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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
___________
FORM 10-K
[x] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 (Fee Required). For the fiscal year ended December 30, 1995.
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (No Fee Required). For the transition period from
__________ to __________
Commission file number 1-8485
CINCINNATI MILACRON INC.
(Exact name of registrant as specified in its charter)
Delaware 31-1062125
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4701 Marburg Avenue
Cincinnati, Ohio 45209
(513)841-8100
(Address and phone number of principal executive offices)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class: Name of each exchange on which registered:
Common Shares - Par Value $1.00 New York Stock Exchange, Inc.
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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [x]
The aggregate market value of voting stock held by non-affiliates of the
registrant is $679,686,805 at 2/28/96.
Voting stock held by officers, directors and principal holders is not included
in the computation. The Company, however, has not made a determination that
such individuals are "affiliates" within the meaning of Rule 405 under the
Securities Act of 1933.
Number of shares of Common Stock, $1.00 par value, outstanding as of February
28, 1996: 34,265,117
Documents incorporated by reference:
PART III - Proxy statement, dated March 22, 1996
===============================================================================
CINCINNATI MILACRON INC.
1995 FORM 10-K
Table of Contents
PART I
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Page
----
Item 1. Business 3
Executive Officers of the Registrant 20
Item 2. Properties 22
Item 3. Legal Proceedings 22
Item 4. Submission of Matters to a Vote of Security-Holders 22
PART II
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Item 5. Market for the Registrant's Common Equity and
Related Stockholder Matters 22
Item 6. Selected Financial Data 23
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations 25
Item 8. Financial Statements and Supplementary Data 33
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 52
PART III
--------
Item 10. Directors and Executive Officers of the Registrant 52
Item 11. Executive Compensation 52
Item 12. Security Ownership of Certain Beneficial Owners
and Management 52
Item 13. Certain Relationships and Related Transactions 52
PART IV
-------
Item 14.
Exhibits, Financial Statement Schedules and Reports
on Form 8-K 53
Signatures 57
Index to Certain Exhibits and Financial Statement
Schedules 58
Exhibit 11 - Computation of Per-Share Earnings 59
Exhibit 21 - Subsidiaries of the Registrant 60
Exhibit 23 - Consent of Independent Auditors 62
Exhibit 27 - Financial Data Schedule 63
Schedule II- Valuation and Qualifying Accounts and
Reserves 64
PART I
------
Item 1. BUSINESS
GENERAL
- -------
Cincinnati Milacron Inc. is a leading global manufacturer of products and
provider of services and technology used to process engineered materials.
Incorporated in Delaware in 1983, the company is a successor to a business
established in 1884.
The company has three business segments: plastics machinery, machine tools
and industrial products. The company's plastics machinery business
includes injection molding machines, extrusion systems, blow molding
machines and auxiliary equipment. The company's machine tool business
consists of turning and machining centers, grinding machines, flexible
manufacturing cells, and advanced systems primarily for the aerospace
industry. The company's industrial products business includes metalcutting
tools, metalworking fluids, grinding wheels, carbide wear parts and
industrial magnets.
The company has gone through a major transformation over the last three
years, primarily through strategic acquisitions, accelerated new product
development, expanded distribution, and consolidation of its U.S. machine
tool operations. As a result, the company has achieved a more equal
balance among its segments' sales, and between its U.S. and non-U.S. sales.
From 1992 to 1995, the company's consolidated sales have grown at a
compound annual rate of 28% from $789 million to $1.6 billion.
In 1995, more than 40% of sales came from the industrial products segment,
making it the company's largest business segment in that year. The
plastics machinery segment was the second-largest business segment in 1995,
with approximately 35% of sales, while the machine tool segment contributed
about 25% of sales. The company expects the growth in industrial products
and plastics machinery sales will make it less susceptible to the
historically severe business cycles and lower margins characteristic of the
machine tool business.
Today, the company sells products and provides services to industrial
customers throughout the world. Sales to customers outside the U.S.
increased from $298 million in 1993, representing 29% of total sales, to
$784 million in 1995, representing 48% of total sales. The company has
been successful in penetrating international markets through acquisitions,
expanded distribution, increased exports, and license and joint venture
agreements. The company believes its current geographic sales balance
helps compensate for varying economic cycles around the world and that its
increased presence outside the U.S. will reduce its dependence upon the
U.S. economy.
The company has a long-standing reputation for quality and technological
leadership. Virtually all of the company's plastics machinery products and
machine tools are computer controlled. Many of these machines are sold
with advanced application software, like software to control machine tools
that fabricate aircraft parts from composite materials. In plastics
machinery, the company believes its new all-electric machine is
revolutionizing the injection molding process by greatly improving quality
and productivity. The company also believes it is a leader in providing
programs to manage all of the wet chemistry in customers' metalworking
plants.
STRATEGIC ACQUISITIONS AND DIVESTITURES
- ---------------------------------------
The company continually explores acquisition, divestiture and consolidation
opportunities when it believes such actions could expand markets, enhance
product synergies or improve earnings potential for the long term. Over
the last three years, the company has completed several strategic
acquisitions and divestitures which the company believes will increase its
potential for further growth. In its plastics machinery segment, the
company acquired FM Maschinenbau GmbH (Ferromatik), the injection molding
machine business of Kloeckner-Werke AG, in 1993 and the D-M-E business from
The Fairchild Corporation in 1996.
Ferromatik is one of Europe's leading manufacturers of plastics injection
molding machines. With annual sales now in excess of $150 million,
Ferromatik expanded the company's plastics processing technology base and
product line and enabled the company to achieve its objective of
establishing a plastics machinery manufacturing and distribution base in
Germany to serve Europe and other markets.
D-M-E is the largest U.S. producer of mold bases, components and supplies
for the plastic injection moldmaking industry. With 1995 sales of
approximately $175 million, D-M-E serves customers throughout the world
with ten major manufacturing facilities, plus several international joint-
venture operations. The company believes D-M-E will enhance its plastics
machinery business because it provides the mold bases, supplies and
components used in the mold apparatus inside an injection molding machine.
D-M-E is the market leader with a well-established reputation for high
quality.
In 1993, the company disposed of its Sano plastics machinery business, due
in part to continuing operating losses. In addition, the Sano business did
not serve a major global market with good long-term growth potential.
In the past three years, the company has made three strategic acquisitions
in its industrial products segment: GTE Valenite Corporation (Valenite),
Krupp Widia GmbH (Widia) and Talbot Holdings, Ltd. (Talbot), all of which
have metalcutting tools as their primary product line. The company
believes that it is now the second-largest U.S. and third-largest worldwide
producer of carbide metalcutting tool systems.
Valenite was acquired in February, 1993. With principal operations in the
U.S. and Canada, it is a leading U.S. producer of consumable industrial
metalcutting tools. Part of the industrial products segment, Valenite's
1995 sales approximated $235 million, excluding about $40 million of
European sales now managed by Widia.
Widia, acquired in February, 1995, is one of the world's leading producers
of industrial metalworking products, with 1995 sales approximating $300
million. Widia's strong presence in Europe and India complements
Valenite's strengths in the U.S. and Japanese markets. Widia also enhances
the company's technological base, diversifies its industrial consumable
product line and expands its worldwide sales and distribution network.
During 1995, the company implemented an integration plan to maximize the
synergies between Valenite and Widia worldwide. The plan will be
substantially completed in 1996, and it is expected to generate $19 million
of cost savings, some of which began to be realized in 1995.
The company acquired Talbot in July, 1995. With 1995 sales of
approximately $40 million, Talbot is a major supplier of round high-speed
steel and carbide metalcutting tools, such as mills and taps, and is the
largest U.S. producer of end mills. These cutting tools, which are not
produced by either Valenite or Widia, will be sold through their
independent distributors and a direct sales force. The Talbot acquisition
enabled the company to increase its product coverage from approximately 40%
to 65% of the types of cutting tools consumed by the world market.
In 1995 the company sold American Mine Tool (AMT), a small business that
was purchased as part of the Valenite acquisition. Like Sano, this
business did not serve a major global market with good long-term growth
potential.
In its machine tools segment, the company sold its Electronic Systems
Division (ESD) in December, 1995 for $105 million. ESD's 1995 sales to
unaffiliated customers were approximately $30 million. ESD was sold to
redeploy assets to more strategic businesses. To maintain control system
continuity and development, the company entered into a long-term supply and
services agreement with the purchaser of ESD to continue to provide the
company's machine tool and plastics machinery businesses with
technologically advanced control systems.
In 1994, the company completed a major consolidation of its U.S. machine
tool operations, closing two plants in South Carolina and moving all of its
U.S. production to its main machine tool facilities in Cincinnati, Ohio.
PRODUCT DEVELOPMENT AND CAPITAL EXPENDITURES
- --------------------------------------------
As part of its objective to enhance its growth potential and global
competitiveness, the company continues to invest in research and
development and in new capital equipment. Research and development
investment in 1995 totaled $58 million, or 3.5% of sales. In 1995, the
company invested $52 million for capital additions, primarily to install
highly advanced systems throughout its operations worldwide. For 1996, the
company is budgeting an increase in capital expenditures to a total of $86
million.
To enhance its research and development effort, in recent years the company
has undertaken a major program for product development, process improvement
and modernization. This program is named "Wolfpack" because of its
emphasis on teamwork and fierce competitiveness. The objectives of
Wolfpack are to design and produce new products at world-competitive levels
of quality, performance, efficiency and cost. Substantially all of the
company's current machine designs have been developed using the Wolfpack
methodology.
SEGMENT INFORMATION
- -------------------
Financial data for the past three years for the company's business segments
are shown in the following tables. Increases in the amounts for the
plastics machinery segment are partially attributable to the acquisition of
Ferromatik on November 8, 1993, while the 1995 increases for industrial
products are partially attributable to the acquisitions of Widia on
February 1, 1995 and Talbot on July 20, 1995.
