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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 January 1, 1994.
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934. For the transition period from __________ to __________
Commission file number 1-8485
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 $676,294,231 at 2/25/94.
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
25, 1994: 33,540,964.
Documents incorporated by reference:
PART III - Proxy statement, dated March 25, 1994.
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CINCINNATI MILACRON INC.
1993 FORM 10-K ANNUAL REPORT
Table of Contents
Page
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PART I
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Item 1. Business 3
Executive Officers of the Registrant 16
Item 2. Properties 18
Item 3. Legal Proceedings 19
Item 4. Submission of Matters to a Vote of Security-Holders 19
PART II
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Item 5. Market for the Registrant's Common Equity and
Related Stockholder Matters 19
Item 6. Selected Financial Data 20
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations 22
Item 8. Financial Statements and Supplementary Data 26
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 26
PART III
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Item 10. Directors and Executive Officers of the Registrant 42
Item 11. Executive Compensation 42
Item 12. Security Ownership of Certain Beneficial Owners
and Management 42
Item 13. Certain Relationships and Related Transactions 42
PART IV
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Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K 43
Signatures 47
Index to Certain Exhibits and Financial Statement
Schedules 48
Exhibit 11- Computation of Per-Share Earnings 49
Exhibit 21- Subsidiaries of the Registrant 50
Exhibit 23- Consent of Independent Auditors 51
Schedule II- Amounts Receivable From Related Parties
and Underwriters, Promoters and Employees Other Than
Related Parties 52
Schedule V- Property, Plant and Equipment 53
Schedule VI- Accumulated Depreciation, Depletion and
Amortization of Property, Plant and Equipment 54
Schedule VIII- Valuation and Qualifying Accounts and
Reserves 55
Schedule IX- Short-Term Borrowings 56
Schedule X- Supplementary Income Statement Information 57
PART I
______
ITEM 1. BUSINESS
Cincinnati Milacron Inc. was incorporated in Delaware in 1983 as the successor
to a business established in 1884. Its principal executive offices are located
in Cincinnati, Ohio. Except where the context otherwise requires, the terms
"company" and "Cincinnati Milacron" herein mean Cincinnati Milacron Inc. and
its consolidated subsidiaries.
Cincinnati Milacron is one of the world's leading manufacturers of plastics
machinery, machine tools and industrial products for metalworking, as well as
related computer controls and software for factory automation.
The company sells products and provides services to industrial customers
throughout the world. The company has a long-standing reputation for quality
and technological leadership. Virtually all of its plastics machinery products
and machine tools are computer-controlled and many include advanced
applications software.
In recent years, the company has undertaken a major program, called "Wolfpack",
for product development, process improvement and modernization. The objectives
of Wolfpack are to design and produce new products at world-competitive levels
of quality, performance, efficiency and cost. The key principles of the
Wolfpack philosophy are teamwork, a "market-driven" approach, "simultaneous
engineering", reduction and standardization of parts, design for
manufacturability and integrated, just-in-time manufacturing. Wolfpack teams
develop marketable products faster than conventional teams with improved
quality, features and cost and quality performance ratios. Compared to the
products they replace, Wolfpack-products typically have achieved a 30 to 50
percent reduction in each of the following areas: product development cycles,
number of total parts, manufacturing lead time, installation time and overall
cost. In 1993, Wolfpack designed products accounted for substantially all of
the company's plastics machinery sales and approximately one-half of the
company's machinery portion of its machine tool segment sales.
Early in 1993, the company acquired GTE Valenite Corporation ("Valenite"),
which the company believes is the second largest U.S. and third largest
worldwide producer of metalcutting systems. The acquisition of Valenite was
part of the company's strategic objective to expand its industrial products
segment and thereby balance revenues among its three business segments of
plastics machinery, machine tools and industrial products. Later in 1993, the
company acquired Ferromatik, a German manufacturer of plastic injection molding
machines. The company expects the acquisition to expand its plastics
processing technology and product line offering and help the company achieve
its objective of establishing a plastics machinery manufacturing and
distribution base in Germany to serve Europe and other markets. With this
acquisition, plastics machinery is now the company's largest segment.
On February 10, 1994, the company announced a major consolidation of its U.S.
machine tool operations to Cincinnati and recorded in the fourth quarter of
1993 a $47.1 million nonrecurring charge to cover the costs of the plan.
Production at the company's two machine tool facilities in South Carolina will
be phased out and the plants closed by year end 1994. The company will
transfer most of the modern machines and systems in South Carolina now used to
manufacture horizontal machining centers and turning centers to its Cincinnati
facilities. The incremental cash required in 1994, before considering any
proceeds from the disposition of assets, will be approximately $18 million. The
consolidation, once fully implemented, is expected to result in annual cost
savings of approximately $16 million. The consolidation addresses excess
manufacturing capacity created by two factors: the company's successful
Wolfpack program, which has significantly reduced the hours and floorspace
required to manufacture and assemble machine tool products; and the unusually
steep recession in the aerospace industry, which has dramatically lowered
demand for the company's advanced machine tool systems.
On February 4, 1994, the company sold its Sano blown and cast film systems
business which incurred an operating loss of approximately $26.3 million in
1993, which included charges totaling $22.8 million for the disposition of this
subsidiary.
