================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[x] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the quarter ended March 31, 2000
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the transition period from to
------ ------
Commission file number 1-8485
MILACRON INC.
2090 Florence Avenue
Cincinnati, Ohio 45206
(513) 487-5000
Incorporated in Delaware I.R.S. No. 31-1062125
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
Number of shares of Common Stock, $1.00 par value, outstanding as of
May 9, 2000: 35,778,138
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<PAGE>
Milacron Inc. and Subidiaries
Index
Page
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Statements of Earnings 3
Consolidated Condensed Balance Sheets 4
Consolidated Condensed Statements of Cash Flows 5
Notes to Consolidated Condensed Financial
Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 11
Item 3. Quantitative and Qualitative Disclosures
about Market Risk 16
PART II OTHER INFORMATION
Item 1. Legal Proceedings 17
Item 6. (a) Exhibits 17
(b) Reports on Form 8-K 17
Signatures 18
Index to Exhibits 19
<PAGE>
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
Milacron Inc. and Subsidiaries
(Unaudited)
=======================================================================================================================
(IN MILLIONS, EXCEPT QUARTER ENDED MARCH 31,
SHARE AND PER-SHARE AMOUNTS) 2000 1999
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Sales............................................................................... $ 396.9 $ 392.0
Cost of products sold............................................................... 294.0 288.4
-------- ---------
Manufacturing margins............................................................ 102.9 103.6
Other costs and expenses
Selling and administrative....................................................... 66.2 70.4
Restructuring costs.............................................................. 1.2 -
Other - net...................................................................... 4.3 2.5
-------- ---------
Total other costs and expenses................................................. 71.7 72.9
-------- ---------
Operating earnings.................................................................. 31.2 30.7
Interest
Income........................................................................... .5 .4
Expense.......................................................................... (9.8) (9.6)
-------- ---------
Interest - net................................................................. (9.3) (9.2)
-------- ---------
EARNINGS BEFORE INCOME TAXES AND MINORITY
SHAREHOLDERS' INTERESTS.......................................................... 21.9 21.5
Provision for income taxes.......................................................... 6.8 6.3
-------- ---------
EARNINGS BEFORE MINORITY SHAREHOLDERS' INTERESTS.................................... 15.1 15.2
Minority shareholders' interests in earnings
of subsidiaries.................................................................. - .1
-------- ---------
NET EARNINGS........................................................................ $ 15.1 $ 15.1
======== =========
EARNINGS PER COMMON SHARE
BASIC............................................................................ $ .42 $ .40
======== =========
DILUTED.......................................................................... $ .41 $ .40
======== =========
Dividends per common share.......................................................... $ .12 $ .12
======== =========
Weighted average common shares outstanding assuming
dilution (in thousands).......................................................... 36,236 37,500
======== =========
=======================================================================================================================
</TABLE>
See notes to consolidated condensed financial statements.
<PAGE>
<TABLE>
CONSOLIDATED CONDENSED BALANCE SHEETS
Milacron Inc. and Subsidiaries
(Unaudited)
========================================================================================================================
(IN MILLIONS, EXCEPT PAR VALUE) MAR. 31, DEC. 31,
2000 1999
- ------------------------------------------------------------------------------------------------------------------------
ASSETS
<S> <C> <C>
Current assets
Cash and cash equivalents........................................................ $ 46.6 $ 81.3
Notes and accounts receivable,less allowances
of $12.8 in 2000 and $12.1 in 1999............................................. 228.7 217.3
Inventories
Raw materials.................................................................. 50.4 44.4
Work-in-process and finished parts............................................. 176.9 176.2
Finished products.............................................................. 146.5 152.8
-------- ---------
Total inventories............................................................ 373.8 373.4
Other current assets............................................................. 48.1 45.6
-------- ---------
Total current assets........................................................... 697.2 717.6
Property, plant and equipment-net................................................... 314.7 323.2
Goodwill............................................................................ 415.0 419.6
Other noncurrent assets............................................................. 78.2 76.3
-------- --------
TOTAL ASSETS........................................................................ $1,505.1 $1,536.7
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Borrowings under lines of credit................................................. $ 107.9 $ 117.7
Long-term debt due within one year............................................... 125.4 107.0
Trade accounts payable........................................................... 126.1 130.7
Advance billings and deposits.................................................... 31.3 28.8
Accrued and other current liabilities............................................ 164.7 172.7
-------- --------
Total current liabilities...................................................... 555.4 556.9
Long-term accrued liabilities....................................................... 189.9 190.8
Long-term debt...................................................................... 276.1 298.1
-------- --------
TOTAL LIABILITIES................................................................ 1,021.4 1,045.8
Commitments and contingencies....................................................... - -
Shareholders' equity
4% Cumulative Preferred shares................................................... 6.0 6.0
Common shares, $1 par value
(outstanding: 35.8 in 2000 and 36.8 in 1999)................................... 35.8 36.8
Capital in excess of par value................................................... 315.6 325.5
Reinvested earnings.............................................................. 168.6 158.0
Accumulated other comprehensive income (loss).................................... (42.3) (35.4)
-------- --------
Total shareholders' equity..................................................... 483.7 490.9
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY........................................................................... $ 1,505.1 $ 1,536.7
========= =========
========================================================================================================================
</TABLE>
See notes to consolidated condensed financial statements.
<PAGE>
<TABLE>
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
Milacron Inc. and Subsidiaries
(Unaudited)
=======================================================================================================================
(IN MILLIONS) QUARTER ENDED MARCH 31,
2000 1999
- -----------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
OPERATING ACTIVITIES CASH FLOWS
<S> <C> <C>
Net earnings................................................................... $ 15.1 $ 15.1
Operating activities providing (using) cash
Depreciation and amortization................................................ 15.2 14.7
Deferred income taxes........................................................ 1.3 .7
Working capital changes
Notes and accounts receivable.............................................. (13.3) (7.4)
Inventories................................................................ (6.5) (15.5)
Other current assets....................................................... (2.0) (1.5)
Trade accounts payable..................................................... (5.0) (14.6)
Other current liabilities.................................................. (4.4) 9.0
Decrease (increase) in other
noncurrent assets.......................................................... (1.9) 4.1
Increase (decrease) in long-term
accrued liabilities........................................................ 1.3 (.7)
Other-net.................................................................... (.8) (.9)
-------- ---------
Net cash provided (used) by operating activities........................... (1.0) 3.0
INVESTING ACTIVITIES CASH FLOWS
Capital expenditures........................................................... (7.5) (15.2)
Net disposals of property, plant
and equipment................................................................ .3 .4
Acquisitions................................................................... - (10.5)
Divestitures................................................................... - 3.2
-------- ---------
Net cash used by investing activities........................................ (7.2) (22.1)
FINANCING ACTIVITIES CASH FLOWS
Dividends paid................................................................. (4.4) (4.6)
Repayments of long-term debt................................................... (.2) (1.5)
Increase (decrease) in borrowings under
lines of credit.............................................................. (8.9) 32.9
Purchase of treasury and other common shares................................... (12.3) (17.7)
--------- ---------
Net cash provided (used) by financing
activities.................................................................. (25.8) 9.1
EFFECT OF EXCHANGE RATE FLUCTUATIONS ON CASH
AND CASH EQUIVALENTS............................................................. (.7) (1.3)
-------- ---------
DECREASE IN CASH AND CASH EQUIVALENTS............................................... (34.7) (11.3)
Cash and cash equivalents at beginning
of period........................................................................ 81.3 48.9
-------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.......................................... $ 46.6 $ 37.6
======== =========
=======================================================================================================================
</TABLE>
See notes to consolidated condensed financial statements.
<PAGE>
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited consolidated
condensed financial statements contain all adjustments, including only normal
recurring adjustments except for the matters discussed in the note captioned
"Restructuring Cost," necessary to present fairly the company's financial
position, results of operations and cash flows.
The Consolidated Condensed Balance Sheet at December 31, 1999, has been
derived from the audited consolidated financial statements at that date, but
does not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements.
The accounting policies followed by the company are set forth in the
"Summary of Significant Accounting Policies" note to the consolidated financial
statements included in the company's Annual Report on Form 10-K for the year
ended December 31, 1999.
RESTRUCTURING COSTS
In 1999, the company implemented two separate initiatives to improve
operating efficiency and strengthen synergies between certain recently acquired
businesses and its previously existing operations.
In September, the company announced a formal plan to consolidate Uniloy's
European blow molding operations in a new manufacturing facility located near
Milan, Italy. At the time Uniloy was acquired in September, 1998, the company
recognized the need for improved efficiency within Uniloy's European operations
and immediately thereafter began to evaluate various options for the purpose of
identifying the optimal long-term solution. Through that process, it was dete-
rmined that the manufacturing and assembly operations at the plantslocated in
Florence and Milan, Italy and Berlin, Germany would be consolidated into a more
modern plant near Milan and transferred to another plant located in the Czech
Republic. In the second quarter of 1999, the company began to develop a detailed
plan for the consolidation, which was formally approved by management in August,
1999, and publicly announced in September, 1999.
The total cost of the plan, which was implemented in the fourth quarter of
1999 and which is scheduled to be completed in the fourth quarter of 2000, was
orginally expected to be approximately $6.7 million. However, foreign currency
exchange rate fluctuations since the acquisiton date have had the effect of
reducing the total cost as measured in U.S. dollars to approximately $5.7
million, including $.8 million that is being charged to expense as incurred.Of
the latter amount, $.5 million was recorded in the first quarter of 2000.The
remainder of thetotal cost of the consolidation is included in a reserve for
employee termination benefits and facility exit costs that was established in
the allocation of the Uniloy acquisition cost. The original amount of the
reserve was $5.7 million but foreign currency exchange rate fluctuation have had
the effect of reducing it by $.8 million,including $.1 million in the first
quarter of 2000. Charges against the reserve in the first quarter of 2000 were
$1.8 million.
The total cash cost of the consolidation is currently expected to be
approximately $3 million, which is net of the expected proceeds from the sale of
two facilities in Italy. The consolidation could reduce revenues in the short
term but is not expected to adversely affect revenue over the next year.
Completion of the consolidation is expected to result in annual pretax cost
savings of approximately $3 million, which will begin to phase-in during the
second quarter of 2000.
