these restrictions, the company's additional borrowing
capacity totaled approximately $192 million at year-end 1995. In January, 1996,
the facility was further amended in connection with the acquisition of D-M-E
(see Subsequent Events).
The weighted average interest rate on short-term borrowings outstanding as of
year-end 1995 and 1994 was 6.5% and 7.3%, respectively.
F-14
<PAGE>
SHAREHOLDERS' EQUITY
In 1993, the company completed the issuance of an additional 5.175 million
common shares through a public offering, resulting in net proceeds (after
deducting issuance costs) of $100.6 million. The proceeds of the offering were
used to redeem $60.0 million of the company's 12% Sinking Fund Debentures due
2010 and to repay borrowings under revolving lines of credit and other bank
debt. The redemption of the 12% Sinking Fund Debentures due 2010 resulted in a
pretax extraordinary loss on early extinguishment of debt of $5.2 million ($4.4
million after tax) which included a cash call premium of $4.7 million and the
write-off of deferred financing fees of $.5 million.
SHAREHOLDERS' EQUITY - PREFERRED AND COMMON SHARES
(Dollars in millions, except per-share amounts) 1995 1994
------ -----
4% Cumulative Preferred shares authorized,
issued and outstanding, 60,000 shares at
$100 par value, redeemable at $105 a share..... $ 6.0 $ 6.0
Common shares, $1 par value authorized
50,000,000 shares, issued and outstanding,
1995: 34,270,304 shares, 1994: 33,742,125...... 34.3 33.7
===== =====
The company has authorized ten million serial preference shares with $1 par
value. None of these shares has been issued.
Holders of company common stock have one vote per share until they have held
their shares for at least 36 consecutive months, after which they are entitled
to ten votes per share.
CONTINGENCIES
The company is involved in remedial investigations and actions at various
locations, including former plant facilities, and EPA Superfund sites where the
company and other companies have been designated as potentially responsible
parties. The company accrues remediation costs when it is probable that a
liability has been incurred and the amount of the liability can be reasonably
estimated. Environmental costs have not been material in the past.
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.
FORWARD EXCHANGE CONTRACTS
The company enters into forward exchange contracts to hedge foreign currency
commitments on an ongoing basis for periods commensurate with known exposures.
The purpose of this practice is to minimize the effect of foreign currency
exchange rate fluctuations on the company's operating results. The company does
not engage in speculation.
At December 30, 1995, the company had outstanding forward exchange contracts
totaling $31.5 million, which generally mature in periods of six months or less.
These contracts require the company and its subsidiaries to exchange currencies
at the maturity dates at exchange rates agreed upon at inception.
LONG-TERM INCENTIVE PLANS
The 1994 Long-Term Incentive Plan (1994 Plan) permits the company to grant its
common shares in the form of non-qualified stock options, incentive stock
options, restricted stock and performance awards. A summary of amounts issued
under the 1994 Plan and prior plans is presented in the following table.
STOCK OPTIONS AND RESTRICTED STOCK AWARDS
Price
Shares Range
- ---------------------------------------------------------------
Outstanding at year-end 1992........ 2,590,915 $ 9 - 29
Activity - Granted..... 118,025 17 - 24
during 1993 - Exercised... (854,918) 9 - 25
- Canceled.... (136,947) 13 - 29
- ---------------------------------------------------------------
Outstanding at year-end 1993........ 1,717,075 9 - 25
Activity - Granted..... 481,547 23
during 1994 - Exercised... (203,404) 9 - 25
- Canceled.... (25,782) 16 - 25
- ---------------------------------------------------------------
Outstanding at year-end 1994........ 1,969,436 9 - 25
Activity - Granted..... 601,477 21
during 1995 - Exercised... (418,755) 13 - 25
- Canceled.... (30,595) 18 - 25
- ---------------------------------------------------------------
Outstanding at year-end 1995........ 2,121,563 $ 9 - 25
===============================================================
EXERCISABLE STOCK OPTIONS AT YEAR-END
Stock Options
-------------
1993................................ 1,474,262
1994................................ 1,437,636
1995................................ 1,054,663
The non-qualified stock options and incentive stock options are issued at
market value, become exercisable under varying terms and expire in ten years.
Shares of restricted stock are subject to three-year restrictions against
selling, encumbering or otherwise disposing of these shares. Performance awards
may be earned based on achievement of specified annual earnings objectives.
The maximum number of shares that may be granted under the 1994 Plan is
2,000,000. Of that amount, 871,150 and 1,481,950 shares were available for grant
at year-end 1995 and 1994, respectively.
F-15
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ORGANIZATION
Cincinnati Milacron Inc. is a worldwide manufacturer of plastics machinery,
machine tools and industrial products for metalworking. The company has
operations in the United States and in other countries, which are located
principally in Western Europe.
The plastics machinery segment includes the production of injection molding
machines, systems for extrusion and blow molding and various other specialty
equipment. The market is driven by the consumer economy and the automotive
industries. The machine tools segment serves a broad range of markets, including
the automotive industry, job shops and the aerospace industry. The industrial
products segment serves a variety of metalworking industries, including the
automotive industry. It produces five basic types of industrial products:
metalcutting tools, metalworking fluids, precision grinding wheels, carbide wear
parts and industrial magnets. The markets for all three business segments are
highly competitive and can be cyclical in nature.
Financial data for the past three years for the company's business segments
are shown in the following tables. Increases in the amounts for the plastics
machinery segment are partially attributable to the acquisition of Ferromatik on
November 8, 1993, while the 1995 increases for industrial products are partially
attributable to the acquisitions of Widia on February 1, 1995 and Talbot on July
20, 1995.
SALES BY SEGMENT
(In millions) 1995 1994 1993
-------- -------- --------
Plastics machinery.................. $ 570.1 $ 503.8 $ 357.2
Machine tools....................... 409.0 338.5 355.0
Industrial products................. 670.2 354.8 317.2
-------- -------- --------
$1,649.3 $1,197.1 $1,029.4
======== ======== ========
OPERATING INFORMATION BY SEGMENT
(In millions) 1995 1994 1993
-------- -------- --------
Operating earnings (loss) (a)
Plastics machinery................ $ 54.3 $ 45.9 $ 29.2
Machine tools..................... 7.7 6.8 7.9
Industrial products............... 62.1 36.3 29.0
Disposition of businesses (b)..... 71.0 - (22.8)
Integration and
consolidation charges (c)......... (9.8) - (47.1)
Corporate expenses................ (15.7) (18.0) (15.8)
Other unallocated expenses (d).... (10.5) (6.8) (4.2)
-------- -------- --------
Operating earnings (loss)......... 159.1 64.2 (23.8)
Interest expense-net.............. (24.8) (15.3) (13.4)
-------- -------- --------
Earnings (loss) before income
taxes, extraordinary item and
cumulative effect of changes
in methods of accounting.......... $ 134.3 $ 48.9 $ (37.2)
======== ======== ========
Identifiable assets
Plastics machinery................ $ 342.9 $ 295.0 $ 289.0
Machine tools..................... 238.1 270.8 243.1
Industrial products............... 478.6 195.0 174.4
Unallocated corporate assets (e).. 137.5 26.8 23.1
-------- -------- --------
Total assets...................... $1,197.1 $ 787.6 $ 729.6
======== ======== ========
Capital expenditures
Plastics machinery................ $ 16.6 $ 13.8 $ 4.2
Machine tools..................... 8.6 11.6 8.8
Industrial products............... 27.1 17.6 10.4
-------- -------- --------
Total capital expenditures........ $ 52.3 $ 43.0 $ 23.4
======== ======== ========
Depreciation and amortization
Plastics machinery................ $ 11.8 $ 9.2 $ 6.2
Machine tools..................... 7.4 7.2 9.4
Industrial products............... 24.4 12.2 10.5
-------- -------- --------
Total depreciation and
amortization...................... $ 43.6 $ 28.6 $ 26.1
======== ======== ========
(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 segments. This change results in additional costs being
classified as corporate expenses. Amounts for 1994 and 1993 have been
restated to conform to the 1995 presentation.
(b) In 1995, $66.0 million relates to the machine tools segment and $5.0
million relates to the industrial products segment. The 1993 amount relates
to the plastics machinery segment.
(c) The 1995 amount relates to the industrial products segment and the 1993
amount relates to the machine tools segment.
(d) Includes financing costs related to the sale of accounts receivable and
minority shareholders' interests in earnings of subsidiaries.
(e) Includes cash and cash equivalents and the assets of the company's
insurance and utility subsidiaries.
F-16
<PAGE>
The following table summarizes the company's U.S. and non-U.S. operations.
Sales of U.S. operations include export sales of $166.9 million in 1995,
$142.0 million in 1994, and $118.7 million in 1993.
Total sales of the company's U.S. and non-U.S. operations to unaffiliated
customers outside the U.S. were $784.2 million, $417.6 million, and $298.4
million in 1995, 1994 and 1993, respectively.
U.S. AND NON-U.S. OPERATIONS
(In millions) 1995 1994 1993
------ ------ ------
U.S. operations
Sales..................................... $938.3 $873.9 $831.9
Operating earnings (a)................... 71.8 67.9 58.1
Disposition of businesses................. 62.1 - (22.8)
Integration and
consolidation charges..................... (2.9) - (47.1)
Identifiable assets....................... 507.5 471.4 420.6
Capital expenditures...................... 31.4 33.2 21.3
Depreciation and amortization............ 21.6 19.2 19.1
Non-U.S. operations
Sales..................................... 711.0 323.2 197.5
Operating earnings (a)................... 52.3 21.1 8.0
Disposition of businesses................. 8.9 - -
Integration charge........................ (6.9) - -
Identifiable assets....................... 552.1 289.4 285.9
Capital expenditures...................... 20.9 9.8 2.1
Depreciation and amortization............ 22.0 9.4 7.0
- ------------------------------------------------------------------------------
(a) In 1995, the company's method of allocating corporate costs to its U.S.
operations was refined to exclude certain costs not directly assignable to
U.S. operations. This change results in additional costs being classified
as corporate expenses. Amounts for 1994 and 1993 have been restated to
conform to the 1995 presentation. In addition, 1994 amounts have been
restated to exclude the effects of the forgiveness of certain intercompany
obligations.
SUBSEQUENT EVENTS
In January, 1996, the company executed an agreement to purchase the assets of
The Fairchild Corporation's D-M-E business for approximately $245 million. With
annual sales of approximately $175 million, D-M-E is the largest U.S. producer
of mold bases, standard components and supplies for the plastics injection mold-
making industry. The acquisition, which will be accounted for under the purchase
method, was financed initially through the execution of promissory notes to the
seller of $183 million and cash of $62 million. One promissory note of $12
million was subsequently paid. The other notes mature on January 26, 1997, but
are subject to prepayment at the option of either the buyer or the seller at any
time after July 26, 1996.
In January, 1996, to finance the acquisition of D-M-E, the company amended its
revolving credit facility to increase the amount of credit available from $150
million to $300 million and extend the term to January, 2000. The facility
requires a facility fee of 1/4% per annum on the total $300 million revolving
loan commitment. The amended facility continues to impose restrictions on total
indebtedness in relation to total capital. The company anticipates that it will
be able to continue to comply with these restrictions throughout the extended
term of the facility. Longer term financing will be completed at a later date
and may include the issuance of some form of equity.
F-17
<PAGE>
SUPPLEMENTARY FINANCIAL INFORMATION
OPERATING RESULTS BY QUARTER (UNAUDITED)
<TABLE>
<CAPTION>
(In millions, except per-share amounts)
....................................... 1995 (a)
....................................... ----------------------------
- --------------
Qtr 1 Qtr 2 Qtr 3 Qtr 4
------------------------------------------
<S> <C> <C> <C> <C>
Sales....................... $331.4 $413.5 $486.5 $417.9
Manufacturing margins....... 81.2 103.5 121.7 104.6
Percent of sales.......... 24.5% 25.0% 25.0% 25.0%
Net earnings................ 13.0 (b) 8.4 (c) 16.0 68.2 (d)
Per common share............ .38 .24 .46 1.96
<CAPTION>
1994 (a)
------------------------------------------
<S> <C> <C> <C> <C>
Sales....................... $245.5 $269.3 $361.2 $321.1
Manufacturing margins....... 58.9 65.4 89.8 78.2
Percent of sales.......... 24.0% 24.3% 24.9% 24.4%
Net earnings................ 5.0 7.9 11.9 12.9
Per common share............ .14 .23 .35 .38
</TABLE>
(a) The fiscal year consists of thirteen four-week periods. The first, second
and fourth quarters consist of twelve weeks each, and the third quarter,
sixteen weeks.
(b) Includes a gain of $5.0 million ($4.0 million after tax, or $.12 per share)
on the sale of the company's American Mine Tool business.
(c) Includes a charge of $9.8 million ($7.8 million after tax, or $.23 per
share) for the integration of certain Widia and Valenite operations.
(d) Includes a gain of $66.0 million ($52.4 million after tax, or $1.51 per
share) on the sale of the company's Electronic Systems Division.
F-18
<PAGE>
[LETTERHEAD OF ERNST & YOUNG LLP]
Report of Independent Auditors
Board of Directors
Cincinnati Milacron Inc.
We have audited the accompanying Consolidated Balance Sheet of Cincinnati
Milacron Inc. and subsidiaries as of December 30, 1995 and December 31, 1994,
and the related Consolidated Statements of Earnings, Changes in Shareholders'
Equity, and Cash Flows for each of the three years in the period ended December
30, 1995. These financial statements are the responsibility of the company's
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. 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 consolidated financial position of Cincinnati
Milacron Inc. and subsidiaries at December 30, 1995 and December 31, 1994, and
the consolidated results of their operations and their cash flows for each of
the three years in the period ended December 30, 1995, in conformity with
generally accepted accounting principles.
As discussed in the Note to Consolidated Financial Statements, Cumulative Effect
of Changes in Methods of Accounting, in 1993 the company changed its method of
accounting for postretirement benefits other than pensions and its method of
accounting for income taxes.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
February 23, 1996
F-19
<PAGE>
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFOR-
MATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND, IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON OR BY ANYONE IN ANY
JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH
JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUN-
DER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THERE
HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE SUCH DATE.
------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information.................................................... 2
Incorporation of Certain Documents by Reference.......................... 2
Prospectus Summary....................................................... 3
Risk Factors............................................................. 6
Use of Proceeds.......................................................... 7
Capitalization........................................................... 8
Dividends on and Market Price of Common Stock............................ 9
Pro Forma Financial Information.......................................... 10
Pro Forma Consolidated Statement of Earnings............................. 11
Selected Historical and Pro Forma Financial Data......................... 13
Selected Historical and Pro Forma Segment Information.................... 14
Selected Historical and Pro Forma Geographic Information................. 15
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 16
Business................................................................. 24
Description of Capital Stock............................................. 35
Certain United States Federal Tax Consequences to Non-United States
Holders................................................................. 38
Underwriting............................................................. 41
Notice to Canadian Residents............................................. 43
Legal Matters............................................................ 44
Experts.................................................................. 44
Index to Consolidated Financial Statements............................... F-1
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CINCINNATI
MILACRON
5,500,000 Shares
Common Stock
($1.00 par value)
PROSPECTUS
CS First Boston
BT Securities Corporation
Merrill Lynch & Co.
J.P. Morgan & Co.
- --------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR ANY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
SUBJECT TO COMPLETION, DATED APRIL 4, 1996
5,500,000 Shares
CINCINNATI
MILACRON
Common Stock
($1.00 par value)
-------
All the shares of Common Stock, $1.00 par value ("Common Stock"), of
Cincinnati Milacron Inc. (the "Company") offered hereby are being sold by the
Company. Of the 5,500,000 shares of Common Stock being offered, 1,100,000
shares are initially being offered outside the United States and Canada
(the "International Shares") by the Managers (the "International
Offering") and 4,400,000 shares are initially being concurrently offered
in the United States and Canada (the "U.S. Shares") by the U.S.
Underwriters (the "U.S. Offering" and, together with the International
Offering, the "Common Stock Offering"). The offering price and
underwriting discounts and commissions of the International Offering
and the U.S. Offering are identical.
The Common Stock is listed on the New York Stock Exchange under the symbol
CMZ. With some exceptions, the holder of record of a share of Common Stock is
entitled to ten votes on each matter submitted to a vote of stockholders, if
the beneficial owner of such share has been the continuous beneficial owner
thereof for at least 36 consecutive calendar months, and is entitled to
one vote per share in all other circumstances. On April 3, 1996, the
reported last sale price of the Common Stock on the New York Stock
Exchange Composite Tape was $26 5/8 per share.
-------
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION
WITH AN INVESTMENT IN THE COMMON STOCK. SEE "RISK FACTORS" ON PAGE 6 HEREIN.
-------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURI-
TIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
Underwriting
Price to Discounts and Proceeds to
Public Commissions Company(1)
------------- ------------- -------------
<S> <C> <C> <C>
Per Share.................................. $ $ $
Total(2)................................... $ $ $
</TABLE>
(1) Before deduction of expenses payable by the Company estimated at $ .
(2) The Company has granted the Managers and the U.S. Underwriters an option,
exercisable by CS First Boston Corporation for 30 days from the date of
this Prospectus, to purchase a maximum of 825,000 additional shares to
cover over-allotments of shares. If the option is exercised in full, the
total Price to Public will be $ , Underwriting Discounts and Commissions
will be $ , and Proceeds to the Company will be $ .
-------
The International Shares are offered by the several Managers when, as and if
issued by the Company, delivered to and accepted by the Managers and subject to
their right to reject orders in whole or in part. It is expected that the
International Shares will be ready for delivery on or about , 1996.
CS First Boston
Bankers Trust International Plc Credit Lyonnais Securities
Merrill Lynch International Limited J.P. Morgan Securities Ltd.
The date of this Prospectus is , 1996.
<PAGE>
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY MANAGER. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT
IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS
OF THE COMPANY SINCE SUCH DATE.
In this Prospectus, references to "$" and "dollars" are to United States
dollars.