STRATEGY AND PRODUCT DEVELOPMENT
The company's objectives are: to develop and produce machines and systems for
world markets that incorporate leading-edge technology and offer its customers
competitive advantages; to increase its manufacturing efficiencies to meet
international competition; and to improve its responsiveness to changing world
markets by decentralizing responsibility for manufacturing, marketing and
product development.
In 1993, the company made progress in the achievement of its overall
objectives. The company's strategic acquisitions of Valenite and Ferromatik
enhanced its technological base, diversified its product line and expanded its
worldwide sales and distribution network. In addition, by balancing revenues
among its three business segments, the company believes that it is in a better
position to take advantage of opportunities in each market even while demand in
a single segment may be weak.
In recent years, the company also 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.
Wolfpack teams consist of members not only from design engineering but also
from sales, marketing, manufacturing, engineering, quality control, purchasing
and assembly, and often include suppliers and customers.
In addition to teamwork, other key principles of the Wolfpack philosophy are:
a "market-driven" approach, "simultaneous engineering", reduction and
standardization of parts, design for manufacturability and integrated,
just-in-time manufacturing. Wolfpack teams develop marketable products faster
than conventional teams with improved quality, features and cost and quality
performance ratios. Compared to the products they replace, Wolfpack-developed
products typically have achieved a 30 to 50 percent reduction in each of the
following areas: product development cycles, number of total parts,
manufacturing lead time, installation time and overall cost.
In 1985, the company began applying Wolfpack principles to the development of
its Vista line of plastics injection molding machines, and the line has since
become the market leader in the United States. Today, most of the company's
plastics processing machinery lines have been developed through the Wolfpack
approach. In 1989, the company formally adopted the Wolfpack approach to
product development and introduced its first Wolfpack machine tool, the Sabre
vertical machining center, which was well received. Subsequently, several
other Sabre machines were added to the family, all of which have met with good
market acceptance. In 1992, key Wolfpack machine tool introductions included
the Maxim line of horizontal machining centers and the Avenger turning center
series, again with encouraging customer reaction. Late in 1993, the company
introduced the Arrow and Lancer lines of vertical machining centers which have
resulted in encouraging sales levels. Additional Wolfpack-developed machine
tool introductions are planned for 1994.
In many cases, Wolfpack designs represent new products for new applications or
markets. In other cases, they replace older product lines and the company
coordinates the phase-out of the older lines with the phase-in of the
Wolfpack-developed product lines. This approach is designed to minimize
inventory obsolescence while providing an opportunity for increased revenue as
the new products achieve market acceptance. From 1991 through 1993, the
Wolfpack program resulted in 27 new product introductions.
The company also conducts an ongoing research and product development effort
for all product lines, designed to create new products to maintain or enhance
its competitive market positions. During the last three years, the company has
maintained its expenditures for research and development at an average of
approximately 4% of sales.
In 1993, the company initiated Total Quality Leadership ("TQL"), a company-wide
commitment to promote higher levels of teamwork, innovation and employee
empowerment. TQL is a people-oriented philosophy that seeks commitment from
all employees, representatives and suppliers to focus on total customer
satisfaction. TQL is a long-term strategy intended to promote continuous
process and quality improvement.
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. In addition
to the Valenite and Ferromatik acquisitions, in the past three years the
company has sold certain businesses and consolidated certain manufacturing
operations. In early 1994, the company announced a major consolidation of its
U.S. machine tool operations.
SEGMENT INFORMATION
The company has three business segments: plastics machinery, machine tools and
industrial products. Financial data for the past three years for these
segments are shown in the tables below.
Fiscal Year (a)
------------------------------
(In millions) 1993 1992 1991
-------- ------ ------
SALES
Plastics machinery. . . . . . . . $ 357.2 $301.4 $267.6
Machine tools . . . . . . . . . . 355.0 379.7 383.7
Industrial products (b) . . . . . 317.2 108.1 102.7
-------- ------ ------
Total sales . . . . . . . . . . $1,029.4 $789.2 $754.0
======== ====== ======
BACKLOG OF UNFILLED ORDERS
Plastics machinery. . . . . . . . $ 85.5 $ 56.1 $ 53.3
Machine tools . . . . . . . . . . 123.9 188.8 219.7
Industrial products (b) . . . . . 36.6 4.7 4.3
-------- ------ ------
Total backlog . . . . . . . . . $ 246.0 $249.6 $277.3
======== ====== ======
_______________________________________________________________________________
(a) 1992 includes 53 weeks compared to 52 weeks included in 1993 and 1991.
(b) The 1993 increases in the industrial products segment are largely
attributable to the inclusion of Valenite as of February 1, 1993.