In December, the company implemented a second plan to improve operating
efficiency and reduce costs at additional businesses. The actions contemplated
by the plan involve both segments' operations in North America and Europe. The
plan involves the closure of four smaller manufacturing facilities, the
operations of which are being transferred to other locations, and the
elimination of approximately 300 manufacturing and administrative positions
worldwide, of which approximately 220 have been eliminated through March 31,
2000. There have been no changes in the actions contemplated by the plan and the
total cost of implementing it is still expected to be approximately $20.8
million, including $16.0 million in 1999 and $4.8 million in 2000. Of the 1999
amount, $14.1 million was included in a reserve for employee termination
benefits and facility exit costs that was recorded in the fourth quarter.
Charges against this reserve in the first quarter of 2000 totaled $1.9 million.
Foreign currency exchange rate fluctuations during the first quarter had the
effect of reducing the reserve by an additional $.4 million. The total cost of
the plan also includes 1999 charges of $1.7 million for supplemental early
retirement benefits for certain employees that will be funded through pension
plans and $5.0 million for additional costs that are being charged to expense as
incurred. Of the latter amount, $.7 million was incurred in the first quarter of
2000.
The total cash cost of the plan, including capital expenditures of $3.5
million, is expected to be approximately $17.7 million, most of which will be
expended in 2000. Completion of the plan is expected to result in annual pretax
cost savings of more than $20 million, which will gradually phase-in during 2000
and be fully realized in 2001.
<PAGE>
As presented in the Consolidated Condensed Statement of Earnings for the
first quarter of 2000, the line captioned "Restructuring costs" includes the
following components:
<TABLE>
- -------------------------------------------------------------------------
RESTRUCTURING COSTS
=========================================================================
(IN MILLIONS) QUARTER ENDED MARCH 31,
2000
- -------------------------------------------------------------------------
<S> <C>
Costs related to Uniloy consolidation ....................... $ .5
Other restructuring costs ................................... .7
------
$ 1.2
======
=========================================================================
</TABLE>
Changes in the reserves for the two initiatives discussed above during the
first quarter of 2000 are summarized in the following table.
<TABLE>
- -------------------------------------------------------------------------
RESTRUCTURING RESERVES
=========================================================================
(IN MILLIONS) BEGINNING ENDING
BALANCE CHANGE BALANCE
- -------------------------------------------------------------------------
<S> <C> <C> <C>
Uniloy consolidation
Termination benefits....... $ 3.6 $ (1.8) $ 1.8
Facility exit costs........ .7 (.1) .6
---------- --------- ---------
4.3 (1.9) 2.4
Restructuring costs
Termination benefits....... 9.4 (2.0) 7.4
Facility exit costs........ 3.8 (.3) 3.5
---------- --------- ---------
13.2 (2.3) 10.9
---------- --------- ---------
Total reserves................ $ 17.5 $ (4.2) $ 13.3
========== ========= =========
=========================================================================
</TABLE>
ACQUISITIONS
In July, 1999, the company acquired Nickerson Machinery Inc., Pliers
International Inc., and Plastic Moulding Supplies Ltd. (collectively,
Nickerson). With annual sales of $7 million as of the acquisition date,
Nickerson sells supplies and equipment for plastic processing through two
catalog distribution centers in the U.S. and one in the U.K. The operation in
the U.K. also manufactures and refurbishes screws and barrels for small
injection molding machines.
In the third quarter of 1999, the company made three acquisitions in the
metalworking technologies segment. In August, the company acquired Producto
Chemical, Inc. (Producto), a U.S. manufacturer of process cleaners, washers,
corrosion inhibitors and specialty products for metalworking with annual sales
approaching $5 million as of the acquisition date. Producto's products are being
marketed worldwide through the company's sales and distribution channels. In
September, the company acquired Oak International, Inc. (Oak), a supplier of
metalforming lubricants and process cleaners and a leading supplier of
lubricants used in the manufacture of industrial heat exchangers and air
conditioners. Headquartered in Michigan, Oak has two manufacturing plants in the
U.S. and one in the U.K. and had annual sales approaching $12 million as of the
acquisition date. Also in September, the company acquired the Micro Carbide
product line of round, solid-carbide metalworking tools, which includes reamers,
step drills and miniature tools. These products are being produced at the
company's Data Flute CNC facility.
All of the 1999 acquisitions were accounted for under the purchase method
and were financed through the use of available cash and borrowings under lines
of credit. The aggregate cost of the acquisitions, including professional fees
and other related costs, is expected to total approximately $32.7 million. The
allocation of the aggregate cost of the acquisitions to the assets acquired and
liabilities assumed is presented in the table that follows.
<TABLE>
- -------------------------------------------------------------------------
ALLOCATION OF ACQUISITION COST
=========================================================================
(IN MILLIONS) 1999
- -------------------------------------------------------------------------
<S> <C>
Cash and cash equivalents............................ $ .7
Accounts receivable.................................. 4.0
Inventories.......................................... 5.0
Other current assets................................. .3
Property, plant and equipment........................ 4.5
Goodwill............................................. 21.9
--------
Total assets...................................... 36.4
Borrowings under lines
of credit......................................... .7
Other current liabilities............................ 1.7
Long-term accrued liabilities........................ .4
Long-term debt....................................... .9
--------
Total liabilities................................. 3.7
--------
Total acquisition cost............................... $ 32.7
========
=========================================================================
</TABLE>
INCOME TAXES
In the first quarter of 2000 and 1999, the provision for income taxes
consists of U.S. federal and state and local income taxes as well as non-U.S.
income taxes. The provision also includes the effects of adjustments of deferred
tax assets and related valuation allowances in certain non-U.S. jurisdictions.
At December 31, 1999, certain of the company's non-U.S. subsidiaries had net
operating loss carryforwards aggregating approximately $146 million,
substantially all of which have no expiration dates. The deferred tax assets
related to certain of these loss carryforwards were partially reserved through
valuation allowances which totaled approximately $35 million. The company
reviews valuation allowances periodically based on the relative amount of
positive and negative evidence available at the time. This is done for the
purpose of reaching conclusions regarding the future realization of deferred tax
<PAGE>
assets. The principal focus of this review is the expected utilization of net
operating loss carryforwards during the current and future years. Valuation
allowances are then adjusted accordingly. The resulting decreases or increases
in valuation allowances serve to favorably or unfavorably affect the company's
effective tax rate.
The company's expected effective tax rate for 2000 of 31% is lower than the
U.S. federal statutory rate due principally to the planned reversal of valuation
allowances in certain jurisdictions, particularly in Germany. However, the
extent of such valuation allowance adjustments will ultimately be contingent on
the achievement of planned operating results for the year and changes in facts
and circumstances that may affect the amount of positive or negative evidence
available at future review dates.
The effective tax rate for the first quarter of 1999 was also less than the
federal statutory rate due in part to the planned adjustment of valuation
allowances based on the utilization of net operating loss carryforwards in
Germany. The first quarter tax provision in 1999 also included the effect of tax
reserve adjustments to more accurately reflect actual expected liabilities.
These benefits were partially offset by the downward adjustment of the company's
net deferred tax assets in Germany to a lower tax rate.
RECEIVABLES
In accordance with the company's receivables purchase agreement with an
independent party, the company sells on an ongoing basis and without recourse an
undivided percentage ownership interest of up to $75.0 million in designated
pools of accounts receivable. At March 31, 2000, December 31, 1999, March 31,
1999 and December 31, 1998, the undivided interest in the company's gross
accounts receivable that had been sold to the purchaser aggregated $75.0
million, $75.0 million, $71.2 million and $63.1 million, respectively. Increases
and decreases in the amount sold are reported as operating cash flows in the
Consolidated Condensed Statements of Cash Flows. Costs related to the sales are
included in other costs and expenses-net in the Consolidated Condensed
Statements of Earnings.
LIABILITIES
The components of accrued and other current liabilities and long-term
accrued liabilities are shown in the following tables.
<TABLE>
- -------------------------------------------------------------------------
ACCRUED AND OTHER CURRENT LIABILITIES
=========================================================================
(IN MILLIONS) MAR. 31, DEC. 31,
2000 1999
- -------------------------------------------------------------------------
<S> <C> <C>
Accrued salaries, wages
and other compensation................... $ 55.6 $ 53.6
Accrued and deferred income
taxes.................................... 18.5 16.1
Other accrued expenses...................... 90.6 103.0
-------- ---------
$ 164.7 $ 172.7
======== =========
=========================================================================
</TABLE>
<TABLE>
- -------------------------------------------------------------------------
Long-Term Accrued Liabilities
=========================================================================
(In millions) Mar. 31, Dec. 31,
2000 1999
- -------------------------------------------------------------------------
<S> <C> <C>
Accrued pensions and
other compensation....................... $ 65.6 $ 69.1
Accrued postretirement
health care benefits..................... 38.6 38.9
Accrued and deferred
income taxes............................. 29.5 27.5
Minority shareholders'
interests................................ 22.2 22.2
Other....................................... 34.0 33.1
-------- ---------
$ 189.9 $ 190.8
======== =========
=========================================================================
</TABLE>
<TABLE>
LONG-TERM DEBT
The components of long-term debt are shown in the following table.
- --------------------------------------------------------------------------
LONG-TERM DEBT
==========================================================================
(IN MILLIONS) MAR. 31, DEC. 31,
2000 1999
- ---------------------------------------------------------------------------
<S> <C> <C>
7-7/8% Notes due 2000 ............. $ 100.0 $ 100.0
8-3/8% Notes due 2004 ............. 115.0 115.0
Revolving credit
facility ....................... 153.8 156.9
Other ............................. 32.7 33.2
------ ------
401.5 405.1
Less current maturities ........... (125.4) (107.0)
------ ------
$ 276.1 $ 298.1
====== ======
===========================================================================
</TABLE>
<PAGE>
Outstanding borrowings under the company's revolving credit facility of
$100.0 million and DM 109.5 million ($53.8 million) at March 31, 2000, and
$100.0 million and DM 110 million ($56.9 million) at December 31, 1999 are
included in long-term debt based on the expectation that these borrowings will
remain outstanding for more than one year. These borrowings are at variable
interest rates, which had a weighted average of 6.1% per year at March 31, 2000
and 6.7% per year at December 31, 1999.
As presented in the previous table, current maturities of long-term debt
includes the 7-7/8% Notes due 2000 which are payable on May 15, 2000.
On April 6, 2000, the company received the proceeds from a public debt
offering in Europe EURO 115 million (approximately $110 million) of 7-5/8%
Eurobonds with a maturity date of April 6, 2005 (see Subsequent Event).