(In millions) Fiscal Year
--------------------------------
1995 1994 1993
-------- -------- --------
Sales
- -----
Plastics machinery . . . . . . . . $ 570.1 $ 503.8 $ 357.2
Machine tools. . . . . . . . . . . 409.0 338.5 355.0
Industrial products. . . . . . . . 670.2 354.8 317.2
-------- -------- --------
Total sales. . . . . . . . . . . $1,649.3 $1,197.1 $1,029.4
======== ======== ========
Backlog of Unfilled Orders
- --------------------------
Plastics machinery . . . . . . . . $ 108.1 $ 122.3 $ 85.5
Machine tools. . . . . . . . . . . 118.1 117.4 123.9
Industrial products. . . . . . . . 118.0 47.4 36.6
-------- -------- --------
Total backlog. . . . . . . . . . $ 344.2 $ 287.1 $ 246.0
======== ======== ========
Operating earnings (loss)(a)
- ----------------------------
Plastics machinery . . . . . . . . $ 54.3 $ 45.9 $ 29.2
Machine tools. . . . . . . . . . . 7.7 6.8 7.9
Industrial products. . . . . . . . 62.1 36.3 29.0
Disposition of businesses (b). . . 71.0 - (22.8)
Integration and
consolidation charges (c). . . . (9.8) - (47.1)
Corporate expenses . . . . . . . . (15.7) (18.0) (15.8)
Other unallocated expenses (d) . . (10.5) (6.8) (4.2)
-------- -------- --------
Operating earnings (loss). . . . 159.1 64.2 (23.8)
Interest expense - net . . . . . . (24.8) (15.3) (13.4)
-------- -------- --------
Earnings (loss) before income
taxes, extraordinary item and
cumulative effect of changes
in methods of accounting . . . . $ 134.3 $ 48.9 $ (37.2)
======== ======== ========
Identifiable assets
- -------------------
Plastics machinery . . . . . . . . $ 342.9 $ 295.0 $ 289.0
Machine tools. . . . . . . . . . . 238.1 270.8 243.1
Industrial products. . . . . . . . 478.6 195.0 174.4
Unallocated corporate assets (e) . 137.5 26.8 23.1
-------- -------- --------
Total assets . . . . . . . . . . $1,197.1 $ 787.6 $ 729.6
======== ======== ========
Capital expenditures
- --------------------
Plastics machinery . . . . . . . . $ 16.6 $ 13.8 $ 4.2
Machine tools. . . . . . . . . . . 8.6 11.6 8.8
Industrial products. . . . . . . . 27.1 17.6 10.4
-------- -------- --------
Total capital expenditures . . . $ 52.3 $ 43.0 $ 23.4
======== ======== ========
Depreciation and amortization
- -----------------------------
Plastics machinery . . . . . . . . $ 11.8 $ 9.2 $ 6.2
Machine tools. . . . . . . . . . . 7.4 7.2 9.4
Industrial products. . . . . . . . 24.4 12.2 10.5
-------- -------- --------
Total depreciation
and amortization . . . . . . . $ 43.6 $ 28.6 $ 26.1
======== ======== ========
(a) In 1995, the company's method of allocating corporate costs to its
business segments was refined to exclude costs for certain services not
directly assignable to the segments. This change results in additional
costs being classified as corporate expenses. Amounts for 1994 and
1993 have been restated to conform to the 1995 presentation.
(b) In 1995, $66.0 million relates to the machine tools segment and
$5.0 million relates to the industrial products segment. The 1993
amount relates to the plastics machinery segment.
(c) The 1995 amount relates to the industrial products segment and the 1993
amount relates to the machine tools segment.
(d) Includes financing costs related to the sale of accounts receivable
and minority shareholders' interests in earnings of subsidiaries.
(e) Includes cash and cash equivalents and the assets of the company's
insurance and utility subsidiaries.
GEOGRAPHIC INFORMATION
- ----------------------
The following table summarizes the company's U.S. and non-U.S. operations.
Sales of U.S. operations include export sales of $166.9 million in 1995,
$142.0 million in 1994, and $118.7 million in 1993.
Total sales of the company's U.S. and non-U.S. operations to unaffiliated
customers outside the U.S. were $784.2 million, $417.6 million, and $298.4
million in 1995, 1994 and 1993, respectively.
Fiscal Year
--------------------------
(In millions) 1995 1994 1993
------ ------ ------
U.S. operations
- ---------------
Sales. . . . . . . . . . . . . . . $938.3 $873.9 $831.9
Operating earnings (a) . . . . . . 71.8 67.9 58.1
Disposition of businesses. . . . . 62.1 - (22.8)
Integration and
consolidation charges. . . . . . (2.9) - (47.1)
Identifiable assets. . . . . . . . 507.5 471.4 420.6
Capital expenditures . . . . . . . 31.4 33.2 21.3
Depreciation and amortization. . . 21.6 19.2 19.1
Non-U.S. operations
- -------------------
Sales. . . . . . . . . . . . . . . 711.0 323.2 197.5
Operating earnings (a) . . . . . . 52.3 21.1 8.0
Disposition of businesses. . . . . 8.9 - -
Integration charge . . . . . . . . (6.9) - -
Identifiable assets. . . . . . . . 552.1 289.4 285.9
Capital expenditures . . . . . . . 20.9 9.8 2.1
Depreciation and amortization. . . 22.0 9.4 7.0
(a) In 1995, the company's method of allocating corporate costs to its U.S.
operations was refined to exclude costs not directly assignable to U.S.
operations. This change results in additional costs being classified
as corporate expenses. Amounts for 1994 and 1993 have been restated to
conform to the 1995 presentation. In addition, 1994 amounts have been
restated to exclude the effects of forgiveness of certain intercompany
obligations.
PLASTICS MACHINERY BUSINESS
- ---------------------------
The company believes it is the largest U.S. producer of plastics machinery
and one of the three largest in the world. In 1995, the company's plastics
machinery segment sales were $570.1 million. The company sells plastics
machinery to manufacturers in several key industries, including automotive,
construction, electronics, consumer goods and packaging. The company
believes it offers more varieties of machinery to process plastic than any
other U.S. company.
One of the company's strengths in the plastics machinery business stems
from having complete lines of machines for three major plastics processing
technologies: injection molding machines, systems for extrusion and blow
molding machinery. The company also sells specialty equipment for plastics
processing and rebuilds and retrofits older injection molding equipment
manufactured by the company or others.
The company distributes all of its plastics machinery products through a
combination of a direct sales forces and independent agents who are
geographically spread throughout the key markets of the world.
PLASTICS MACHINERY INDUSTRY
The market for plastics machinery has grown steadily over the past four
decades, as plastics have continued to replace traditional materials such
as metal, wood, glass and paper in an increasing number of manufactured
products, particularly in the transportation, construction, housewares,
electrical, and medical industries. Advancements in both the development
of materials, which make plastic products more functional, and the
capabilities of plastics processing equipment have been major contributors
to the steady growth in the plastics machinery market. In addition,
consumer demand for safer, more convenient and recyclable products has
increased the general demand for plastic products. Like other capital
goods markets, the plastics machinery market is subject to economic cycles,
but to a lesser degree than the machine tool market. In particular, the
market for injection molding machines is driven by the consumer economy and
the automotive industry. From 1992, plastics machinery orders have been
strong, although the company began to experience some softening of demand
in the last half of 1995, but the company expects continued growth.
Custom molders, which produce a wide variety of components for many
industries, are the single largest group of plastics machinery buyers.
Other customer categories include the automotive industry, the electrical
and packaging industries, the construction industry, manufacturers of
housewares and appliances and producers of medical supplies. Among the
factors that affect the plastics machinery market are the health of the
consumer economy, residential and commercial construction and automotive
production. Because of intense competition from international plastics
machinery producers, currency exchange rates also have a significant
impact. Fluctuations in the supply and prices of petrochemical feed stocks
for resin supply may affect the businesses of the customers for plastics
machinery and, in turn, the market for this equipment.
Environmental concerns about plastics may have the potential to slow the
growth of the plastics machinery market. However, some plastics raw
materials suppliers, machinery makers and processors are developing methods
of recycling to address environmental issues. The company believes that
environmental concerns have not had any discernible negative effect on the
market to date. Nevertheless, the company, through its membership in The
Society of Plastics Industry (an industry trade association) and its
affiliate, The American Plastics Council, is working with other leading
companies within the plastics industry to address the role of plastics in
the environment.
THE COMPANY'S PLASTICS MACHINERY BUSINESS
Until January of 1996, the company's plastics machinery segment consisted
of three major products lines: injection molding machines, extrusions
systems and blow molding machines, with injection molding machines
constituting over two-thirds of plastics machinery sales. In January,
1996, the company acquired D-M-E, which manufactures standardized mold
bases, components, and supplies for the plastics injection moldmaking
industry. See "Mold Bases and Components".
INJECTION MOLDING. The company believes it is the largest U.S. producer of
injection molding machines. Injection molding is the most common and
versatile method of processing plastic, and it is used to make a wide
variety of parts and products ranging from housewares and consumer goods to
medical supplies and industrial components. The company manufactures many
types of injection molding machines, most all of which were developed using
Wolfpack principles. The injection molding machine line includes machines
powered conventionally (with hydraulics) as well as ones that are driven by
servo motors (fully electric). Product standardization (which
facilitates part commonality) and the modernization of the company's
manufacturing facilities and methods, as well as increased volumes, have
enabled the company to achieve significant economies of scale for the
production of injection molding machines. The company believes these
factors have enabled it to become the lowest-cost U.S. producer of these
machines. Additionally, the company believes its success in injection
molding machines has been due in large part to the development and
marketing of its Vista line. Beginning in 1995, the Vista line is being
modernized even further through the internationally designed and
distributed "Magna" series of fully hydraulically-driven machines. In
addition, the company has enhanced and expanded its product offerings in
1995 with the Elektra line of all electrically driven machines.
In November, 1993, the company acquired Ferromatik, one of Europe's leading
producers of injection molding machines. Ferromatik is recognized for its
high-end technology, including multi-color machines, multi-component
systems and other specialty applications. The acquisition included the
Ferromatik lines of hydraulic and electric injection molding machines and a
modern manufacturing facility in Malterdingen, Germany, as well as
Ferromatik's worldwide marketing, sales and service network. The
Ferromatik acquisition expanded the company's plastics processing
technology base and product line and enabled the company to achieve its
objective of establishing a plastics machinery manufacturing and
distribution base in Germany to serve Europe and other markets. Ferromatik
has provided a complementary fit with the company's other injection molding
machine businesses.
The company has completed a restructuring of Ferromatik to derive synergies
between Ferromatik and other company operations and to improve Ferromatik
operations through implementation of manufacturing techniques and methods
currently being used in the company's U.S. plastics machinery operations.
The company believes that this restructuring has helped, and will continue
to help, it to achieve its cost reduction goals in both marketing and
manufacturing.
The company sells several of its successful U.S. and Ferromatik plastics
machinery lines to European customers through Ferromatik's sales and
distribution network.
In May, 1995, the company announced the startup of a joint venture with a
well-established plastics machinery maker in India. This operation builds
entry-level injection molding machines for Asian and South American
markets.
EXTRUSION SYSTEMS. The company's extrusion systems business consists of
the manufacture, sale and distribution of individual extruders and systems
comprised of multiple units which are tooled to extrude a specific product
in quantity. Such systems take longer to manufacture than injection
molding machines. Extrusion systems, which are manufactured in both the
U.S. and Austria, include twin-screw extruders and single-screw extruders.