___________________________________________________________________________
Fiscal Year (a)
------------------------------
(In millions) 1993 1992 1991
------ ------ ------
OPERATING EARNINGS (LOSS)
Plastics machinery (c). . . . . . $ 26.6 $ 22.8 $ 14.6
Machine tools . . . . . . . . . . 3.9 8.9 (6.6)
Industrial products (b) . . . . . 27.1 17.7 18.3
Consolidation charge and
closing and relocation
charge (d). . . . . . . . . . . (47.1) - (75.1)
Disposition of subsidiary (e) . . (22.8) - -
Unallocated corporate
expenses (f). . . . . . . . . . (11.5) (6.2) (9.5)
------ ------ ------
Operating earnings (loss) . . . . (23.8) 43.2 (58.3)
Interest - net. . . . . . . . . . (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. . . . $(37.2) $ 27.0 $(73.4)
====== ====== ======
IDENTIFIABLE ASSETS
Plastics machinery. . . . . . . . $289.0 $219.9 $202.9
Machine tools . . . . . . . . . . 243.1 282.8 310.9
Industrial products (b) . . . . . 174.4 56.8 63.7
Unallocated corporate assets (g). 23.1 19.4 20.9
------ ------ ------
Total assets. . . . . . . . . . $729.6 $578.9 $598.4
====== ====== ======
CAPITAL EXPENDITURES
Plastics machinery. . . . . . . . $ 4.2 $ 6.2 $ 6.5
Machine tools . . . . . . . . . . 8.8 7.1 7.5
Industrial products (b) . . . . . 10.4 4.3 1.5
------ ------ ------
Total capital expenditures. . . $ 23.4 $ 17.6 $ 15.5
====== ====== ======
DEPRECIATION
3 Plastics machinery. . . . . . . . $ 6.2 $ 7.7 $ 7.0
Machine tools . . . . . . . . . . 9.4 10.6 14.2
Industrial products (b) . . . . . 10.5 2.6 2.8
------ ------ ------
Total depreciation. . . . . . . $ 26.1 $ 20.9 $ 24.0
====== ====== ======
__________________________________________________________________________
(a) 1992 includes 53 weeks compared to 52 weeks included in 1993 and 1991.
(b) The 1993 increases in the industrial products segment are largely
attributable to the inclusion of Valenite as of February 1, 1993.
(c) The 1993 amount includes a $2.5 million gain on sale of surplus land.
(d) These amounts relate to the machine tools segment.
(e) This amount relates to the plastics machinery segment.
(f) Includes corporate research and development and certain administrative
expenses. The 1993 amount includes amortization of financing costs and
costs related to the sale of receivables totaling $3.0 million.
(g) Includes cash and cash equivalents and the assets of the company's
insurance and utility subsidiaries.
The following table summarizes the company's United States and foreign
operations which are located principally in Western Europe:
(In millions) 1993 1992 1991
------ ------ ------
GEOGRAPHIC INFORMATION
U.S. operations
Sales . . . . . . . . . . . . . . . $831.9 $654.1 $613.0
Operating earnings. . . . . . . . . 49.6 47.9 23.3
Consolidation charge and closing
and relocation charge . . . . . . (47.1) - (75.1)
Disposition of subsidiary . . . . . (22.8) - -
Identifiable assets . . . . . . . . 420.6 410.8 413.9
Liabilities . . . . . . . . . . . . 469.9 403.3 404.7
Capital expenditures. . . . . . . . 21.3 13.9 11.8
Depreciation. . . . . . . . . . . . 19.1 16.3 19.3
Foreign operations
Sales . . . . . . . . . . . . . . . 197.5 135.1 141.0
Operating earnings. . . . . . . . . 8.0 1.5 3.0
Identifiable assets . . . . . . . . 285.9 148.7 163.6
Liabilities . . . . . . . . . . . . 135.6 41.2 64.7
Capital expenditures. . . . . . . . 2.1 3.7 3.7
Depreciation. . . . . . . . . . . . 7.0 4.6 4.7
Sales of U.S. operations include export sales of $118.7 million in 1993,
$111.7 million in 1992, and $98.6 million in 1991.
Total sales of the company's U.S. and foreign operations outside the U.S.
were $298.4 million, $242.6 million, and $236.0 million in 1993, 1992 and
1991, respectively.
PLASTICS MACHINERY
The company is the largest U.S. producer of plastics machinery. In 1993, the
company's plastics machinery segment sales were $357 million, of which
approximately 70% were to customers in the U.S. The company believes it
offers more varieties of machinery to process plastic than any other U.S.
company.
The company produces equipment for most of the major plastics processing
technologies, including a full range of injection molding machines and systems
for extrusion and blow molding. In February 1994, the company sold Sano. The
company also sells a line of imported electric injection molding machines and
a number of types of auxiliary equipment, which are manufactured by others to
the company's specifications.
The company designs and builds its own electronic controls and develops the
necessary software for virtually all of its plastics machinery lines. The
company believes that its advanced controls and software for plastics
manufacturing equipment are key selling features that have helped increase its
market share.
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, packaging 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. Beginning in 1989, the
plastic machinery industry began to experience a slowdown in orders from
these sectors and the slowdown continued through 1991 and into the first
half of 1992. Plastics machinery orders improved in the second half of
1992 and continued to be strong through 1993.
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 packaging
industry, 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 oil and natural gas supplies and prices
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
biodegradable products and 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), is participating in a joint initiative
with "The Partnership for Plastics Progress", which has brought together
leading companies within the plastics industry to address the role of
plastics in the environment.
THE COMPANY'S PLASTICS MACHINERY SEGMENT
The company's plastics machinery segment consists of three major businesses:
injection molding machines, extrusion systems and blow molding systems. In
1993, sales of injection molding machines constituted over one-half of the
sales of the company's plastics machinery segment.