IN CONNECTION WITH THE COMMON STOCK OFFERING, CS FIRST BOSTON CORPORATION ON
BEHALF OF THE U.S. UNDERWRITERS AND MANAGERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK, CINCINNATI, BOSTON, PACIFIC,
PHILADELPHIA AND MIDWEST STOCK EXCHANGES OR OTHERWISE. SUCH STABILIZING, IF
COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information................................................................. 2
Incorporation of Certain Documents by Reference....................................... 2
Prospectus Summary.................................................................... 3
Risk Factors.......................................................................... 6
Use of Proceeds....................................................................... 7
Capitalization........................................................................ 8
Dividends on and Market Price of Common Stock......................................... 9
Pro Forma Financial Information....................................................... 10
Pro Forma Consolidated Statement of Earnings.......................................... 11
Selected Historical and Pro Forma Financial Data...................................... 13
Selected Historical and Pro Forma Segment Information................................. 14
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Selected Historical and Pro Forma Geographic Information.............................. 15
Management's Discussion and Analysis of Financial Condition and Results of Operation.. 16
Business.............................................................................. 24
Description of Capital Stock.......................................................... 35
Certain United States Federal Tax Consequences to Non-United States Holders........... 38
Subscription and Sale................................................................. 41
Legal Matters......................................................................... 44
Experts............................................................................... 44
Index to Consolidated Financial Statements............................................ F-1
</TABLE>
------------
2
<PAGE>
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
SUBSCRIPTION AND SALE
The institutions named below (the "Managers") have, pursuant to a
Subscription Agreement dated , 1996 (the "Subscription Agreement"),
severally and not jointly agreed with the Company to subscribe and pay for the
following respective numbers of International Shares as set forth opposite
their names:
<TABLE>
<CAPTION>
NUMBER OF
MANAGER INTERNATIONAL SHARES
------- --------------------
<S> <C>
CS First Boston Limited...............................
Bankers Trust International Plc.......................
Credit Lyonnais Securities ...........................
Merrill Lynch International Limited ..................
J.P. Morgan Securities Ltd. ..........................
--------------------
Total .............................................. 1,100,000
====================
</TABLE>
The Subscription Agreement provides that the obligations of the Managers are
such that, subject to certain conditions precedent, the Managers will be
obligated to purchase all of the International Shares offered hereby (other
than those International Shares covered by the over-allotment option described
below) if any are purchased. The Subscription Agreement provides that, in the
event of a default by a Manager, in certain circumstances the purchase
commitments of non-defaulting Managers may be increased or the Subscription
Agreement may be terminated.
The Company has entered into an Underwriting Agreement with the U.S.
Underwriters of the U.S. Offering (the "U.S. Underwriters") providing for the
concurrent offer and sale of the U.S. Shares in the United States and Canada.
The closing of the U.S. Offering is a condition to the closing of the
International Offering and vice versa.
The Company has granted to the Managers and the U.S. Underwriters an option,
exercisable by CS First Boston Corporation, the representative of the U.S.
Underwriters, expiring at the close of business on the 30th day after the date
of this Prospectus to purchase up to 825,000 additional shares at the initial
public offering price, less the underwriting discounts and commissions, all as
set forth on the cover page of this Prospectus. Such option may be exercised
only to cover over-allotments in the sale of the shares of Common Stock
offered hereby. To the extent that this option to purchase is exercised, each
Manager and each U.S. Underwriter will become obligated, subject to certain
conditions, to purchase approximately the same percentage of additional shares
being sold to the Managers and the U.S. Underwriters as the number of
International Shares set forth next to such Manager's name in the preceding
table and as the number set forth next to such U.S. Underwriter's name in the
corresponding table in the Prospectus relating to the U.S. Offering bears to
the sum of the total number of shares of Common Stock in such tables.
The Company has been advised by CS First Boston Limited, on behalf of the
Managers, that the Managers propose to offer the International Shares outside
the United States and Canada initially at the public offering price set forth
on the cover page of this Prospectus and, through the Managers, to certain
dealers at such price less a commission of $ per share and that the Managers
and such dealers may reallow a commission of $ per share on sales to certain
other dealers. After the initial public offering, the public offering price
and commission and reallowance may be changed by the Managers.
The offering price and the aggregate underwriting discounts and commissions
per share and per share commission and re-allowance to dealers for the
International Offering and the concurrent U.S. Offering will be identical.
Pursuant to an Agreement Between the U.S. Underwriters and Managers (the
"Intersyndicate Agreement") relating to the Common Stock Offering, changes in
the offering price, the aggregate underwriting discounts and commissions per
share and per share commission and reallowance to dealers will be made only
41
<PAGE>
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
upon the mutual agreement of CS First Boston Limited, on behalf of the
Managers, and CS First Boston Corporation, as representative of the U.S.
Underwriters.
Pursuant to the Intersyndicate Agreement, each of the Managers has agreed
that, as part of the distribution of International Shares and subject to
certain exceptions, it has not offered or sold, and will not offer or sell,
directly or indirectly, any shares of Common Stock or distribute any
prospectus relating to the Common Stock in the United States or Canada or to
any other dealer who does not so agree. Each of the U.S. Underwriters has
agreed that, as part of the distribution of the U.S. Shares and subject to
certain exceptions, it has not offered or sold and will not offer or sell,
directly or indirectly, any shares of Common Stock or distribute any
prospectus relating to the Common Stock to any person outside the United
States and Canada or to any other dealer who does not so agree. The foregoing
limitations do not apply to stabilization transactions or to transactions
between the Managers and the U.S. Underwriters pursuant to the Intersyndicate
Agreement. As used herein "United States" means the United States of America
(including the States and the District of Columbia), its territories,
possessions and other areas subject to its jurisdiction, "Canada" means
Canada, its provinces, territories, possessions and other areas subject to its
jurisdiction, and an offer or sale shall be in the United States or Canada if
it is made to (i) any individual resident in the Unites States or Canada or
(ii) any corporation, partnership, pension, profit-sharing or other trust or
other entity (including any such entity acting as an investment adviser with
discretionary authority) whose office most directly involved with the purchase
is located in the United States or Canada.
Pursuant to the Intersyndicate Agreement, sales may be made between the
Managers and the U.S. Underwriters of such number of shares of Common Stock as
may be mutually agreed upon. The price of any shares so sold will be the
public offering price less such amount agreed upon by CS First Boston Limited,
on behalf of the Managers, and CS First Boston Corporation, as representative
of the U.S. Underwriters, but not exceeding the selling concession applicable
to such shares. To the extent that there are sales between the Managers and
the U.S. Underwriters pursuant to the Intersyndicate Agreement, the number of
shares of Common Stock initially available for sale by the Managers or by the
U.S. Underwriters may be more or less than the amount appearing on the cover
page of this Prospectus. Neither the Managers nor the U.S. Underwriters are
obligated to purchase from the other any unsold shares of Common Stock.
Each of the Managers and the U.S. Underwriters severally represents and
agrees that: (1) it has not offered or sold and prior to the date six months
after the date of issue of the Common Stock will not offer or sell any Common
Stock to persons in the United Kingdom except persons whose ordinary
activities involve them in acquiring, holding, managing or disposing of
investments (as principal or agent) for the purposes of their businesses or
otherwise in circumstances which have not resulted and will not result in an
offer to the public in the United Kingdom within the meaning of the Public
Offers of Securities Regulations 1995; (2) it has complied and will comply
with all applicable provisions of the Financial Services Act of 1986 with
respect to anything done by it in relation to any shares of Common Stock in,
from or otherwise involving the United Kingdom; and (3) it has only issued or
passed on and will only issue or pass on in the United Kingdom any document
received by it in connection with the issue of any shares of Common Stock to a
person who is of a kind described in Article 11(3) of the Financial Services
Act 1986 (Investment Advertisements) (Exemptions) Order 1995 or is a person to
whom such document may otherwise lawfully be issued or passed on.
The Company has agreed that it will not offer, sell, contract to sell,
announce its intention to sell, pledge or otherwise dispose of, directly or
indirectly, or file with the Securities and Exchange Commission a registration
statement under the Securities Act of 1933 (the "Securities Act") relating to
any additional shares of its Common Stock or any securities convertible into,
or exchangeable or exercisable for, any shares of its Common Stock without the
prior written consent of CS First Boston Corporation for a period of 90 days
after the date of this Prospectus, provided however, that the Company may
issue Common Stock pursuant to the exercise of options outstanding on the date
hereof, grants of employee stock options pursuant to the terms of a plan in
effect
42
<PAGE>
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
on the date hereof and pursuant to the exercise of such options or issuances
of Common Stock in connection with the Company's dividend reinvestment plan.
The Company has agreed to indemnify the Managers and the U.S. Underwriters
against certain liabilities, including civil liabilities under the Securities
Act, or to contribute to payments that the Managers and the U.S. Underwriters
may be required to make in respect thereof.
Certain of the U.S. Underwriters and Managers and their affiliates have from
time to time performed, and continue to perform, various investment banking
and commercial banking services for the Company, for which customary
compensation has been received.
43
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee.................. $59,706
Printing Expenses.................................................... *
Accounting Fees and Expenses......................................... 45,000
Legal Fees and Expenses.............................................. *
NASD Fees............................................................ 17,815
Blue Sky Fees and Expenses........................................... 20,000
Miscellaneous Expenses............................................... *
-------
Total Expenses....................................................... $ *
=======
</TABLE>
- --------
* To be provided by amendment.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Subsection (a) of Section 145 of the General Corporation Law of Delaware
empowers a corporation to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation or enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by him in connection with
such action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful.
Subsection (b) of Section 145 empowers a corporation to indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action or suit by or in the right of the corporation to
procure a judgment in its favor by reason of the fact that such person acted
in any of the capacities set forth above, against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection with
the defense or settlement of such action or suit if he acted in good faith and
in a manner he reasonably believes to be in or not opposed to the best
interests of the corporation, except that no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the corporation unless and only to the extent that
the Delaware Court of Chancery or the court in which such action or suit was
brought shall determine that despite the adjudication of liability such person
is fairly and reasonably entitled to indemnity for such expenses which the
court shall deem proper.
Section 145 further provides that to the extent a director, officer,
employee or agent of a corporation has been successful in the defense of any
action, suit or proceeding referred to in subsections (a) and (b) of such
Section 145 or in the defense of any claim, issue or matter therein, he shall
be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith. It also provides that
indemnification provided for by Section 145 shall not be deemed exclusive of
any other rights to which the indemnified party may be entitled, and it
empowers a corporation to purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of the corporation
or is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation or enterprise against any liability
asserted against him or incurred by him in any such capacity or arising out of
his status as such, whether or not the corporation would have the power to
indemnify him against such liabilities under Section 145.
Article Eleventh of the Restated Certification of Incorporation of the
Registrant provides for the indemnification of all officers and directors of
the Registrant to the fullest extent authorized by the General Corporation Law
of Delaware.
II-1
<PAGE>
Article Twelfth of the Restated Certificate of Incorporation of the
Registrant also provides for indemnification of officers and directors against
expenses, fines and amounts paid in settlement actually and reasonably
incurred by such person in connection with a proceeding, other than (with
certain exceptions) a proceeding that was commenced by such director or
officer prior to a change in control of the Registrant.
Section 18 of Article III of the By-laws of the Registrant also provides for
indemnification of officers and directors provided such person acted, in good
faith, in what he reasonably believed to be in or not opposed to the best
interests of the Registrant or such other corporation or any employee benefit
plan thereof for which he served at the request of the Registrant, as the case
may be, and, in addition, with respect to any criminal actions or proceedings,
had no reasonable cause to believe his conduct was unlawful, and provided
further that, in the case of a claim, action, suit or proceeding brought by or
in the right of the Registrant to procure a judgment in its favor, such person
has not been adjudged to be liable for negligence or misconduct in the
performance of his duty to the Registrant.
The Registrant also has purchased directors' and officers' liability
insurance covering certain liabilities incurred by its officers and directors
in connection with the performance of their duties.
ITEM 16. EXHIBITS
<TABLE>
<C> <S>
1.1 Proposed form of Underwriting Agreement relating to the U.S. Offering.*
1.2 Proposed form of Subscription Agreement relating to International
Offering.*
4.1 Articles of Incorporation
(a) Restated Certificate of Incorporation filed with the Secretary of
State of the State of Delaware on June 16, 1983, is incorporated by
reference to the Company's Form 10-K for the fiscal year ended
December 28, 1985, as amended by Amendment No. 1 thereto on Form 8
dated June 30, 1986, and Amendment No. 2 thereto on Form 8 dated July
17, 1986 (File No. 1-8485).
(b) Certificate of Amendment of the Restated Certificate of Incorporation
dated April 22, 1986, and filed with the Secretary of State of the
State of Delaware on April 22, 1986, is incorporated by reference to
the Company's Form 10-Q for the quarter ended March 22, 1986 (File
No. 1-8485).
(c) Certificate of Amendment of the Restated Certificate of Incorporation
dated June 11, 1987, and filed with the Secretary of State of the
State of Delaware on June 15, 1987, is incorporated by reference to
the Company's Form 10-Q for the quarter ended March 28, 1987 (File
No. 1-8485).
4.2 By-laws, as amended, are incorporated herein by reference to the
Company's Registration Statement on Form S-8 filed February 28, 1990
(File No. 33-33623).
5 Opinion of Cravath, Swaine & Moore. (1)
23.1 Consent of Ernst & Young LLP.*
23.2 Consent of Arthur Andersen LLP.*
23.3 Consent of Cravath, Swaine & Moore (included in Exhibit 5). (1)
24 Powers of Attorney.(2)
</TABLE>
- --------
* Filed electronically herewith.
(1) To be filed by amendment.
(2) Previously filed.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
II-2
<PAGE>
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described under Item 15 above, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer
or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication
of such issue.
The undersigned Registrant hereby further undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in the
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS
ALL OF THE REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS
REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO
DULY AUTHORIZED, IN THE CITY OF CINCINNATI, STATE OF OHIO, ON THIS 4TH DAY OF
APRIL, 1996.
Cincinnati Milacron Inc.,
Registrant
/s/ Ronald D. Brown
By __________________________________
RONALD D. BROWN
VICE PRESIDENT-FINANCE
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATE INDICATED.
SIGNATURE TITLE DATE
* Chairman of the
- ------------------------------------- Board (Principal April 4, 1996
DANIEL J. MEYER Executive Officer)
/s/ Ronald D. Brown Vice President-
- ------------------------------------- Finance (Principal April 4, 1996
RONALD D. BROWN Financial Officer)
/s/ Robert P. Lienesch Controller
- ------------------------------------- (Principal April 4, 1996
ROBERT P. LIENESCH Accounting Officer)
* Director
- ------------------------------------- April 4, 1996
NEIL A. ARMSTRONG
* Director
- ------------------------------------- April 4, 1996
LYLE EVERINGHAM
* Director
- ------------------------------------- April 4, 1996
DARRYL F. ALLEN
II-4
<PAGE>
* Director
- ------------------------------------- April 4, 1996
JAMES E. PERELLA
* Director
- ------------------------------------- April 4, 1996
HARRY A. HAMMERLY
* Director
- ------------------------------------- April 4, 1996
DANIEL J. MEYER
* Director
- ------------------------------------- April 4, 1996
RAYMOND E. ROSS
* Director
- ------------------------------------- April 4, 1996
JOSEPH A. STEGER
* Director
- ------------------------------------- April 4, 1996
HARRY C. STONECIPHER
The undersigned, by signing his name hereto, does hereby sign this
Registration Statement on behalf of each of the above-indicated officers and
directors of Cincinnati Milacron Inc. pursuant to powers of attorney executed
on behalf of each such officer or director.
/s/ Ronald D. Brown
*By__________________________________
Attorney-in-Fact RONALD D. BROWN
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NO. DESCRIPTIONS PAGE NOS.
------- ------------ ----------
<C> <S> <C>
1.1 Proposed form of Underwriting Agreement relating to U.S.
Offering.*
1.2 Proposed form of Subscription Agreement relating to
International Offering.*
4.1 Articles of Incorporation
(a) Restated Certificate of Incorporation filed with the
Secretary of State of the State of Delaware on June
16, 1983, is incorporated by reference to the
Company's Form 10-K for the fiscal year ended
December 28, 1985, as amended by Amendment No. 1
thereto on Form 8 dated June 30, 1986, and Amendment
No. 2 thereto on Form 8 dated July 17, 1986 (File No.
1-8485).
(b) Certificate of Amendment of the Restated Certificate
of Incorporation dated April 22, 1986, and filed with
the Secretary of State of the State of Delaware on
April 22, 1986, is incorporated by reference to the
Company's Form 10-Q for the quarter ended March 22,
1986 (File No. 1-8485).
(c) Certificate of Amendment of the Restated Certificate
of Incorporation dated June 11, 1987, and filed with
the Secretary of State of the State of Delaware on
June 15, 1987, is incorporated by reference to the
Company's Form 10-Q for the quarter ended March 28,
1987 (File No. 1-8485).
4.2 By-laws, as amended, are incorporated herein by reference
to the Company's Registration Statement on Form S-8 filed
February 28, 1990 (File No. 33-33623).
5 Opinion of Cravath, Swaine & Moore. (1)
23.1 Consent of Ernst & Young LLP.*
23.2 Consent of Arthur Andersen LLP.*
23.3 Consent of Cravath, Swaine & Moore (included in
Exhibit 5). (1)
24 Powers of Attorney. (2)
</TABLE>
- --------
*Filed electronically herewith.
(1) To be filed by amendment.
(2) Previously filed.
<PAGE>
EXHIBIT 1.1
DRAFT 4/3/96
5,500,000 SHARES
CINCINNATI MILACRON INC.
COMMON STOCK ($1.00 PAR VALUE)
UNDERWRITING AGREEMENT
----------------------
__________ ___, 1996
CS First Boston Corporation
BT Securities Corporation
Merrill Lynch, Pierce, Fenner & Smith Incorporated
J.P. Morgan Securities Inc.,
As Representatives of the Several Underwriters,
c/o CS First Boston Corporation,
Park Avenue Plaza,
New York, N.Y. 10055.