LINES OF CREDIT
At March 31, 2000, the company had lines of credit with various U.S. and
non-U.S. banks of approximately $589 million, including a $375 million committed
revolving credit facility. These credit facilities support letters of credit and
leases in addition to providing borrowings under varying terms. Under the
provisions of the revolving credit facility, the company's additional borrowing
capacity totaled approximately $116 million at March 31, 2000.
SHAREHOLDERS' EQUITY
On October 2, 1998, the company announced its intention to repurchase up to
two million of its outstanding common shares on the open market, of which
1,239,700 were repurchased during the fourth quarter of 1998. The remaining
760,300 shares were repurchased in the first quarter of 1999 at a cost of $13.1
million. Additional shares totaling 88,309 were purchased in the first quarter
of 1999 in connection with current exercises of stock options and restricted
share grants in lieu of the use of authorized but unissued shares or treasury
shares.
On February 4, 2000, the company's Board of Directors approved an additional
share repurchase program authorizing the repurchase of up to four million common
shares on the open market, of which 898,100 were repurchased during the first
quarter of 2000 at a cost of $12.2 million. An additional 9,521 shares were
purchased on the open market in the first quarter of 2000 for management
incentive and employee benefit programs. A total of 78,000 treasury shares were
reissued in the first quarter of 2000 in connection with restricted share
grants.
COMPREHENSIVE INCOME
Total comprehensive income represents the net change in shareholders' equity
during a period from sources other than transactions with shareholders and, as
such, includes net earnings. For the company, the only other component of total
comprehensive income is the change in the cumulative foreign currency
translation adjustments recorded in shareholders' equity. Total comprehensive
income and changes in total shareholders' equity are as follows:
<TABLE>
- ------------------------------------------------------------------------------------------------------------
Comprehensive Income and Shareholders' Equity
============================================================================================================
(In millions) Quarter Ended March 31,
2000 1999
---------------------- -------------------
Total Total Total Total
Compre- Share- Compre- Share-
hensive holders' hensive holders'
Income Equity Income Equity
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at beginning
of period................................ $ 490.9 $ 476.6
Net common share
transactions............................. (11.0) (13.6)
Net earnings................................ $ 15.1 15.1 $ 15.1 15.1
Foreign currency
translation adjustments.................. (6.9) (6.9) (12.4) (12.4)
-------- ---------
Total comprehensive
income................................... $ 8.2 $ 2.7
======== =========
Cash dividends.............................. (4.4) (4.6)
--------- ---------
Balance at end of period.................... $ 483.7 $ 461.1
========= =========
============================================================================================================
</TABLE>
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, on an undiscounted basis, when
it is probable that a liability has been incurred and the amount of the
liability can be reasonably estimated. Accruals for estimated losses from
environmental remediation obligations are generally recognized no later than the
completion of a remediation feasibility study. The accruals are adjusted as
further information becomes available or circumstances change. Environmental
costs have not been material in the past.
<PAGE>
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.
ORGANIZATION
The company has two business segments: plastics technologies and
metalworking technologies. Descriptions of the products and services of these
business segments are included in the "Organization" note to the consolidated
financial statements included in the company's Annual Report on Form 10-K for
the year ended December 31, 1999. Operating results for the first quarters of
2000 and 1999 are presented in the following table.
<TABLE>
==============================================================================
(IN MILLIONS) QUARTER ENDED MARCH 31,
2000 1999
- ------------------------------------------------------------------------------
<S> <C> <C>
Sales
Plastics technologies......................... $ 217.6 $ 217.2
Metalworking technologies..................... 179.3 174.8
-------- ---------
$ 396.9 $ 392.0
======== =========
Operating earnings
Plastics technologies......................... $ 22.1 $ 20.1
Metalworking technologies..................... 16.6 16.1
Restructuring costs (a)....................... (1.2) -
Corporate expenses............................ (4.8) (4.2)
Other unallocated
expenses (b)................................ (1.5) (1.3)
--------- ---------
Operating earnings.......................... 31.2 30.7
Interest expense-net............................. (9.3) (9.2)
--------- ---------
Earnings before income
taxes and minority
shareholders' interests..................... $ 21.9 $ 21.5
======== =========
New orders
Plastics technologies......................... $ 209.7 $ 206.5
Metalworking technologies..................... 187.0 181.5
-------- ---------
$ 396.7 $ 388.0
======== =========
==============================================================================
</TABLE>
(a)..$.6 million relates to the plastics technologies segment and
$.6 million relates to the metalworking technologies segment.
(b) Includes financing costs related to the sale of accounts receivable.
EARNINGS PER COMMON SHARE
Basic earnings per common share data are based on the weighted-average
number of common shares outstanding during the respective periods. Diluted
earnings per common share data are based on the weighted-average number of
common shares outstanding adjusted to include the effects of potentially
dilutive stock options and certain restricted shares.
RECENTLY ISSUED PRONOUNCEMENTS
In 1998, the Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" (SFAS No. 133). This standard was originally to have
been effective for the company beginning in 2000. However, in July, 1999, the
FASB issued Statement of Financial Accounting Standards No. 137, which postpones
the mandatory adoption of SFAS No. 133 by the company until 2001. SFAS No. 133
establishes comprehensive accounting and reporting requirements for the
recognition and measurement of derivative financial instruments and hedging
activities, including a requirement that derivatives be measured at fair value
and recognized in the statement of financial position. The company enters into
forward contracts, which are a form of derivative instrument, to minimize the
effects of foreign currency exchange rate fluctuations. The company is
evaluating the effect of SFAS No. 133 on its financial position and results of
operations. However, management currently believes that the effects will not be
material.
SUBSEQUENT EVENT
On April 6, 2000, the company received the proceeds from a public debt
offering in Europe of EURO 115 million (approximately $110 million) of 77-5/8%
Eurobonds with a maturity date of April 6, 2005. The net proceeds of the
offering will be used in part to repay $100 million of 7-7/8% Notes due on May
15, 2000 (see Long-Term Debt). The Eurobonds are not being registered under the
Securities Act of 1933 for sale in the United States.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Unaudited)
RESULTS OF OPERATIONS
Milacron operates in two business segments: plastics technologies and
metalworking technologies.
ACQUISITIONS
In July, 1999, we acquired Nickerson Machinery Inc., Pliers International
Inc. and Plastic Moulding Supplies Ltd. (collectively, Nickerson). With annual
sales of $7 million as of the acquisition date, Nickerson sells supplies and
equipment for plastic processing through two catalog distribution centers in the
U.S. and one in the U.K. The operation in the U.K. also manufactures and
refurbishes screws and barrels for small injection molding machines.
In August, 1999, we acquired Producto Chemical, Inc. (Producto), which
manufactures process cleaners, washers, corrosion inhibitors and specialty
products for metalworking. Producto had annual sales approaching $5 million as
of the acquisition date.
In September, 1999, we acquired Oak International, Inc. (Oak), a supplier
of lubricants and process cleaners used in metalforming and metalworking. Oak
has three manufacturing plants, including two in the U.S. and one in the U.K.,
and had annual sales approaching $12 million as of the acquisition date.
In September, 1999, we acquired the Micro Carbide product line, which
includes solid-carbide reamers, step drills and miniature tools. These products
are being produced by Data Flute CNC, which we acquired in 1997 and which also
manufactures round solid-carbide metalworking tools.
Of the businesses acquired in 1999, Nickerson is included in the plastics
technologies segment while Producto, Oak and Micro Carbide are included in the
metalworking technologies segment.
All of the acquisitions were financed through available cash and bank
borrowings and have been accounted for under the purchase method of accounting.
In the aggregate, these acquisitions had the effect of increasing first quarter
2000 new orders and sales by $5 million in relation to 1999.
PRESENCE OUTSIDE THE U.S.
In recent years, Milacron's growth outside the U.S. has allowed it to become
more globally balanced. In 1999, markets outside the U.S. represented the
following percentages of our consolidated sales: Europe 27%; Asia 7%; Canada and
Mexico 7%; and the rest of the world 3%. As a result of this geographic mix,
foreign currency exchange rate fluctuations affect the translation of our sales
and earnings, as well as consolidated shareholders' equity. During the first
quarter of 2000, the weighted-average exchange rate of the euro was weaker in
relation to the U.S. dollar than in the comparable period of 1999. As a result,
Milacron experienced unfavorable translation effects on new orders and sales of
$12 million and $16 million, respectively. The effect on earnings was not
significant.
Between December 31, 1999 and March 31, 2000, the euro weakened against the
dollar by approximately 5%. Certain other currencies also weakened in relation
to the dollar during the period. In the aggregate, these rate fluctuations
resulted in a $7 million reduction in consolidated shareholders' equity due to
unfavorable foreign currency translation adjustments.
If the euro should weaken further against the U.S. dollar in future
periods, we will once again experience a negative effect in translating our
non-U.S. new orders, sales and, possibly, net earnings when compared to
historical results.
NEW ORDERS AND BACKLOG
New orders in the first quarter of 2000 were $397 million compared to $388
million in 1999. As discussed above, foreign currency exchange rate fluctuations
had the effect of reducing new orders by $12 million, while the 1999
acquisitions contributed an incremental $5 million of orders. The 1999
consolidated orders amount includes $13 million related to our European
extrusion systems business that was sold in the fourth quarter of the year.
Excluding currency effects and acquisitions, consolidated new orders for ongoing
operations increased by $29 million, or more than 7%.
<PAGE>
Orders for plastics technologies products were $210 million, an increase of
$3 million in relation to 1999 despite the absence of $13 million of orders from
the European extrusion systems business. Unfavorable currency exchange rate
fluctuations had the effect of reducing orders by $5 million. Excluding currency
and acquisition effects, orders for ongoing operations increased by almost 10%.
Orders for injection molding machines increased worldwide as did orders for
U.S.-built extrusion systems. Orders for Uniloy blow molding systems decreased
due in part to the ongoing consolidation in the dairy industry.
Orders for metalworking technologies products were $187 million, which
represents an increase of $5 million from $182 million in the first quarter of
1999. The 1999 acquisitions contributed an incremental $3 million of orders in
2000 while currency effects reduced new orders by $7 million. Orders for Widia
products in Europe decreased due principally to the aforementioned currency
effects. Orders for round metalcutting tools approximated the level achieved in
1999 despite ongoing softness in the aerospace industry in North America. Orders
for metalworking fluids were essentially flat in Europe due principally to
currency effects but increased in North America due in part to the 1999
acquisitions.
U.S. export orders were $37 million in the first quarter of 2000. In the
first quarter of 1999, export orders totaled $28 million. The increase resulted
principally from increased orders for U.S.-built injection molding machines and
for Valenite products.