INJECTION MOLDING
The company is the largest U.S. producer of injection molding machines.
Injection molding is the most common and versatile method of processing
plastic. The company manufactures many types of injection molding machines,
all of which were developed using Wolfpack principles. Product
standardization (which facilitates part commonality), 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, which the company continues to expand.
In 1991, the company entered the market for very small hydraulic injection
molding machines with its Wolfpack-developed Sentry Line, which has been
well received in the marketplace. In 1992 and 1993, the company
introduced two new Vista models known as the Revenge and the Patriot.
Additionally, in 1993 the company began shipping the largest hydraulic
injection molding machine it has ever built, the Wolfpack-designed
VL4000, which is used for large interior and exterior automotive parts.
Sales of injection molding machines began to weaken in May 1989 and remained
depressed through 1991. Sales remained soft in the first half of 1992, but
became particularly strong in the second half of 1992 and through 1993. As a
result, the company's injection molding machine business had a record
sales-year in 1992, and the company surpassed that record in 1993.
On November 8, 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 company expects the Ferromatik
acquisition to expand its technology base and product line and help it
achieve its objective of establishing a manufacturing and distribution
base in Germany to serve Europe and other markets. 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 company believes Ferromatik provides a complementary fit
with its existing injection molding machine business. The purchase price,
including assumed debt of approximately $6 million, was approximately
$56 million. The amount of the purchase price paid was based upon
estimates of the amount of assets and liabilities of Ferromatik, a
subject to adjustment as set forth in the purchase agreement. The company
financed the purchase by drawing upon its revolving credit facility of $130
million and the company's existing European lines of credit.
The company has commenced a restructuring of Ferromatik intended to
(1) derive benefits of synergies between Ferromatik and other company
operations and (2) 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 restructuring opportunities are available in both marketing and
manufacturing.
The company intends to conduct its plastics machinery European marketing
activities through Ferromatik's existing network and thus to eliminate
expenses previously incurred by the company's European marketing operation
in Offenbach, Germany. The company will sell several of its successful
plastics machinery lines to European customers through Ferromatik's sales
and distribution network.
To improve manufacturing efficiency, in addition to the head count reductions
made at Ferromatik prior to the acquisition, the company intends to further
reduce head count in 1994. The company believes such personnel reductions
will not adversely affect current production capacity at Ferromatik. The
company intends to implement numerous advanced manufacturing technologies
in the Malterdingen facility, including cellular manufacturing, which
have been successful in the company's main U.S. facility for injection
molding machine production in Ohio.
EXTRUSION SYSTEMS
Extrusion systems business consists of systems comprised of multiple units
which are tooled to make a specific product in quantity. Such systems take
longer to manufacture than do injection molding machines. Extrusion systems
include twin-screw extruders and single-screw extruders. The company believes
it has a strong competitive position in each of these lines. Twin-screw
extruders are used to produce continuous-flow products such as pipe,
residential siding, sheet lines and window frames, hence the business is
closely tied to housing 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. In February 1994, the company sold its
Sano blown and cast film systems business. The company recorded nonrecurring
charges totaling $22.8 million in 1993 on the disposition of this subsidiary.
BLOW MOLDING SYSTEMS
The company's blow molding systems business consists of reheat and extrusion
blow molding systems. Reheat blow molding systems are used to produce strong,
lightweight containers that resist oxygen migration to hold perishable liquids,
such as soft drinks, toiletries, and household products. Extrusion blow
molding systems are used to make a wide variety of products ranging from
bottles, jars, vials and other containers, to industrial parts and toys. In
1991, the company introduced a Wolfpack-developed line of accumulator-head
blow molding machines, known as Eclipse. Additionally, in 1993, the company
expanded its Eclipse line by introducing three models of large extrusion and
blow molding machines.
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 which are
manufactured by third parties to the company's specifications. The company
also rebuilds and retrofits many types of plastics processing equipment sold
by the company or others, refitting them with new company-produced controls
and software.
SALES, MARKETING AND CUSTOMER SERVICE
The company maintains a large direct sales force in the United States 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
regional technical centers in Allentown, Pennsylvania; Arlington, Texas;
Charlotte, North Carolina; Chicago, Illinois; Detroit, Michigan; and Los
Angeles, California to demonstrate and market its products, and provide
customer support and training. Through its Austrian subsidiary and
Ferromatik, the company has an extensive sales, marketing, service and
distribution system throughout Europe.
COMPETITION
The markets for plastics machinery in the United States 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. 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 enhance the company's
competitive position with respect to each of these competitive factors.
MACHINE TOOLS
- -------------
The company is a leading U.S. producer of machine tools. A machine tool is a
power-driven machine, not hand-held, that is used to cut, form or shape metal.
Machine tools are typically installed as capital equipment in metalworking
industries. In 1993, the company's machine tool segment sales were $355
million, of which approximately 75% were to customers in the U.S.
MACHINE TOOL INDUSTRY
The primary customers for machine tools are the automotive and aerospace
industries; machine shops; producers of farm, construction, off-road and power
generation equipment; manufacturers of bearings; 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.