The company believes it has a strong competitive position in each of these
lines, and is the largest worldwide maker of twin-screw extruders. Twin-
screw extruders are used to produce continuous-flow products such as pipe,
residential siding, sheet lines and window frames. As a result, the
business is closely tied to construction market cycles. Single-screw
extruders are used in a variety of applications and systems such as blow
molding, blown-film and cast-film systems, pipe and profiles and wire and
cable applications.
BLOW MOLDING MACHINES. The company's blow molding machine business
consists of the manufacture, sale and distribution of extrusion blow
molding machines, which are used to make a wide variety of products,
including industrial parts, outdoor furniture, refuse containers, toys, and
packaging containers.
SPECIALTY EQUIPMENT. The company sells a variety of specialty equipment
used in the processing of plastics products, including peripheral auxiliary
equipment such as material management systems, heat exchangers and product
handling systems, all of which are manufactured by third parties to the
company's specifications. The company also sells a line of vertical
injection molding machines, which are manufactured to the company's
specifications by a third party. The company also rebuilds and retrofits
older types of injection molding equipment sold by the company or others,
refitting them with new controls and software.
MOLD BASES AND COMPONENTS. In January, 1996, the company completed the
acquisition of D-M-E, which the company believes is the largest U.S.
producer of mold bases, standard components and supplies for the moldmaking
industry, serving customers throughout the world with ten major
manufacturing facilities, plus several international joint venture
operations. Its 1995 sales approximated $175 million. Like most of the
company's plastics business, D-M-E serves the largest segment of the
market, the injection molding process. D-M-E complements the company's
other businesses because D-M-E provides the mold bases, supplies and
components used in the mold apparatus inside the injection molding
machines. The company expects to achieve synergies in a number of areas,
including manufacturing process, technology, marketing and distribution.
PRODUCTION FACILITIES.
For the plastics machinery segment, the company maintains the following
principal production facilities:
FACILITY PRODUCTS
- -------- --------
Ahmedabad, India Injection molding machines.
Batavia, Ohio (a) Injection and blow molding
machines.
Cincinnati, Ohio Extrusion systems.
Malterdingen, Germany Injection molding machines.
Mt. Orab, Ohio (a) Plastics machinery parts.
Vienna, Austria Extrusion systems.
(a) The plant in Batavia, Ohio operates under a long-term lease, which was
financed by the sale of Clermont County Industrial Development Revenue
Bonds. The plant in Mt. Orab, Ohio operates under a long-term lease,
which was financed by the sale of State of Ohio Industrial Development
Revenue Bonds. At the expiration of the long-term leases, the company
will acquire title to the leased properties at a nominal cost.
Not included are the ten production facilities of D-M-E, which was acquired
in January, 1996.
SALES, MARKETING AND CUSTOMER SERVICE
The company maintains a large direct sales force in the U.S. for its
plastics machinery segment, which it supplements with independent agents.
Internationally, the company uses both a direct sales force and independent
agents. In the U.S., the plastics machinery business uses the company's
Cincinnati, Ohio, headquarters, as well as sales and service centers in
Allentown, Pennsylvania; Charlotte, North Carolina; Chicago, Illinois;
Dallas, Texas; Detroit, Michigan; and Los Angeles, California to market its
products and provide customer support and training. Through its Austrian
and Ferromatik subsidiaries, the company has an extensive sales, marketing,
service and distribution system throughout Europe.
COMPETITION
The markets for plastics machinery in North America and worldwide are
highly competitive and are made up of a number of U.S., European and Asian
competitors. The company believes it has a significant share of the U.S.
market for the type of products it produces, and, with the D-M-E
acquisition, the company believes it is the broadest-line maker of
equipment, supplies and systems for plastics processing in the world. The
company's competitors vary in size and resources; some are larger than the
company, many are smaller, and only a few compete in more than one product
category. Principal competitive factors in the plastics machinery industry
are: product features, technology, quality, performance, reliability, speed
of delivery, price and customer service. The Wolfpack program is designed
to maintain and enhance the company's competitive position worldwide with
respect to each of these competitive factors.
MACHINE TOOL BUSINESS
- ---------------------
The company is a leading U.S. producer of machine tools. A machine tool is
a power-driven machine that is used to cut, form or shape metal. Machine
tools are typically installed as capital equipment in metalworking
industries. In 1995, the company's machine tool segment sales were $409.0
million.
MACHINE TOOL INDUSTRY
The primary customers for this $25-billion worldwide market for
metalcutting machine tools are the automotive industry; machine shops;
producers of farm, construction, off-road and power generation equipment;
manufacturers of bearings; the aerospace industry; the die and mold
industry; and a variety of other metalworking manufacturers. The machine
tool industry has historically been cyclical with relatively long lead
times between orders and shipments. Machine tool sales are affected by
capital spending levels, interest rates, tax and depreciation policies,
international competition, currency exchange rates and general economic
conditions.
THE COMPANY'S MACHINE TOOL BUSINESS
The company designs, builds and sells a variety of standard and advanced
computer numerically controlled (CNC) metalcutting machine tools for
various industries, including industrial components, job shops, automotive
and aerospace. The company's core machine tool operation, the standard
machine tool business, manufactures horizontal machining centers, vertical
machining centers, turning centers, centerless grinders and automated
flexible manufacturing cells for the metalworking industry. The products
of the company's machine tool systems business include large, multi-axis
metalcutting and composites processing systems for the aerospace industry;
large, multi-axis machines for manufacturers of farm, construction, off-
road vehicles and power generation equipment and for the die and mold
industry. ESD, which was formerly part of the company's machine tool
business, manufactures computer controls for the company's machine tools
and plastics machinery. ESD was sold in December, 1995, and the company
entered into an extensive seven-year supply and services agreement with the
purchaser.
STANDARD MACHINE TOOL PRODUCTS
HORIZONTAL CNC MACHINING CENTERS. The company produces CNC horizontal
machining centers for basic metalworking operations in a number of
industries. These machines are suited to the manufacture of prismatic
components such as transmission and gear casings, pump bodies or other box-
like parts. Machines are equipped with standard automatic parts and tool
changers, and precision rotary tables for multi-sided processing of a
single or several parts. Typical operations involve highly precise
milling, drilling, boring, tapping, reaming and routing.
VERTICAL CNC MACHINING CENTERS. Similar to the horizontal machining
centers in the basic types of metal removal operations performed, the
vertical machining centers are better suited to the manufacture of flat,
plate-like parts for a broad spectrum of industries including mold and die
machining. All models utilize automatic tool interchange for efficient
processing. Add-on features can further enhance productivity by automating
the loading and unloading of parts.
CNC TURNING CENTERS. Also called CNC lathes, turning centers shape
cylindrical parts which are rotated at high speed against a stationary tool
to perform metal removal operations. Typical examples of parts
manufactured with CNC lathes are shafts, pulleys, spindles or similar
rotating parts. Though primarily designed to provide a symmetrical cross-
section, some models are capable of applying rotating tools such as milling
cutters or drills. This expanded capability allows for more comprehensive
part processing while the part is still in the turning center, a feature
that can eliminate additional handling and processing on a separate
machine.
CNC GRINDING MACHINES. CNC precision grinding machines are used to bring a
part surface into a more precise dimension or surface. There are several
kinds of grinding processes. The company specializes in centerless
grinding machines, which grind external diameters of cylindrical parts such
as compressor shafts and cam shafts. The company believes that it has a
long-standing leadership position in the U.S. centerless grinding business
with an installed base of several thousand machines.
AUTOMATED FLEXIBLE MANUFACTURING CELLS. Automated flexible manufacturing
cells consist of one or more processing machines (usually standard machine
tools), ancillary equipment for parts and tools handling and computer
hardware and software to automate and integrate all necessary functions,
allowing for lightly-manned or unattended operation. These systems are
used widely throughout the metalworking industry and generally feature a
number of computer-driven functions, such as work and tool scheduling and
quality control. Automated flexible manufacturing cells are a major focus
of a number of U.S. companies seeking to update plant and equipment to
enhance their productivity and international competitiveness. The company
believes that its Wolfpack-developed cell control hardware and software
have enabled it to obtain a leadership position in the U.S. automated
flexible manufacturing cells market.
ADVANCED SYSTEMS
METALCUTTING AND COMPOSITES PROCESSING SYSTEMS FOR AEROSPACE. The company
believes it is one of the world's leading producers of large five-axis
machining centers and profilers. These machines are generally used to
create intricately contoured surfaces in components manufactured by the
aerospace industry. Typical materials machined include aluminum and high-
strength alloys such as titanium.
The company is also a pioneer and world leader in the development of new
machines and systems to automate the manufacture of components made of
advanced composite materials, such as carbon or graphite fibers in
combination with epoxy or other resins. These systems are used by the
aerospace industry to manufacture a variety of high strength-to-weight
ratio structural and air surface components. The company's unique fiber-
placement machine was recently honored by R&D Magazine as one of the most
significant inventions in 1995.
LARGE MACHINE TOOLS. The company makes large metalcutting machines and
systems for the manufacturers of heavy machinery such as farm and
construction implements and machinery, off-road vehicles and power
generation equipment.
APPLIED PRODUCTION TURNING CENTERS AND CENTERLESS GRINDING MACHINES. The
company also specializes in the customized application of production
turning centers and centerless grinding machines designed to meet exacting
specifications and high volume parts production. The company's applied CNC
turning centers are used by the automotive industry in a number of
applications, including those which require an extremely accurate finishing
process. Other significant users of these machines are precision bearing
manufacturers where machining tolerances are measured in millionths of an
inch.
ELECTRONIC SYSTEMS. In December, 1995, the company sold its Electronic
Systems Division. To maintain control system continuity and development,
the company entered into an extensive seven-year supply contract with the
purchaser for electronic controls used on the company's machine tools and
plastics machinery. The company continues to develop and maintain its own
applications software. The decision to sell ESD was made to redeploy assets
to more strategic businesses. ESD's 1995 sales to unaffiliated customers
were approximately $30 million.
PRODUCTION FACILITIES.
For the machine tools segment, the company maintains the following
principal production facilities:
FACILITY PRODUCTS
- -------- --------
Birmingham, England Standard vertical machining centers.
Cincinnati, Ohio Standard machine tool products and advanced
(4 plants) systems.
SALES, MARKETING AND CUSTOMER SERVICE
A strong distribution network is one of the cornerstones in the company's
strategy to improve its position in the global market for standard machine
tools. The company markets machine tools in North America through a
comprehensive network of independent distributors assisted by the company's
factory support and direct sales force. Through these distributors, the
company currently has approximately 275 sales people representing its
machine tool business in North America. In the past year, the company has
upgraded its European distributor network by tripling the number of sales
people to over 150.