Dear Sirs:
1. Introductory. Cincinnati Milacron Inc., a Delaware corporation
("Company"), proposes to issue and sell ("U.S. Offering") to the several
Underwriters named in Schedule A hereto ("Underwriters") 4,400,000 shares ("U.S.
Firm Securities") of its common stock, $1.00 par value ("Securities").
It is understood that the Company is concurrently entering into a
Subscription Agreement, dated the date hereof ("Subscription Agreement"), with
CS First Boston Limited ("CSFBL"), Bankers Trust International PLC, Credit
Lyonnais Securities, Merrill Lynch International Limited, J.P. Morgan Securities
Ltd., and the other managers named therein ("Managers") relating to the
concurrent offering and sale of 1,100,000 shares of Securities ("International
Firm Securities") outside the United States and Canada ("International
Offering").
In addition, as set forth below the Company proposes to issue and sell
(i) to the Underwriters, at the option of the Underwriters, an aggregate of not
more than 660,000 additional shares of Securities ("U.S. Optional Securities")
and (ii) to the Managers, at the option of the Managers, an aggregate of not
more than 165,000 additional shares of Securities ("International Optional
Securities"). The U.S. Firm Securities and the U.S. Optional Securities are
hereinafter called the "U.S. Securities"; the International Firm Securities and
the International Optional Securities are hereinafter called the "International
Securities"; the U.S. Firm Securities and the International Firm Securities are
hereinafter called the "Firm Securities"; the U.S. Optional Securities and the
International Optional Securities are hereinafter called the "Optional
Securities". The U.S. Securities and the International Securities are
collectively referred to as the "Offered Securities". To provide for the
coordination of their activities, the Underwriters and the Managers have entered
into an Agreement Between U.S. Underwriters and Managers which permits them,
among other things, to sell the Offered Securities to each other for purposes of
resale.
<PAGE>
The Company hereby agrees with the several Underwriters as follows:
2. Representations and Warranties of the Company. The Company
represents and warrants to, and agrees with, the several Underwriters that:
(a) A registration statement (No. 333-01739) relating to the Offered
Securities, including a form of prospectus relating to the U.S. Securities
and a form of prospectus relating to the International Securities being
offered in the International Offering, has been filed with the Securities
and Exchange Commission ("Commission") and either (i) has been declared
effective under the Securities Act of 1933 ("Act") and is not proposed to
be amended or (ii) is proposed to be amended by amendment or post-effective
amendment. If such registration statement (the "initial registration
statement") has been declared effective, either (A) an additional
registration statement (the "additional registration statement") relating
to the Offered Securities may have been filed with the Commission pursuant
to Rule 462(b) ("Rule 462(b)") under the Act and, if so filed, has become
effective upon filing pursuant to such Rule and the Offered Securities all
have been duly registered under the Act pursuant to the initial
registration statement and, if applicable, the additional registration
statement or (B) such an additional registration statement is proposed to
be filed with the Commission pursuant to Rule 462(b) and will become
effective upon filing pursuant to such Rule and upon such filing the
Offered Securities will all have been duly registered under the Act
pursuant to the initial registration statement and such additional
registration statement. If the Company does not propose to amend the
initial registration statement or if an additional registration statement
has been filed and the Company does not propose to amend it, and if any
post-effective amendment to either such registration statement has been
filed with the Commission prior to the execution and delivery of this
Agreement, the most recent amendment (if any) to each such registration
statement has been declared effective by the Commission or has become
effective upon filing pursuant to Rule 462(c) ("Rule 462(c)") under the Act
or, in the case of the additional registration statement, Rule 462(b). For
purposes of this Agreement, "Effective Time" with respect to the initial
registration statement or, if filed prior to the execution and delivery of
this Agreement, the additional registration statement means (i) if the
Company has advised the Representatives that it does not propose to amend
such registration statement, the date and time as of which such
registration statement, or the most recent post-effective amendment thereto
(if any) filed prior to the execution and delivery of this Agreement, was
declared effective by the Commission or has become effective upon filing
pursuant to Rule 462(c), or (ii) if the Company has advised the
Representatives that it proposes to file an amendment or post-effective
amendment to such registration statement, the date and time as of which
such registration statement, as amended by such amendment or post-effective
amendment, as the case may be, is declared effective by the Commission. If
an additional registration statement has not been filed prior to the
execution and delivery of this Agreement but the Company has advised the
Representatives that it proposes to file one, "Effective Time" with respect
to such additional registration statement means the date and time as of
which such registration statement is filed and becomes effective pursuant
to Rule 462(b). "Effective Date" with respect to the initial registration
statement or the additional registration statement (if any) means the date
of the Effective Time thereof. The initial registration statement, as
amended at its Effective Time, including all material incorporated by
reference therein, including all information contained in the additional
registration statement (if any) and deemed to be a part of the initial
registration statement as of the Effective Time of the additional
registration statement pursuant to the General Instructions of the Form on
which it is filed and including all information (if any) deemed to be a
part of the initial registration statement as of its Effective Time
pursuant to Rule 430A(b) ("Rule 430A(b)") under the Act, is hereinafter
referred to as the "Initial Registration Statement". The additional
registration statement, as amended at its Effective Time, including the
contents of the initial registration statement incorporated by reference
therein and including all information (if any) deemed to be a part of the
additional registration statement as of its Effective Time pursuant to Rule
430A(b), is hereinafter referred to as the "Additional Registration
Statement". The Initial Registration Statement and the Additional
Registration Statement are hereinafter referred to collectively as the
"Registration Statements" and individually as a "Registration Statement".
The form of prospectus relating to the U.S. Securities and the
2
<PAGE>
form of prospectus relating to the International Securities, each as first
filed with the Commission pursuant to and in accordance with Rule 424(b)
("Rule 424(b)") under the Act or (if no such filing is required) as
included in the Registration Statement, including all material incorporated
by reference in each such prospectus, are hereinafter referred to as the
"U.S. Prospectus" and the "International Prospectus", respectively, and
collectively as the "Prospectuses". No document has been or will be
prepared or distributed in reliance on Rule 434 under the Act.
(b) If the Effective Time of the Initial Registration Statement is
prior to the execution and delivery of this Agreement: (i) on the
Effective Date of the Initial Registration Statement, the Initial
Registration Statement conformed in all respects to the requirements of the
Act and the rules and regulations of the Commission ("Rules and
Regulations") and did not include any untrue statement of a material fact
or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, (ii) on the
Effective Date of the Additional Registration Statement (if any), each
Registration Statement conformed, or will conform, in all respects to the
requirements of the Act and the Rules and Regulations and did not include,
or will not include, any untrue statement of a material fact and did not
omit, or will not omit, to state any material fact required to be stated
therein or necessary to make the statements therein not misleading, and
(iii) on the date of this Agreement, the Initial Registration Statement
and, if the Effective Time of the Additional Registration Statement is
prior to the execution and delivery of this Agreement, the Additional
Registration Statement each conforms, and at the time of filing of each of
the Prospectuses pursuant to Rule 424(b) or (if no such filing is required)
at the Effective Date of the Additional Registration Statement in which the
Prospectuses are included, each Registration Statement and each of the
Prospectuses will conform, in all respects to the requirements of the Act
and the Rules and Regulations, and none of such documents includes, or will
include, any untrue statement of a material fact or omits, or will omit, to
state any material fact required to be stated therein or necessary to make
the statements therein not misleading. If the Effective Time of the Initial
Registration Statement is subsequent to the execution and delivery of this
Agreement: on the Effective Date of the Initial Registration Statement, the
Initial Registration Statement and each of the Prospectuses will conform in
all respects to the requirements of the Act and the Rules and Regulations,
none of such documents will include any untrue statement of a material fact
or will omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, and no Additional
Registration Statement has been or will be filed. The two preceding
sentences do not apply to statements in or omissions from a Registration
Statement or either of the Prospectuses based upon written information
furnished to the Company by any Underwriter through the Representatives or
by any Manager through CSFBL specifically for use therein, it being
understood and agreed that the only such information is that described as
such in Section 7(b).
(c) There are no contracts, agreements or understandings between the
Company and any person granting such person the right to require the
Company to file a registration statement under the Act with respect to any
securities of the Company owned or to be owned by such person or to require
the Company to include such securities in the securities registered
pursuant to a Registration Statement or in any securities being registered
pursuant to any other registration statement filed by the Company under the
Act, except for the Registration Rights Agreement dated April [_____], 1996
by and between the Company and [__________], as Trustee for the Cincinnati
Milacron Retirement Plan.
(d) Except as described in the Prospectuses, there are no outstanding
(i) securities or obligations of the Company convertible into or
exchangeable for any shares of capital stock of the Company, (ii) warrants,
rights or options to subscribe for or purchase from the Company any such
capital stock or any such convertible or exchangeable securities or
obligations, or (iii) obligations of the Company to issue such shares, any
such convertible or exchangeable securities or obligations, or any such
warrants, rights or obligations.
3
<PAGE>
(e) Except as disclosed in the Prospectuses, since the date of
the latest audited financial statements included in the Prospectuses there
has been no material adverse change, nor any development or event involving
a prospective material adverse change, in the condition (financial or
other), business, properties or results of operations of the Company and
its subsidiaries taken as a whole, and, except as disclosed in or
contemplated by the Prospectuses, there has been no dividend or
distribution of any kind declared, paid or made by the Company on any class
of its capital stock; since the respective dates as of which information is
given in each Registration Statement and the Prospectuses, there has not
been any change in the capital stock (other than issuances of capital stock
upon exercise of options and stock appreciation rights, upon earn-outs of
performance shares (if any) and upon conversions of convertible securities
and under employee incentive and benefit plans, in each case which were
outstanding on the date of this Agreement) of the Company.
(f) Except as disclosed in the Prospectuses, the Company and its
subsidiaries have good and marketable title to all real properties and all
other material properties and assets owned by them, in each case free from
liens, encumbrances and defects except such as do not have a material
adverse effect on the business of the Company and its subsidiaries taken as
a whole; and except as disclosed in the Prospectuses, the Company and its
subsidiaries hold any leased real or personal property under valid and
enforceable leases with no exceptions except such as do not have a material
adverse effect on the business of the Company and its subsidiaries taken as
a whole.
(g) The Company has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the State of Delaware,
with power and authority (corporate and other) to own its properties and
conduct its business as described in the Prospectuses, and the Company is
duly qualified to do business as a foreign corporation in good standing in
each other jurisdiction in which it owns or leases properties, or conducts
its business, except where the failure so to qualify would not have a
material adverse effect upon the business of the Company and its
subsidiaries taken as a whole; and each of the Company's subsidiaries has
been duly incorporated and is validly existing as a corporation in good
standing under the laws of its jurisdiction of incorporation and is duly
qualified to do business as a foreign corporation in good standing in each
other jurisdiction in which it owns or leases properties, or conducts its
business, except where the failure so to qualify would not have a material
adverse effect upon the business of the Company and its subsidiaries taken
as a whole.
(h) The Company has an authorized capitalization as set forth in the
Prospectuses; and all of the issued shares of capital stock of each
subsidiary of the Company have been duly and validly authorized and issued,
are fully paid and non-assessable; and (except for directors' qualifying
shares) the capital stock of each subsidiary owned by the Company, directly
or indirectly, is owned free and clear of all liens, encumbrances, equities
or claims, except such as do not materially and adversely affect the value
of such shares or interfere with the conduct of the business of the issuer
thereof or the Company's control over such shares or such business.
(i) The Offered Securities and all other outstanding shares of
capital stock of the Company have been duly authorized; all outstanding
shares of capital stock of the Company are, and, when the Offered
Securities have been delivered and paid for in accordance with this
Agreement and the Subscription Agreement on each Closing Date (as defined
below), such Offered Securities will have been, validly issued, fully paid
and nonassessable and will conform to the description thereof contained in
the Prospectuses; and the stockholders of the Company have no preemptive
rights with respect to the Securities.
(j) The issue and sale of the Offered Securities, the use of the
proceeds of the sale of the Offered Securities by the Company in the manner
contemplated by the Prospectuses and the compliance by the Company with all
of the provisions of this Agreement and the Subscription Agreement and the
consummation of the transactions herein and therein contemplated will not
conflict with or result in a
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breach of any of the terms or provisions of, or constitute a default under,
any material indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which the Company is a party or by which the
Company is bound or to which any of the properties or assets of the Company
are subject, nor will such action result in any violation of the provisions
of the Restated Certificate of Incorporation, as amended (the "charter"),
or the by-laws of the Company or any material statute or any material
order, rule or regulation of any court or governmental agency or body
having jurisdiction over the Company or any of its properties.
(k) No consent, approval, authorization or order of, or filing with,
any governmental agency or body or any court is required for the
consummation of the transactions contemplated by this Agreement or the
Subscription Agreement in connection with the issuance or sale of the
Offered Securities by the Company, except such as have been obtained and
made under the Act and such as may be required under state securities laws.
(l) The financial statements of the Company included in each
Registration Statement and the Prospectuses present fairly the financial
position of the Company and its consolidated subsidiaries as of the dates
shown and their results of operations and cash flows for the periods shown,
and such financial statements have been prepared in conformity with the
generally accepted accounting principles in the United States applied on a
consistent basis; and the assumptions used in preparing the pro forma
financial statements included in each Registration Statement and the
Prospectuses provide a reasonable basis for presenting the significant
effects directly attributable to the transactions or events described
therein, the related pro forma adjustments give appropriate effect to those
assumptions, and the pro forma columns therein reflect the proper
application of those adjustments to the corresponding historical financial
statement amounts.
(m) Other than as may be set forth or contemplated in the
Prospectuses, there are no legal or governmental proceedings pending to
which the Company or any of its subsidiaries is a party or of which any
property of the Company or any of its subsidiaries is the subject which
might reasonably be expected to have, individually or in the aggregate, a
material adverse effect on the consolidated financial position,
shareholders' equity or results of operations of the Company and its
subsidiaries, or would materially and adversely affect the ability of the
Company to perform its obligations under this Agreement or the Subscription
Agreement, or which are otherwise material in the context of the sale of
the Offered Securities and, no such proceedings are threatened or, to the
Company's knowledge, contemplated.
(n) Neither the Company nor any of its affiliates does business with
the government of Cuba or with any person or affiliate located in Cuba
within the meaning of Section 517.075, Florida Statutes and the Company
agrees to comply with such Section if prior to the completion of the
distribution of the Offered Securities it commences doing such business.
(o) This Agreement and the Subscription Agreement have been duly
authorized, executed and delivered by the Company.
(p) The Company and its subsidiaries possess adequate certificates,
authorities or permits issued by appropriate governmental agencies or
bodies necessary to conduct the business now operated by them and have not
received any notice of proceedings relating to the revocation or
modification of any such certificate, authority or permit that, if
determined adversely to the Company or any of its subsidiaries, would
individually or in the aggregate have a material adverse effect on the
Company and its subsidiaries taken as a whole.
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(q) No labor dispute with the employees of the Company or any
subsidiary exists or, to the knowledge of the Company, is imminent that
might have a material adverse effect on the Company and its subsidiaries
taken as a whole.
(r) The Company and its subsidiaries own, possess or can acquire on
reasonable terms, adequate trademarks, trade names and other rights to
inventions, know-how, patents, copyrights, confidential information and
other intellectual property (collectively, "intellectual property rights")
necessary to conduct the business now operated by them, or presently
employed by them, and have not received any notice of infringement of or
conflict with asserted rights of others with respect to any intellectual
property rights that, if determined adversely to the Company or any of its
subsidiaries, would individually or in the aggregate have a material
adverse effect on the Company and its subsidiaries taken as a whole.
(s) Except as disclosed in the Prospectuses, neither the Company nor
any of its subsidiaries is in violation of any statute, any rule,
regulation, decision or order of any governmental agency or body or any
court, domestic or foreign, relating to the use, disposal or release of
hazardous or toxic substances or relating to the protection or restoration
of the environment or human exposure to hazardous or toxic substances
(collectively, "environmental laws"), owns or operates any real property
contaminated with any substance that is subject to any environmental laws,
is liable for any off-site disposal or contamination pursuant to any
environmental laws, or is subject to any claim relating to any
environmental laws, which violation, contamination, liability or claim
would individually or in the aggregate have a material adverse effect on
the Company and its subsidiaries taken as a whole; and the Company is not
aware of any pending investigation which might lead to such a claim.
(t) Except as disclosed in the Prospectuses, there are no contracts,
agreements or understandings between the Company and any person that would
give rise to a valid claim against the Company or any Underwriter or
Manager for a brokerage commission, finder's fee or other like payment.
(u) The Company is not and, after giving effect to the offering and
sale of the Offered Securities and the application of the proceeds thereof
as described in the Prospectuses, will not be an "investment company" as
defined in the Investment Company Act of 1940.
(v) The Offered Securities have been approved for listing on The New
York Stock Exchange subject to notice of issuance.
3. Purchase, Sale and Delivery of Offered Securities. On the basis
of the representations, warranties and agreements herein contained, but subject
to the terms and conditions herein set forth, the Company agrees to sell to the
Underwriters, and the Underwriters agree, severally and not jointly, to purchase
from the Company, at a purchase price of U.S.$ per share, the respective
numbers of shares of U.S. Firm Securities set forth opposite the names of the
Underwriters in Schedule A hereto.