Milacron's backlog of unfilled orders totaled $225 million at March 31,
2000, compared to $243 million at December 31, 1999, and $261 million at March
31, 1999. The reduction in relation to December 31, 1999 is due principally to
currency effects and lower order levels for Uniloy blow molding systems. The
same factors contributed to the decrease in relation to March 31, 1999, as did
the effect of the sale of the European extrusion systems business.
SALES
Sales in the first quarter of 2000 were $397 million, which represented a $5
million increase from $392 million in 1999. Currency effects reduced
consolidated sales by $16 million in relation to 1999. The 1999 acquisitions
contributed an incremental $5 million of sales in 2000, which was more than
offset by the absence of $17 million of 1999 sales from the European extrusion
systems business. Excluding currency and acquisition effects, sales for ongoing
operations increased by 8%.
In the plastics technologies segment, first quarter 2000 sales were $218
million compared to $217 million in the same period of 1999. Excluding currency
and acquisition effects, orders for ongoing operations increased by more than
10%. The absence of the European extrusion business was offset by higher sales
of U.S.-built injection molding machines and extrusion systems. Sales of D-M-E
products increased modestly despite softening markets in North America and
Europe, but sales of Uniloy products continued to be penalized by consolidation
in the dairy industry.
Sales of metalworking technologies products increased by $4 million from
$175 million in 1999 to $179 million in 2000. The 1999 acquisitions contributed
an incremental $3 million of sales while currency effects reduced reported sales
by $9 million. Sales of metalworking fluids and Valenite products increased in
North America. In Europe, sales of Widia metalcutting products increased in
local currencies but were lower as measured in U.S. dollars due to adverse
currency effects. Despite ongoing soft demand in the U.S. aerospace industry for
certain product lines, sales of round tools increased due to higher sales of
high-speed steel drills in North America and Europe.
Export sales were $38 million in the first quarter of 2000 compared to $33
million in 1999. The increase resulted from higher shipments of injection
molding machines and Valenite products which more than offset reduced export
sales of Uniloy blow molding systems.
Sales of both segments to non-U.S. markets, including exports, totaled $159
million in the first quarter of 2000, compared to $178 million in 1999. In 2000
and 1999, products manufactured outside the U.S. approximated 36% and 43% of
sales, respectively, while products sold outside the U.S. approximated 40% and
45% of sales, respectively.
MARGINS, COSTS AND EXPENSES AND OPERATING EARNINGS
Our consolidated manufacturing margin in the first quarter of 2000 was 25.9%
compared to 26.4% in 1999. In the plastics technologies segment, the overall
margin percentage approximated the level achieved in 1999. Margins decreased in
the metalworking technologies segment due to a number of factors including lower
margins at Widia where production cutbacks to control inventory levels resulted
in unabsorbed manufacturing costs.
Excluding restructuring costs, the plastics technologies segment had
operating earnings of $22.1 million, or 10.1% of sales, in the first quarter of
2000, compared to $20.1 million, or 9.3% of sales, in 1999. The increase
resulted from improved earnings for injection molding machines worldwide and for
U.S.-built extrusion systems.
Excluding restructuring costs, the metalworking technologies segment had
operating earnings of $16.6 million, or 9.3% of sales, in the first quarter of
2000, which represented a modest increase from $16.1 million, or 9.2% of sales,
in 1999. Metalworking fluids, round tools and Valenite all had improved earnings
in relation to 1999.
<PAGE>
Total selling and administrative expense decreased in amount in relation to
1999 due principally to the effect of our aggressive cost reduction efforts that
began in 1999 and continued in 2000. As a percentage of sales, these expenses
decreased from 18.0% in 1999 to 16.7% in 2000.
Other expense-net was $4.3 million in the first quarter of 2000 compared to
$2.5 million in 1999. The 2000 amount includes higher goodwill amortization
expense related to the 1999 acquisitions.
Interest expense-net, including amortization of debt issuance costs,
increased only slightly in the first quarter of 2000 despite higher short-term
interest rates. The effects of higher interest rates were substantially offset
by lower average debt levels which resulted from the use of a portion of the
proceeds from the sale of the European extrusion systems business to repay
borrowings under lines of credit.
RESTRUCTURING COSTS
In 1999, we implemented two separate initiatives to improve operating
efficiency and strengthen synergies between certain recently acquired businesses
and our previously existing operations.
In September, we announced a formal plan to consolidate Uniloy's European
blow molding operations in a new manufacturing facility located near Milan,
Italy. At the time Uniloy was acquired in September, 1998, we recognized the
need for improved efficiency within Uniloy's European operations and immediately
thereafter began to evaluate various options for the purpose of identifying the
optimal long-term solution. Through that process, it was determined that the
manufacturing and assembly operations at the plants located in Florence and
Milan, Italy and Berlin, Germany would be consolidated into a more modern plant
near Milan and transferred to another plant located in the Czech Republic. In
the second quarter of 1999, we began to develop a detailed plan for the
consolidation, which was formally approved by management in August, 1999, and
publicly announced in September, 1999.
The total cost of the plan, which was implemented in the fourth quarter of
1999 and which is scheduled to be completed in the fourth quarter of 2000, was
orginally expected to be approximately $6.7 million. However, foreign currency
exchange rate fluctuations since the acquisiton date have had the effect of
reducing the total cost as measured in U.S. dollars to approximately $5.7
million, including $.8 million that is being charged to expense as incurred. Of
the latter amount, $.5 million was recorded in the first quarter of 2000. The
remainder of the total cost of the consolidation is included in a reserve for
employee termination benefits and facility exit costs that was established in
the allocation of the Uniloy acquisition cost. The original amount of the
reserve was $5.7 million but foreign currency exchange rate fluctuations have
had the effect of reducing it by $.8 million, including $.1 million in the first
quarter of 2000. Charges against the reserve in the first quarter of 2000 were
$1.8 million.
The total cash cost of the consolidation is currently expected to be
approximately $3 million, which is net of the expected proceeds from the sale of
two facilities in Italy. The consolidation could reduce revenues in the short
term but is not expected to adversely affect revenue over the next year.
Completion of the consolidation is expected to result in annual pretax cost
savings of approximately $3 million, which will begin to phase-in during the
second quarter of 2000.
In December, the company implemented a second plan to improve operating
efficiency and reduce costs at additional businesses. The actions contemplated
by the plan involve both segments' operations in North America and Europe. The
plan involves the closure of four smaller manufacturing facilities, the
operations of which are being transferred to other locations, and the
elimination of approximately 300 manufacturing and administrative positions
worldwide, of which approximately 220 have been eliminated through March 31,
2000. There have been no changes in the actions contemplated by the plan and the
total cost of implementing it is still expected to be approximately $20.8
million, including $16.0 million in 1999 and $4.8 million in 2000. Of the 1999
amount, $14.1 million was included in a reserve for employee termination
benefits and facility exit costs that was recorded in the fourth quarter.
Charges against this reserve in the first quarter of 2000 totaled $1.9 million.
Foreign currency exchange rate fluctuations during the first quarter had the
effect of reducing the reserve by an additional $.4 million. The total cost of
the plan also includes 1999 charges of $1.7 million for supplemental early
retirement benefits for certain employees that will be funded through pension
plans and $5.0 million for additional costs that are being charged to expense as
incurred. Of the latter amount, $.7 million was incurred in the first quarter of
2000.
The total cash cost of the plan, including capital expenditures of $3.5
million, is expected to be approximately $17.7 million, most of which will be
expended in 2000. Completion of the plan is expected to result in annual pretax
cost savings of more than $20 million, which will gradually phase-in during 2000
and be fully realized in 2001.
<PAGE>
As presented in the Consolidated Condensed Statement of Earnings for the
first quarter of 2000, the line captioned "Restructuring costs" includes the
following components:
<TABLE>
- -------------------------------------------------------------------------------
Restructuring Costs
===============================================================================
(In millions) Quarter Ended March 31,
2000
- -------------------------------------------------------------------------------
<S> <C>
Costs related to Uniloy
consolidation................................... $ .5
Other restructuring costs.......................... .7
---------
$ 1.2
===============================================================================
</TABLE>
Changes in the reserves for the two initiatives discussed above during the
first quarter of 2000 are summarized in the following table.
<TABLE>
- -------------------------------------------------------------------------------
Restructuring Reserves
===============================================================================
(In millions) Beginning Ending
Balance Change Balance
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Uniloy consolidation
Termination benefits ........... $ 3.6 $ (1.8) $ 1.8
Facility exit costs ............ .7 (.1) .6
------- ------- -------
4.3 (1.9) 2.4
Restructuring costs
Termination benefits ........... 9.4 (2.0) 7.4
Facility exit costs ............ 3.8 (.3) 3.5
------- ------- -------
13.2 (2.3) 10.9
------- ------- -------
Total reserves .................... $ 17.5 $ (4.2) $ 13.3
======= ======= =======
- -------------------------------------------------------------------------------
</TABLE>
EARNINGS BEFORE INCOME TAXES AND MINORITY SHAREHOLDERS' INTERESTS
Earnings before income taxes and minority shareholders' interests, net of
restructuring costs, were $21.9 million in the first quarter of 2000 compared to
$21.5 million in 1999. Excluding restructuring costs, pretax earnings increased
by 7% due in part to lower selling and administrative expenses.
INCOME TAXES
The first quarter 2000 and 1999 provisions for income taxes include U.S.
federal and state and local income taxes as well as non-U.S. income taxes in
jurisdictions outside the U.S.
As discussed more fully in the notes to the consolidated condensed financial
statements, Milacron entered both 2000 and 1999 with sizeable net operating loss
(NOL) carryforwards in certain jurisdictions, along with valuation allowances
against the NOL carryforwards and other deferred tax assets. Valuation
allowances are evaluated periodically and revised based on a "more likely than
not" assessment of whether the related deferred tax assets will be realized.
Increases or decreases in these valuation allowances serve to unfavorably or
favorably affect our effective tax rate. As a result of planned reductions in
valuation allowances, Milacron's expected effective tax rate for 2000 is less
than the U.S. statutory rate, as was also the case in 1999.
In addition to the effects of reductions in valuation allowances, the 1999
effective tax rate included adjustments of income tax reserves to more
accurately reflect actual expected liabilities. These benefits were partially
offset by the downward adjustment of the carrying value of net deferred tax
assets in Germany to the lower "with distribution" rate.
