UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

For the quarterly period ended March 31, 2005

or

For the transition period from ____________ to ____________

Commission file number 1-8485

MILACRON INC.

(513) 487-5000

     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     o     No     þ

Indicate by check mark whether the registrant is an accelerated filer (as defined by Rule 12b-2 of the Exchange Act)

Yes     þ     No     o

     Number of shares of Common Stock, $.01 par value, outstanding as of April 30, 2005: 49,795,114

Milacron Inc. and Subsidiaries
Index

2

PART I Financial Information

Consolidated Condensed Statements of Operations

See notes to consolidated condensed financial statements.

3

Consolidated Condensed Balance Sheets

See notes to consolidated condensed financial statements.

4

Consolidated Condensed Statements of Comprehensive Income and
Shareholders’ Equity (Deficit)

See notes to consolidated condensed financial statements.

5

Consolidated Condensed Statements of Cash Flows

See notes to consolidated condensed financial statements.

6

Notes to Consolidated Condensed Financial Statements

Basis of Presentation

     In the opinion of management, the accompanying unaudited Consolidated Condensed Financial Statements contain all adjustments, which consist only of normal recurring adjustments except for the matters discussed in the notes captioned “Refinancing Costs” and “Restructuring Costs,” necessary to present fairly the company’s financial position, results of operations and cash flows.

     The Consolidated Condensed Balance Sheet at December 31, 2004 has been derived from the audited Consolidated Financial Statements at that date, but does not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements.

     The accounting policies followed by the company are set forth in the “Summary of Significant Accounting Policies” note to the Consolidated Financial Statements included in the company’s Annual Report on Form 10-K for the year ended December 31, 2004.

Stock-Based Compensation

     The company currently accounts for stock-based compensation, including stock options, under the provisions of Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” and the related interpretations. Because all stock options outstanding under the company’s 1997 and 2004 Long-Term Incentive Plans and a predecessor plan have exercise prices equal to the fair market value of the underlying common shares at the respective grant dates, no compensation expense is recognized in earnings. The following table illustrates on a pro forma basis the effect on net loss and net loss per common share if the stock options granted from 1995 through 2004 had been accounted for based on their fair values as determined under the provisions of Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation.”

     The conversion of $30.0 million of Series A Notes into 15.0 million common shares on April 15, 2004 (see Refinancing Transactions) resulted in a change in control under the provisions of the 1997 Plan which triggered the early vesting of all stock options outstanding as of that date. In the first quarter of 2005, the pro forma expense amount related to stock options granted subsequent to April 15, 2004 is less that $.1 million.

     As discussed more fully below, a newly issued accounting standard will require the company to include expense related to stock options in its financial statements beginning in the first quarter of 2006 rather than reporting it on a pro forma basis as in the past.

Change in Method of Accounting

     In the fourth quarter of 2004, the company elected to change its method of accounting for certain inventories from the last-in, first-out (LIFO) method to the first-in, first-out (FIFO) method, retroactive to the beginning of the year. The company’s financial statements for all prior years were restated to conform to the 2004 presentation. The effect of the restatement was to decrease the accumulated deficit as of December 31, 2003 by $10.3 million.

Recently Issued Pronouncements

     In December 2004, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 123 (Revised 2004), “Share-Based Payment” (SFAS No. 123R). Among other things, this standard requires that

7

Notes to Consolidated Condensed Financial Statements
(Unaudited)

expense related to stock options be included in a company’s primary financial statements over the vesting periods based on their fair values as of the grant dates. The company will comply with the new standard beginning in the first quarter of 2006 but because there are currently only 14,000 stock options that are not fully vested, the effect of complying with the new standard is not currently expected to be material. The company will use the “modified-prospective” transition method and prior years’ financial statements will therefore not be restated. The company is evaluating the other provisions of SFAS No. 123R but currently does not expect their effects to be significant.

Discontinued Operations

     In the third quarter of 2002, the company announced a strategy of focusing its capital and resources on building its position as a premier supplier of plastics processing technologies and strengthening its worldwide industrial fluids business. In connection with this strategy, during 2002 the company initiated plans for the sale of its grinding wheels business. The business was sold on April 30, 2004.

     The grinding wheels business is reported as a discontinued operation in the Consolidated Condensed Financial Statements through the date of its disposition. Operating results for this business are presented in the following table.

     Allocated interest expense represents an allocated portion of consolidated interest expense based on the ratio of net assets sold or to be sold to consolidated assets.

8

Notes to Consolidated Condensed Financial Statements
(Unaudited)

Refinancing Costs

     During the first quarter of 2004, the company charged to expense $6.4 million of refinancing costs incurred in pursuing various alternatives to the March 12, 2004 refinancing of approximately $200 million in debt and other obligations (see Refinancing Transactions).

Restructuring Costs

     During 2001, the company’s management approved a plan to integrate the operations of EOC and Reform, two businesses that were acquired earlier in that year, with the company’s existing European mold base and components business. These businesses are included in the mold technologies segment. The plan involved the consolidation of the manufacturing operations of five facilities located in Germany and Belgium into three facilities, the reorganization of warehousing and distribution activities in Europe and the elimination of approximately 230 positions. The total cost of the plan was $11.2 million, of which $1.2 million was included in reserves for employee termination benefits that were established in the allocations of the EOC and Reform acquisition costs. The remaining $10.0 million was charged to expense. Of the total cost of the plan, $4.4 million related to employee termination costs, $2.7 million to facility exit costs and $4.1 million to other costs, including $3.1 million to relocate employees, inventory and machinery. The cash cost of the integration will be approximately $9.4 million, of which $.1 million was spent in the first quarter of 2004. Cash costs for all of 2005 are expected to be approximately $.1 million. The non-cash costs of the integration relate principally to the write-down of one of the closed facilities to its expected realizable value. As of March 31, 2005 reserves for employee termination benefits and facility exit costs totaled $1.2 million and related principally to supplemental retirement benefits that will be paid to certain former employees in Belgium at a rate of approximately $.1 million per year for the next several years.