U.S. machine tool producers benefitted to a degree in the late 1980s when the
U.S. manufacturing sector continued efforts to improve productivity and quality
and to lower costs in order to compete in world markets. At that time, the
dollar also weakened relative to other currencies. A growing market then
developed for automated flexible manufacturing cells, which are machine tools
linked together using computers, software and materials-handling equipment to
automate and integrate all manufacturing functions, allowing for lightly-manned
or unattended operation. In 1989, however, the U.S. market softened, primarily
as a result of cutbacks in capital spending by the automotive industry. This
softness in automotive industry capital spending continued through 1991 and
1992. Also in 1992, machine tool orders in the aerospace industry declined due
primarily to difficulties in the commercial airline industry. In 1993, U.S.
automotive capital spending began to pick up for certain types of machine
tools-mostly transfer line and fixed station equipment, which the company does
not manufacture. Demand for machine tools from the aerospace industry,
however, continued to worsen. Since early 1991 the machine tool markets in
Europe and Japan have been severely depressed.
THE COMPANY'S MACHINE TOOL SEGMENT
The company's machine tool segment is comprised of three focused businesses:
standard machine tool products, advanced machine tool systems and electronic
systems. The company's standard machine tool products business manufactures
horizontal machining centers, vertical machining centers and turning centers
for a variety of industries engaged in basic metalworking operations, including
machine shops. The products of the company's advanced machine tool systems
business include large, multi-axis metalcutting and composites processing
systems for the aerospace industry; large, multi-axis machines for
manufacturers of farm, construction, off-road and power generation equipment
and for the die and mold industry; applied production turning centers and
centerless grinding machines for the automotive industry and for bearings
manufacturers; and automated flexible manufacturing cells for the metalworking
industry. The company's electronic systems business designs and manufactures
computer controls and develops proprietary software for the company's machine
tools, plastics machinery and automated flexible manufacturing cells.
STANDARD MACHINE TOOL PRODUCTS
HORIZONTAL AND VERTICAL MACHINING CENTERS
The company designs, builds and sells general-purpose CNC horizontal and
vertical machining centers for basic metalworking operations to a number of
industries. These machines produce prismatic or box-like parts and are capable
of performing a variety of operations such as milling, drilling, boring,
tapping, reaming and routing. Since 1991, the company has introduced a number
of new Wolfpack machines, including four models of the Sabre line of vertical
machining centers and, in 1992, the Maxim series of horizontal machining
centers, and in 1993 the Arrow and Lancer lines of vertical machining centers.
TURNING CENTERS
Standard turning centers are designed for ease of use by a broad variety of
customers that do not require custom-designed features. As part of its ongoing
Wolfpack program, the company has introduced a variety of new turning centers,
including the Talon entry-level series in 1991, and the more sophisticated
Avenger series in 1992. In 1993 the company expanded its Avenger series which
now includes eight models.
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 MACHINE TOOL 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 used to machine intricately contoured
surfaces, often out of aluminum, titanium and other high-strength alloys, for
the aerospace industry. The company is also a world leader in the development
of new machines and systems to automate the manufacture of components made of
advanced composite materials, such as carbon or graphite fibers in combination
with epoxy. These systems are used by the aerospace industry to manufacture
jet engine parts and structural components, primarily for commercial aircraft.
LARGE MACHINE TOOLS
The company makes large, often highly customized, 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.
The company's large machine tools business also includes the product lines
acquired by the company from The Pratt & Whitney Company, Inc. early in 1991.
These product lines, which include die sinkers, blade mills and heavy-duty
bridge mills, expand and supplement the company's offering of products to jet
engine and power generation equipment makers and to the die and mold industry.
APPLIED PRODUCTION TURNING CENTERS AND CENTERLESS GRINDING MACHINES
The company also specializes in manufacturing applied production turning
centers and centerless grinding machines designed to meet exacting
specifications for the automotive industry. Turning centers, also called CNC
lathes, shape cylindrical parts, which are rotated at high speed against a
stationary tool. The company's applied production turning centers are used by
the automotive industry in a number of applications, including aluminum-alloy
wheel turning. Grinding machines are used to bring a part surface to a more
precise definition or finish. There are many different kinds of grinding
processes. In 1991, the company announced its intention to focus on centerless
grinding machines, which grind external diameters of cylindrical parts
primarily for the automotive industry and for bearings manufacturers. The
company has a long-standing leadership position in the domestic centerless
grinding machine business. In 1993, this business experienced an increase in
new orders from the automotive industry.
ELECTRONIC SYSTEMS
The company designs and manufactures computer controls and develops proprietary
software for its machine tools, plastics machinery and automated flexible
manufacturing cells. Computer controls and software are often important
selling features for individual machines, and the controls and software enable
machines to be linked together to form automated cells and manufacturing
systems. Most of the controls for the company's machine tools and plastics
machinery are manufactured by the company, providing significant product
differentiation from competing products. The company's electronic systems
business also offers a variety of retrofitting services to automate or upgrade
existing machine tools, including those manufactured by other companies.
During 1992, the company upgraded two of its major families of computer
numerical controls, the Acramatic 950 and the Acramatic 850SX, with enhanced
software and programming capabilities.