The company believes that applications expertise, field-service engineering
and customer support are important for all its products, especially for
grinding machines, aerospace and special machines and automated flexible
manufacturing cells. In addition to its marketing and service headquarters
in Cincinnati, Ohio, the company maintains regional offices in Detroit,
Michigan; Birmingham, England; Offenbach, Germany; and Singapore.
COMPETITION
The worldwide machine tool industry is made up of a number of competitors,
none of which has a dominant market share. The markets for the company's
machine tool segment products are highly competitive in the U.S. and
internationally, with strong competition from U.S., European and Asian
companies in all markets. The company's competitors vary in size and
resources; some are larger than the company, many are smaller, and only a
few compete in more than one product category.
Principal competitive factors for products in the machine tool business are
product features or capabilities (including controls and software),
quality, performance, reliability, technology, speed of delivery, price and
customer service. The Wolfpack program is designed to enhance the
company's competitive position with respect to each of these factors. In
certain aerospace and grinding machine lines, the company has significant
market positions and relatively few competitors. However, in the case of
standard machine tool products and automated flexible manufacturing cells,
there are many competitors and no one company has market dominance.
INDUSTRIAL PRODUCTS BUSINESS
- ----------------------------
The company produces five basic types of industrial products: metalcutting
tools, metalworking fluids, precision grinding wheels, carbide wear parts
and industrial magnets, representing over 140,000 different products. In
1995, sales of the company's industrial products segment were $670.2
million. The company believes it is a leader in many new product
technologies, including synthetic lubricants, use of synthetic ceramic
abrasives, high-performance cutting tool coatings, and product designs
using computer modeling. Over 75% of the company's industrial products
sales are of consumable products, which means they are depleted during the
process for which they are used, offering the company a continuous
opportunity to sell replacement products to its customers. The company
believes that its industrial products business complements its plastics
machinery and machine tool businesses, because the industrial products
business is exposed to less pronounced business cycles and, therefore,
generates more consistent cash flows.
INDUSTRIAL PRODUCTS INDUSTRY
The company's industrial products business participates in a $35 billion
world market, which traditionally has grown at a rate approximating the
growth of the world GDP. The company's products address approximately
$20 billion of the world market with heaviest market penetration in the
U.S. and Europe, and in the case of metalcutting tools, India. The company
serves customers in the automotive, industrial components, and electrical
industries, as well as job shops.
THE COMPANY'S INDUSTRIAL PRODUCTS BUSINESS
METALCUTTING TOOLS. Metalcutting tools are made of carbide, steel and
other materials and include systems to hold these tools used on machine
tools for use in a wide variety of metalcutting operations. The company
believes that, through its subsidiaries, Valenite, Widia and Talbot, it is
the second-largest producer of carbide metalcutting tool systems in the
U.S. and the third-largest worldwide. Valenite manufactures over 33,000
products, including an extensive line of cutting tool inserts in a wide
variety of materials and geometries for turning, boring, milling and
drilling, and standard and special steel insert holders. Valenite has an
excellent market position in the automotive, off-road vehicle and truck
industries and has strong market positions in carbide wear parts for
metalforming and in products requiring the wear and corrosion-resistant
properties of tungsten carbide.
In February, 1995, the company completed the acquisition of Widia, a major
European metal cutting tool maker with key production facilities in Germany
and other Western European countries. Widia also owns a 51% interest in
Widia (India) Ltd., an Indian public company. Widia's product lines
include tungsten carbide cutting tool inserts and steel insert holders
needed for metalcutting operations, carbide wear parts used in forming and
stamping metal, and both soft and permanent industrial magnets, used in
automotive and other applications.
In 1995, the company initiated a $28 million plan to integrate certain
Valenite and Widia operations, primarily in Europe and Japan. This plan
involves the closing of two manufacturing plants, the downsizing of another
plant, a reduction in employment levels at another plant and the
headquarters facility, as well as the consolidation of numerous sales,
customer service and warehousing operations in Europe and Japan. In total,
the execution of the plan is expected to result in the elimination of
approximately 290 production, sales and administrative personnel. As a
result, the company expects to achieve annual cost reductions of
approximately $19 million, a portion of which has already been realized in
1995. The majority of the expected cost reductions will be fully realized
in 1996.
In July, 1995, the company completed the acquisition of Talbot, a major
supplier of round high-speed steel and carbide metalcutting tools and the
largest U.S. producer of end mills, as well as a leading tap producer.
Talbot, with annual sales of approximately $40 million, enables the company
to enter the market for round tools, including high-speed steel and carbide
end mills, taps, countersinks, counterbores and reamers. These products
are highly complementary to the products made by Valenite and Widia. The
company expects to expand Talbot products into non-U.S. markets.
METALWORKING FLUIDS. Metalworking fluids are proprietary chemical
compounds and emulsions used as lubricants, coolants and corrosion
inhibitors in a wide variety of metalcutting and metalforming operations.
Major customers are producers of precision metal components for many
industries, including manufacturers of automotive power trains, aerospace
engines, and bearings as well as general metalworking shops. The company
is a full-line supplier, offering water-based fluids (synthetics), water-
based oil-bearing fluids (semi-synthetics) and oil-based fluids. Over the
last four years, the company expanded its lines of soluble oils, base oils
and synthetic fluids. In 1993, the company developed a brand of fluid
called Valcool designed to work with all metalcutting tools that is being
marketed through Valenite's market channels. Valcool sales quadrupled in
1995. In 1996, the company plans to introduce a Widacool line of fluid in
Europe.
The company also is the leader in providing certain customers with
comprehensive fluid management programs. This involves the company's
engineers working full-time on site at the customer's plant to oversee and
optimize all wet chemistry, including metalworking fluids used in the
plant.
GRINDING WHEELS. Grinding wheels are rotating tools made of granular
abrasive materials bonded together with vitreous or resin materials, which
are used by manufacturers in the metalworking industry. The company
believes that it is now the second-largest U.S. producer of grinding
wheels. Major customers are producers of precision metal components for
many industries, including manufacturers of automotive power trains,
aerospace engines and bearings as well as general metalworking machine
shops. The company designs and manufactures a wide variety of precision
abrasive grinding wheels, including resin-bonded, vitrified, cubic boron
nitride (CBN), diamond and synthetic ceramic abrasive types.
The company believes, based on tests in its laboratories, as well as in
customer plants, that the company's proprietary formulae and modern
production equipment and techniques for the manufacture of precision
grinding wheels give it advantages in terms of product quality, lower
production costs and faster deliveries. The company believes that it has
also benefitted from technologies common to both grinding wheels and
metalcutting fluids. The company achieves lower production costs, in part,
by finishing its wheels on CNC machines designed and built by the company's
machine tool business.
CARBIDE WEAR PARTS. Carbide wear parts are various components made from
sintered tungsten carbides having physical properties of very high
hardness, wear resistance and resistance to chemical activity. Valenite
and Widia manufacture three types of carbide wear parts: tooling
components for metalforming, carbide rod for use in round tools, and
metalforming and general wear parts to resist frictional wear and chemical
activity.
INDUSTRIAL MAGNETS. Widia manufactures permanent industrial magnets and
magnetic circuits for automotive, electrical and other industrial
applications, as well as soft magnets for the telecommunications industry.
PRODUCTION FACILITIES
For its industrial products segment, the company maintains the following
principal production facilities:
FACILITY PRODUCTS
- -------- --------
Andrezieux, France Carbide inserts.
Bangalore, India Carbide inserts, steel insert holders,
carbide wear parts and special machine
tools.
Carlisle, Pennsylvania Resin grinding wheels.
Cincinnati, Ohio Metalworking fluids and precision
grinding wheels.
Detroit, Michigan
(metro area) (3 plants)(a) Carbide inserts, special steel
products and gauging systems and
ceramic inserts.
Essen, Germany (3 plants) Carbide inserts, magnets and carbide
rods.
Gainesville, Texas (a) Turning tools, milling cutters and
boring bars.
Hardenberg,
The Netherlands Carbide wear parts.
Lichtenau, Germany Steel insert holders.
Millersburg, Pennsylvania
(2 plants) End mills, taps and counterbores.
Nogales, Mexico (a) Resin grinding wheels.
Patancheru, India Rock tools.
Sinsheim, Germany (a) Special steel tooling products.
Tokyo, Japan Carbide inserts and steel tools.
Valley View, Ohio (a) End mills.
Vitoria, Spain Special braised tools.
Vlaardingen,
The Netherlands Metalworking fluids.
West Branch, Michigan
(2 plants) Powder production and carbide wear
parts.
Westminster and Seneca,
South Carolina (5 plants) Carbide and diamond inserts.
(a) The Gainesville, Texas plant, Nogales, Mexico plant, Tokyo, Japan
plant, Sinsheim, Germany plant, Valley View, Ohio plants and three
plants in the Detroit, Michigan (metro area) are leased from unrelated
third parties.
SALES, MARKETING AND CUSTOMER SERVICE
The company generally sells its industrial products under multiple brands
through parallel market channels, using direct sales, industrial
distributors, agents and manufacturers' representatives, as well as
industrial catalog sales. Most of the company's sales are of products
manufactured by the company and sold under company-owned brands. In
addition, the company sells its products under the brand names of other
companies through their market channels, as well as products under
Milacron's own brand names that are made by other companies. For all its
industrial products, the company has 450 employees for direct sales and
service and approximately 4,000 industrial distributors. Sales by
distribution channel are summarized as follows:
Valenite and Widia cutting tools and 80% Direct
fluids 20% Distributor and
Catalog
Cincinnati Milacron fluids and grinding wheels 20% Direct
80% Distributor and
Catalog
Talbot tool brands 10% Direct
90% Distributor and
Catalog
COMPETITION
The company's main global competitors in its metalworking fluids business
are large petrochemical companies and smaller companies specializing in
similar fluids. There are a few large competitors in the U.S. grinding
wheel market, one of which is significantly larger than the company. The
company has many competitors for metalcutting tools but only two have
higher worldwide sales.
PATENTS
- -------
The company holds a number of patents, none of which is material to any
business segment.
EMPLOYEES
- ---------
During 1995, the company employed an average of 11,701 people, of whom
5,340 were employed outside the U.S. As of year-end 1995, the company
employed 11,790 people.
BACKLOG
- -------
The backlog of unfilled orders was $344.2 million at the end of 1995 and
$287.1 million at the end of 1994. The backlog at year-end 1995 is
believed to be firm and, in general, is expected to be delivered in 1996
and early 1997.