The Company will deliver the U.S. Firm Securities to the
Representatives for the accounts of the Underwriters, against payment of the
purchase price in funds available on the same day by wire transfer to the
account of the Company at a bank acceptable to CS First Boston Corporation
("CSFBC") or by official Federal Reserve Bank check or checks drawn to the order
of the Company at the office of Cravath, Swaine & Moore, 825 Eighth Avenue, New
York, New York 10019 at 10:00 A.M., New York time, on __________________, 1996,
or at such other time not later than seven full business days thereafter as
CSFBC and the Company determine, such time being herein referred to as the
"First Closing Date". For purposes of Rule 15c6-1 under the Securities Exchange
Act of 1934, the First Closing Date (if later than the otherwise applicable
settlement date) shall be the settlement date for payment of funds and delivery
of securities for all the Offered Securities sold pursuant to the U.S. Offering
and the International Offering. The certificates for the U.S. Firm Securities so
to be delivered will be in definitive form, in such denominations and registered
in such names as CSFBC requests and will be made
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available for checking and packaging at the office of CSFBC, Park Avenue Plaza,
55 East 52nd Street, New York, New York 10055, at least 24 hours prior to the
First Closing Date.
In addition, upon written notice from CSFBC given to the Company from
time to time not more than 30 days subsequent to the date of the Prospectuses,
the Underwriters may purchase all or less than all of the U.S. Optional
Securities at the purchase price per Security to be paid for the U.S. Firm
Securities. The U.S. Optional Securities to be purchased by the Underwriters on
any Optional Closing Date, if any, shall be in the same proportion to all the
Optional Securities to be purchased by the Underwriters and the Managers on such
Optional Closing Date as the U.S. Firm Securities bear to all the Firm
Securities. The Company agrees to sell to the Underwriters such U.S. Optional
Securities and the Underwriters agree, severally and not jointly, to purchase
such U.S. Optional Securities. Such U.S. Optional Securities shall be purchased
for the account of each Underwriter in the same proportion as the number of
shares of U.S. Firm Securities set forth opposite such Underwriter's name bears
to the total number of shares of U.S. Firm Securities (subject to adjustment by
CSFBC to eliminate fractions) and may be purchased by the Underwriters only for
the purpose of covering over-allotments made in connection with the sale of the
U.S. Firm Securities. No Optional Securities shall be sold or delivered unless
the U.S. Firm Securities and the International Firm Securities previously have
been, or simultaneously are, sold and delivered. The right to purchase the
Optional Securities or any portion thereof may be exercised from time to time
and to the extent not previously exercised may be surrendered and terminated at
any time upon notice by CSFBC on behalf of Underwriters and the Managers to the
Company. It is understood that CSFBC is authorized to make payment for and
accept delivery of such Optional Securities on behalf of the Underwriters and
Managers pursuant to the terms of CSFBC's instructions to the Company.
Each time for the delivery of and payment for the U.S. Optional
Securities, being herein referred to as an "Optional Closing Date", which may be
the First Closing Date (the First Closing Date and each Optional Closing Date,
if any, being sometimes referred to as a "Closing Date"), shall be determined by
CSFBC but shall be not later than five full business days after written notice
of election to purchase Optional Securities is given. The Company will deliver
the U.S. Optional Securities being purchased on each Optional Closing Date to
the Representatives for the accounts of the several Underwriters against payment
of the purchase price therefor in funds available on the same day by wire
transfer to the account of the Company at a bank acceptable to CSFBC or by
official Federal Reserve Bank check or checks drawn to the order of the Company,
at the above office of Cravath, Swaine & Moore. The certificates for the U.S.
Optional Securities will be in definitive form, in such denominations and
registered in such names as CSFBC requests upon reasonable notice prior to such
Optional Closing Date and will be made available for checking and packaging at
the above office of CSFBC, or at the above office of Cravath, Swaine & Moore at
a reasonable time in advance of such Optional Closing Date.
4. Offering by Underwriters. It is understood that the several
Underwriters propose to offer the U.S. Securities for sale to the public as set
forth in the U.S. Prospectus.
5. Certain Agreements of the Company. The Company agrees with the
several Underwriters that:
(a) If the Effective Time of the Initial Registration Statement is
prior to the execution and delivery of this Agreement, the Company will
file each of the Prospectuses with the Commission pursuant to and in
accordance with subparagraph (1) (or, if applicable and if consented to by
CSFBC, subparagraph (4)) of Rule 424(b) not later than the earlier of (A)
the second business day following the execution and delivery of this
Agreement or (B) the fifteenth business day after the Effective Date of the
Initial Registration Statement.
The Company will advise CSFBC promptly of any such filing pursuant to Rule
424(b). If the Effective Time of the Initial Registration Statement is
prior to the execution and delivery of this Agreement and an additional
registration statement is necessary to register a portion of the Offered
Securities under the Act but the Effective Time thereof has not occurred as
of such execution and delivery, the Company will file
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<PAGE>
the additional registration statement or, if filed, will file a post-
effective amendment thereto with the Commission pursuant to and in
accordance with Rule 462(b) on or prior to 10:00 P.M., New York time, on
the date of this Agreement or, if earlier, on or prior to the time either
Prospectus is printed and distributed to any Underwriter or Manager, or
will make such filing at such later date as shall have been consented to by
CSFBC.
(b) The Company will advise CSFBC promptly of any proposal to amend
or supplement the initial or any additional registration statement as filed
or either of the related prospectuses or the Initial Registration
Statement, the Additional Registration Statement (if any) or either of the
Prospectuses and will not effect such amendment or supplementation without
CSFBC's prior consent, which shall not be unreasonably withheld; and the
Company will also advise CSFBC promptly of the effectiveness of each
Registration Statement (if its Effective Time is subsequent to the
execution and delivery of this Agreement) and of any amendment or
supplementation of a Registration Statement or either of the Prospectuses
and of the institution by the Commission of any stop order proceedings in
respect of a Registration Statement and will use its best efforts to
prevent the issuance of any such stop order and to obtain as soon as
possible its lifting, if issued.
(c) If, at any time when a prospectus relating to the Offered
Securities is required to be delivered under the Act in connection with
sales by any Underwriter, Manager or dealer, any event occurs as a result
of which either or both of the Prospectuses as then amended or supplemented
would include an untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or if it is
necessary at any time to amend either or both of the Prospectuses to comply
with the Act, the Company will promptly notify CSFBC of such event and will
promptly prepare and file with the Commission, at its own expense, an
amendment or supplement which will correct such statement or omission or an
amendment which will effect such compliance. Neither CSFBC's consent to,
nor the Underwriters' delivery of, any such amendment or supplement shall
constitute a waiver of any of the conditions set forth in Section 6.
(d) As soon as practicable, but not later than the Availability Date
(as defined below), the Company will make generally available to its
securityholders an earnings statement covering a period of at least 12
months beginning after the Effective Date of the Initial Registration
Statement (or, if later, the Effective Date of the Additional Registration
Statement) which will satisfy the provisions of Section 11(a) of the Act.
For the purpose of the preceding sentence, "Availability Date" means the
45th day after the end of the fourth fiscal quarter following the fiscal
quarter that includes such Effective Date, except that, if such fourth
fiscal quarter is the last quarter of the Company's fiscal year,
"Availability Date" means the 90th day after the end of such fourth fiscal
quarter.
(e) The Company will furnish to the Representatives copies of the
Registration Statement (five of which will be signed and will include all
exhibits), each preliminary prospectus relating to the U.S. Securities,
and, so long as delivery of a prospectus relating to the Offered Securities
is required to be delivered under the Act in connection with sales by any
Underwriter or dealer, the U.S. Prospectus and all amendments and
supplements to such documents, in each case in such quantities as CSFBC
requests. The U.S. Prospectus shall be so furnished on or prior to 3:00
P.M., New York time, on the business day following the later of the
execution and delivery of this Agreement or the Effective Time of the
Initial Registration Statement. All other such documents shall be so
furnished as soon as available. The Company will pay the expenses of
printing and distributing to the Underwriters all such documents.
(f) The Company will arrange for the qualification of the Offered
Securities for sale under the laws of such jurisdictions in the United
States as CSFBC designates and will continue such qualifications in effect
so long as required for the distribution.
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<PAGE>
(g) During the period of five years hereafter, the Company will
furnish to the Representatives and, upon request, to each of the other
Underwriters, as soon as practicable after the end of each fiscal year, a
copy of its annual report to stockholders for such year; and the Company
will furnish to the Representatives (i) as soon as available, a copy of
each report and any definitive proxy statement of the Company filed with
the Commission under the Securities Exchange Act of 1934 or mailed to
stockholders, and (ii) from time to time, such other information concerning
the Company as CSFBC may reasonably request.
(h) The Company will pay all expenses incident to the performance of
its obligations under this Agreement and will reimburse the Underwriters
(if and to the extent incurred by them) for any filing fees and other
expenses (including fees and disbursements of counsel) incurred by them in
connection with qualification of the Offered Securities for sale under the
laws of such jurisdictions in the United States as CSFBC designates and the
printing of memoranda relating thereto, for the filing fee of the National
Association of Securities Dealers, Inc. relating to the Offered Securities,
for any travel expenses of the Company's officers and employees and any
other expenses of the Company in connection with attending or hosting
meetings with prospective purchasers of the Offered Securities and for
expenses incurred in preparing, printing and distributing preliminary
prospectuses and the Prospectuses (including any amendments and supplements
thereto) to the Underwriters.
(i) For a period of 90 days after the date of the initial public
offering of the Offered Securities, the Company will not offer, sell,
contract to sell, pledge or otherwise dispose of, directly or indirectly,
or file with the Commission a registration statement under the Act relating
to, any additional shares of its Securities or securities convertible into
or exchangeable or exercisable for any shares of its Securities, or
publicly disclose the intention to make any such offer, sale, pledge,
disposal or filing, without the prior written consent of CSFBC, except
issuances of Securities pursuant to the exercise of options outstanding on
the date hereof, grants of employee stock options pursuant to the terms of
a plan in effect on the date hereof, issuances of Securities pursuant to
the exercise of such options or issuances of Securities pursuant to the
Company's dividend reinvestment plan.
6. Conditions of the Obligations of the Underwriters. The
obligations of the several Underwriters to purchase and pay for the U.S. Firm
Securities on the First Closing Date and the U.S. Optional Securities to be
purchased on each Optional Closing Date will be subject to the accuracy of the
representations and warranties on the part of the Company herein, to the
accuracy of the statements of Company officers made pursuant to the provisions
hereof, to the performance by the Company of its obligations hereunder and to
the following additional conditions precedent:
(a) (1) The Representatives shall have received a letter, dated the
date of delivery thereof (which, if the Effective Time of the Initial
Registration Statement is prior to the execution and delivery of this
Agreement, shall be on or prior to the date of this Agreement or, if the
Effective Time of the Initial Registration Statement is subsequent to the
execution and delivery of this Agreement, shall be prior to the filing of
the amendment or post-effective amendment to the registration statement to
be filed shortly prior to such Effective Time), of Ernst & Young LLP
confirming that they are independent public accountants within the meaning
of the Act and the applicable published Rules and Regulations thereunder
and stating to the effect that:
(i) in their opinion the financial statements and schedules of
the Company examined by them and included in the Registration
Statements comply as to form in all material respects with the
applicable accounting requirements of the Act and the related
published Rules and Regulations;
(ii) they have performed the procedures specified by the
American Institute of Certified Public Accountants for a review of
interim financial information for the first quarter of 1996 as
9
<PAGE>
described in Statement of Auditing Standards No. 71, Interim Financial
Information, on the unaudited financial statements of the Company, if
any, included in the Registration Statements;
(iii) on the basis of the review referred to in clause (ii)
above, a reading of the latest available interim financial statements
of the Company, inquiries of officials of the Company who have
responsibility for financial and accounting matters and other
specified procedures, nothing came to their attention that caused them
to believe that:
(A) the unaudited financial statements of the Company, if
any, included in the Registration Statements do not comply as to
form in all material respects with the applicable accounting
requirements of the Act and the related published Rules and
Regulations or any material modifications should be made to such
unaudited financial statements for them to be in conformity with
generally accepted accounting principles;
(B) if any unaudited "capsule" information of the Company
is included in the Prospectuses, the unaudited consolidated
sales, net earnings and net earnings per share amounts for the
three-month periods ended March 25, 1995 and March __, 1996
included in the Prospectuses do not agree with the amounts set
forth in the unaudited consolidated financial statements of the
Company for those same periods or were not determined on a basis
substantially consistent with that of the corresponding amounts
in the audited statements of income of the Company;
(C) the unaudited pro forma financial information included
in the Prospectuses does not comply as to form in all material
respects with the applicable requirements of Rule 11-02 of
Regulation S-X of the Commission, or the pro forma adjustments
have not been properly applied to the historical amounts in the
compilation of those statements;
(D) at the date of the latest available balance sheet of
the Company read by such accountants, or at a subsequent
specified date not more than five days prior to the date of this
Agreement, there was any change in the capital stock or any
increase in short-term indebtedness or long-term debt of the
Company and its consolidated subsidiaries or, at the date of the
latest available balance sheet of the Company read by such
accountants, there was any decrease in consolidated total assets,
as compared with amounts shown on the latest balance sheet of the
Company included in the Prospectuses; or
(E) for the period from the closing date of the latest
income statement of the Company included in the Prospectuses to
the closing date of the latest available income statement of the
Company read by such accountants there were any decreases, as
compared with the corresponding period of the previous year, in
consolidated sales, manufacturing margins, or in the total or per
common share amounts of net earnings;
except in all cases set forth in clauses (D) and (E) above for
changes, increases or decreases which the Prospectuses disclose
have occurred or may occur or which are described in such letter;
and
(iv) they have compared specified dollar amounts (or percentages
derived from such dollar amounts) and other financial information
contained in the Registration Statements (in each case to the extent
that such dollar amounts, percentages and other financial information
are derived from the general accounting records of the Company and its
subsidiaries subject to the internal controls of the Company's
accounting system or are derived directly from such records by
analysis or computation) with the results obtained from inquiries, a
reading of such general accounting
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<PAGE>
records and other procedures specified in such letter and have found
such dollar amounts, percentages and other financial information to be
in agreement with such results, except as otherwise specified in such
letter.
(2) The Representatives shall have received a letter, dated the
date of delivery thereof (which, if the Effective Time of the Initial
Registration Statement is prior to the execution and delivery of this
Agreement, shall be on or prior to the date of this Agreement or, if
the Effective Time of the Initial Registration Statement is subsequent
to the execution and delivery of this Agreement, shall be prior to the
filing of the amendment or post-effective amendment to the
registration statement to be filed shortly prior to the Effective
Time), of Arthur Andersen LLP confirming that they are independent
public accountants with respect to the D-M-E business ("D-M-E") of The
Fairchild Corporation within the meaning of the Act and the applicable
published Rules and Regulations thereunder and stating in effect that:
(i) in their opinion the financial statements and schedules
and summary of earnings of D-M-E examined by them and included in
the Registration Statements comply in form in all material
respects with the applicable accounting requirements of the Act
and the related published Rules and Regulations;
(ii) on the basis of a reading of the latest available
interim financial statements of D-M-E through January 27, 1996,
inquiries of officials of D-M-E who have responsibility for
financial and accounting matters and other specified procedures,
nothing came to their attention that caused them to believe that:
(A) the unaudited financial statements of D-M-E
included in the Registration Statements do not comply in
form in all material respects with the applicable accounting
requirements of the Act and the related published Rules and
Regulations or any material modifications should be made to
such unaudited financial statements for them to be in
conformity with generally accepted accounting principles;
(B) if any unaudited "capsule" information of D-M-E is
included in the Prospectuses, the unaudited consolidated
sales, earnings from continuing operations and net earnings
amounts for the six month period ended December 31, 1994 and
December 31, 1995 included in such Prospectuses do not agree
with the amounts set forth in the unaudited consolidated
financial statements of D-M-E for those same periods or were
not determined on a basis substantially consistent with that
of the corresponding amounts in the audited statements of
income of D-M-E;
(C) at the date of the latest available balance sheet
of D-M-E read by such accountants there was any change in
the capital stock or any increase in short-term indebtedness
or long-term debt of D-M-E and its consolidated subsidiaries
or, at the date of the latest available balance sheet of D-
M-E read by such accountants, there was any decrease in
consolidated total assets, as compared with amounts shown on
the latest balance sheet of D-M-E included in the
Prospectuses; or
(D) for the period from the closing date of the latest
income statement of D-M-E included in the Prospectuses to
the closing date of the latest available income statement of
D-M-E read by such accountants, there were any decreases,
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<PAGE>
as compared with the corresponding period of the previous
year, in consolidated sales, manufacturing profit, or in the
total or per share amounts of earnings from continuing
operations before extraordinary items and cumulative effect
of changes in methods of accounting, or net earnings;
except in all cases set forth in clauses (C) and (D) above
for changes, increases or decreases which the Prospectuses
disclose have occurred or may occur or which are described
in such letter; and
(iii) they have compared specified dollar amounts (or
percentages derived from such dollar amounts) and other financial
information contained in the Registration Statements (in each
case to the extent that such dollar amounts, percentages and
other financial information are derived from the general
accounting records of D-M-E and its subsidiaries subject to the
internal controls of D-M-E's accounting system or are derived
directly from such records by analysis or computation) with the
results obtained from inquiries, a reading of such general
accounting records and other procedures specified in such letter
and have found such dollar amounts, percentages and other
financial information to be in agreement with such results,
except as otherwise specified in such letter.
For purposes of this subsection (a), (i) if the Effective Time of the
Initial Registration Statement is subsequent to the execution and delivery
of this Agreement, "Registration Statements" shall mean the initial
registration statement as proposed to be amended by the amendment or post-
effective amendment to be filed shortly prior to its Effective Time, (ii)
if the Effective Time of the Initial Registration Statement is prior to the
execution and delivery of this Agreement but the Effective Time of the
Additional Registration Statement is subsequent to such execution and
delivery, "Registration Statements" shall mean the Initial Registration
Statement and the additional registration statement as proposed to be filed
or as proposed to be amended by the post-effective amendment to be filed
shortly prior to its Effective Time, and (iii) "Prospectuses" shall mean
the prospectuses included in the Registration Statements. All financial
statements and schedules included in material incorporated by reference
into the Prospectuses shall be deemed included in the Registration
Statements for purposes of this subsection (a).