The effective tax rate for 2000 is expected to be approximately 30-32% while
the rate for 2001 is expected to increase slightly to 32-34%. However, the
actual rates for both years will ultimately be contingent on the mix of earnings
among tax jurisdictions and other factors that cannot be predicted with
certainty at this time.
NET EARNINGS
For the first quarter of 2000, net earnings were $15.1 million, or $.41 per
share (diluted), which equaled the $15.1 million, or $.40 per share (diluted),
earned in 1999. The 2000 amount includes $.8 million, or $.02 per share, for
restructuring costs.
YEAR 2000
The term "Year 2000 problem" (Y2K) refers to processing difficulties that
may occur in information technology (I.T.) systems and other equipment with
embedded microprocessors that were designed without considering the distinction
between dates in the 1900's and the 2000's.
As a result of our planning and implementation efforts, we experienced no
significant disruptions in mission-critical information technology and
non-information technology systems. We are not aware of any material Y2K
problems associated with our products or the products and services of third
parties. We will, however, continue to monitor our mission-critical computer
applications and the ability of our suppliers and vendors to provide
uninterrupted service throughout the year 2000 to ensure that any potential Y2K
matters that may arise are addressed promptly.
<PAGE>
MARKET RISK
FOREIGN CURRENCY EXCHANGE RATE RISK
Milacron uses foreign currency forward exchange contracts to hedge its
exposure to adverse changes in foreign currency exchange rates related to firm
commitments arising from international transactions. The company does not hold
or issue derivative instruments for trading purposes. At March 31, 2000,
Milacron had outstanding forward contracts totaling $55.8 million compared to
$18.7 million at December 31, 1999, and $14.9 million at March 31, 1999. The
March 31, 2000 amount includes contracts totaling $48.0 million that were
entered into on March 30, 2000 to hedge a portion of the proceeds of the
Eurobond offering that were received on April 6, 2000 (see Liquidity and Sources
of Capital). The potential loss from a hypothetical 10% adverse change in
foreign currency rates on Milacron's foreign exchange contracts at March 31,
2000 or March 31, 1999, would not materially affect Milacron's consolidated
financial position, results of operations, or cash flows.
INTEREST RATE RISK
At March 31, 2000, Milacron had fixed interest rate debt of $223 million,
including $100 million of 7-7/8% Notes due May 15, 2000, and $115 million of
8-3/8% Notes due March 15, 2004. We also had floating rate debt totaling $286
million, with interest fluctuating based primarily on changes in LIBOR. At
December 31, 1999 and March 31, 1999, fixed rate debt totaled $222 million, and
floating rate debt totaled $301 million and $319 million, respectively. We also
sell up to $75 million of accounts receivable under our receivables purchase
agreement, which results in financing fees that fluctuate based on changes in
commercial paper rates. As a result, annual interest expense and financing fees
fluctuate based on fluctuations in short-term borrowing rates. The potential
loss on floating rate debt from a hypothetical 10% change in interest rates
would be approximately $2.3 million at March 31, 2000 and December 31, 1999 and
$2.2 million at March 31, 1999.
LIQUIDITY AND SOURCES OF CAPITAL
At March 31, 2000, Milacron had cash and cash equivalents of $47 million,
representing a decrease of $35 million during the first quarter of the year. The
decrease resulted from the use of $42 million of the proceeds from the sale of
the European extrusion systems business to repay borrowings under lines of
credit early in 2000.
Operating activities used $1 million of cash in the first quarter of 2000,
compared with $3 million of cash provided in 1999. The latter amount includes $8
million of cash provided through the sale of additional accounts receivable
under our receivables purchase agreement. The 2000 amount includes the cash
costs of the previously discussed efficiency and restructuring initiatives.
In the first quarter of 2000, investing activities resulted in a $7 million
use of cash due to capital expenditures. In 1999, investing activities used $22
million of cash, including capital expenditures of $15 million and post-closing
adjustments related to 1998 acquisitions of $10 million.
Financing activities used $26 million of cash in the first quarter of 2000,
compared to $9 million of cash provided in 1999. The 2000 amount includes a $9
million net decrease in debt and $12 million for the repurchase of common shares
(as described below). In 1999, incremental borrowings provided $31 million while
repurchases of common shares used $18 million of cash.
In the fourth quarter of 1998, we announced a two million common share
repurchase program, of which 1.2 million shares were repurchased through
December 31, 1998. The remainder of shares were repurchased in the first quarter
of 1999. In the first quarter of 2000, our Board of Directors authorized the
repurchase of up to four million additional common shares on the open market of
which .9 million had been repurchased through March 31, 2000.
As of March 31, 2000, December 31, 1999 and March 31, 1999, Milacron's
current ratio was 1.3.
At March 31, 2000, Milacron had lines of credit with various U.S. and
non-U.S. banks of approximately $589 million, including a $375 million committed
revolving credit facility. Under the provisions of the facility, our additional
borrowing capacity totaled approximately $116 million at March 31, 2000.
Total debt was $509 million at March 31, 2000, representing an decrease of
$14 million from $523 million at December 31, 1999. Total debt at March 31, 2000
includes $100 million of 7-7/8% Notes due May 15, 2000 which will be repaid
using the proceeds of the EURO 115 million 7-7-5/8% Eurobond debt offering that
was completed on April 6, 2000.
Total shareholders' equity was $484 million at March 31, 2000, a decrease of
$7 million from December 31, 1999. The decrease resulted from $7 million of
unfavorable foreign currency translation effects and the share repurchase
program, which more than offset earnings net of dividends paid. The ratio of
total debt to total capital (debt plus equity) was 51% at March 31, 2000,
compared to 52% at December 31, 1999. We believe that Milacron's cash flow from
operations, the Eurobond proceeds and currently available credit lines are
sufficient to meet our operating, debt repayment, share repurchase and capital
requirements in 2000.
<PAGE>
OUTLOOK
The outlook for 2000 remains mixed. We are encouraged by generally strong
business levels in North America and by improving conditions in several key
European countries. However, many industrial sectors of the economy remain soft
and we are concerned about projected declines in vehicle production and rising
interest rates in North America in the second half of the year.
We are launching a record number of important new products in 2000. Some
have already been introduced and others will be featured at major U.S. plastics
and metalworking trade shows in the second and third quarters. With the
introduction of these new products and assuming world markets remain at current
levels, we continue to target 6% to 7% overall sales growth in 2000 after
adjusting for the sale of the European extrusion systems business. We also
believe that with the implementation of the company-wide efficiency measures we
initiated in 1999, we can achieve a 10% increase in earnings and a comparable
increase in cash flow.
CAUTIONARY STATEMENT
Milacron wishes to caution readers about all of the forward-looking
statements in the "Outlook" section and elsewhere. These include all statements
that speak about the future or are based on our interpretation of factors that
might affect our businesses. Milacron believes the following important factors,
among others, could affect its actual results in 2000 and beyond and cause them
to differ materially from those expressed in any of our forward-looking
statements:
* global and regional economic conditions, consumer spending and industrial
production, particularly in segments related to the level of automotive
production and spending in the construction industry;
* fluctuations in currency exchange rates of U.S. and foreign countries,
including countries in Europe and Asia where Milacron has several principal
manufacturing facilities and where many of our competitors and suppliers
are based;
* fluctuations in domestic and non-U.S. interest rates which affect the cost
of borrowing under Milacron's lines of credit and financing fees related to
the sale of domestic accounts receivable;
* production and pricing levels of important raw materials, including plastic
resins, which are a key material used by purchasers of Milacron's plastics
technologies products, 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
relations issues;
* customer acceptance of new products being introduced during 2000;
* 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 Milacron does business, including
export duties, import controls, quotas and other trade barriers;
* changes in tax, environmental and other laws and regulations in the U.S.
and non-U.S. countries where Milacron does business;
* unanticipated litigation, claims or assessments, including but not limited
to claims or problems related to product liability, warranty or
environmental issues.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information required by Item 3 is included in Item 2 on page 15 of this
Form 10-Q.
<PAGE>
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In the opinion of management and counsel, there are no material pending
legal proceedings to which the company or any of its subsidiaries is a party or
of which any of its property is the subject.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit (3) - Certificate of Incorporation and Bylaws
Exhibit (4) - Instruments Defining the Rights of
Security Holders, Including Indentures
Exhibit (10) - Material Contracts
Exhibit (11) - Statement Regarding Computation
of Per Share Earnings
- filed as a part of Part I
Exhibit (27) - Financial Data Schedule
- filed as part of Part I
(b) Reports on Form 8-K
- A current report on Form 8-K, Item 5, dated March 10, 2000 was filed
regarding a proposed unregistered offering of up to EURO 150 million
Eurobonds by Milacron Capital Holdings B.V., a wholly-owned subsidiary
of Milacron Inc.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MILACRON INC.
Date: May 12, 2000 By:/s/Jerome L. Fedders
------------ --------------------
Jerome L. Fedders
Controller
Date: May 12, 2000 By:/s/ Robert P. Lienesch
------------ ----------------------
Robert P. Lienesch
Vice President - Finance
and Treasurer and
Chief Financial Officer
<PAGE>
INDEX TO EXHIBITS
EXHIBIT NO. PAGE
2. Plan of Acquisition, Reorganization, Arrangement,
Liquidation, or Succession - not applicable.
3. Articles of Incorporation and By-Laws.
3.1 Restated Certificate of Incorporation filed
with the Secretary of State of the State of
Delaware on November 17, 1998
- Incorporated herein by reference to the
company's Registration Statement on
Form S-8 (Registration No. 333-70733).
3.2 By-Laws, as amended
- Incorporated herein by reference to the
company's Registration Statement on
Form S-8 (Registration No. 333-70733).
4. Instruments Defining the Rights of Security Holders,
Including Indentures:
4.1 8-3/8% Notes due 2004
- Incorporated herein by reference to the
company's Amendment No. 3 to Form S-4
Registration Statement dated July 7, 1994
(File No. 33-53009).
4.2 7-7/8 Notes due 2000
- Incorporated by reference to the company's
Registration Statement on Form S-4 dated
July 21, 1995 (File No. 33-60081).
4.3 Milacron Inc. hereby agrees to furnish to the
Securities and Exchange Commission, upon its
request, the instruments with respect to long-term
debt for securities authorized thereunder which do
not exceed 10% of the registrant's total
consolidated assets.
10. Material Contracts:
10.1 Milacron 1987 Long-Term Incentive Plan
- Incorporated herein by reference to the
company's Proxy Statement dated March 27, 1987.