     In November 2002, the company announced restructuring initiatives intended to improve operating efficiency and customer service. One of these actions involved the transfer of all manufacturing of container blow molding machines and structural foam systems from the plant in Manchester, Michigan to the company’s more modern and efficient facility near Cincinnati, Ohio. The mold making operation has also been moved to a smaller location near Manchester. These operations are included in the machinery technologies – North America segment. The relocations, which involved the elimination of approximately 40 positions, are resulting in restructuring costs of $13.4 million, including $.3 million in the first quarter of 2005 and $.9 million in the comparable period of 2004. An additional $.4 million is expected to be expensed during the remainder of 2005. The 2005 costs relate principally to completing the move of the mold making operation. Of the total cost of $13.4 million, $1.5 million relates to employee severance costs, $6.1 million to plant closing and facility exit costs (including adjustments of the carrying values of the Manchester facility and other assets to be disposed of), $1.9 million to inventory adjustments related to discontinued product lines and $3.9 million to other move-related costs, including employee, inventory and machinery relocation. The cash cost of the relocations will be approximately $6.2 million, including $1.7 million for severance and termination benefits, $.3 million for plant clean up costs and $4.2 million for other costs, primarily to relocate inventory and machinery. The non-cash costs of $7.2 million relate principally to the previously mentioned adjustments related to inventories of discontinued product lines and assets to be disposed of as a result of the plant closure.

     In the third quarter of 2003, the company announced additional restructuring initiatives that focused on further overhead cost reductions in each of its plastics technologies segments and at the corporate office. These actions, which involved the relocation of production and warehousing (including the closure of one small facility and the downsizing of two others), closures of sales offices, voluntary early retirement programs and general overhead reductions, have resulted in the elimination of approximately 300 positions worldwide. A total of $11.2 million was charged to expense in 2003 in connection with these initiatives and an additional $.6 million was expensed in 2004, including $.3 million in the first quarter. Of the total cost of the initiatives of $11.8 million, $3.7 million related to the machinery technologies – North America segment, $2.7 million to the machinery technologies – Europe segment, $5.0 million to the mold technologies segment and $.4 million to corporate expenses. The total cost of the 2003 actions includes $3.2 million for supplemental early retirement benefits that will be paid through the company’s defined benefit pension plan for certain U.S. employees, $6.8 million for severance and other termination benefits for certain other employees, $.6 million for facility exit costs and $1.2 million for moving expenses. The supplemental early retirement benefits will have the effect of increasing the amount of the company’s funding requirements in future years. The cash costs of the initiatives – including $6.8 million for severance and other termination benefits, $.5 million for lease termination and other facility exit costs and $1.1 million for other costs – are expected to total approximately $8.4 million. In 2003, $3.5 million was spent and another $4.7 million was spent in 2004. Of the latter amount, $2.3 million was spent in the first quarter. Cash costs for 2005 will be approximately $.2 million, including $.1 million that was spent in the first quarter. The non-cash costs of the 2003

9

Notes to Consolidated Condensed Financial Statements
(Unaudited)

initiatives will be approximately $3.4 million and relate principally to the early retirement benefits funded through the pension plan as discussed above.

     In the second quarter of 2004, the company initiated additional actions to further enhance customer service while reducing the overhead cost structure of its machinery technologies — North America segment. These overhead reductions resulted in restructuring expense of $1.1 million in 2004 and $.2 million in the first quarter of 2005. An additional $.3 million is expected to be charged to expense during the remainder of 2005 in connection with these actions. Termination benefits will account for $1.0 million of the total cost of $1.6 million while facility exit costs represent a substantial majority of the remaining $.6 million. Total cash costs are expected to be approximately $1.5 million, of which $.8 million was spent in 2004. The remainder is being spent in 2005, including $.2 million in the first quarter. The cash costs include $.9 million for severance and $.6 million for facility exit and moving costs. These actions resulted in the elimination of 66 positions, a majority of which occurred during 2004.

     In the fourth quarter of 2004, the company initiated a plan to reduce employment levels at a mold technologies facility in Germany due to sluggish demand in Europe. The plan will result in the elimination of approximately 25 positions at a cost of $1.1 million, all of which was charged to expense in 2004. In addition, certain surplus assets were written down to estimated realizable values through non-cash charges totaling $1.1 million. The cash costs, principally for severance benefits, will be approximately $1.0 million. Of this amount, $.6 million was spent in 2004. The remainder will be spent in 2005, including $.2 million that was spent in the first quarter.

     In the fourth quarter of 2004, the company initiated additional headcount reductions in its European mold base and components business that resulted in expense of $.6 million. These reductions represent a continuation of the actions initiated in the third quarter of 2003 (as discussed above) and were undertaken due to continued slow economic conditions in Europe. The cash costs of these initiatives will be approximately $.6 million, of which $.4 million was spent in the first quarter of 2005. The remainder will be spent later in 2005.

     The following table presents the components of the restructuring costs that are included in the Consolidated Condensed Statements of Operations for the first quarters of 2005 and 2004.

     As presented in the above table, the costs under the line captioned “Costs charged to expense as incurred” do not meet the conditions for accrual under U.S. generally accepted accounting principles and are therefore expensed when the related contractual liabilities are incurred. Accordingly, no reserves related to these costs have been established.

10

Notes to Consolidated Condensed Financial Statements
(Unaudited)

     The status of the reserves for the initiatives discussed above is summarized in the following tables. The amounts included therein relate solely to continuing operations.