(b) If the Effective Time of the Initial Registration Statement is
not prior to the execution and delivery of this Agreement, such Effective
Time shall have occurred not later than 10:00 P.M., New York time, on the
date of this Agreement or such later date as shall have been consented to
by CSFBC. If the Effective Time of the Additional Registration Statement
(if any) is not prior to the execution and delivery of this Agreement, such
Effective Time shall have occurred not later than 10:00 P.M., New York
time, on the date of this Agreement or, if earlier, the time either
Prospectus is printed and distributed to any Underwriter or Manager, or
shall have occurred at such later date as shall have been consented to by
CSFBC. If the Effective Time of the Initial Registration Statement is prior
to the execution and delivery of this Agreement, each of the Prospectuses
shall have been filed with the Commission in accordance with the Rules and
Regulations and Section 5(a) of this Agreement. Prior to such Closing
Date, no stop order suspending the effectiveness of a Registration
Statement shall have been issued and no proceedings for that purpose shall
have been instituted or, to the knowledge of the Company or the
Representatives, shall be contemplated by the Commission.
(c) Subsequent to the execution and delivery of this Agreement, there
shall not have occurred (i) any change, or any development or event
involving a prospective change, in the condition (financial or other),
business, properties or results of operations of the Company or its
subsidiaries which, in the judgment of a majority in interest of the
Underwriters including the Representatives, is material and adverse and
makes it impractical or inadvisable to proceed with completion of the
public offering or the
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<PAGE>
sale of and payment for the U.S. Securities; (ii) any downgrading in the
rating of any debt securities or preferred stock of the Company by any
"nationally recognized statistical rating organization" (as defined for
purposes of Rule 436(g) under the Act), or any public announcement that any
such organization has under surveillance or review its rating of any debt
securities or preferred stock of the Company (other than an announcement
with positive implications of a possible upgrading, and no implication of a
possible downgrading, of such rating); (iii) any suspension or limitation
of trading in securities generally on the New York Stock Exchange, or any
setting of minimum prices for trading on such exchange, or any suspension
of trading of any securities of the Company on any exchange or in the over-
the-counter market; (iv) any banking moratorium declared by U.S. Federal or
New York authorities; or (v) any outbreak or escalation of major
hostilities in which the United States is involved, any declaration of war
by Congress or any other substantial national or international calamity or
emergency if, in the judgment of a majority in interest of the Underwriters
including the Representatives, the effect of any such outbreak, escalation,
declaration, calamity or emergency makes it impractical or inadvisable to
proceed with completion of the public offering or the sale of and payment
for the U.S. Securities.
(d) The Representatives shall have received an opinion, dated such
Closing Date, of Wayne F. Taylor, Vice-President, General Counsel and
Secretary of the Company, to the effect that:
(i) Each of the Company and its subsidiaries has been duly
incorporated and is an existing corporation in good standing under the
laws of the jurisdiction of its incorporation or organization with
corporate power and authority to own its properties and conduct its
business as described in the Prospectuses; and each of the Company and
its subsidiaries is duly qualified to do business as a foreign
corporation in good standing in all other jurisdictions in which it
owns or leases substantial properties or in which the conduct of its
business requires such qualification, except where the failure to be
so qualified would not have a material adverse effect on the business
of the Company and its subsidiaries taken as a whole;
(ii) There are no contracts, agreements or understandings known
to such counsel between the Company and any person granting such
person the right to require the Company to file a registration
statement under the Act with respect to any securities of the Company
owned or to be owned by such person or to require the Company to
include such securities in the securities registered pursuant to a
Registration Statement or in any securities being registered pursuant
to any other registration statement filed by the Company under the
Act, except for the Registration Rights Agreement dated April [_____],
1996 by and between the Company and [__________], as Trustee for the
Cincinnati Milacron Retirement Plan;
(iii) No consent, approval, authorization or order of, or filing
with, any governmental agency or body or any court is required for the
consummation of the transactions contemplated by this Agreement or the
Subscription Agreement in connection with the issuance or sale of the
Offered Securities by the Company, except such as have been obtained
and made under the Act and such as may be required under state
securities laws;
(iv) The execution, delivery and performance of this Agreement
and the Subscription Agreement and the issuance and sale of the
Offered Securities and the use of the proceeds of the sale of the
Offered Securities by the Company in the manner contemplated by the
Prospectuses will not result in a breach or violation of any of the
terms and provisions of, or constitute a default under, any statute,
any rule, regulation or order of any governmental agency or body or
any court having jurisdiction over the Company or any subsidiary of
the Company or any of their properties, or any material agreement or
instrument to which the Company or any such subsidiary is a party or
by which the Company or any such subsidiary is bound or to which any
of the properties of the Company or any such subsidiary is subject, or
the charter or by-laws of the Company or any
13
<PAGE>
such subsidiary except where such breach, violation or default (other
than with respect to the use of the proceeds of the sale of the
Offered Securities by the Company in the manner contemplated by the
Prospectuses) would not have a material adverse effect on the
enforceability of this Agreement or the Subscription Agreement or on
the Company's ability to perform this Agreement or the Subscription
Agreement in accordance with their respective terms or on the business
of the Company or any "significant subsidiary" (as such term is
defined in Rule 1-02 of Regulation S-X of the Rules and Regulations)
of the Company, and the Company has full power and authority to
authorize, issue and sell the Offered Securities as contemplated by
this Agreement and the Subscription Agreement, respectively;
(v) Except as described in the Prospectuses, there are no
outstanding (i) securities or obligations of the Company convertible
into or exchangeable for any shares of capital stock of the Company,
(ii) warrants, rights or options to subscribe for or purchase from the
Company any such capital stock or any such convertible or exchangeable
securities or obligations, or (iii) obligations of the Company to
issue such shares, any such convertible or exchangeable securities or
obligations, or any such warrants, rights or obligations;
(vi) Except as described in the Prospectuses, the Company and
its subsidiaries have good and marketable title to all real properties
and all other material properties and assets owned by them, in each
case free from liens, encumbrances and defects except such as do not
have a material adverse effect on the business of the Company and its
subsidiaries taken as a whole; and except as described in the
Prospectuses, the Company and its subsidiaries hold any material
leased real or personal property under valid and enforceable leases
except such as do not have a material adverse effect on the business
of the Company and its subsidiaries taken as a whole;
(vii) The Company has an authorized capitalization as set forth
in the Prospectuses; and all of the issued shares of capital stock of
each subsidiary of the Company have been duly and validly authorized
and issued, are fully paid and non-assessable; and (except for
directors' qualifying shares) the capital stock of each subsidiary
owned by the Company, directly or indirectly, is owned, free and clear
of all liens, encumbrances, equities or claims, except such as do not
materially and adversely affect the value of such shares or interfere
with the conduct of the business of the issuer thereof or the
Company's control over such shares or such business;
(viii) The Offered Securities delivered on such Closing Date and
all other outstanding shares of the Common Stock of the Company have
been duly authorized, and validly issued, are fully paid and non-
assessable, and conform to the description thereof in the Prospectuses
and the stockholders of the Company have no preemptive rights with
respect to the Offered Securities;
(ix) The issue and sale of the Offered Securities, the use of
the proceeds of the sales of the Offered Securities by the Company in
the manner contemplated by the Prospectuses and the compliance by the
Company with all of the provisions of this Agreement and the
Subscription Agreement and the consummation of the transactions herein
and therein contemplated will not conflict with or result in a breach
of any of the terms or provisions of, or constitute a default under,
any material indenture, mortgage, deed of trust, loan agreement or
other material agreement or instrument to which the Company is a party
or by which the Company is bound or to which any of the property or
assets of the Company is subject, nor will such action result in any
violation of the provisions of the charter or the by-laws of the
Company or any material statute or any material order, rule or
regulation of any court or governmental agency or body having
jurisdiction over the Company or any of its properties, and no
consent, approval, authorization, order, registration or qualification
of or with any such court or governmental agency or body is required
for the issue and sale of the Offered Securities or the consummation
by the
14
<PAGE>
Company of the other transactions contemplated by this Agreement or
the Subscription Agreement except such as have been or will have been
prior to each Closing Date obtained under the Act and such consents,
approvals, authorizations, registrations or qualifications as may be
required under state securities or Blue Sky laws in connection with
the purchase and distribution of the U.S. Securities by the
Underwriters;
(x) Other than as may be set forth or contemplated in the
Prospectuses, there are no legal or governmental proceedings pending
to which the Company or any of its subsidiaries is a party or of which
any property of the Company or any of its subsidiaries is the subject
which might reasonably be expected to have, individually or in the
aggregate, a material adverse effect on the consolidated financial
position, shareholders' equity or results of operations of the Company
and its subsidiaries, or would materially and adversely affect the
ability of the Company to perform its obligations under this Agreement
or the Subscription Agreement, or which are otherwise material in the
context of the sale of the Offered Securities and, no such proceedings
are threatened or, to such counsel's knowledge, contemplated; and
(xi) There are no legal or governmental proceedings which are
required to be described in the Registration Statements or
Prospectuses which are not described as required therein, and there
are no contracts or documents of a character required to be described
in the Registration Statements or Prospectuses or to be filed as
exhibits to the Registration Statements which are not described and
filed as required.
(e) The Representatives shall have received an opinion or statement
(with respect to clause (v) below), dated such Closing Date, of Cravath,
Swaine & Moore, special counsel for the Company, to the effect that:
(i) The Offered Securities delivered on such Closing Date have
been duly authorized and validly issued, are fully paid and non-
assessable and conform to the description thereof contained in the
Prospectuses; the stockholders of the Company have no preemptive
rights with respect to the Offered Securities; and the provisions of
the Company's charter, conform to the description thereof contained in
the Prospectuses;
(ii) The Initial Registration Statement was declared effective
under the Act as of the date and time specified in such opinion, the
Additional Registration Statement (if any) was filed and became
effective under the Act as of the date and time (if determinable)
specified in such opinion, each of the Prospectuses either were filed
with the Commission pursuant to the subparagraph of Rule 424(b)
specified in such opinion on the date specified therein or were
included in the Initial Registration Statement or the Additional
Registration Statement (as the case may be), and, to the best of the
knowledge of such counsel, no stop order suspending the effectiveness
of a Registration Statement or any part thereof has been issued and no
proceedings for that purpose have been instituted or are pending or
contemplated under the Act, and each Registration Statement and each
of the Prospectuses, and each amendment or supplement thereto, as of
their respective effective or issue dates, complied as to form in all
material respects with the requirements of the Act and the Rules and
Regulations; the descriptions in the Registration Statements and the
Prospectuses of statutes, the Company's charter and by-laws, legal and
governmental proceedings and contracts and other documents are
accurate and fairly present the information required to be shown; and
such counsel do not know of any legal or governmental proceedings
required to be described in a Registration Statement or the
Prospectuses which are not described as required or of any contracts
or documents of a character required to be described in a Registration
Statement or the Prospectuses or to be filed as exhibits to a
Registration Statement which are not described and
15
<PAGE>
filed as required; it being understood that such counsel need express
no opinion as to the financial statements or other financial data
contained in a Registration Statement, or the Prospectuses;
(iii) This Agreement and the Subscription Agreement have been
duly authorized, executed and delivered by the Company;
(iv) The issue and sale of the Offered Securities, the use of
the proceeds of the sale of the Offered Securities by the Company in
the manner described under the heading "Use of Proceeds" in the
Prospectus and the performance by the Company of its obligations under
this Agreement and the Subscription Agreement will not conflict with
or result in a breach of any of the terms or provisions of, or
constitute a default under, any of the following agreements: (i) the
Amended and Restated Revolving Credit Agreement, dated as of December
31, 1994, among the Company, Cincinnati Milacron Kunststoffmaschinen
Europe GmbH, the lenders listed therein and Bankers Trust Company, as
agent, as amended by Amendment Number One thereto dated as of May 31,
1995, Amendment Number Two thereto dated as of January 23, 1996 and
Amendment Number Three thereto dated as of April [ ], 1996, (ii) the
Indenture dated as of July 1, 1985, as supplemented, between the
Company and BankAmerica National Trust Company, as Trustee, and (iii)
the Second Amended and Restated Receivables Purchase Agreement dated
as of January 26, 1996 among the Company and Cincinnati Milacron
Commercial Corp., as Seller, Valenite Inc., as sub-servicer, and
Cincinnati Milacron Marketing Company, as initial Servicer, and Market
Street Funding Corporation, as Purchaser, and PNC Bank, National
Association, as Administrator, and (iv) the Receivables Purchase
Agreement, dated as of December 23, 1993, as amended by the First
Amendment thereto dated as of February 18, 1994, between Valenite
Inc., as seller and initial servicer, and PNC Bank, Ohio, National
Association, as purchaser, and acknowledged by the Company; and
(v) Such counsel have no reason to believe that any part of a
Registration Statement or any amendment thereto, as of its effective
date or as of such Closing Date, contained any untrue statement of a
material fact or omitted to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading or that either of the Prospectuses or any amendment or
supplement thereto, as of its issue date or as of such Closing Date,
contained any untrue statement of a material fact or omitted to state
any material fact necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not
misleading, it being understood that such counsel need express no
statement as to the financial statements or other financial data
contained in a Registration Statement, or the Prospectuses.
(f) The Representatives shall have received from Mayer, Brown &
Platt, counsel for the Underwriters, such opinion or opinions, dated such
Closing Date, with respect to the incorporation of the Company, the
validity of the Offered Securities delivered on such Closing Date, the
Registration Statements, the Prospectuses and other related matters as the
Representatives may require, and the Company shall have furnished to such
counsel such documents as they request for the purpose of enabling them to
pass upon such matters.
(g) The Representatives shall have received a certificate, dated such
Closing Date, of the President or any Vice-President and a principal
financial or accounting officer of the Company in which such officers, to
the best of their knowledge after reasonable investigation, shall state
that: the representations and warranties of the Company in this Agreement
are true and correct; the Company has complied with all agreements and
satisfied all conditions on its part to be performed or satisfied hereunder
at or prior to such Closing Date; no stop order suspending the
effectiveness of any Registration Statement has been issued and no
proceedings for that purpose have been instituted or are contemplated by
the Commission; the Additional Registration Statement (if any) satisfying
the requirements of subparagraphs
16
<PAGE>
(1) and (3) of Rule 462(b) was filed pursuant to Rule 462(b), including
payment of the applicable filing fee in accordance with Rule 111(a) or (b)
under the Act, prior to the time either Prospectus was printed and
distributed to any Underwriter or Manager; and, subsequent to the date of
the most recent financial statements in the Prospectuses, there has been no
material adverse change, nor any development or event involving a
prospective material adverse change, in the condition (financial or other),
business, properties or results of operations of the Company and its
subsidiaries taken as a whole except as set forth in or contemplated by the
Prospectuses or as described in such certificate.
(h) The Representatives shall have received a letter, dated such
Closing Date, of (i) Ernst & Young LLP which meets the requirements of
subsection (a)(1) of this Section, and (ii) Arthur Andersen LLP which meets
the requirements of subsection (a)(2) of this Section, except that the
specified date referred to in such subsections will be a date not more than
five days prior to such Closing Date for the purposes of this subsection.
(i) On such Closing Date, the Managers shall have purchased the
International Firm Securities or the International Optional Securities, as
the case may be, pursuant to the Subscription Agreement.
The Company will furnish the Representatives with such conformed copies of such
opinions, certificates, letters and documents as the Representatives reasonably
request. CSFBC may in its sole discretion waive on behalf of the Underwriters
compliance with any conditions to the obligations of the Underwriters hereunder,
whether in respect of an Optional Closing Date or otherwise.
7. Indemnification and Contribution. (a) The Company will indemnify
and hold harmless each Underwriter against any losses, claims, damages or
liabilities, joint or several, to which such Underwriter may become subject,
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
any Registration Statement, either of the Prospectuses, or any amendment or
supplement thereto, or any related preliminary prospectus, or arise out of or
are based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and will reimburse each Underwriter for any legal or other expenses
reasonably incurred by such Underwriter in connection with investigating or
defending any such loss, claim, damage, liability or action as such expenses are
incurred; provided, however, that the Company will not be liable in any such
case to the extent that any such loss, claim, damage or liability arises out of
or is based upon an untrue statement or alleged untrue statement in or omission
or alleged omission from any of such documents in reliance upon and in
conformity with written information furnished to the Company by any Underwriter
through the Representatives specifically for use therein, it being understood
and agreed that the only information furnished by any Underwriter consists of
the information described as such in subsection (b) below.
(b) Each Underwriter will severally and not jointly indemnify and
hold harmless the Company against any losses, claims, damages or liabilities to
which the Company may become subject, under the Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in any Registration Statement, either of the
Prospectuses, or any amendment or supplement thereto, or any related preliminary
prospectus, or arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Company by such Underwriter
through the Representatives specifically for use therein, and will reimburse any
legal or other expenses reasonably incurred by the Company in connection with
investigating or defending any such loss, claim, damage, liability or action as
such expenses are incurred, it being understood and agreed that the only such
information furnished by any Underwriter consists of the following information
in the U.S. Prospectus furnished on behalf of each Underwriter: the last
paragraph at the
17
<PAGE>
bottom of the cover page concerning the terms of the offering by the
Underwriters, the legend concerning over-allotments and stabilizing on the
inside front cover page and the concession and reallowance figures appearing in
the fourth paragraph under the caption "Underwriting".
(c) Promptly after receipt by an indemnified party under this Section
of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under
subsection (a) or (b) above, notify the indemnifying party of the commencement
thereof; but the omission so to notify the indemnifying party will not relieve
it from any liability which it may have to any indemnified party otherwise than
under subsection (a) or (b) above. In case any such action is brought against
any indemnified party and it notifies the indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate therein and, to
the extent that it may wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel satisfactory to such
indemnified party (who shall not, except with the consent of the indemnified
party, be counsel to the indemnifying party), and after notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof, the indemnifying party will not be liable to such indemnified
party under this Section for any legal or other expenses subsequently incurred
by such indemnified party in connection with the defense thereof other than
reasonable costs of investigation. No indemnifying party shall, without the
prior written consent of the indemnified party, effect any settlement of any
pending or threatened action in respect of which any indemnified party is or
could have been a party and indemnity could have been sought hereunder by such
indemnified party unless such settlement includes an unconditional release of
such indemnified party from all liability on any claims that are the subject
matter of such action.