EXECUTIVE OFFICERS OF THE REGISTRANT
- -------------------------------------
The following information is included in accordance with the provisions for
Part III, Item 10:
Positions Held During
Name and Age Position Last Five Years
- ------------ -------- ---------------------
Daniel J. Meyer Chairman and Chief Elected Chairman and Chief
(59) Executive Officer, Executive Officer in
Director November, 1991. Prior
thereto was Chairman, President
and Chief Executive Officer
from January, 1991; President
and Chief Executive Officer
from 1990. Has served as
Director since 1985. Also, is
a member of the Nominating and
Executive Committees.
Raymond E. Ross President and Chief Elected President and Chief
(59) Operating Officer, Operating Officer in
Director November, 1991. Prior thereto
was Executive Vice President -
Operations from February, 1991;
Senior Vice President -
Industrial Systems from 1989.
Has served as Director since
1991.
D. Michael Clabaugh Group Vice President- Elected Group Vice
(53) Machine Tools President - Machine Tools
in 1993. Prior thereto was
Vice President - Advanced
Systems from 1990.
Harold J. Faig Group Vice President- Elected Group Vice
(47) Plastics Machinery President - Plastics
Machinery in February, 1994.
Prior thereto was Vice
President - Injection Molding
from 1990.
Alan L. Shaffer Group Vice President-Elected Group Vice
(45) Industrial Products President - Industrial
Products in 1986.
Ronald D. Brown Vice President- Elected Vice President -
(42) Finance and Finance and Chief Financial
Chief Financial Officer in 1993. Prior
Officer thereto was Treasurer and
Assistant Secretary from 1989.
William J. Gruber Vice President - Elected Vice President -
(42) U.S. Plastics U.S. Plastics Machinery in
Machinery 1996. Prior thereto was
Manager of U.S.
Plastics Machinery from
1995; General Manager, Products
Division from 1984.
Richard L. Kegg Vice President - Elected Vice President -
(60) Technology and Technology and
Manufacturing Manufacturing Development
Development in 1993. Prior thereto was
Director, Corporate Research
and Manufacturing Development
from 1990.
Theodore Mauser Vice President- Elected Vice President -
(56) Human Resources Human Resources in 1984.
James M. Stergiopoulos Vice President- Elected Vice President -
(57) Plastics Machinery Plastics Machinery Europe
Europe in 1995. Prior thereto was
Director, Plastics
Machinery Europe from 1994 and
General Manager, Cincinnati
Milacron
Austria from 1987.
Wayne F. Taylor Vice President- Elected Vice President -
(52) General Counsel General Counsel and
and Secretary Secretary in 1990.
Robert P. Lienesch Controller Elected Controller in 1989.
(50)
Kenneth W. Mueller Treasurer and Elected Treasurer and
(62) Assistant Secretary Assistant Secretary in 1993.
Prior thereto was Acting
Director of Standard Machine
Tools from 1992; Machine Tool
Group Controller from 1989.
Note:
Parenthetical figure below name of individual indicates age at most
recent birthday prior to December 31, 1995.
There are no family relationships among the executive officers of the
Registrant.
Officers of the company are elected each year by the Board of Directors.
Item 2. PROPERTIES
The information required by Item 2 is included in Part I on pages 11, 14
and 18 of this Form 10-K.
Item 3. 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 4. SUBMISSION OF MATTERS TO A VOTE OF STOCKHOLDERS
There were no matters submitted to a vote of stockholders during the fourth
quarter of 1995.
PART II
-------
Item. 5 MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The company's common shares are listed on the New York Stock Exchange. Such
shares are also traded on the Cincinnati Stock Exchange, Boston Stock
Exchange, Pacific Stock Exchange, Philadelphia Stock Exchange and Midwest
Stock Exchange, with options traded on the Philadelphia Stock Exchange. As
of February 28, 1996, there were approximately 6,000 holders of record of
the company's common shares. The company's preferred shares are not
actively traded.
The table below shows the price range of the common shares for 1994 and
1995, as reported by the New York Stock Exchange. Cash dividends of $.09
per common share and $1.00 per preferred share were paid in each quarter of
1994 and 1995.
Common Stock
Price Range
---------------------
Fiscal 1994, quarter ended High Low
------ ------
March 26 . . . . . . . . . . . . . . . $25.63 $21.75
June 18. . . . . . . . . . . . . . . . 24.25 19.50
October 8. . . . . . . . . . . . . . . 27.00 18.63
December 31. . . . . . . . . . . . . . 27.63 22.25
Fiscal 1995, quarter ended
March 25 . . . . . . . . . . . . . . . $25.00 $19.88
June 17. . . . . . . . . . . . . . . . 28.00 20.75
October 7. . . . . . . . . . . . . . . 33.63 26.75
December 30. . . . . . . . . . . . . . 27.63 23.00
Item 6. SELECTED FINANCIAL DATA
(Dollars in millions, except per-share amounts)
1995 1994 1993 1992 1991
------- -------- -------- ------- ------
Summary of Operations
- ---------------------
Sales . . . . . . . . . . . . . . . . . . $1,649.3 $1,197.1 $1,029.4 $ 789.2 $754.0
Cost of products sold. . . . . . . . . . . . 1,238.3 904.8 791.3 612.6 603.2
-------- -------- -------- ------- -------
Manufacturing margins . . . . . . . . . . 411.0 292.3 238.1 176.6 150.8
Other costs and expenses
Selling and administrative. . . . . . . . 301.4 222.2 191.3 133.6 132.2
(Gain) loss on disposition . . . . . . . .
of businesses . . . . . . . . . . . . . (71.0)(a) - 22.8(c) - -
Integration, consolidation and
closing and relocation
charges. . . . . . . . . . . . . . . . . 9.8 (b) - 47.1(d) - 75.1(e)
Minority shareholders'
interests . . . . . . . . . . . . . . . 2.3 - - - -
Other- net. . . . . . . . . . . . . . . . 9.4 5.9 .7 (.2) 1.8
-------- -------- -------- ------- -------
Total other costs
and expenses . . . . . . . . . . . . 251.9 228.1 261.9 133.4 209.1
-------- -------- -------- ------- -------
Operating earnings (loss). . . . . . . . . . 159.1 64.2 (23.8) 43.2 (58.3)
Interest - net . . . . . . . . . . . . . . . (24.8) (15.3) (13.4) (16.2) (15.1)
-------- -------- -------- ------- -------
Earnings (loss) from
continuing operations before
income taxes, extraordinary
items and cumulative
effect of changes in methods
of accounting . . . . . . . . . . . . . . 134.3 48.9 (37.2) 27.0 (73.4)
Provision for income taxes . . . . . . . . . 28.7 11.2 8.2 10.9 9.7
-------- -------- -------- ------- -------
Earnings (loss) from
continuing operations before
extraordinary items and
cumulative effect of changes
in methods of accounting. . . . . . . . . 105.6 37.7 (45.4) 16.1 (83.1)
Extraordinary items
Loss on early extinguishment
of debt . . . . . . . . . . . . . . . . - - (4.4) - -
Tax benefit from
loss carryforward . . . . . . . . . . . - - - 5.4 -
Cumulative effect of changes
in methods of accounting. . . . . . . . . - - (52.1) - -
Discontinued operations
net of income taxes . . . . . . . . . . . - - - - (17.1)(f)
-------- -------- -------- ------- -------
Net earnings (loss) . . . . . . . . . . $ 105.6 $ 37.7 $ (101.9) $ 21.5 $(100.2)
======== ======== ======== ======= =======
Earnings (loss) per common share
Earnings (loss) from
continuing operations
before extraordinary
items and cumulative
effect of changes in
methods of accounting . . . . . . . . . $ 3.04 $ 1.10 $ (1.41) $ .58 $(3.04)
Extraordinary items
Loss on early
extinguishment of debt . . . . . . . - - (.14) - -
Tax benefit from
loss carryforward. . . . . . . . . . - - - .19 -
Cumulative effect of changes
in methods of accounting. . . . . . . . - - (1.61) - -
Discontinued operations
net of income taxes . . . . . . . . . . - - - - (.63)(f)
-------- -------- -------- ------- ------
Net earnings (loss). . . . . . . . $ 3.04 $ 1.10 $ (3.16) $ .77 $(3.67)
======== ======== ======== ======= ======
See notes on page 24.
(Dollars in millions, except employees and per-share amounts)
1995 1994 1993 1992 1991
------ ------ ------ ------ ------
Financial Position at Year End
- ------------------------------
Working capital. . . . . . . . . . . . . . . $392.7 $151.4 $114.3 $191.8 $188.0
Property, plant and equipment-
net . . . . . . . . . . . . . . . . . . 265.5 198.8 184.0 121.1 129.7
Total assets . . . . . . . . . . . . . . . . 1,197.1 787.6 729.6 578.9 598.4
Long-term debt and lease
obligations . . . . . . . . . . . . . . . 332.2 143.0 107.6 154.4 155.9
Total debt . . . . . . . . . . . . . . . . . 355.8 226.9 185.2 175.6 162.8
Shareholders' equity . . . . . . . . . . . . 270.7 157.8 124.1 134.4 129.0
Per common share. . . . . . . . . . . . . 7.72 4.50 3.53 4.67 4.49
Other Data
- ----------
Dividends paid to common
shareholders. . . . . . . . . . . . . . . 12.3 12.2 11.6 10.0 17.3
Per common share. . . . . . . . . . . . .36 .36 .36 .36 .63
Capital expenditures . . . . . . . . . . . . 52.3 43.0 23.4 17.6 15.5
Depreciation and amortization. . . . . . . . 43.6 28.6 26.1 20.9 24.0
Backlog of unfilled orders at
year-end. . . . . . . . . . . . . . . . . 344.2 287.1 246.0 249.6 277.3
Employees (average). . . . . . . . . . . . . 11,701 8,395 7,885 6,135 6,903
(a) Represents a gain of $66.0 million ($52.4 million after tax) on
the sale of the company's Electronic Systems Division and a gain
of $5.0 million ($4.0 million after tax) on the sale of the
company's American Mine Tool business.
(b) Represents a charge of $9.8 million ($7.8 million after tax) for the
integration of certain Widia and Valenite operations.
(c) Represents charges (with no current tax effect) for the disposition of
a plastics machinery subsidiary.
(d) Represents a charge (with no current tax effect) for the consolidation
of U.S. machine tool manufacturing operations.
(e) Represents a charge (with no current tax effect) for plant closing and
relocation of certain machine tool manufacturing operations.
(f) Includes a charge of $14.9 million (with no current tax effect),
or $.54 per share, related to the revaluation for sale of the
company's coordinate measurement and inspection machine business.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The company operates in three principal business segments: plastics
machinery, machine tools and industrial products. In the last year, all
three segments experienced internal growth. Machine tools' sales increased
largely because of growth in sales of Wolfpack designed standard products.