10.2 Milacron 1991 Long-Term Incentive Plan
- Incorporated herein by reference to the
company's Proxy Statement dated Mach 22, 1991.
10.3 Milacron 1994 Long-Term Incentive Plan
- Incorporated herein by reference to the
company's Proxy Statement dated March 24, 1994.
10.4 Milacron 1997 Long-Term Incentive Plan, as amended
- Incorporated by reference to the company's
Form 10-K for the fiscal year ended December 31, 1998.
10.5 Milacron 1996 Short-Term Management Incentive Plan
- Incorporated herein by reference to the company's
Form 10-K for the Fiscal year ended December 28, 1996.
<PAGE>
10.6 Milacron Supplemental Pension Plan, as amended
- Incorporated by reference to the company's
Form 10-K for the Fiscal year ended December 31, 1999.
10.7 Milacron Supplemental Retirement Plan, as amended
- Incorporated by reference to the company's
Form 10-K for the Fiscal year ended December 31, 1999.
10.8 Milacron Inc. Plan for the Deferral of Director's
Compensation, as amended
- Incorporated by reference to the company's
Form 10-K for the fiscal year ended December 31, 1998.
10.9 Milacron Inc. Retirement Plan for Non-Employee Directors,
as amended
- Incorporated by reference to the company's
Form 10-K for the fiscal year ended December 31, 1998.
10.10 Milacron Supplemental Executive Retirement Plan,
as amended
- Incorporated by reference to the company's
Form 10-K for the Fiscal year ended December 31, 1999.
10.11 Amended and Restated Revolving Credit Agreement
dated as of November 30, 1998 among Milacron Inc.,
Cincinnati Milacron Kunststoffmaschinen Europe GmbH,
the lenders listed therein and Bankers Trust Company,
as agent.
- Incorporated by reference to the company's
Form 10-K for the fiscal year ended December 31, 1998.
10.12 Milacron Compensation Deferral Plan, as amended
- Incorporated by reference to the company's
Form 10-K for the Fiscal year ended December 31, 1999.
10.13 Rights Agreement dated as of February 5, 1999, between
Milacron Inc. and Chase Mellon Shareholder Services,
L.L.C., as Rights Agent
- Incorporated herein by reference to the company's
Registration Statement on Form 8-A (File No. 001-08485).
10.14 Purchase and Sale Agreement between UNOVA, Inc.,
UNOVA Industrial Automation Systems, Inc.,
UNOVA U.K. Limited and Cincinnati Milacron Inc.
dated August 20, 1998.
- Incorporated herein by reference to the company's
Form 8-K dated December 30, 1995.
10.15 Purchase and Sale Agreement between Johnson Controls, Inc.,
Hoover Universal, Inc. and Cincinnati Milacron Inc.,
dated August 3, 1998.
- Incorporated herein by reference to the company's
Form 8-K dated September 30, 1998.
10.16 Amendment Number One to the Amended and Restated Revolving
Credit Agreement dated as of November 30, 1998 among
Milacron Inc., Cincinnati Milacron Kunststoffmaschinen
Europe GmbH, the lenders listed therein and Bankers Trust
Company, as agent.
- Incorporated by reference to the company's
Form 10-K for the Fiscal year ended December 31, 1999.
<PAGE>
10.17 Milacron Supplemental Executive Pension Plan.
- Incorporated by reference to the company's
Form 10-K for the Fiscal year ended December 31, 1999.
10.18 Milacron Compensation Deferral Plan Trust Agreement
by and between Milacron Inc. and Reliance Trust Company.
- Incorporated by reference to the company's
Form 10-K for the Fiscal year ended December 31, 1999.
10.19 Milacron Supplemental Retirement Plan Trust Agreement
by and between Milacron Inc. and Reliance Trust Company.
- Incorporated by reference to the company's
Form 10-K for the Fiscal year ended December 31, 1999.
10.20 Amendment Number Two to the Amended and Restated
Revolving Credit Agreement dated as of November 30, 1998
among Milacron Inc., Cincinnati Milacron
Kunststoffmaschinen Europe Gmbh, the lenders listed
Therein and Bankers Trust Company as Agent.
- Filed herewith.
11. Statement Regarding Computation of
Per-Share Earnings 22
15. Letter Regarding Unaudited Interim Financial
Information - not applicable
18. Letter regarding Change in Accounting
Principles - not applicable
19. Report Furnished to Security Holders
- not applicable
22. Published Report Regarding Matters Submitted to
Vote of Security Holders
- Incorporated by reference to the company's Proxy
Statement dated March
26, 1999.
23. Consent of Experts and Counsel
24. Power of Attorney - not applicable
27. Financial Data Schedule
- Filed as part of EDGAR document
99. Additional Exhibits - not applicable
<PAGE>
<TABLE>
EXHIBIT 11
COMPUTATION OF PER SHARE EARNINGS
Milacron Inc. and Subsidiaries
(Unaudited)
===============================================================================
(In thousands, except per share amounts) Quarter Ended March 31,
2000 1999
- -------------------------------------------------------------------------------
<S> <C> <C>
Net earnings................................ $ 15,077 $ 15,075
Less preferred dividends.................... (60) (60)
------------ ------------
Net earnings available to common
shareholders........................... $ 15,017 $ 15,015
============ ============
Basic earnings per share:
Weighted-average common shares
outstanding............................ 36,149 37,299
------------ ------------
Per share amount......................... $ .42 $ .40
============ ==========
Diluted earnings per share:
Weighted-average common shares
outstanding............................ 36,149 37,299
Dilutive effect of stock options and
restricted shares based on the
treasury stock method................ 87 201
------------ ------------
Total.................................... 36,236 37,500
============ ============
Per share amount......................... $ .41 $ .40
============ ==========
===============================================================================
</TABLE>
Note: This computation is required by Regulation S-K, Item 601, and is filed
as an exhibit under Item 6 of Form 10-Q.
EXHIBIT 10.20
AMENDMENT NUMBER TWO, dated as of January 31, 2000 ("Amendment") to the
Amended and Restated Revolving Credit Agreement dated as of November 30, 1998 as
amended by Amendment No. 1 dated as of March 31, 1999 and as amended hereby (the
"Credit Agreement"), among MILACRON INC., a Delaware corporation (the "Borrower"
and the "Company"), MILACRON KUNSTSTOFFMASCHINEN EUROPA GMBH, a German
corporation ("MKE"), Cincinnati GrundstUcksverwaltung GMBH, a German corporation
("CG" and, together with "MKE", the "German Borrowers"; the German Borrowers,
collectively, with the Company, the "Borrowers"), the lenders listed on Schedule
2.1 thereto (each, a "Lender" and, collectively, the "Lenders") and Bankers
Trust Company, a New York banking corporation ("BTCo"), as a Lender and as agent
for the Lenders (in such capacity, including its successors and permitted
assigns, the "Agent"). Capitalized terms used and not otherwise defined herein
shall have the meanings assigned to them in the Credit Agreement.
WHEREAS, the Company has requested that the Agent and the Lenders amend
certain provisions of the Credit Agreement in order to permit a German entity
and a Dutch entity to be named as additional Borrowers, whose Obligations will
be guaranteed by the Company and to delete CG as a Borrower;
WHEREAS, the Company has requested that the Agent and the Lenders amend or
waive compliance with certain covenants of the Credit Agreement;
WHEREAS, the Company has requested an increase to the Alternate Currency
Sublimit available to the Foreign Subsidiary Borrowers;
WHEREAS, the Company has requested a Swingline facility, available to the
Company in Dollars and to the Foreign Subsidiary Borrowers in euros and such
Swingline facility would not increase the Total Revolving Loan Commitment;
WHEREAS, the Agent and the Requisite Lenders have considered and agreed to
the Company's requests, upon the terms and conditions set forth in this
Amendment;
NOW, THEREFORE, in consideration of the foregoing, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
SECTION ONE - AMENDMENTS.
----------- ----------
The Credit Agreement is amended as hereinafter provided in this Section
ONE, effective as of January 31, 2000 (the "Amendment Effective Date");
provided, that with respect to the sections being amended to permit (x) Milacron
B.V. as an additional Borrower, such sections shall not be amended until the
conditions set forth in Section Four (a), (b)(i), (e), (f) and (g) of this
Amendment shall have been satisfied and (y) Milacron GmbH as an additional
Borrower, such sections shall not be amended until the conditions set forth in
Section Four (a), (b)(ii), (c), (h) and (g) of this Amendment shall have been
satisfied.
1.1. Amendment to Section 1 (Definitions) of the Credit Agreement
(a) Section 1.1 shall be amended by adding the following new definition in
appropriate alphabetical order:
"Amendment No. 2" shall mean Amendment Number TWO dated as of January
31, 2000 to this Agreement.
"Mandatory Cost" means the cost imputed to each Lender(s) of
compliance with (a) the cash ratios and special deposit requirements of the
Bank of England and/or the banking supervision or other costs imposed by
the Financial Services Authority, and (b) any reserve asset requirements of
the European Central Bank.
"Maximum Swingline Amount" shall mean $15,000,000.
"Milacron B.V." shall mean Milacron B.V. a Dutch corporation and
wholly-owned Subsidiary of the Company.
"Milacron GmbH" shall mean Milacron Metalworking Technologies Holding
GmbH, a German corporation, a direct, wholly-owned Subsidiary of Milacron
B.V. and an indirect, wholly-owned Subsidiary of the Company.
"Overnight Euro Rate" on any date shall mean the offered quotation to
first-class banks in the London interbank market by BTCo for Euro overnight
deposits of amounts in immediately available funds comparable to the
outstanding principal amount of the Euro Swingline Loan of BTCo as of 11:00
a.m. (London time) on such date, provided that in the event the Agent has
made any determination pursuant to Section 2.10(a)(i) in respect of Euro
Sterling Swingline Loans the Overnight Euro Rate determined pursuant to
this definition shall instead be the rate determined by BTCo as the
all-in-cost of funds for BTCo to fund such Euro Swingline Loan.
"Overnight Euro Rate Loan" shall mean each Euro Swingline Loan.
"Percentage" in the case of a Lender at any time shall mean a fraction
(expressed as a percentage) the numerator of which is the Revolving Loan
Commitment of such Lender at such time and the denominator of which is the
Total Revolving Loan Commitment at such time; provided that if the
Percentage of any Lender is to be determined after the Total Revolving Loan
Commitment has been terminated, then the Percentages of the Lenders shall
be determined immediately prior (and without giving effect) to such
termination.