(d) If the indemnification provided for in this Section is
unavailable or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above, then each indemnifying party shall contribute to
the amount paid or payable by such indemnified party as a result of the losses,
claims, damages or liabilities referred to in subsection (a) or (b) above (i) in
such proportion as is appropriate to reflect the relative benefits received by
the Company on the one hand and the Underwriters on the other from the offering
of the U.S. Securities or (ii) if the allocation provided by clause (i) above is
not permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (i) above but also the
relative fault of the Company on the one hand and the Underwriters on the other
in connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one hand
and the Underwriters on the other shall be deemed to be in the same proportion
as the total net proceeds from the offering of the U.S. Securities (before
deducting expenses) received by the Company bear to the total underwriting
discounts and commissions received by the Underwriters. The relative fault
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the Company or the
Underwriters and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such untrue statement or omission. The
amount paid by an indemnified party as a result of the losses, claims, damages
or liabilities referred to in the first sentence of this subsection (d) shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any action or
claim which is the subject of this subsection (d). Notwithstanding the
provisions of this subsection (d), no Underwriter shall be required to
contribute any amount in excess of the amount by which the total price at which
the U.S. Securities underwritten by it and distributed to the public were
offered to the public exceeds the amount of any damages which such Underwriter
has otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations in this subsection (d) to
contribute are several in proportion to their respective underwriting
obligations and not joint.
(e) The obligations of the Company under this Section shall be in
addition to any liability which the Company may otherwise have and shall extend,
upon the same terms and conditions, to each person, if any, who controls any
Underwriter within the meaning of the Act; and the obligations of the
Underwriters under this Section
18
<PAGE>
shall be in addition to any liability which the respective Underwriters may
otherwise have and shall extend, upon the same terms and conditions, to each
director of the Company, to each officer of the Company who has signed a
Registration Statement and to each person, if any, who controls the Company
within the meaning of the Act.
8. Default of Underwriters. If any Underwriter or Underwriters
default in their obligations to purchase U.S. Securities hereunder on either the
First or any Optional Closing Date and the aggregate number of shares of U.S.
Securities that such defaulting Underwriter or Underwriters agreed but failed to
purchase does not exceed 10% of the total number of shares of U.S. Securities
that the Underwriters are obligated to purchase on such Closing Date, CSFBC may
make arrangements satisfactory to the Company for the purchase of such U.S.
Securities by other persons, including any of the Underwriters, but if no such
arrangements are made by such Closing Date the non-defaulting Underwriters shall
be obligated severally, in proportion to their respective commitments hereunder,
to purchase the U.S. Securities that such defaulting Underwriters agreed but
failed to purchase on such Closing Date. If any Underwriter or Underwriters so
default and the aggregate number of shares of U.S. Securities with respect to
which such default or defaults occur exceeds 10% of the total number of shares
of U.S. Securities that the Underwriters are obligated to purchase on such
Closing Date and arrangements satisfactory to CSFBC and the Company for the
purchase of such U.S. Securities by other persons are not made within 36 hours
after such default, this Agreement will terminate without liability on the part
of any non-defaulting Underwriter or the Company, except as provided in Section
9 (provided that if such default occurs with respect to U.S. Optional Securities
after the First Closing Date, this Agreement will not terminate as to the U.S.
Firm Securities or any U.S. Optional Securities purchased prior to such
termination). As used in this Agreement, the term "Underwriter" includes any
person substituted for an Underwriter under this Section. Nothing herein will
relieve a defaulting Underwriter from liability for its default.
9. Survival of Certain Representations and Obligations. The
respective indemnities, agreements, representations, warranties and other
statements of the Company or its officers and of the several Underwriters set
forth in or made pursuant to this Agreement will remain in full force and
effect, regardless of any investigation, or statement as to the results thereof,
made by or on behalf of any Underwriter, the Company or any of their respective
representatives, officers or directors or any controlling person, and will
survive delivery of and payment for the U.S. Securities. If this Agreement is
terminated pursuant to Section 8 or if for any reason the purchase of the U.S.
Securities by the Underwriters is not consummated, the Company shall remain
responsible for the expenses to be paid or reimbursed by it pursuant to Section
5 and the respective obligations of the Company and the Underwriters pursuant to
Section 7 shall remain in effect and if any U.S. Securities have been purchased
hereunder the representations and warranties in Section 2 and all obligations
under Section 5 shall also remain in effect. If the purchase of the U.S.
Securities by the Underwriters is not consummated for any reason other than
solely because of the termination of this Agreement pursuant to Section 8 or the
occurrence of any event specified in clause (iii), (iv), or (v) of Section 6(c),
the Company will reimburse the Underwriters for all out-of-pocket expenses
(including fees and disbursements of counsel) reasonably incurred by them in
connection with the offering of the U.S. Securities.
10. Notices. All communications hereunder will be in writing and, if
sent to the Underwriters, will be mailed, delivered or telegraphed and confirmed
to the Representatives, c/o CS First Boston Corporation, Park Avenue Plaza, New
York, N.Y. 10055, Attention: Investment Banking Department -- Transactions
Advisory Group, or, if sent to the Company, will be mailed, delivered or
telegraphed and confirmed to it at 4701 Marburg Avenue, Cincinnati, Ohio 45209,
Attention: Secretary; provided, however, that any notice to an Underwriter
pursuant to Section 7 will be mailed, delivered or telegraphed and confirmed to
such Underwriter.
11. Successors. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective successors and the officers
and directors and controlling persons referred to in Section 7, and no other
person will have any right or obligation hereunder.
19
<PAGE>
12. Representation of Underwriters. The Representatives will act for
the several Underwriters in connection with this financing, and any action under
this Agreement taken by the Representatives jointly or by CSFBC will be binding
upon all the Underwriters.
13. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same Agreement.
14. APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD
TO PRINCIPLES OF CONFLICTS OF LAWS.
The Company hereby submits to the non-exclusive jurisdiction of the
Federal and state courts in the Borough of Manhattan in The City of New York in
any suit or proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby.
20
<PAGE>
If the foregoing is in accordance with the Representatives'
understanding of our agreement, kindly sign and return to the Company one of the
counterparts hereof, whereupon it will become a binding agreement between the
Company and the several Underwriters in accordance with its terms.
Very truly yours,
Cincinnati Milacron Inc.
By.....................................
Ronald D. Brown
Vice President - Finance
The foregoing Underwriting Agreement is hereby confirmed
and accepted as of the date first above written.
CS First Boston Corporation
BT Securities Corporation
Merrill Lynch, Pierce, Fenner
& Smith Incorporated
J.P. Morgan Securities Inc.
Acting on behalf of themselves and as the Repre-
sentatives of the several Underwriters.
By CS First Boston Corporation
By...........................
21
<PAGE>
SCHEDULE A
NUMBER OF
UNDERWRITER U.S. FIRM SECURITIES
----------- --------------------
CS First Boston Corporation.........................
BT Securities Corporation...........................
Merrill Lynch, Pierce, Fenner & Smith Incorporated..
J.P. Morgan Securities Inc..........................
---------
Total........................................ 4,400,000
=========
22
<PAGE>
EXHIBIT 1.2
DRAFT 4/3/96
5,500,000 SHARES
CINCINNATI MILACRON INC.
COMMON STOCK ($1.00 PAR VALUE)
SUBSCRIPTION AGREEMENT
----------------------
London, England
___________ __, 1996
To: CS First Boston Limited
Bankers Trust International PLC
Credit Lyonnais Securities
Merrill Lynch International Limited
J.P. Morgan Securities Ltd.
c/o: CS First Boston Limited ("CSFBL")
One Cabot Square
London, England E14 4QJ
Dear Sirs:
1. Introductory. Cincinnati Milacron Inc., a Delaware corporation
("Company"), proposes to issue and sell ("International Offering") to the
several Managers named in Schedule A hereto ("Managers") 1,100,000 shares
("International Firm Securities") of its Common Stock, $1.00 par value
("Securities").
It is understood that the Company is concurrently entering into an
Underwriting Agreement, dated the date hereof ("Underwriting Agreement"), with
certain United States underwriters listed in Schedule A thereto (the "U.S.
Underwriters"), for whom CS First Boston Corporation ("CSFBC"), BT Securities
Corporation, Merrill Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan
Securities Inc. are acting as representatives (the "U.S. Representatives"),
relating to the concurrent offering and sale of 4,400,000 shares of Securities
("U.S. Firm Securities") in the United States and Canada ("U.S. Offering").
In addition, as set forth below the Company proposes to issue and sell (i)
to the U.S. Underwriters, at the option of the U.S. Underwriters, an aggregate
of not more than 660,000 additional shares of Securities ("U.S. Optional
Securities") and (ii) to the Managers, at the option of the Managers, an
aggregate of not more than 165,000 additional shares of Securities
("International Optional Securities"). The U.S. Firm Securities and the U.S.
Optional Securities are hereinafter called the "U.S. Securities"; the
International Firm Securities and the International Optional Securities are
hereinafter called the "International Securities"; the U.S. Firm Securities and
the International Firm Securities are hereinafter called the "Firm Securities";
the U.S. Optional Securities and the International Optional Securities are
hereinafter called the "Optional Securities". The U.S. Securities and the
International Securities are collectively referred to as the "Offered
Securities". To provide for the coordination of their activities, the U.S.
Underwriters and the Managers have entered into an Agreement Between U.S.
Underwriters and Managers which permits them, among other things, to sell the
Offered Securities to each other for purposes of resale.
<PAGE>
The Company hereby agrees with the several Managers as follows:
2. Representations and Warranties of the Company. The Company represents
and warrants to, and agrees with, the several Managers that:
(a) A registration statement (No. 333-01739) relating to the Offered
Securities, including a form of prospectus relating to the U.S. Securities
and a form of prospectus relating to the International Securities being
offered in the International Offering, has been filed with the Securities
and Exchange Commission ("Commission") and either (i) has been declared
effective under the Securities Act of 1933 ("Act") and is not proposed to
be amended or (ii) is proposed to be amended by amendment or post-effective
amendment. If such registration statement (the "initial registration
statement") has been declared effective, either (A) an additional
registration statement (the "additional registration statement") relating
to the Offered Securities may have been filed with the Commission pursuant
to Rule 462(b) ("Rule 462(b)") under the Act and, if so filed, has become
effective upon filing pursuant to such Rule and the Offered Securities all
have been duly registered under the Act pursuant to the initial
registration statement and, if applicable, the additional registration
statement or (B) such an additional registration statement is proposed to
be filed with the Commission pursuant to Rule 462(b) and will become
effective upon filing pursuant to such Rule and upon such filing the
Offered Securities will all have been duly registered under the Act
pursuant to the initial registration statement and such additional
registration statement. If the Company does not propose to amend the
initial registration statement or, if an additional registration statement
has been filed and the Company does not propose to amend it, and if any
post-effective amendment to either such registration statement has been
filed with the Commission prior to the execution and delivery of this
Agreement, the most recent amendment (if any) to each such registration
statement has been declared effective by the Commission or has become
effective upon filing pursuant to Rule 462(c) ("Rule 462(c)") under the Act
or, in the case of the additional registration statement, Rule 462(b). For
purposes of this Agreement, "Effective Time" with respect to the initial
registration statement or, if filed prior to the execution and delivery of
this Agreement, the additional registration statement means (i) if the
Company has advised CSFBL that it does not propose to amend such
registration statement, the date and time as of which such registration
statement, or the most recent post-effective amendment thereto (if any)
filed prior to the execution and delivery of this Agreement, was declared
effective by the Commission or has become effective upon filing pursuant to
Rule 462(c), or (ii) if the Company has advised CSFBL that it proposes to
file an amendment or post-effective amendment to such registration
statement, the date and time as of which such registration statement, as
amended by such amendment or post-effective amendment, as the case may be,
is declared effective by the Commission. If an additional registration
statement has not been filed prior to the execution and delivery of this
Agreement but the Company has advised CSFBL that it proposes to file one,
"Effective Time" with respect to such additional registration statement
means the date and time as of which such registration statement is filed
and becomes effective pursuant to Rule 462(b). "Effective Date" with
respect to the initial registration statement or the additional
registration statement (if any) means the date of the Effective Time
thereof. The initial registration statement, as amended at its Effective
Time, including all material incorporated by reference therein, including
all information contained in the additional registration statement (if any)
and deemed to be a part of the initial registration statement as of the
Effective Time of the additional registration statement pursuant to the
General Instructions of the Form on which it is filed and including all
information (if any) deemed to be a part of the initial registration
statement as of its Effective Time pursuant to Rule 430A(b) ("Rule
430A(b)") under the Act, is hereinafter referred to as the "Initial
Registration Statement". The additional registration statement, as amended
at its Effective Time, including the contents of the initial registration
statement incorporated by reference therein and including all information
(if any) deemed to be a part of the additional registration statement as of
its Effective Time pursuant to Rule 430A(b), is hereinafter referred to as
the "Additional Registration Statement". The Initial Registration Statement
and the Additional Registration Statement are hereinafter referred to
collectively as the "Registration Statements" and individually as a
"Registration Statement". The form of prospectus relating to the U.S.
Securities and the
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<PAGE>
form of prospectus relating to the International Securities, each as first
filed with the Commission pursuant to and in accordance with Rule 424(b)
("Rule 424(b)") under the Act or (if no such filing is required) as
included in the Registration Statement, including all material incorporated
by reference in each such prospectus, are hereinafter referred to as the
"U.S. Prospectus" and the "International Prospectus", respectively, and
collectively as the "Prospectuses". No document has been or will be
prepared or distributed in reliance on Rule 434 under the Act.
(b) If the Effective Time of the Initial Registration Statement is
prior to the execution and delivery of this Agreement: (i) on the
Effective Date of the Initial Registration Statement, the Initial
Registration Statement conformed in all respects to the requirements of the
Act and the rules and regulations of the Commission ("Rules and
Regulations") and did not include any untrue statement of a material fact
or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, (ii) on the
Effective Date of the Additional Registration Statement (if any), each
Registration Statement conformed, or will conform, in all respects to the
requirements of the Act and the Rules and Regulations and did not include,
or will not include, any untrue statement of a material fact and did not
omit, or will not omit, to state any material fact required to be stated
therein or necessary to make the statements therein not misleading, and
(iii) on the date of this Agreement, the Initial Registration Statement
and, if the Effective Time of the Additional Registration Statement is
prior to the execution and delivery of this Agreement, the Additional
Registration Statement each conforms, and at the time of filing of each of
the Prospectuses pursuant to Rule 424(b) or (if no such filing is required)
at the Effective Date of the Additional Registration Statement in which the
Prospectuses are included, each Registration Statement and each of the
Prospectuses will conform, in all respects to the requirements of the Act
and the Rules and Regulations, and none of such documents includes, or will
include, any untrue statement of a material fact or omits, or will omit, to
state any material fact required to be stated therein or necessary to make
the statements therein not misleading. If the Effective Time of the Initial
Registration Statement is subsequent to the execution and delivery of this
Agreement: on the Effective Date of the Initial Registration Statement, the
Initial Registration Statement and each of the Prospectuses will conform in
all respects to the requirements of the Act and the Rules and Regulations,
none of such documents will include any untrue statement of a material fact
or will omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, and no Additional
Registration Statement has been or will be filed. The two preceding
sentences do not apply to statements in or omissions from a Registration
Statement or either of the Prospectuses based upon written information
furnished to the Company by any Underwriter through the Representatives or
by any Manager through CSFBL specifically for use therein, it being
understood and agreed that the only such information is that described as
such in Section 7(b).
(c) There are no contracts, agreements or understandings between the
Company and any person granting such person the right to require the
Company to file a registration statement under the Act with respect to any
securities of the Company owned or to be owned by such person or to require
the Company to include such securities in the securities registered
pursuant to a Registration Statement or in any securities being registered
pursuant to any other registration statement filed by the Company under the
Act, except for the Registration Rights Agreement dated April [___], 1996
by and between the Company and [______], as Trustee for the Cincinnati
Milacron Retirement Plan.
(d) Except as described in the Prospectuses, there are no outstanding
(i) securities or obligations of the Company convertible into or
exchangeable for any shares of capital stock of the Company, (ii) warrants,
rights or options to subscribe for or purchase from the Company any such
capital stock or any such convertible or exchangeable securities or
obligations, or (iii) obligations of the Company to issue such shares, any
such convertible or exchangeable securities or obligations, or any such
warrants, rights or obligations.
(e) Except as disclosed in the Prospectuses, since the date of the
latest audited financial statements
3
<PAGE>
included in the Prospectuses there has been no material adverse change, nor
any development or event involving a prospective material adverse change,
in the condition (financial or other), business, properties or results of
operations of the Company and its subsidiaries taken as a whole, and,
except as disclosed in or contemplated by the Prospectuses, there has been
no dividend or distribution of any kind declared, paid or made by the
Company on any class of its capital stock; since the respective dates as of
which information is given in each Registration Statement and the
Prospectuses, there has not been any change in the capital stock (other
than issuances of capital stock upon exercise of options and stock
appreciation rights, upon earn-outs of performance shares (if any) and upon
conversions of convertible securities and under employee incentive and
benefit plans, in each case which were outstanding on the date of this
Agreement) of the Company.
(f) Except as disclosed in the Prospectuses, the Company and its
subsidiaries have good and marketable title to all real properties and all
other material properties and assets owned by them, in each case free from
liens, encumbrances and defects except such as do not have a material
adverse effect on the business of the Company and its subsidiaries taken as
a whole; and except as disclosed in the Prospectuses, the Company and its
subsidiaries hold any leased real or personal property under valid and
enforceable leases with no exceptions except such as do not have a material
adverse effect on the business of the Company and its subsidiaries taken as
a whole.