SALES, MARKETING AND CUSTOMER SERVICE
The company markets machine tools in North America through a comprehensive
network of independent distributors assisted by the company's direct sales
force. The expanded use of distributors is a significant aspect of the
company's strategy aimed at placing more sales representatives in the field to
reach additional markets. Through these distributors, the company currently
has approximately 300 salespeople representing its machine tools in North
America, which is approximately three times more salespeople than it had four
years ago. The company has begun emphasizing distribution in Europe by
upgrading its distributor network. A strong distribution network is one of the
cornerstones in the company's plan to improve its position in the global market
for standard machine tools.
The company believes that extensive applications work, 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, the company maintains regional technical centers in Allentown,
Pennsylvania; Chicago, Illinois; Detroit, Michigan; Los Angeles, California;
and Toronto, Ontario; as well as in Birmingham, England; and Offenbach,
Germany. These facilities provide customers with demonstrations, engineering
services and training for most major product lines.
COMPETITION
The worldwide machine tool industry is made up of a number of competitors, none
of which has a dominant market share despite the considerable consolidation
that has occurred in the industry over the past decade. The markets for the
company's machine tool segment products are highly competitive in the United
States 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 (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 competitive 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
- -------------------
THE COMPANY'S INDUSTRIAL PRODUCTS SEGMENT
The company is a leading producer of three basic types of industrial products:
metalcutting tools, metalworking fluids and precision grinding wheels. In
1993, sales of the company's industrial products segment, including Valenite's
sales for 11 months, were $317 million, of which approximately 70% were to
customers in the U.S. Most of the company's industrial products are
consumable, 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, as the
industrial products business requires relatively small investment in equipment
and working capital and is exposed to less pronounced business cycles.
VALENITE
In 1993, Valenite's sales were $209 million, of which approximately 65% were to
customers in the U.S. The company believes Valenite is the second largest
producer of metalcutting tool systems in the U.S. and the third largest
worldwide. Valenite manufactures over 20,000 products, including an extensive
line of cutting tool inserts in a wide variety of materials and geometries for
turning, boring, milling and drilling; standard and special steel insert
holders; and monitoring, gauging and control devices. Valenite has strong
market positions in carbide die and wear products for metalforming and in
products requiring the wear and corrosion resistant properties of tungsten
carbide.
METALWORKING FLUIDS
Metalworking fluids are used as lubricants and coolants 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 three 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 specifically to work with Valenite metal
cutting tools that is being marketed through Valenite's distribution channels.
GRINDING WHEELS
Grinding wheels are used by manufacturers in the metalworking industry. 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, diamond and synthetic types. Recently, the
company introduced two Wolfpack-developed products: CMSA II, a second
generation line of ceramic abrasive grinding wheels, and VIDA, a new line of
diamond wheels for nonferrous metals.
The company believes, based on tests in its own laboratories and 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 achieves lower production costs, in part, by finishing
its wheels on computer numerically controlled machines designed and built by
the company's machine tool business.
SALES, MARKETING AND CUSTOMER SERVICE
The company sells its fluids and wheels primarily through a growing network of
independent industrial distributors, as well as through a direct sales force.
The company's metalworking fluids and grinding wheels businesses offer customer
demonstrations, service, training, and applications engineering at most of the
company's regional technical centers in the U.S. and Europe. Valenite
maintains its own worldwide, direct sales and service force of some 350
technically trained engineers of whom 200 are located in the United States.
The direct sales and service force is complemented by selected independent
industrial distributors.
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 small number of large competitors in the U.S. grinding
wheel market, one of which is significantly larger than the company. The
company has limited sales of grinding wheels outside the U.S.
The company believes that Valenite has the second largest metalcutting tool
systems business in the U.S. In international markets Valenite faces
competition from several competitors, two of which have larger market shares.
PATENTS
- -------
The company holds a number of patents, none of which is material to any
business segment.
EMPLOYEES
- ---------
During 1993, the company employed an average of 7,885 people, of whom 1,617
were employed outside the United States. As of year-end 1993, the company
employed 8,427 people.
BACKLOG
- -------
The backlog of unfilled orders was $246.0 million at the end of 1993 and $249.6
million at the end of 1992. The backlog at year-end is believed firm and, in
general, is expected to be delivered in 1994 and early 1995.
ITEM 1. 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
(57) 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, President and Chief
Operating Officer from 1987.
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
(57) 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 and Vice
President - U.S. Plastics
Machinery from 1987. Has
served as Director since
1991.
David E. Noffsinger(a) Senior Vice President- Elected Senior Vice
(59) Plastics Machinery President - Plastics
Machinery in 1989. Prior
thereto was Group Vice
President - Plastics
Machinery from 1985.
D. Michael Clabaugh Group Vice President- Elected Group Vice
(51) Machine Tools President - Machine Tools in
1993. Prior thereto was
Vice President - Advanced
Systems from 1990, Vice
President - Marketing,
Industrial Systems from 1989
and Vice President - Machine
Tool Marketing from 1988.
Harold J. Faig Group Vice President- Elected Group Vice
(45) Plastics Machinery President - Plastics
Machinery in February, 1994.
Prior thereto was Vice
President - Injection
Molding from 1990 and
Manager - Injection Molding
from 1988.
Alan L. Shaffer Group Vice President- Elected Group Vice
(43) Industrial Products President - Industrial
Products in 1989. Prior
thereto was Group Vice
President in charge of
certain industrial specialty
products from 1986.