In the last three years, the plastics machinery and industrial products
segments have experienced more rapid growth, primarily as a result of four
major acquisitions.
On July 20, 1995, the company acquired Talbot Holdings, Ltd. (Talbot) for
approximately $38 million in cash and assumed debt. Talbot operates
primarily in the U.S. and is a major supplier of round metalcutting tools.
With 1995 sales of about $40 million, it is included in the industrial
products segment. The company's consolidated 1995 sales includes five
months of Talbot's sales.
On February 1, 1995, the company acquired Krupp Widia GmbH (Widia) for
approximately $88 million of cash and assumed debt. Headquartered in
Germany, Widia is one of the world's leading producers of metalcutting
products and industrial magnets and is also being operated as part of the
industrial products segment. Widia's 1995 sales approximated $300 million,
although the company's consolidated 1995 sales include only the eleven
months in which the company owned Widia.
On November 8, 1993, the company acquired Ferromatik, the plastics
injection molding machine business of Kloeckner-Werke AG, for approximately
$50 million in cash and assumed debt. Ferromatik is also headquartered in
Germany, and is one of the world's leading producers of injection molding
machines; it is part of the company's plastics machinery segment. Its 1995
annual sales approximated $150 million. All twelve months' sales were
included in 1995 and 1994 results, while only two months' sales were
included in consolidated 1993 results.
On February 1, 1993, the company acquired GTE Valenite Corporation
(Valenite) for $77 million of cash and assumed debt. Valenite, with its
principal operations in the U.S. and Canada, is a leading U.S. producer of
consumable industrial metalcutting tools. Part of the industrial products
segment, Valenite's 1995 sales approximated $235 million, excluding about
$40 million of European sales now managed by Widia. Except for one month in
1993, Valenite's results are included for all of the years shown in the
accompanying Consolidated Statement of Earnings.
Also in the last three years, the company has completed three
divestitures. The 1995 divestitures of Electronic Systems Division (ESD)
and American Mine Tool (AMT) resulted in gains, while the 1993 disposition
of Sano resulted in a loss, as described below. Except for these gains and
the loss, these divestitures did not otherwise have a material effect on
the comparability of the Consolidated Statement of Earnings.
Because of the company's recent acquisitions, as well as the company's
internal growth in non-U.S. markets, close to half of the company's 1995
sales and operating earnings were generated outside the U.S. Foreign
currency exchange rate fluctuations affect the translation of non-U.S.
sales and earnings, as well as consolidated shareholders' equity. However,
the company's major foreign operations are in European countries which have
not experienced significant currency exchange rate fluctuations in recent
years. In 1995, the generally stronger European currencies had the
translation effect of increasing 1995 new orders and sales by approximately
$40 million and net earnings by $1.9 million. In addition, in 1995 there
was an increase in shareholders' equity due to a $9 million reduction in
the cumulative foreign currency translation adjustment.
1995 COMPARED TO 1994
- ----------------------
NEW ORDERS AND BACKLOG
New orders for 1995 were $1,635 million, which represented a $397
million, or 32%, increase over 1994. Of the $397 million increase, $271
million resulted from the Widia and Talbot acquisitions. Orders for
plastics machinery increased $16 million, or 3%, primarily due to increased
orders for German-built injection molding machines. Although the segment
experienced increased orders for the year, new business in the fourth
quarter decreased compared to the exceptionally strong order level in the
fourth quarter of 1994. Machine tool orders increased in 1995 by $84
million, or 25%, as all major U.K. and U.S. product lines, including
aerospace products, showed increases. Machine tool orders in the fourth
quarter of 1995 were $85 million, up 14% over the fourth quarter of 1994;
however, the $85 million was not as strong as earlier 1995 quarters. This
decline is expected to affect sales in the first quarter of 1996. Orders
for industrial products, excluding the acquisitions, increased by $26
million, or 7%, primarily as a result of increased industrial activity in
the U.S. and Europe.
U.S. export orders approximated $171 million in 1995 compared to $124
million in 1994. This represents a 38% increase, which was primarily
attributable to increased machine tool orders from European customers.
At December 30, 1995, the backlog of unfilled orders was $344 million.
This figure has been reduced by ESD's backlog of unfilled orders from
non-Milacron customers as a result of the ESD sale in December, 1995.
Despite this reduction, the backlog increased in 1995 by $57 million,
primarily as a result of the Widia acquisition.
SALES
Sales in 1995 were $1,649 million, which represented a $452 million, or
38%, increase over 1994. Of the $452 million increase, $276 million
represented sales from the 1995 acquisitions, Widia and Talbot. The rest of
the increase was attributable to: (i) a $66 million, or 13%, increase in
sales of plastics machinery resulting primarily from growth in the
company's European injection molding and extrusion businesses; (ii) a $71
million, or 21%, increase in sales of machine tools resulting primarily
from increased sales of U.K.-built vertical machining centers; and (iii)
excluding the acquisitions, a $39 million, or 11%, increase in industrial
products' sales due to increased sales in all businesses: cutting fluids,
grinding wheels and Valenite cutting tools.
Sales of all segments to non-U.S. markets totaled $784 million, an
increase in 1995 of $367 million primarily due to the Widia acquisition.
Export sales totaled $167 million, an increase of $25 million, or 18%,
primarily due to increased sales of machine tools in Europe. In 1995,
products manufactured outside the U.S. constituted 43% of consolidated
sales as compared to 27% in 1994, while products sold outside the U.S. were
48% of consolidated sales as compared to 35% in 1994.
MARGINS, COSTS AND EXPENSES
Manufacturing margins increased to 24.9% in 1995 compared to 24.4% in
1994, due primarily to the increased proportion of industrial products'
sales which have higher margins than the machinery businesses. Plastics
machinery margins were unchanged for the year although they were lower in
the last half of 1995, largely due to increased exports and reduced
automotive sales. Machine tools experienced a slight decline largely due to
phasing out some older product lines. Industrial products' margins declined
slightly because of the mix of product sales.
Selling and administrative expense increased due to the acquisitions and
increased sales. As a percent to sales, selling expense increased from
16.1% to 16.3% due to the higher proportion of industrial products' sales
which have higher selling costs. Administrative expense increased because
the administrative costs of the newly acquired subsidiaries exceeded a
reduction in corporate overhead expenses, although the 1995 total was less
than 2% of sales.
The $71.0 million gain on disposition of businesses resulted from the
$66.0 million before tax gain on the sale of ESD, which was sold in the
fourth quarter of 1995, and the $5.0 million before tax gain on the sale of
AMT, which was sold in the first quarter of 1995. These transactions had
the effect of increasing 1995 net earnings by $56.4 million, or $1.63 per
share. The ESD sale is expected to have a material effect on the company's
future operating results; its 1995 sales to non-Milacron customers
approximated $30 million and its before tax operating profit totaled
approximately $14 million. However, the proceeds from the sale were used in
January, 1996, to repay bank borrowings and to partially fund the D-M-E
acquisition which is expected to increase 1996 earnings (see Subsequent
Events).
The $9.8 million pretax integration charge ($7.8 million after tax)
relates to the company's February, 1995, acquisition of Widia. The Widia
acquisition allows the company to capitalize on synergistic opportunities
with Valenite, an existing subsidiary which manufactures similar products.
Accordingly, in May, 1995, management formally approved a plan to integrate
certain operations of these businesses at an expected cost of $17.1 million
which was increased to $28.1 million ($21.0 million in cash) in December,
1995, to include additional actions at Widia. That portion of the cost
directly related to Widia, totaling $18.3 million, has been recorded as a
purchase accounting adjustment, while the remaining $9.8 million, which is
directly related to Valenite, was recorded as a charge to earnings. The
$28.1 million plan involves the closing or downsizing of three
manufacturing plants and the consolidation of numerous sales, service and
warehouse operations in Europe and Asia. The $9.8 million integration
charge includes $5.8 million for severance and other termination benefits
and $4.0 million for facility exit costs and asset write downs. As a result
of the actions included in the $28.1 million plan, which were started in
1995 and all of which are expected to be substantially completed in the
first half of 1996 except for certain personnel reductions at Widia, the
company expects annual cost savings of approximately $19 million. The total
cash cost of $21.0 million will be funded by operations and bank
borrowings.
Other-net increased by $3.5 million due to a $1.5 million increase in
financing fees on the sale of receivables, as well as the effects of the
acquisitions.
Minority shareholders' interests in earnings of subsidiaries relates
principally to Widia's 51% interest in a public company in India.
Interest expense, net of interest income, was $24.8 million in 1995
compared to $15.3 million in 1994. The primary cause of the increase was
higher borrowing levels to support the Widia and Talbot acquisitions.
INCOME TAXES
The provision for income taxes in both 1995 and 1994 consists primarily
of U.S. state and local income taxes and non-U.S. income taxes in certain
profitable jurisdictions. The company entered 1995 and 1994 with U.S. net
operating loss carryforwards of $38 million and $17 million, respectively.
The company also had net operating loss carryforwards in certain non-U.S.
jurisdictions. As a result, U.S. federal income taxes and taxes in certain
non-U.S. jurisdictions are minimal in both years due to the realization of
certain fully reserved deferred tax assets, particularly the aforementioned
net operating loss carryforwards.
EARNINGS
Net earnings in 1995 were $105.6 million, or $3.04 per share, compared to
$37.7 million, or $1.10 per share in 1994. The net earnings in 1995
included $48.6 million, or $1.40 per share, resulting from the combined
effects of the gain on the disposition of two businesses, offset by the
integration charge. Excluding these items, net earnings increased from 1994
by $19.3 million, or $.54 per share.
1994 COMPARED TO 1993
- ----------------------
NEW ORDERS AND BACKLOG
New orders for 1994 were $1,238 million, which represented a $268
million, or 28%, increase over 1993. Orders for plastics machinery
increased $174 million, or 48%. Approximately $100 million of the increase
resulted from the acquisition of Ferromatik late in 1993. Other
contributing factors included higher demand for U.S.-built injection
molding machines and a single $17 million European order. Machine tool new
orders increased $47 million, or 16%, due to a greater demand for
Wolfpack-designed products, primarily vertical machining centers. Orders
for industrial products increased $48 million, or 15%, due primarily to the
timing of the Valenite acquisition and strengthening demand in the U.S.
U.S. export orders approximated $124 million in 1994 compared to $100
million in 1993. The increase in export orders was primarily attributable
to the plastics machinery segment.
At December 31, 1994, the backlog of unfilled orders was $287 million
compared with $246 million at the beginning of 1994. The increase in
backlog was primarily attributable to greater demand for Ferromatik
plastics machinery and vertical machining centers.