(g) The Company has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the State of Delaware,
with power and authority (corporate and other) to own its properties and
conduct its business as described in the Prospectuses, and the Company is
duly qualified to do business as a foreign corporation in good standing in
each other jurisdiction in which it owns or leases properties, or conducts
its business, except where the failure so to qualify would not have a
material adverse effect upon the business of the Company and its
subsidiaries taken as a whole; and each of the Company's subsidiaries has
been duly incorporated and is validly existing as a corporation in good
standing under the laws of its jurisdiction of incorporation and is duly
qualified to do business as a foreign corporation in good standing in each
other jurisdiction in which it owns or leases properties, or conducts its
business, except where the failure so to qualify would not have a material
adverse effect upon the business of the Company and its subsidiaries taken
as a whole.
(h) The Company has an authorized capitalization as set forth in the
Prospectuses; and all of the issued shares of capital stock of each
subsidiary of the Company have been duly and validly authorized and issued,
are fully paid and non-assessable; and (except for directors' qualifying
shares) the capital stock of each subsidiary owned by the Company, directly
or indirectly, is owned free and clear of all liens, encumbrances, equities
or claims, except such as do not materially and adversely affect the value
of such shares or interfere with the conduct of the business of the issuer
thereof or the Company's control over such shares or such business.
(i) The Offered Securities and all other outstanding shares of
capital stock of the Company have been duly authorized; all outstanding
shares of capital stock of the Company are, and, when the Offered
Securities have been delivered and paid for in accordance with this
Agreement and the Underwriting Agreement on each Closing Date (as defined
below), such Offered Securities will have been, validly issued, fully paid
and nonassessable and will conform to the description thereof contained in
the Prospectuses; and the stockholders of the Company have no preemptive
rights with respect to the Securities.
(j) The issue and sale of the Offered Securities, the use of the
proceeds of the sale of the Offered Securities by the Company in the manner
contemplated by the Prospectuses and the compliance by the Company with all
of the provisions of this Agreement and the Underwriting Agreement and the
consummation of the transactions herein and therein contemplated will not
conflict with or result in a breach of any of the terms or provisions of,
or constitute a default under, any material indenture, mortgage,
4
<PAGE>
deed of trust, loan agreement or other agreement or instrument to which the
Company is a party or by which the Company is bound or to which any of the
properties or assets of the Company are subject, nor will such action
result in any violation of the provisions of the Restated Certificate of
Incorporation, as amended (the "charter"), or the by-laws of the Company or
any material statute or any material order, rule or regulation of any court
or governmental agency or body having jurisdiction over the Company or any
of its properties.
(k) No consent, approval, authorization or order of, or filing with,
any governmental agency or body or any court is required for the
consummation of the transactions contemplated by this Agreement or the
Underwriting Agreement in connection with the issuance or sale of the
Offered Securities by the Company, except such as have been obtained and
made under the Act and such as may be required under state securities laws.
(l) The financial statements of the Company included in each
Registration Statement and the Prospectuses present fairly the financial
position of the Company and its consolidated subsidiaries as of the dates
shown and their results of operations and cash flows for the periods shown,
and such financial statements have been prepared in conformity with the
generally accepted accounting principles in the United States applied on a
consistent basis; and the assumptions used in preparing the pro forma
financial statements included in each Registration Statement and the
Prospectuses provide a reasonable basis for presenting the significant
effects directly attributable to the transactions or events described
therein, the related pro forma adjustments give appropriate effect to those
assumptions, and the pro forma columns therein reflect the proper
application of those adjustments to the corresponding historical financial
statement amounts.
(m) Other than as may be set forth or contemplated in the
Prospectuses, there are no legal or governmental proceedings pending to
which the Company or any of its subsidiaries is a party or of which any
property of the Company or any of its subsidiaries is the subject which
might reasonably be expected to have, individually or in the aggregate, a
material adverse effect on the consolidated financial position,
shareholders' equity or results of operations of the Company and its
subsidiaries, or would materially and adversely affect the ability of the
Company to perform its obligations under this Agreement or the Subscription
Agreement, or which are otherwise material in the context of the sale of
the Offered Securities and, no such proceedings are threatened or, to the
Company's knowledge, contemplated.
(n) Neither the Company nor any of its affiliates does business with
the government of Cuba or with any person or affiliate located in Cuba
within the meaning of Section 517.075, Florida Statutes and the Company
agrees to comply with such Section if prior to the completion of the
distribution of the Offered Securities it commences doing such business.
(o) This Agreement and the Underwriting Agreement have been duly
authorized, executed and delivered by the Company.
(p) The Company and its subsidiaries possess adequate certificates,
authorities or permits issued by appropriate governmental agencies or
bodies necessary to conduct the business now operated by them and have not
received any notice of proceedings relating to the revocation or
modification of any such certificate, authority or permit that, if
determined adversely to the Company or any of its subsidiaries, would
individually or in the aggregate have a material adverse effect on the
Company and its subsidiaries taken as a whole.
(q) No labor dispute with the employees of the Company or any
subsidiary exists or, to the knowledge of the Company, is imminent that
might have a material adverse effect on the Company and its subsidiaries
taken as a whole.
5
<PAGE>
(r) The Company and its subsidiaries own, possess or can acquire on
reasonable terms, adequate trademarks, trade names and other rights to
inventions, know-how, patents, copyrights, confidential information and
other intellectual property (collectively, "intellectual property rights")
necessary to conduct the business now operated by them, or presently
employed by them, and have not received any notice of infringement of or
conflict with asserted rights of others with respect to any intellectual
property rights that, if determined adversely to the Company or any of its
subsidiaries, would individually or in the aggregate have a material
adverse effect on the Company and its subsidiaries taken as a whole.
(s) Except as disclosed in the Prospectuses, neither the Company nor
any of its subsidiaries is in violation of any statute, any rule,
regulation, decision or order of any governmental agency or body or any
court, domestic or foreign, relating to the use, disposal or release of
hazardous or toxic substances or relating to the protection or restoration
of the environment or human exposure to hazardous or toxic substances
(collectively, "environmental laws"), owns or operates any real property
contaminated with any substance that is subject to any environmental laws,
is liable for any off-site disposal or contamination pursuant to any
environmental laws, or is subject to any claim relating to any
environmental laws, which violation, contamination, liability or claim
would individually or in the aggregate have a material adverse effect on
the Company and its subsidiaries taken as a whole; and the Company is not
aware of any pending investigation which might lead to such a claim.
(t) Except as disclosed in the Prospectuses, there are no contracts,
agreements or understandings between the Company and any person that would
give rise to a valid claim against the Company or any Underwriter or
Manager for a brokerage commission, finder's fee or other like payment.
(u) The Company is not and, after giving effect to the offering and
sale of the Offered Securities and the application of the proceeds thereof
as described in the Prospectuses, will not be an "investment company" as
defined in the Investment Company Act of 1940.
(v) The Offered Securities have been approved for listing on The New
York Stock Exchange subject to notice of issuance.
3. Purchase, Sale and Delivery of Offered Securities. On the basis of
the representations, warranties and agreements herein contained, but subject to
the terms and conditions herein set forth, the Company agrees to sell to the
Managers, and the Managers agree, severally and not jointly, to purchase from
the Company, at a purchase price of U.S.$______ per share, the respective number
of shares of International Firm Securities set forth opposite the names of the
Managers in Schedule A hereto.
The Company will deliver the International Firm Securities to CSFBL for the
accounts of the Managers, against payment of the purchase price in funds
available on the same day by wire transfer to the account of the Company, at a
bank acceptable to CSFBL or by official Federal Reserve Bank check or checks
drawn to the order of the Company at the office of Cravath, Swaine & Moore, 825
Eighth Avenue, New York, New York 10019 at 10:00 A.M., New York time, on
__________, 1996, or at such other time not later than seven full business days
thereafter as CSFBL and the Company determine, such time being herein referred
to as the "First Closing Date". For purposes of Rule 15c6-1 under the
Securities Exchange Act of 1934, the First Closing Date (if later than the
otherwise applicable settlement date) shall be the settlement date for payment
of funds and delivery of securities for all the Offered Securities sold pursuant
to the U.S. Offering and the International Offering. The certificates for the
International Firm Securities so to be delivered will be in definitive form, in
such denominations and registered in such names as CSFBL requests and will be
made available for checking and packaging at the office of CSFBL, One Cabot
Square, London, England E14 4QJ, at least 24 hours prior to the First Closing
Date.
In addition, upon written notice from CSFBC given to the Company from time
to time not more than 30 days subsequent to the date of the Prospectuses, the
Managers may purchase all or less than all of the International
6
<PAGE>
Optional Securities at the purchase price per Security to be paid for the
International Firm Securities. The International Optional Securities to be
purchased by the Managers on any Optional Closing Date shall be in the same
proportion to all the Optional Securities to be purchased by the Managers and
U.S. Underwriters on such Optional Closing Date as the International Firm
Securities bear to all the Firm Securities. The Company agrees to sell to the
Managers such International Optional Securities and the Managers agree,
severally and not jointly, to purchase such International Optional Securities.
Such International Optional Securities shall be purchased for the account of
each Manager in the same proportion as the number of shares of International
Firm Securities set forth opposite such Manager's name bears to the total number
of shares of International Firm Securities (subject to adjustment by CSFBC to
eliminate fractions) and may be purchased by the Managers only for the purpose
of covering over-allotments made in connection with the sale of the
International Firm Securities. No Optional Securities shall be sold or delivered
unless the International Firm Securities and the U.S. Firm Securities previously
have been, or simultaneously are, sold and delivered. The right to purchase the
Optional Securities or any portion thereof may be exercised from time to time
and to the extent not previously exercised may be surrendered and terminated at
any time upon notice by CSFBC on behalf of the Managers and the U.S.
Underwriters to the Company. It is understood that CSFBC is authorized to make
payment for and accept delivery of such Optional Securities on behalf of the
U.S. Underwriters and Managers pursuant to the terms of CSFBC's instructions to
the Company.
Each time for the delivery of and payment for the International Optional
Securities, being herein referred to as an "Optional Closing Date", which may be
the First Closing Date (the First Closing Date and each Optional Closing Date,
if any, being sometimes referred to as a "Closing Date"), shall be determined by
CSFBC but shall be not later than five full business days after written notice
of election to purchase Optional Securities is given. The Company will deliver
the International Optional Securities being purchased on each Optional Closing
Date to CSFBL for the accounts of the several Managers, against payment of the
purchase price therefor in funds available on the same day by wire transfer to
the account of the Company at a bank acceptable to CSFBL or by official Federal
Reserve Bank check or checks drawn to the order of the Company at the above
office of Cravath, Swaine & Moore. The certificates for the International
Optional Securities will be in definitive form, in such denominations and
registered in such names as CSFBL requests upon reasonable notice prior to such
Optional Closing Date and will be made available for checking and packaging at
the above office of CSFBL at a reasonable time in advance of such Optional
Closing Date.
The Company will pay to the Managers as aggregate compensation for their
commitments hereunder and for their services in connection with the purchase of
the International Securities and the management of the offering thereof, if the
sale and delivery of the International Securities to the Managers provided
herein is consummated, an amount equal to U.S. $_____ per International Security
purchased, which may be divided among the Managers in such proportions as they
may determine. Such payment will be made on the First Closing Date in the case
of the International Firm Securities and on each Optional Closing Date in the
case of the International Optional Securities sold to the Manager on such
Closing Date, in each case by way of deduction by the Managers of said amount
from the purchase price for the International Securities referred to above.
4. Offering by Managers. It is understood that the several Managers
propose to offer the International Securities for sale to the public as set
forth in the International Prospectus.
In connection with the distribution of the International Securities, the
Managers, through a stabilizing manager, may over-allot or effect transactions
on any exchange, in any over-the-counter market or otherwise which stabilize or
maintain the market prices of the International Securities at levels other than
those which might otherwise prevail, but in such event and in relation thereto,
the Managers will act for themselves and not as agents of the Company, and any
loss resulting from over-allotment and stabilization will be borne, and any
profit arising therefrom will be beneficially retained, by the Managers. Such
stabilizing, if commenced, may be discontinued at any time.
5. Certain Agreements of the Company. The Company agrees with the
several Managers that:
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<PAGE>
(a) If the Effective Time of the Initial Registration Statement is
prior to the execution and delivery of this Agreement, the Company will
file each of the Prospectuses with the Commission pursuant to and in
accordance with subparagraph (1) (or, if applicable and if consented to by
CSFBL, subparagraph (4)) of Rule 424(b) not later than the earlier of (A)
the second business day following the execution and delivery of this
Agreement or (B) the fifteenth business day after the Effective Date of the
Initial Registration Statement.
The Company will advise CSFBL promptly of any such filing pursuant to
Rule 424(b). If the Effective Time of the Initial Registration Statement is
prior to the execution and delivery of this Agreement and an additional
registration statement is necessary to register a portion of the Offered
Securities under the Act but the Effective Time thereof has not occurred as
of such execution and delivery, the Company will file the additional
registration statement or, if filed, will file a post-effective amendment
thereto with the Commission pursuant to and in accordance with Rule 462(b)
on or prior to 10:00 P.M., New York time, on the date of this Agreement or,
if earlier, on or prior to the time either Prospectus is printed and
distributed to any Manager or U.S. Underwriter, or will make such filing at
such later date as shall have been consented to by CSFBL.
(b) The Company will advise CSFBL promptly of any proposal to amend
or supplement the initial or any additional registration statement as filed
or either of the related prospectuses or the Initial Registration
Statement, the Additional Registration Statement (if any) or either of the
Prospectuses and will not effect such amendment or supplementation without
CSFBL's prior consent, which shall not be unreasonably withheld; and the
Company will also advise CSFBL promptly of the effectiveness of each
Registration Statement (if its Effective Time is subsequent to the
execution and delivery of this Agreement) and of any amendment or
supplementation of a Registration Statement or either of the Prospectuses
and of the institution by the Commission of any stop order proceedings in
respect of a Registration Statement and will use its best efforts to
prevent the issuance of any such stop order and to obtain as soon as
possible its lifting, if issued.
(c) If, at any time when a prospectus relating to the Offered
Securities is required to be delivered under the Act in connection with
sales by any U.S. Underwriter, Manager or dealer, any event occurs as a
result of which either or both of the Prospectuses as then amended or
supplemented would include an untrue statement of a material fact or omit
to state any material fact necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading, or
if it is necessary at any time to amend either or both of the Prospectuses
to comply with the Act, the Company will promptly notify CSFBL of such
event and will promptly prepare and file with the Commission, at its own
expense, an amendment or supplement which will correct such statement or
omission or an amendment which will effect such compliance. Neither CSFBL's
consent to, nor the Managers' delivery of, any such amendment or supplement
shall constitute a waiver of any of the conditions set forth in Section 6.
(d) As soon as practicable, but not later than the Availability Date
(as defined below), the Company will make generally available to its
securityholders an earnings statement covering a period of at least 12
months beginning after the Effective Date of the Initial Registration
Statement (or, if later, the Effective Date of the Additional Registration
Statement) which will satisfy the provisions of Section 11(a) of the Act.
For the purpose of the preceding sentence, "Availability Date" means the
45th day after the end of the fourth fiscal quarter following the fiscal
quarter that includes such Effective Date, except that, if such fourth
fiscal quarter is the last quarter of the Company's fiscal year,
"Availability Date" means the 90th day after the end of such fourth fiscal
quarter.
(e) The Company will furnish to the Managers copies of the
Registration Statement (five of which will be signed and will include all
exhibits), each preliminary prospectus relating to the International
Securities, and, until completion of the distribution of the International
Securities as determined by CSFBL,
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<PAGE>
the International Prospectus and all amendments and supplements to such
documents, in each case in such quantities as CSFBL requests. The
International Prospectus shall be so furnished on or prior to 3:00 P.M.,
New York time, on the business day following the later of the execution and
delivery of this Agreement or the Effective Time of the Initial
Registration Statement. All other such documents shall be so furnished as
soon as available. The Company will pay the expenses of printing and
distributing to the Managers all such documents.
(f) No action has been or, prior to the completion of the
distribution of the Offered Securities, will be taken by the Company in any
jurisdiction outside the United States and Canada that would permit a
public offering of the Offered Securities, or possession or distribution of
the International Prospectus, or any amendment or supplement thereto, or
any related preliminary prospectus issued in connection with the offering
of the Offered Securities, or any other offering material, in any country
or jurisdiction where action for that purpose is required.
(g) During the period of five years hereafter, the Company will
furnish to CSFBL and, upon request, to each of the other Managers, as soon
as practicable after the end of each fiscal year, a copy of its annual
report to stockholders for such year; and the Company will furnish to CSFBL
(i) as soon as available, a copy of each report and any definitive proxy
statement of the Company filed with the Commission under the Securities
Exchange Act of 1934 or mailed to stockholders, and (ii) from time to time,
such other information concerning the Company as CSFBL may reasonably
request.
(h) The Company will pay all expenses incident to the performance of
its obligations under this Agreement and will reimburse the Managers (if
and to the extent incurred by them) for the filing fee of the National
Association of Securities Dealers, Inc. relating to the Offered Securities,
for any travel expenses of the Company's officers and employees and any
other expenses of the Company in connection with attending or hosting
meetings with prospective purchasers of the Offered Securities and for
expenses incurred in distributing preliminary prospectuses and the
Prospectuses (including any amendments and supplements thereto) to the
Managers.
(i) For a period of 90 days after the date of the initial public
offering of the Offered Securities, the Company will not offer, sell,
contract to sell, pledge or otherwise dispose of, directly or indirectly,
or file with the Commission a registration statement under the Act relating
to, any additional shares of its Securities or securities convertible into
or exchangeable or exercisable for any shares of its Securities, or
publicly disclose the intention to make any such offer, sale, pledge,
disposal or filing, without the prior written consent of CSFBC, except
issuances of Securities pursuant to the exercise of options outstanding on
the date hereof, grants of employee stock options pursuant to the terms of
a plan in effect on the date hereof, issuances of Securities pursuant to
the exercise of such options or issuances of Securities pursuant to the
Company's dividend reinvestment plan.