"Swingline Expiry Date" shall mean the date which is five Business
Days prior to the Final Maturity Date.
"Swingline Loan" shall have the meaning assigned to such term in
Section 2.1(e).
(b) Section 1.1 shall be further amended as follows:
"Borrower" shall be amended and restated by deleting the definition
thereof and replacing it with the following:
"Borrowers" shall mean the Company and each of the Foreign Subsidiary
Borrowers.
"Certain Existing Indebtedness" shall be amended and restated by
deleting the definition thereof and replacing it with the following:
"Certain Existing Indebtedness" shall mean any Indebtedness of the
Company in an aggregate principal amount equal to or greater than
$100,000,000.
"Dividends" shall be deleted in its entirety.
"German Borrowers" shall be amended and restated by deleting the
definition thereof and replacing it with the following new definition and
all references to "German Borrowers" shall be replaced with "Foreign
Subsidiary Borrowers" throughout the Credit Agreement.
"Foreign Subsidiary Borrowers" shall mean as the context so requires
(i) MKE, (ii) Milacron GmbH, (iii) Milacron B.V. or (iv) each of MKE,
Milacron GmbH and Milacron B.V.
"Fixed Charges" shall be deleted in its entirety.
"Loan" shall be amended and restated by deleting the definition
thereof and "Loan or" in Section 2.1(a) and replacing the definition with
the following:
"Loan" shall mean a Revolving Loan or Swingline Loan.
"Significant Subsidiary" shall be amended by deleting clause (z) and
substituting "(z) is a Foreign Subsidiary Borrower." therefor.
"Type" shall be amended by inserting "or Swingline Loan" immediately
following the words "Revolving Loan."
1.2. Amendment to Section 2 (Amount and Terms of Loans) to the Credit
Agreement
Section 2.1(b) shall be amended by deleting "$125,000,000" immediately
following the words "Deutsche Mark Revolving Loans, would exceed" and
substituting "$200,000,000" therefor.
Section 2.1 shall be amended by inserting the following at the end of
clause (c):
"(d) Subject to and upon the terms and conditions herein set forth,
BTCo in its individual capacity agrees to make at any time and from time to
time on and after the Amendment Effective Date and prior to the Swingline
Expiry Date, a loan or loans to the Company (each, a "Dollar Swingline
Loan" and, collectively, the "Dollar Swingline Loans"), which Swingline
Loans (i) shall be made and maintained as Base Rate Loans, (ii) shall be
denominated in Dollars, (iii) may be repaid and reborrowed in accordance
with the provisions hereof, (iv) shall not exceed in aggregate principal
amount at any time outstanding, when combined with the aggregate principal
amount of all Loans then outstanding (including the Dollar Equivalent of
all Deutsche Mark Loans then outstanding) and the Letter of Credit
Outstandings (exclusive of Unpaid Drawings relating to Letters of Credit
which are repaid with the proceeds of, and simultaneously with the
incurrence of, the respective incurrence of Revolving Loans) at such time,
an amount equal to the Total Revolving Loan Commitment then in effect and
(v) shall not exceed in aggregate principal amount at any time outstanding,
when added to the Dollar Equivalent of the aggregate principal amount of
any Euro Swingline Loan then outstanding the Maximum Swingline Amount. BTCo
will not make a Dollar Swingline Loan after it has received written notice
from any Borrower or the Requisite Lenders stating that a Default or an
Event of Default exists until such time as BTCo shall have received a
written notice of (A) rescission of such notice from the party or parties
originally delivering the same or (B) a waiver of such Default or Event of
Default from the Requisite Lenders.
(e) Subject to and upon the terms and conditions set forth herein,
BTCo in its individual capacity agrees to make, at any time and from time
to time on or after the Amendment Effective Date and prior to the Swingline
Expiry Date, a loan or loans (each, a "Euro Swingline Loan" and,
collectively, the "Euro Swingline Loans" and, together with the Dollar
Swingline Loans, the "Swingline Loans") to the Foreign Subsidiary
Borrowers, which Euro Swingline Loans (i) shall be made and maintained as
Overnight Euro Rate Loans, (ii) shall be made and maintained in Euros,
(iii) may be repaid and reborrowed in accordance with the provisions
hereof, (iv) shall not in aggregate principal amount at any time
outstanding, when combined with the aggregate principal amount of all Loans
then outstanding and the Letter of Credit Outstanding at such time to
exceed the Total Revolving Loan Commitment at such time and (v) shall not
exceed in aggregate principal amount at any time outstanding (taking the
Dollar Equivalents of all amounts in currencies other than Dollars), when
added to the aggregate principal amount of any Dollar Swingline Loan then
outstanding, the Maximum Swingline Amount. BTCo shall not make any Euro
Swingline Loan after it has received written notice from any Borrower or
the Requisite Lenders stating that a Default or an Event of Default exists
and is continuing until such time as BTCo shall have received written
notice (A) of rescission of all such notices from the party or parties
originally delivering such notice or notices or (B) of the waiver of such
Default or Event of Default by the Requisite Lenders.
(f) On any Business Day, BTCo may, in its sole discretion, give notice
to the Revolving Lenders and the Borrowers that its outstanding Swingline
Loans shall be funded with a Borrowing of Revolving Loans (provided that
each such notice shall be deemed to have been automatically given upon the
occurrence of a Default or an Event of Default under Section 7.7), in which
case a Borrowing of Revolving Loans constituting Base Rate Loans (each such
Borrowing, a "Mandatory Borrowing") shall be made on the immediately
succeeding Business Day by all Lenders pro rata based on each Lender's
Percentage, and the proceeds thereof shall be applied directly to repay
BTCo for such outstanding Swingline Loans. Each Lender hereby irrevocably
agrees to make Base Rate Loans upon one Business Day's notice pursuant to
each Mandatory Borrowing in the amount and in the manner specified in the
preceding sentence and on the date specified in writing by BTCo
notwithstanding (i) that the amount of the Mandatory Borrowing may not
comply with the minimum borrowing amount otherwise required hereunder, (ii)
whether any conditions specified in Section 4 are then satisfied, (iii)
whether a Default or an Event of Default has occurred and is continuing,
(iv) the date of such Mandatory Borrowing and (v) any reduction in the
Total Revolving Loan Commitment after any such Swingline Loans were made.
In the event that any Mandatory Borrowing cannot for any reason be made on
the date otherwise required above (including, without limitation, as a
result of the commencement of a proceeding under the Bankruptcy Code in
respect of the Company), each Lender (other than BTCo) hereby agrees that
it shall forthwith purchase from BTCo (without recourse or warranty) such
assignment of the outstanding Swingline Loans as shall be necessary to
cause the Revolving Lenders to share in such Swingline Loans ratably based
upon their respective Percentages; provided that all interest payable on
the Swingline Loans shall be for the account of BTCo until the date the
respective assignments are purchased and, to the extent attributable to the
purchased assignment, shall be payable to the Lender purchasing same from
and after such date of purchase."
Section 2.3 shall be amended by inserting the following at the end of
clause (c):
"(d)(i) Whenever the applicable Borrower desires to make a Borrowing
of Swingline Loans hereunder, such Borrower shall give the Swingline Lender
not later than (x) in the case of Dollar Swingline Loans, 2:00 p.m. (New
York time) and (y) in the case of Euro Swingline Loans, 12:00 noon (London
time), on the date that a Swingline Loan is to be made, written notice or
telephonic notice promptly confirmed in writing of each Swingline Loan to
be made hereunder. Each such notice shall be irrevocable and specify (A)
the date of Borrowing (which shall be a Business Day), (B) the aggregate
principal amount of the Swingline Loans to be made pursuant to such
Borrowing (stated in the relevant currency) and (C) whether the respective
Swingline Loans shall constitute Dollar Swingline Loans or Euro Swingline
Loans."
Section 2.8 shall be amended by inserting the following at the end of
clause (h):
(i) The Foreign Borrowers hereby agree to pay interest in respect of
the unpaid principal amount of each Euro Swingline Loan from the date the
proceeds thereof are made available to the applicable Foreign Borrower
until the maturity thereof (whether by acceleration, prepayment or
otherwise) at a rate per annum which shall be equal to the sum of the
Applicable Borrowing Margin for Alternate Currency Loans as in effect from
time to time plus the Overnight Euro Rate in effect from time to time
during the period such Euro Swingline Loan is outstanding plus any
Mandatory Costs.
1.3. Amendment to Section 6 (Negative Covenants) to the Credit Agreement.
Section 6.4 shall be amended by deleting the text thereof in its entirety
and replacing it with the following:
"6.4 Total Interest Coverage Ratio. The Company shall not permit at any
time the ratio of (i) Consolidated EBITDA of the Company to (ii) Interest
Expense for the most recently completed four fiscal quarter period of the
Company to be less than 3.00 to 1.00."
Section 6.9 shall be amended by deleting it in its entirety.
SECTION TWO - WAIVER.
----------- ------
The Lenders hereby waive any failure by the Company to comply with Section
6.4 for any four fiscal quarter period ending on or prior to the Amendment
Effective Date to the extent such failure results from the exclusion of the
Dollar amount of share repurchases in the calculation of Fixed Charges.
SECTION THREE - REPRESENTATIONS AND WARRANTIES.
------------- ------------------------------
The Company hereby confirms, reaffirms and restates the representations and
warranties made by it in Section 8 of the Credit Agreement, as amended hereby,
and all such representations and warranties are true and correct in all material
respects as of the date hereof except such representations and warranties need
not be true and correct to the extent that changes in the facts and conditions
on which such representations and warranties are based are required or permitted
under the Credit Agreement or such changes arise out of events not prohibited by
the covenants set forth in Sections 5 and 6 of the Credit Agreement. The Company
further represents and warrants (which representations and warranties shall
survive the execution and delivery hereof) to the Agent and each Lender that:
(a) The Company, MKE, Milacron GmbH and Milacron B.V. each has the
corporate power, authority and legal right to execute, deliver and perform this
Amendment and has taken all corporate actions necessary to authorize the
execution, delivery and performance of this Amendment;
(b) No consent of any person other than the majority of the Lenders, and no
consent, permit, approval or authorization of, exemption by, notice or report
to, or registration, filing or declaration with, any governmental authority is
required in connection with the execution, delivery, performance, validity or
enforceability of this Amendment;
(c) This Amendment has been duly executed and delivered on behalf of each
of the Company, MKE, Milacron GmbH and Milacron B.V. by a duly authorized
officer or attorney-in-fact of the Company and each Foreign Subsidiary Borrower
as the case may be, and constitutes a legal, valid and binding obligation of the
Company and each Foreign Subsidiary Borrower, as the case may be, enforceable in
accordance with its terms, except as the enforceability thereof may be limited
by applicable bankruptcy, reorganization, insolvency, moratorium or similar laws
affecting creditor's rights generally or by equitable principles relating to
enforceability; and
(d) The execution, delivery and performance of this Amendment will not
violate (i) any provision of law applicable to the Company or any Foreign
Subsidiary Borrower or (ii) contractual obligations of either the Company or any
Foreign Subsidiary Borrower, except in the case of clause (i) or (ii), such
violations that would not have, individually or in the aggregate, a Material
Adverse Effect.