SALES
Sales in 1994 were $1,197 million, which represented a $168 million, or
16%, increase over 1993. The sales increase was primarily attributable to:
(i) a $147 million, or 41%, increase in plastics machinery sales, which
included an approximate $80 million increase resulting from the acquisition
of Ferromatik in late 1993, with the rest of the plastics machinery
increase coming from injection molding machines and (ii) a $38 million
increase in industrial products sales, of which about half resulted from
the inclusion of Valenite's sales for twelve months in 1994 versus eleven
months in 1993. Machine tool sales declined by $17 million, or 5%,
resulting primarily from a decline in demand from the aerospace market.
Sales of all segments to non-U.S. markets increased in 1994 by $119
million, or 40%, primarily due to the effect of the Ferromatik acquisition.
Export shipments increased by $23 million, or 20%, primarily due to
increases in exports of injection molding machines to Mexico. In 1994,
products manufactured outside the U.S. were 27% of consolidated sales as
compared to 19% in 1993, while products sold outside the U.S. were 35% of
consolidated sales as compared to 29% in 1993.
MARGINS, COSTS AND EXPENSES
Manufacturing margins increased to 24.4% in 1994 from 23.1% in 1993.
Margins for all three segments improved. Plastics machinery benefited from
increased volume and more stable pricing; machine tool reduced its costs
due to the consolidation (see Consolidation Charge); and industrial
products achieved benefits from increased U.S. sales of grinding wheels,
metalworking fluids and cutting tools.
Selling and administrative expense as a percent of sales was 19% in both
1994 and 1993.
The $22.8 million disposition of a business in 1993 resulted from the
decision to sell Sano, due in part to continuing operating losses. Sano was
included in the plastics machinery segment.
Other-net increased by $5.2 million due to: (i) a $2.8 million increase
in financing fees, principally attributed to the sale of receivables and
(ii) the inclusion in 1993 of a $2.5 million gain on the sale of surplus
land.
Interest expense, net of interest income, was $15.3 million in 1994
compared to $13.4 million in 1993. The increase was due to higher borrowing
levels as well as higher interest rates.
CONSOLIDATION CHARGE
In December, 1993, management adopted a plan to reduce machine tool
manufacturing capacity by consolidating U.S. machine tool manufacturing
into facilities in Cincinnati and accordingly recorded a charge of $47.1
million in the fourth quarter of 1993. Production at the company's two
machine tool facilities in Fountain Inn and Greenwood, South Carolina, was
phased out during 1994 and the plants were closed in the fourth quarter of
1994.
The consolidation plan included a provision for the phase out of
production in South Carolina offset by a simultaneous ramp up of production
in Cincinnati to minimize the effect of the consolidation on 1994 sales.
However, two important factors necessitated adjustments to the original
plan. First, the favorable job market in South Carolina resulted in an
unexpectedly high early attrition rate affecting both production employees
and certain other employees who were key to the execution of the production
phase-out plan. The early attrition was particularly acute in parts
manufacturing and resulted in an earlier than expected loss of capability
in this area, slowing the phase out of production in South Carolina and
hampering the ramp up of production in Cincinnati. To offset some of the
lost capability, the company had to temporarily utilize more costly
subcontract sources. Second, market demand for machine tool products,
including products previously manufactured in South Carolina, was strong
in 1994. This temporarily strained key suppliers, causing parts shortages
and further slowing the ramp up of production in Cincinnati. These
production delays and inefficiencies during the consolidation process
contributed to lower than expected operating earnings in the machine tools
segment and resulted in an estimated $20 million to $30 million reduction
in 1994 sales of products previously manufactured in South Carolina.
Completion of the consolidation was originally expected to result in a
net employee reduction of 235 in U.S. machine tool operations. However,
increased customer demand for machine tool products, including the products
being transferred from South Carolina, resulted in a net employee reduction
of 150. As a result of the larger than expected number of voluntary
terminations and transfers to Cincinnati, the cost for severance and other
fringe benefits was approximately $6 million less than anticipated.
Simultaneously, the delay in the phase out of production in South Carolina
resulted in additional operating losses of approximately $2 million
through the closure date of the two plants. The net $4 million reduction in
the cost of the consolidation was utilized to absorb incremental costs
arising from the 1990 and 1991 machine tool restructurings, including the
lower estimated net proceeds from the sale of the Heald facility, the
closure of certain overseas sales offices and the restructuring of U.S.
machine tool operations.
The consolidation was originally expected to result in annual cost
savings of approximately $16 million. Approximately $12 million of the $16
million in anticipated savings related to the planned net employee
reduction of 235 people. As a result of the lower than expected reduction,
the actual annual cost savings were $4 million less than originally
anticipated. However, higher margins associated with increased sales offset
this reduction.
The consolidation plan was essentially completed by year-end, 1994,
although the company experienced some production difficulties in early 1995
which were related to the consolidation and a simultaneous increase in
customer demand.
INCOME TAXES
The provision for income taxes in both 1994 and 1993 consists primarily
of U.S. state and local income taxes and non-U.S. income taxes in certain
profitable jurisdictions.
Income taxes were minimal in 1994 because benefits from the utilization
of the company's U.S. and non-U.S. net operating loss carryforwards were
applied as a reduction of the provision for income taxes.
Current tax benefits were not offset against the U.S. loss in 1993 in
accordance with the income tax accounting rules that became effective
January 3, 1993. In addition, current tax benefits could not be recognized
for losses in certain non-U.S. jurisdictions.
EARNINGS
Earnings before extraordinary item and cumulative effect of changes in
methods of accounting improved to $37.7 million, or $1.10 per share, in
1994 compared to a loss of $45.4 million, or $1.41 per share, in 1993. The
1993 loss was caused by the $47.1 million consolidation charge described
above and the $22.8 million charge for the disposition of a business
described above.
The net loss for 1993 included the effect of an extraordinary charge of
$4.4 million, or $.14 per share, related to the early extinguishment of $60
million of 12% debentures.
The net loss for 1993 also included the effect of adopting SFAS No. 109,
"Accounting for Income Taxes," and SFAS No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions," effective January 3, 1993,
resulting in charges to earnings totaling $52.1 million, or $1.61 per
share. Except for the cumulative effect, the new rules regarding
postretirement medical benefits did not significantly affect the company's
earnings in any of the years presented, while the new rules regarding
income taxes had the effect of reducing the company's effective tax rate in
all the years presented due to the realization of net operating loss
carryforwards.
Net earnings were $37.7 million, or $1.10 per share, in 1994, compared to
a net loss of $101.9 million, or $3.16 per share, in 1993. The 1993 net
loss was caused by the aforementioned charges, the extraordinary item and
the cumulative effect of changes in methods of accounting that totaled
$126.4 million.
LIQUIDITY AND SOURCES OF CAPITAL
- ---------------------------------
At December 30, 1995, the company had cash and cash equivalents of
$133 million, an increase of $112 million during the year. The increase
resulted primarily from the sale of ESD near the end of 1995.
Operating activities provided $41 million of cash in 1995 after
deducting incremental cash costs of the industrial products integration and
the U.S. machine tool consolidation of $11 million. Operating activities
provided $8 million in 1994. Working capital improved by $241 million in
1995 and the current ratio improved to 2.0. These improvements resulted
primarily from the acquisitions and divestitures.
Expenditures for new property, plant and equipment in 1995 were $52
million, compared to $43 million in 1994. Proceeds from the disposal of
property, plant and equipment for 1995 were $10 million compared to $4
million in 1994. Proceeds during both years included amounts related to the
sale of surplus assets and the sale and operating leaseback of certain
manufacturing equipment. The 1996 capital budget is $86 million, some of
which may be financed through operating leases.
In 1995, the acquisitions of Widia and Talbot resulted in cash
payments of $114 million, including the related professional fees. Also in
1995, the company realized proceeds of $120 million on the disposition of
ESD and AMT. While a portion of the proceeds from the ESD sale were used to
partially repay existing bank borrowings before year-end 1995, the majority
is included in cash and cash equivalents in the accompanying Consolidated
Balance Sheet.
The Widia acquisition was financed by borrowing $87 million under the
company's revolving credit facility, that portion of which is classified as
long-term debt. Also in 1995, the company issued $100 million of 7 7/8%
notes. The proceeds were used principally to pay down other long-term debt
and to reduce amounts payable to banks. The subsequent acquisition of
Talbot was financed by available cash and increasing amounts payable to
banks.
The company had a number of short-term intercompany loans and advances
denominated in various currencies totaling approximately $61 million at
December 30, 1995, that were subject to foreign currency exchange risk. The
company also enters into various transactions, in the ordinary course of
business, for the purchase and sale of goods and services in various
currencies. The company hedges its exposure to currency fluctuations
related to short-term intercompany loans and advances and the purchase and
sale of goods under firm commitments by entering into foreign exchange
contracts to minimize the effect of foreign currency exchange rate
fluctuations related to significant transactions. The company is currently
not involved with any additional derivative financial instruments.
At year-end 1995, the company had lines of credit with various U.S.
and non-U.S. banks of approximately $370 million, including a $150 million
committed revolving credit facility. These credit facilities support
letters of credit and leases in addition to providing borrowings under
varying terms. The revolving credit facility was amended in May, 1995, to
allow for the purchase of Talbot, to extend the debt maturity to 1998, and,
at the company's request, to reduce the amount of the facility to $150
million to reduce facility fees. The facility imposes a number of
restrictions, including restrictions on total indebtedness in relation to
total capital. The company has remained in compliance with the restrictions
imposed by the facility since its inception. Under the provisions of the
amended facility, the company's additional borrowing capacity totaled
approximately $192 million at year-end 1995.
The interest rates on the lines of credit and the financing fees on
the receivables purchase agreement fluctuate based on changes in prevailing
interest rates in the countries in which amounts are borrowed or
receivables are sold. At December 30, 1995, approximately $180 million was
subject to the effects of fluctuations in interest rates under these
arrangements. Future changes in interest rates will affect the company's
interest expense and other financing costs.
Total debt was $356 million at December 30, 1995, an increase of $129
million over 1994. The ratio of total debt to total capital (debt plus
equity) was 57% at December 30, 1995, down from 59% at year-end 1994. The
company believes that its cash flow from operations and available credit
lines will be sufficient to meet its debt service, capital expenditures and
other operating requirements, including those associated with the
acquisition of D-M-E (see Subsequent Events).
SUBSEQUENT EVENTS
- -----------------
On January 26, 1996, the company completed the acquisition of D-M-E.