Ronald D. Brown Vice President- Elected Vice President -
(40) Finance and Finance and Chief Financial
Chief Financial Officer in 1993. Prior
Officer thereto was Treasurer and
Assistant Secretary from
1989 and Assistant Treasurer
from 1988.
Christopher C. Cole(b) Vice President- Elected Vice President -
(38) Machine Tool Machine Tool Products in
Products 1993. Prior thereto was
Vice President- Strategy and
Business Development from
1991, Group Vice President-
Machine Tool Products from
1990, Group Vice President
Industrial Systems
Operations from 1989, Group
Vice President - Machine
Tools from 1988.
Richard L. Kegg Vice President - Elected Vice President -
(58) Technology and Technology and Manufacturing
Manufacturing Development in 1993. Prior
Development thereto was Director,
Corporate Research and
Manufacturing Development
from 1990 and Director of
Engineering, Aerospace and
Specials Division from 1988.
Theodore Mauser Vice President- Elected Vice President -
(54) Human Resources Human Resources in 1984.
Wayne F. Taylor Vice President- Elected Vice President -
(50) General Counsel and General Counsel and
Secretary Secretary in 1990. Prior
thereto was Secretary and
Corporate Counsel from 1988.
Robert P. Lienesch Controller Elected Controller in 1989.
(48) Prior thereto was Assistant
Corporate Controller from
1988.
Kenneth W. Mueller Treasurer and Elected Treasurer and
(60) Assistant Secretary Assistant Secretary in 1993.
Prior thereto was Acting
Director of Standard Machine
Tools from 1992, Machine
Tool Group Controller from
1989, and Division Manager
for certain industrial and
specialty products from
1988.
Note:
Parenthetical figure below name of individual indicates age at most recent
birthday prior to January 1, 1994.
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.
(a) In February, 1994, Mr. Noffsinger announced his intention to retire in
April, 1994.
(b) In March, 1994, Mr. Cole announced his intention to leave the company at
the end of that month.
ITEM 2. PROPERTIES
The company has thirty four principal manufacturing plants in operation with a
combined floor space of approximately 5.0 million square feet as listed below:
Location No. of Plants Principal Product Line Manufactured
- -------- ------------- -----------------------------------
Cincinnati, Ohio 5 Standard machine tool products and
advanced machine tool systems
Cincinnati, Ohio 1 Extrusion systems
Cincinnati, Ohio 1 Metalworking fluids and precision
grinding wheels
South Lebanon, Ohio 1 Electronic controls and industrial
software
Batavia, Ohio 1 (A) Injection and blow molding machines
Mt. Orab, Ohio 1 (A) Plastics machinery parts
Fountain Inn, South Carolina 1 (C) Standard horizontal machining
centers and standard turning
centers
Greenwood, South Carolina 1 (A)(C) Standard turning centers
Carlisle, Pennsylvania 1 Precision grinding wheels
Birmingham, England 1 Standard vertical machining centers
Vlaardingen, The Netherlands 1 Metalworking fluids
Vienna, Austria 1 Extrusion systems
Nogales, Mexico 1 (B) Precision grinding wheels
Malterdingen, Germany 1 Injection molding machines
Detroit, Michigan (metro area) 6 (B) Carbide inserts, special steel
products and gauging systems,
ceramic inserts and cerment inserts
West Branch, Michigan 2 Powder production, die and wear
Westminister and Seneca,
South Carolina 4 Carbide and diamond inserts
Gainsville, Texas 1 Turning tools, milling cutters and
boring bars
Andrezieux, France 1 Carbide inserts
Sinsheim, Germany 1 Special steel tooling products
Tokyo, Japan 1 Carbide inserts and steel tools
(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. The plant in Greenwood, South Carolina operates under
a long-term lease, which was financed by the sale of Greenwood County,
South Carolina Industrial Revenue Bonds. At the expiration of the
long-term leases, the company will acquire title to the leased
properties at a nominal cost.
(B) The Nogales, Mexico plant and three plants in the Detroit, Michigan
(metro area) are leased from unrelated third parties.
(C) In February, 1994, the company announced its intention to close these
facilities and transfer the manufacturing operations to Cincinnati, Ohio.
In addition to the above facilities, the company has nine marketing bases,
called "regional technical centers." These centers are located in Allentown,
Pennsylvania; Arlington, Texas; Charlotte, North Carolina; Chicago, Illinois;
Detroit, Michigan; Los Angeles, California; Toronto, Canada; Birmingham,
England; and Offenbach, Germany and provide customers with demonstrations,
engineering services and training for most major product lines.
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 1993.
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 25,
1994, there were approximately 6,900 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 1992 and 1993,
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 1992 and 1993.