6. Conditions of the Obligations of the Managers. The obligations of the
several Managers to purchase and pay for the International Firm Securities on
the First Closing Date and the International Optional Securities to be purchased
on each Optional Closing Date will be subject to the accuracy of the
representations and warranties on the part of the Company herein, to the
accuracy of the statements of Company officers made pursuant to the provisions
hereof, to the performance by the Company of its obligations hereunder and to
the following additional conditions precedent:
(a) (1) The Managers shall have received a letter, dated the date of
delivery thereof (which, if the Effective Time of the Initial Registration
Statement is prior to the execution and delivery of this Agreement, shall
be on or prior to the date of this Agreement or, if the Effective Time of
the Initial Registration Statement is subsequent to the execution and
delivery of this Agreement, shall be prior to the filing of the amendment
or post-effective amendment to the registration statement to be filed
shortly prior
9
<PAGE>
to such Effective Time), of Ernst & Young LLP in the agreed form.
(2) The Managers shall have received a letter, dated the date of
delivery thereof (which, if the Effective Time of the Initial Registration
Statement is prior to the execution and delivery of this Agreement, shall
be on or prior to the date of this Agreement or, if the Effective Time of
the Initial Registration Statement is subsequent to the execution and
delivery of this Agreement, shall be prior to the filing of the amendment
or post-effective amendment to the registration statement to be filed
shortly prior to such Effective Time), of Arthur Anderson LLP in the agreed
form.
(b) If the Effective Time of the Initial Registration Statement is
not prior to the execution and delivery of this Agreement, such Effective
Time shall have occurred not later than 10:00 P.M., New York time, on the
date of this Agreement or such later date as shall have been consented to
by CSFBL. If the Effective Time of the Additional Registration Statement
(if any) is not prior to the execution and delivery of this Agreement, such
Effective Time shall have occurred not later than 10:00 P.M., New York
time, on the date of this Agreement or, if earlier, the time either
Prospectus is printed and distributed to any Manager or U.S. Underwriter,
or shall have occurred at such later date as shall have been consented to
by CSFBL. If the Effective Time of the Initial Registration Statement is
prior to the execution and delivery of this Agreement, each of the
Prospectuses shall have been filed with the Commission in accordance with
the Rules and Regulations and Section 5(a) of this Agreement. Prior to
such Closing Date, no stop order suspending the effectiveness of a
Registration Statement shall have been issued and no proceedings for that
purpose shall have been instituted or, to the knowledge of the Company or
the Managers, shall be contemplated by the Commission.
(c) Subsequent to the execution and delivery of this Agreement, there
shall not have occurred (A) a change in U.S. or international financial,
political or economic conditions or currency exchange rates or exchange
controls as would, in the judgement of CSFBL, be likely to prejudice
materially the success of the proposed issue, sale or distribution of the
International Securities, whether in the primary market or in respect of
dealings in the secondary market, or (B)(i) any change, or any development
or event involving a prospective change, in the condition (financial or
other), business, properties or results of operations of the Company or its
subsidiaries which, in the judgment of CSFBL, is material and adverse and
makes it impractical or inadvisable to proceed with completion of the
public offering or the sale of and payment for the International
Securities; (ii) any downgrading in the rating of any debt securities or
preferred stock of the Company by any "nationally recognized statistical
rating organization" (as defined for purposes of Rule 436(g) under the
Act), or any public announcement that any such organization has under
surveillance or review its rating of any debt securities or preferred stock
of the Company (other than an announcement with positive implications of a
possible upgrading, and no implication of a possible downgrading, of such
rating); (iii) any suspension or limitation of trading in securities
generally on the New York Stock Exchange, or any setting of minimum prices
for trading on such exchange, or any suspension of trading of any
securities of the Company on any exchange or in the over-the-counter
market; (iv) any banking moratorium declared by U.S. Federal or New York
authorities; or (v) any outbreak or escalation of major hostilities in
which the United States is involved, any declaration of war by the United
States Congress or any other substantial national or international calamity
or emergency if, in the judgment of CSFBL, the effect of any such outbreak,
escalation, declaration, calamity or emergency makes it impractical or
inadvisable to proceed with completion of the public offering or the sale
of and payment for the International Securities.
(d) The Managers shall have received an opinion and statement, each
dated such Closing Date, of Cravath, Swaine & Moore, special counsel for
the Company, in the agreed form.
(e) The Managers shall have received an opinion, dated such Closing
Date, of Wayne F. Taylor, General Counsel and Secretary of the Company, in
the agreed form.
10
<PAGE>
(f) The Managers shall have received from Mayer, Brown & Platt,
counsel for the Managers, such opinion or opinions, dated such Closing
Date, with respect to the incorporation of the Company, the validity of the
Offered Securities delivered on such Closing Date, the Registration
Statement, the Prospectuses and other related matters as the Managers may
require, and the Company shall have furnished to such counsel such
documents as they request for the purpose of enabling them to pass upon
such matters.
(g) The Managers shall have received a certificate, dated such
Closing Date, of the President or any Vice-President and a principal
financial or accounting officer of the Company in which such officers, to
the best of their knowledge after reasonable investigation, shall state
that: the representations and warranties of the Company in this Agreement
are true and correct; the Company has complied with all agreements and
satisfied all conditions on its part to be performed or satisfied hereunder
at or prior to such Closing Date; no stop order suspending the
effectiveness of any Registration Statement has been issued and no
proceedings for that purpose have been instituted or are contemplated by
the Commission; the Additional Registration Statement (if any) satisfying
the requirements of subparagraphs (1) and (3) of Rule 462(b) was filed
pursuant to Rule 462(b), including payment of the applicable filing fee in
accordance with Rule 111(a) or (b) under the Act, prior to the time either
Prospectus was printed and distributed to any Manager or U.S. Underwriter;
and, subsequent to the date of the most recent financial statements in the
Prospectuses, there has been no material adverse change, nor any
development or event involving a prospective material adverse change, in
the condition (financial or other), business, properties or results of
operations of the Company and its subsidiaries taken as a whole except as
set forth in or contemplated by the Prospectuses or as described in such
certificate.
(h) The Managers shall have received a letter, dated such Closing
Date, of (i) Ernst & Young LLP which meets the requirements of subsection
(a)(1) of this Section, and (ii) Arthur Anderson LLP which meets the
requirements of subsection (a)(2) of this Section, except that the
specified date referred to in such subsections will be a date not more than
five days prior to such Closing Date for the purposes of this subsection.
(i) On such Closing Date, the U.S. Underwriters shall have purchased
the U.S. Firm Securities or the U.S. Optional Securities, as the case may
be, pursuant to the Underwriting Agreement.
Documents described as being "in the agreed form" are documents which are in the
forms which have been initialed for the purpose of identification by Mayer,
Brown & Platt, copies of which are held by the Company and CSFBL with such
changes as CSFBL may approve. The Company will furnish the Managers with such
conformed copies of such opinions, certificates, letters and documents as the
Managers reasonably request. CSFBL may in its sole discretion waive on behalf of
the Managers compliance with any conditions to the obligations of the Managers
hereunder, whether in respect of an Optional Closing Date or otherwise.
7. Indemnification and Contribution.
(a) The Company will indemnify and hold harmless each Manager against
any losses, claims, damages or liabilities, joint or several, to which such
Manager may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in any Registration Statement,
either of the Prospectuses, or any amendment or supplement thereto, or any
related preliminary prospectus, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not
misleading, and will reimburse each Manager for any legal or other expenses
reasonably incurred by such Manager in connection with investigating or
defending any such loss, claim, damage, liability or action as such
expenses are incurred; provided, however, that the Company will not be
liable in any such case to the
11
<PAGE>
extent that any such loss, claim, damage or liability arises out of or is
based upon an untrue statement or alleged untrue statement in or omission
or alleged omission from any of such documents in reliance upon and in
conformity with written information furnished to the Company by any Manager
through CSFBL specifically for use therein, it being understood and agreed
that the only information furnished by any Manager consists of the
information described as such in subsection (b) below.
(b) Each Manager will severally and not jointly indemnify and hold
harmless the Company against any losses, claims, damages or liabilities to
which the Company may become subject, under the Act or otherwise, insofar
as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any Registration
Statement, either of the Prospectuses, or any amendment or supplement
thereto, or any related preliminary prospectus, or arise out of or are
based upon the omission or the alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent, but only to the extent,
that such untrue statement or alleged untrue statement or omission or
alleged omission was made in reliance upon and in conformity with written
information furnished to the Company by such Manager through CSFBL
specifically for use therein, and will reimburse any legal or other
expenses reasonably incurred by the Company in connection with
investigating or defending any such loss, claim, damage, liability or
action as such expenses are incurred, it being understood and agreed that
the only such information furnished by any Manager consists of the
following information in the International Prospectus furnished on behalf
of each Manager: the last paragraph at the bottom of the cover page
concerning the terms of the offering by the Managers, the legend concerning
over-allotments and stabilizing on the inside front cover page and the
concession and reallowance figures appearing in the fifth paragraph under
the caption "Subscription and Sale".
(c) Promptly after receipt by an indemnified party under this Section
of notice of the commencement of any action, such indemnified party will,
if a claim in respect thereof is to be made against the indemnifying party
under subsection (a) or (b) above, notify the indemnifying party of the
commencement thereof; but the omission so to notify the indemnifying party
will not relieve it from any liability which it may have to any indemnified
party otherwise than under subsection (a) or (b) above. In case any such
action is brought against any indemnified party and it notifies the
indemnifying party of the commencement thereof, the indemnifying party will
be entitled to participate therein and, to the extent that it may wish,
jointly with any other indemnifying party similarly notified, to assume the
defense thereof, with counsel satisfactory to such indemnified party (who
shall not, except with the consent of the indemnified party, be counsel to
the indemnifying party), and after notice from the indemnifying party to
such indemnified party of its election so to assume the defense thereof,
the indemnifying party will not be liable to such indemnified party under
this Section for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than
reasonable costs of investigation. No indemnifying party shall, without the
prior written consent of the indemnified party, effect any settlement of
any pending or threatened action in respect of which any indemnified party
is or could have been a party and indemnity could have been sought
hereunder by such indemnified party unless such settlement includes an
unconditional release of such indemnified party from all liability on any
claims that are the subject matter of such action.
(d) If the indemnification provided for in this Section is
unavailable or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above, then each indemnifying party shall contribute
to the amount paid or payable by such indemnified party as a result of the
losses, claims, damages or liabilities referred to in subsection (a) or (b)
above (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company on the one hand and the Managers on the
other from the offering of the International Securities or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law,
in such proportion as is appropriate to reflect not only the relative
benefits referred to in clause (i) above but also the relative fault of the
Company on the one hand and the Managers
12
<PAGE>
on the other in connection with the statements or omissions which resulted
in such losses, claims, damages or liabilities as well as any other
relevant equitable considerations. The relative benefits received by the
Company on the one hand and the Managers on the other shall be deemed to be
in the same proportion as the total net proceeds from the offering of the
International Securities (before deducting expenses) received by the
Company bear to the total underwriting discounts and commissions received
by the Managers. The relative fault shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or the Managers and the
parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such untrue statement or omission. The amount paid by
an indemnified party as a result of the losses, claims, damages or
liabilities referred to in the first sentence of this subsection (d) shall
be deemed to include any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any
action or claim which is the subject of this subsection (d).
Notwithstanding the provisions of this subsection (d), no Manager shall be
required to contribute any amount in excess of the amount by which the
total price at which the International Securities underwritten by it and
distributed to the public were offered to the public exceeds the amount of
any damages which such Manager has otherwise been required to pay by reason
of such untrue or alleged untrue statement or omission or alleged omission.
No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The Managers'
obligations in this subsection (d) to contribute are several in proportion
to their respective underwriting obligations and not joint.
(e) The obligations of the Company under this Section shall be in
addition to any liability which the Company may otherwise have and shall
extend, upon the same terms and conditions, to each person, if any, who
controls any Manager within the meaning of the Act; and the obligations of
the Managers under this Section shall be in addition to any liability which
the respective Managers may otherwise have and shall extend, upon the same
terms and conditions, to each director of the Company, to each officer of
the Company who has signed a Registration Statement and to each person, if
any, who controls the Company within the meaning of the Act.
8. Default of Managers. If any Manager or Managers default in their
obligations to purchase International Securities hereunder on either the First
or any Optional Closing Date and the aggregate number of shares of International
Securities that such defaulting Manager or Managers agreed but failed to
purchase does not exceed 10% of the total number of shares of International
Securities that the Managers are obligated to purchase on such Closing Date,
CSFBL may make arrangements satisfactory to the Company for the purchase of such
International Securities by other persons, including any of the Managers, but if
no such arrangements are made by such Closing Date the non-defaulting Managers
shall be obligated severally, in proportion to their respective commitments
hereunder, to purchase the International Securities that such defaulting
Managers agreed but failed to purchase on such Closing Date. If any Manager or
Managers so default and the aggregate number of shares of International
Securities with respect to which such default or defaults occur exceeds 10% of
the total number of shares of International Securities that the Managers are
obligated to purchase on such Closing Date and arrangements satisfactory to
CSFBL and the Company for the purchase of such International Securities by other
persons are not made within 36 hours after such default, this Agreement will
terminate without liability on the part of any non-defaulting Manager or the
Company, except as provided in Section 9 (provided that if such default occurs
with respect to International Optional Securities after the First Closing Date,
this Agreement will not terminate as to the International Firm Securities or any
International Optional Securities purchased prior to such termination). As used
in this Agreement, the term "Manager" includes any person substituted for a
Manager under this Section. Nothing herein will relieve a defaulting Manager
from liability for its default.
9. Survival of Certain Representations and Obligations. The respective
indemnities, agreements, representations, warranties and other statements of the
Company or its officers and of the several Managers set forth
13
<PAGE>
in or made pursuant to this Agreement will remain in full force and effect,
regardless of any investigation, or statement as to the results thereof, made by
or on behalf of any Manager, the Company or any of their respective
representatives, officers or directors or any controlling person, and will
survive delivery of and payment for the International Securities. If this
Agreement is terminated pursuant to Section 8 or if for any reason the purchase
of the International Securities by the Managers is not consummated, the Company
shall remain responsible for the expenses to be paid or reimbursed by it
pursuant to Section 5 and the respective obligations of the Company and the
Managers pursuant to Section 7 shall remain in effect and if any International
Securities have been purchased hereunder the representations and warranties in
Section 2 and all obligations under Section 5 shall also remain in effect. If
the purchase of the International Securities by the Managers is not consummated
for any reason other than solely because of the termination of this Agreement
pursuant to Section 8 or the occurrence of any event specified in Section
6(c)(A) or clause (iii), (iv), or (v) of Section 6(c)(B), the Company will
reimburse the Managers for all out-of-pocket expenses (including fees and
disbursements of counsel) reasonably incurred by them in connection with the
offering of the International Securities.
10. Notices. All communications hereunder will be in writing and, if sent
to the Managers, will be mailed, delivered or telexed and confirmed to CSFBL at
One Cabot Square, London E14 4QJ England, Attention: Company Secretary, or, if
sent to the Company, will be mailed, delivered or telegraphed and confirmed to
it at 4701 Marburg Avenue, Cincinnati, Ohio 45209, Attention: Secretary;
provided, however, that any notice to a Manager pursuant to Section 7 will be
mailed, delivered or telexed and confirmed to such Manager.
11. Successors. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective successors and the officers
and directors and controlling persons referred to in Section 7, and no other
person will have any right or obligation hereunder.
12. Representation of Managers. CSFBL will act for the several Managers
in connection with this financing, and any action under this Agreement taken by
CSFBL will be binding upon all the Managers.
13. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same Agreement.
14. APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES
OF CONFLICTS OF LAWS.
The Company hereby submits to the non-exclusive jurisdiction of the Federal
and state courts in the Borough of Manhattan in The City of New York in any suit
or proceeding arising out of or relating to this Agreement or the transactions
contemplated hereby.
14
<PAGE>
If the foregoing is in accordance with the Managers' understanding of our
agreement, kindly sign and return to the Company one of the counterparts hereof,
whereupon it will become a binding agreement between the Company and the several
Managers in accordance with its terms.
Very truly yours,
Cincinnati Milacron Inc.
By:_______________________________________________
Ronald D. Brown
Vice President - Finance
The foregoing Subscription Agreement is hereby confirmed
and accepted as of the date first above written.
CS First Boston Limited
By: ...............................................................
Bankers Trust International PLC
Credit Lyonnais Securities
Merrill Lynch International Limited
J.P. Morgan Securities Ltd.
Each by its duly authorized attorney-in-fact:
..................................................................
15
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
NUMBER OF
MANAGER INTERNATIONAL FIRM SECURITIES
- ------------------------------ ---------------------------------
<S> <C>
CS First Boston Limited..............
Bankers Trust International PLC......
Credit Lyonnais Securities...........
Merrill Lynch International Limited..
J.P. Morgan Securities Ltd...........
Total......................... 1,100,000
=========
</TABLE>
16
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated February 23, 1996, in Amendment No. 1 to the
Registration Statement (Form S-3 No. 333-01739) and related Prospectus of
Cincinnati Milacron Inc. for the registration of 5,500,000 shares of its
common stock.
/s/ Ernst & Young LLP
_____________________________________
Ernst & Young LLP
Cincinnati, Ohio
April 3, 1996
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the reference to our
firm under the caption "Experts" and to the incorporation by reference in
Amendment No. 1 to the Registration Statement (Form S-3 File No. 333-01739) of
our report dated September 8, 1995 on the combined financial statements of D-
M-E Company which report is included in Cincinnati Milacron Inc.'s Amendment
No. 1 to the Current Report on Form 8-K dated January 26, 1996.
/s/ Arthur Andersen LLP
_____________________________________
Arthur Andersen LLP
Detroit, Michigan
April 2, 1996.