With 1995 sales of approximately $175 million, D-M-E is the largest U.S.
producer of mold bases, standard components and supplies for the plastics
injection mold-making industry. The acquisition was financed initially
through the execution of $183 million of notes payable to the seller along
with $62 million of cash. One promissory note of $12 million was
subsequently paid. The other notes mature on January 26, 1997, but are
subject to prepayment at the option of either the buyer or the seller at
any time after July 26, 1996. To finance the acquisition, the company
completed an amendment to its revolving credit facility that increased the
facility to $300 million and extended the debt maturity to January 31,
2000. After giving effect to the acquisition on a pro forma basis, as if
the transaction had been completed by year-end 1995, the company's unused
borrowing capacity would be approximately $30 million and its debt to
capital ratio would be 66%. Longer-term financing for the acquisition will
be completed at a later date and may include the issuance of some form of
equity.
OUTLOOK
- --------
As for the future, the slowdown in the North American and European
economies, which began in mid-1995, is likely to persist and the company is
planning on only modest economic growth in the second half of the year.
Even in this environment, however, due to new product introductions and
productivity improvements, the company expects good improvements in sales
and earnings in 1996, compared with 1995 results after excluding the effect
of dispositions and the integration charge. These forward-looking
statements by their nature involve risks and uncertainties that could
significantly impact expected results, as described more fully in the
Cautionary Statement below.
==========================================================================
CAUTIONARY STATEMENT
- ---------------------
The company wishes to caution readers that all its forward-looking
statements in the "Outlook" section above and elsewhere, which include all
statements which, at the time made, speak about the future, or are based
upon the company's interpretation of what it believes are significant
factors affecting its businesses. The company believes the following
important factors, among others, in some cases have affected, and, in the
future, could affect, the company's actual results and could cause the
company's actual consolidated results for 1996, and beyond, to differ
materially from those expressed in any forward-looking statements made by,
or on behalf of, the company:
* global economic conditions, consumer spending and
industrial production in the United States and Europe,
particularly in segments related to the level of
automotive production and spending in the aerospace and
construction industries;
* fluctuations in the exchange rates of U.S. and foreign
currencies, particularly those of countries in Europe
where the company has several principal manufacturing
facilities;
* production and pricing levels of important raw
materials, including plastic resins, which are a key
raw material used by purchasers of the company's
plastics machinery products, and steel, cobalt,
tungsten and industrial grains used in the production
of metalworking products;
* lower than anticipated levels of plant utilization
resulting in production inefficiencies and higher
costs, whether related to the delay of new product
introductions, improved production processes or
equipment, or labor relation issues;
* any major disruption in production at key customer or
supplier facilities;
* alterations in trade conditions in and between the U.S.
and non-U.S. countries where the company does business,
including export duties, import controls, quotas and
other trade barriers;
* changes in tax, environmental and other laws and
regulations in the U.S. and non-U.S. countries where
the company does business.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Beginning on page 34 and continuing through page 51 are the consolidated
financial statements with applicable notes and the related Report of
Independent Auditors, and the supplementary financial information specified
by Item 302 of Regulation S-K.
CONSOLIDATED STATEMENT OF EARNINGS
CINCINNATI MILACRON INC. AND SUBSIDIARIES
FISCAL YEAR ENDS ON SATURDAY CLOSEST TO DECEMBER 31.
(In millions, except per-share amounts)
1995 1994 1993
-------- -------- --------
Sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,649.3 $1,197.1 $1,029.4
Cost of products sold. . . . . . . . . . . . . . . . . . . . . . . . 1,238.3 904.8 791.3
--------- -------- --------
Manufacturing margins. . . . . . . . . . . . . . . . . . . . . . . 411.0 292.3 238.1
Other costs and expenses
Selling and administrative . . . . . . . . . . . . . . . . . . . . 301.4 222.2 191.3
(Gain) loss on disposition of businesses . . . . . . . . . . . . . (71.0) - 22.8
Integration and consolidation charges. . . . . . . . . . . . . . . 9.8 - 47.1
Minority shareholders interests in earnings of subsidiaries. . . . 2.3 - -
Other - net . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.4 5.9 .7
-------- -------- --------
Total other costs and expenses . . . . . . . . . . . . . . . . . 251.9 228.1 261.9
-------- -------- --------
Operating earnings (loss) . . . . . . . . . . . . . . . . . . . . . 159.1 64.2 (23.8)
Interest
Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2 2.6 2.3
Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (28.0) (17.9) (15.7)
-------- -------- --------
Interest - net . . . . . . . . . . . . . . . . . . . . . . . . . (24.8) (15.3) (13.4)
-------- -------- --------
Earnings (loss) before income taxes, extraordinary item and
cumulative effect of changes in methods of accounting. . . . . . . 134.3 48.9 (37.2)
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . 28.7 11.2 8.2
-------- -------- --------
Earnings (loss) before extraordinary item and
cumulative effect of changes in methods of accounting. . . . . . . 105.6 37.7 (45.4)
Extraordinary loss on early extinguishment of debt . . . . . . . . . - - (4.4)
Cumulative effect of changes in methods of accounting - - (52.1)
-------- -------- --------
Net earnings (loss). . . . . . . . . . . . . . . . . . . . . . . . . $ 105.6 $ 37.7 $ (101.9)
======== ======== ========
Earnings (loss) per common share
Earnings (loss) before extraordinary item and cumulative
effect of changes in methods of accounting . . . . . . . . . . . $ 3.04 $ 1.10 $ (1.41)
Extraordinary loss on early extinguishment of debt . . . . . . . . - - (.14)
Cumulative effect of changes in methods of accounting. . . . . . . - - (1.61)
-------- -------- --------
Net earnings (loss). . . . . . . . . . . . . . . . . . . . . . . . $ 3.04 $ 1.10 $ (3.16)
======== ======== ========
See notes to consolidated financial statements.
CONSOLIDATED BALANCE SHEET
CINCINNATI MILACRON INC. AND SUBSIDIARIES
FISCAL YEAR ENDS ON SATURDAY CLOSEST TO DECEMBER 31.
(In millions) 1995 1994
-------- -------
Assets
Current assets
Cash and cash equivalents. . . . . . . $ 133.1 $ 21.5
Notes and accounts receivable (less
allowances of $12.9 in 1995 and
$8.7 in 1994). . . . . . . . . . . . 242.8 188.0
Inventories
Raw materials . . . . . . . . . . . 34.7 25.4
Work-in-process and finished parts . 188.2 162.8
Finished products . . . . . . . . . 128.8 79.0
-------- ------
Total inventories . . . . . . . . 351.7 267.2
Other current assets . . . . . . . . . 54.7 38.0
-------- ------
Total current assets . . . . . . . . 782.3 514.7
Property, plant and equipment - net . . 265.5 198.8
Other noncurrent assets . . . . . . . . 149.3 74.1
-------- ------
Total assets . . . . . . . . . . . . . . $1,197.1 $787.6
-------- ------
Liabilities and Shareholders' Equity
Current liabilities
Amounts payable to banks . . . . . . . $ 20.3 $ 62.8
Long-term debt and lease obligations
due within one year. . . . . . . . . 3.3 21.1
Trade accounts payable . . . . . . . . 109.9 99.2
Advance billings and deposits. . . . . 42.7 39.6
Accrued and other current
liabilities. . . . . . . . . . . . . 213.4 140.6
-------- ------
Total current liabilities. . . . . . 389.6 363.3
Long-term accrued liabilities. . . . . . . 204.6 123.5
Long-term debt and lease obligations . . 332.2 143.0
-------- ------
Total liabilities. . . . . . . . . . . 926.4 629.8
-------- ------
Commitments and contingencies. . . . . . - -
Shareholders' equity
4% Cumulative Preferred shares . . . . 6.0 6.0
Common shares, $1 par value
(outstanding: 34.3 in 1995
and 33.7 in 1994) . . . . . . . . . . 34.3 33.7
Capital in excess of par value . . . . 266.0 255.5
Accumulated deficit. . . . . . . . . . (32.8) (125.9)
Cumulative foreign currency
translation adjustments. . . . . . . (2.8) (11.5)
-------- ------
Total shareholders' equity . . . . . 270.7 157.8
-------- ------
Total liabilities and
shareholders' equity . . . . . . . . . $1,197.1 $787.6
======== ======
See notes to consolidated financial statements.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
CINCINNATI MILACRON INC.
FISCAL YEAR ENDS ON SATURDAY CLOSEST TO DECEMBER 31.
Cumulative
4% Foreign
Cumulative Common Capital in Currency Total
Preferred Shares, Excess of Accumulated Translation Shareholders'
In millions, except share amounts) Shares $1 Par Value Par Value Deficit Adjustments Equity
---------- ------------ ---------- ----------- ----------- ------------
Balance at year-end 1992 . . . . . . . . $6.0 $27.5 $143.3 $(37.5) $(4.9) $134.4
Issuance of 5,175,000 common shares in
public offering. . . . . . . . . . . . 5.2 95.4 100.6
Stock options exercised and restricted
stock awarded for 854,918
common shares. . . . . . . . . . . . . .8 12.8 13.6
Net purchase of 3,967 treasury shares. . (.2) (.2)
Net loss for the year. . . . . . . . . . (101.9) (101.9)
Cash dividends
Preferred shares ($4.00 per share) . . (.2) (.2)
Common shares ($.36 per share) . . . . (11.6) (11.6)
Foreign currency translation
adjustments. . . . . . . . . . . . . . (10.6) (10.6)
- --------------------------------------------------------------------------------------------------------------------------
Balance at year-end 1993 . . . . . . . . 6.0 33.5 251.3 (151.2) (15.5) 124.1
Stock options exercised and restricted
stock awarded for 203,404
common shares. . . . . . . . . . . . . .2 4.1 4.3
Sale of 6,998 treasury shares .1 .1
Net earnings for the year 37.7 37.7
Cash dividends
Preferred shares ($4.00 per share) . . (.2) (.2)
Common shares ($.36 per share) . . . . (12.2) (12.2)
Foreign currency translation
adjustments. . . . . . . . . . . . . . 4.0 4.0
- --------------------------------------------------------------------------------------------------------------------------
Balance at year-end 1994 . . . . . . . . 6.0 33.7 255.5 (125.9) (11.5) 157.8
Contribution of 118,180 common shares
to pension plan. . . . . . . . . . . . .1 3.3 3.4
Stock options exercised and restricted
stock awarded for 418,755
common shares. . . . . . . . . . . . . .5 7.4 7.9
Net purchase of 8,756 treasury shares. . (.2) (.2)
Net earnings for the year. . . . . . . . 105.6 105.6
Cash dividends
Preferred shares ($4.00 per share) . . (.2) (.2)
Common shares ($.36 per share) . . . . (12.3) (12.3)
Foreign currency translation
adjustments. . . . . . . . . . . . . . 8.7 8.7
- --------------------------------------------------------------------------------------------------------------------------
Balance at year-end 1995 . . . . . . . . $6.0 $34.3