SECTION FOUR - CONDITIONS PRECEDENT.
------------ --------------------
Upon the fulfillment of the following conditions, the amendments
contemplated by this Amendment to permit the new additional Borrowers shall
become effective:
(a) The Company shall have delivered to the Agent a certificate of the
Secretary of the Company, dated the Amendment Effective Date and attaching
resolutions of its Board of Directors in form and substance satisfactory to the
Agent approving and authorizing the execution, delivery and performance of this
Amendment, signature and incumbency certificates and such other documents that
the Agent may reasonably request.
(b) The Company shall have delivered to the Agent the signature
certificate(s) of the persons authorized by (i) Milacron B.V. and (ii) Milacron
GmbH to execute Amendment No. 2.
(c) The Company shall have delivered to the Agent such documents and
certificates as the Agent or its counsel may reasonably request relating to the
organization and good standing of Milacron GmbH.
(d) The Company shall have delivered to the Agent an opinion from Hengeler
Mueller Weitzel Wirtz, special German counsel to Milacron GmbH, which opinion
shall be dated as of the Amendment Effective Date, and shall cover such matters
as shall be reasonably requested or approved by the Agent.
(e) The Company shall have delivered to the Agent such documents and
certificates as the Agent or its counsel may reasonably request relating to the
organization and good standing of Milacron B.V.
(f) The Company shall have delivered an opinion to the Agent from Carron &
Stevens/Baker & McKenzie (the Netherlands), special Dutch counsel to Milacron
B.V., which opinion shall be dated as of the Amendment Effective Date, and shall
cover such matters as shall be reasonably requested or approved by the Agent.
(g) The Company shall have duly authorized, executed and delivered to the
Agent a Company Guarantee, dated as of the Amendment Effective Date, pursuant to
which the Company guarantees the Obligations of Milacron B.V. and Milacron GmbH
owing to the Lenders, in substantially the form of Exhibit F to the Credit
Agreement.
SECTION FIVE - MISCELLANEOUS.
------------ -------------
(a) Upon execution of this Amendment, Milacron B.V. shall be a party to the
Credit Agreement and shall be a Borrower for all purposes thereof, and Milacron
B.V. hereby agrees to be bound by all applicable provisions of the Credit
Agreement.
(b) Upon execution of this Amendment, Milacron GmbH shall be a party to the
Credit Agreement and shall be a Borrower for all purposes thereof, and Milacron
GmbH hereby agrees to be bound by all applicable provisions of the Credit
Agreement.
(c) Except as herein expressly amended, the Credit Agreement and all other
agreements, documents, instruments and certificates executed in connection
therewith, except as otherwise provided herein, are ratified and confirmed in
all respects and shall remain in full force and effect in accordance with their
respective terms.
(d) All references to the Credit Agreement shall mean the Credit Agreement
as amended as of the Amendment Effective Date, and as the same may at any time
be amended, amended and restated, supplemented or otherwise modified from time
to time and as in effect.
(e) This Amendment may be executed by the parties hereto in one or more
counterparts, each of which shall be an original and all of which shall
constitute one and the same agreement.
(f) THIS AMENDMENT SHALL BE GOVERNED BY, CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE
PRINCIPLES OF CONFLICT OF LAWS.
(g) This Amendment shall not constitute a consent or waiver to or
modification of any other provision, term or condition of the Credit Agreement.
All terms, provisions, covenants, representations, warranties, agreements and
conditions contained in the Credit Agreement, as amended hereby, shall remain in
full force and effect.
(h) CG, the Agent and each Lender hereby irrevocably terminate the
Commitments and Obligations of the Agent and each Lender with respect to CG
under the Credit Agreement. The Agent and each Lender hereby release CG from
further liability or Obligation under the Credit Agreement.
<PAGE>
Amendment No. 2
MILACRON INC.
By:______________________________
Title: Vice President & Treasurer
Notice Address:
Milacron Inc.
2090 Florence Avenue
Cincinnati, Ohio 45206
Attention: Robert P. Lienesch
Telephone: (513) 487-5588
FAX: (513) 487-5586
MILACRON KUNSTSTOFF-MASCHINEN
EUROPA GmbH,
By:______________________________
on basis of Power of Attorney
dated as of December 15, 1998
Notice Address:
c/o Milacron Inc.
2090 Florence Avenue
Cincinnati, Ohio 45206
Attention: Robert P. Lienesch
Telephone: (513) 487-5588
FAX: (513)487-5586
CINCINNATI GRUNDSTUCKSVERWALTUNG
GmbH,
By:______________________________
on basis of Power of Attorney
dated as of March 15, 1999
<PAGE>
Amendment No. 2
MILACRON METALWORKING TECHNOLOGIES
HOLDING GmbH
By:______________________________
on basis of Power of Attorney
dated as of February 2, 2000
Notice Address:
c/o Milacron Inc.
2090 Florence avenue
Cincinnati, Ohio 45209
Attention: Robert P. Lienesch
Telephone: (513) 487-5588
FAX: (513) 487-5586
MILACRON B.V.
By:______________________________
on basis of Power of Attorney
dated as of January 31, 2000
Notice Address:
c/o Milacron Inc.
2090 Florence Avenue
Cincinnati, Ohio 45209
Attention: Robert P. Lienesch
Telephone: (513) 487-5588
FAX: (513) 487-5586
<PAGE>
Amendment No. 2
BANKERS TRUST COMPANY,
as a Lender and as Agent
By:______________________________
Title:
Notice Address and Payment Office:
Bankers Trust Company
130 Liberty Street
New York, New York 10006
Attention:
Telephone:
FAX:
<PAGE>
Amendment No. 2
ABN AMRO BANK N.V., as a Lender
By:______________________________
Title: Vice President
By:______________________________
Title: Vice President
Notice Office and Payment Office:
208 South LaSalle Street
Chicago, IL 60674
Attention: Loan Administration
Telephone: (312) 992-5151
FAX: (312) 992-5156
One PPG Place
Suite 2950
Pittsburgh, PA 15222
Attention: Pat Pastore
Telephone: (412) 566-2297
FAX: (412) 566-2266
<PAGE>
Amendment No. 2
BANK OF AMERICA N.A., as a Lender
By:______________________________
Title:
Notice Address and Payment Office:
<PAGE>
Amendment No. 2
BANK ONE INDIANA, N.A., as a Lender
By:______________________________
Title:
Notice Address and Payment Office:
<PAGE>
Amendment No. 2
COMERICA BANK, as a Lender
By:______________________________
Title:
Notice Office and Payment Office:
500 Woodward Avenue
Detroit, Michigan 48226
Attention:
Telephone: (313) 222-9644
FAX: (313) 222-9514
<PAGE>
Amendment No. 2
CREDIT LYONNAIS CHICAGO BRANCH,
as a Lender
By:______________________________
Title:
Notice Address and Payment Office:
227 West Monroe Street
Chicago, Illinois 60606
Attention: Mary Ann Klemm
Telephone: (312) 641-0500
FAX: (312) 641-0527
<PAGE>
Amendment No. 2
FIRSTAR BANK, National Association,
as a Lender
By:______________________________
Title:
Notice Address and Payment Office:
425 Walnut St. Location 8160
Cincinnati, Ohio 45201-1038
Attention: Thomas D. Gibbons
Telephone: (513) 287-8313
FAX: (513) 632-2068
<PAGE>
Amendment No. 2
KEYBANK NATIONAL ASSOCIATION,
as a Lender
By:______________________________
Title:
Notice Address and Payment Office:
127 Public Square
Mail Code OH01-27-0606
Cleveland, Ohio 44114
Attention: Thomas J. Purcell
Telephone: (216) 689-4439
FAX: (216) 689-4981
<PAGE>
Amendment No. 2
MELLON BANK, N.A., as a Lender
By:______________________________
Title:
Notice Address and Payment Office:
One Mellon Center
500 Grant Street
Room 4530
Pittsburgh, PA 15258
Attention: Ryan F. Busch
Telephone: (412) 234-0733
FAX: (412) 236-1914
<PAGE>
Amendment No. 2
MORGAN GUARANTY TRUST COMPANY OF
NEW YORK, as a Lender
By:______________________________
Title: Vice President
Notice Address and Payment Office:
Morgan Guaranty Trust Company
of New York
c/o J.P. Morgan Services Inc.
500 Stanton Christian Road
P.O. Box 6070
Newark, DE 19713-3107
Attention: Michael Massena
Telephone: (302) 643-4217
FAX: (302) 634-1852
<PAGE>
Amendment No. 2
PNC BANK, as a Lender
By:______________________________
Title:
Notice Address and Payment Office:
PNC Center
P.O. Box 1198
Cincinnati, Ohio 45201
Attention:
Telephone:
FAX:
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Exhibit 27
</LEGEND>
<CIK> 0000716823
<NAME> MILACRON INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 46,600
<SECURITIES> 0
<RECEIVABLES> 241,500
<ALLOWANCES> 12,800
<INVENTORY> 373,800
<CURRENT-ASSETS> 697,200
<PP&E> 584,800
<DEPRECIATION> 270,100
<TOTAL-ASSETS> 1,505,100
<CURRENT-LIABILITIES> 555,400
<BONDS> 0
0
6,000
<COMMON> 351,400
<OTHER-SE> 126,300
<TOTAL-LIABILITY-AND-EQUITY> 1,505,100
<SALES> 396,900
<TOTAL-REVENUES> 396,900
<CGS> 294,000
<TOTAL-COSTS> 294,000
<OTHER-EXPENSES> 71,700
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,300
<INCOME-PRETAX> 21,900
<INCOME-TAX> 6,800
<INCOME-CONTINUING> 15,100
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,100
<EPS-BASIC> .42
<EPS-DILUTED> .41
</TABLE>