Common Stock
Price Range
--------------------
Fiscal 1992, quarter ended High Low
------ ------
March 21 ........................... $17.50 $10.88
June 13 ............................ 18.25 13.88
October 3 .......................... 15.50 12.25
January 2 .......................... 17.63 13.38
Fiscal 1993, quarter ended
March 27 ........................... $22.25 $16.25
June 19 ............................ 29.63 19.50
October 9 .......................... 26.00 20.75
January 1 .......................... 24.75 19.25
ITEM 6. SELECTED FINANCIAL DATA
(Dollars in millions, except per-share amounts)
1993 1992 1991 1990 1989
-------- ------ ------ ------
SUMMARY OF OPERATIONS
Sales . . . . . . . . . . . . . $1,029.4 $789.2 $754.0 $805.2 $789.3
Cost of products sold . . . . . 791.3 612.6 603.2 632.8 611.1
-------- ------ ------ ------
Manufacturing Margins . . . . 238.1 176.6 150.8 172.4 178.2
Other costs and expenses
Selling and administrative. . 191.3 133.6 132.2 136.0 123.2
Consolidation charge. . . . . 47.1 - - - -
Disposition of subsidiary . . 22.8 - - - -
Closing and relocation
charge . . . . . . . . . . . - - 75.1 - -
Special charge. . . . . . . . - - - 26.6 -
Other- net. . . . . . . . . . .7 (.2) 1.8 3.0 (1.8)
-------- ------ ------ ------ ------
Total other costs
and expenses . . . . . . . 261.9 133.4 209.1 165.6 121.4
-------- ------ ------ ------ ------
Operating earnings (loss) . . . (23.8) 43.2 (58.3) 6.8 56.8
Interest - net. . . . . . . . . (13.4) (16.2) (15.1) (14.6) (16.9)
-------- ------ ------ ------ ------
Earnings (loss) from
continuing operations before
income taxes, extraordinary
items and cumulative
effect of changes in methods
of accounting. . . . . . . . . (37.2) 27.0 (73.4) (7.8) 39.9
Provision for income taxes. . . 8.2 10.9 9.7 5.8 18.1
-------- ------ ------ ------ ------
Earnings (loss) from
continuing operations before
extraordinary items and
cumulative effect of changes
in methods of accounting . . . (45.4) 16.1 (83.1) (13.6) 21.8
Extraordinary items
Loss on early extinguishment
of debt. . . . . . . . . . . (4.4) - - - -
Tax benefit from
loss carryforward. . . . . . - 5.4 - - 5.7
Cumulative effect of changes
in methods of accounting . . . (52.1) - - - -
Discontinued operations
net of income taxes. . . . . . - - (17.1)(a) (10.7)(b) (10.1)(c)
-------- ------ ------- ------ ------
Net earnings (loss) . . . . . $ (101.9) $ 21.5 $(100.2) $(24.3) $ 17.4
======== ====== ======= ====== ======
Earnings (loss) per common
share
Earnings (loss) from
continuing operations
before extraordinary
items and cumulative
effect of changes in
methods of accounting. . . . $ (1.41) $ .58 $ (3.04) $(.54) $ .88
Extraordinary items
Loss on early
extinguishment of debt. . . (.14) - - -
Tax benefit from
loss carryforward . . . . . - .19 - - .23
Cumulative effect of changes
in methods of accounting. . (1.61) - - - -
Discontinued operations
net of income taxes. . . . . - - (.63)(a) (.41)(b) (.41)(c)
-------- ------ ------- ------ ------
Net earnings (loss) . . . . $ (3.16) $ .77 $ (3.67) $ (.95) $ .70
======== ====== ======= ====== ======
_____________________________________________________________________________
(a) 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, LK Tool.
(b) Includes a provision for loss on the sale of the discontinued industrial
robot business of $1.7 million (with no current tax effect), or $.06 per
share.
(c) Includes a provision for loss on the sale of the discontinued laser
machine operations of $4.5 million, or $.18 per share.
_____________________________________________________________________________
(Dollars in millions, except per-share amounts)
1993 1992 1991 1989 1988
------ ------ ------ ------ ------
FINANCIAL POSITION AT YEAR END
- ------------------------------
Working capital . . . . . . . . $114.3 $191.8 $188.0 $253.6 $259.0
Property, plant and equipment-
net . . . . . . . . . . . . . 184.0 121.1 129.7 159.2 146.4
Total assets. . . . . . . . . . 729.6 578.9 598.4 693.0 686.1
Long-term debt and lease
obligations . . . . . . . . . 107.6 154.4 155.9 157.3 165.8
Total debt . . . . . . . . . . 185.2 175.6 162.8 169.4 195.5
Shareholders' equity. . . . . . 124.1 134.4 129.0 247.7 226.6
Per common share. . . . . . . 3.53 4.67 4.49 8.85 9.07
OTHER DATA
- ----------
Dividends paid to common
shareholders. . . . . . . . . 11.6 10.0 17.3 18.6 17.5
Per common share. . . . . . .36 .36 .63 .72 .72
Capital expenditures. . . . . . 23.4 17.6 15.5 34.1 33.6
Depreciation. . . . . . . . . . 26.1 20.9 24.0 23.7 22.9
Backlog of unfilled orders at
year-end. . . . . . . . . . . 246.0 249.6 277.3 268.6 315.0
Employees (average) . . . . . . 7,885 6,135 6,903 7,203 7,254
_____________________________________________________________________________
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The company's financial results for the last three years, presented on page 27,
are discussed below. The company operates in three principal business segments:
plastics machinery, machine tools and industrial products. Financial
information for each of these segments is presented on pages 5 and 6.
1993 COMPARED TO 1992
- ---------------------
SALES
Sales in 1993 were $1,029 million, which represented a $240 million increase
over 1992. This increase was primarily attributable to the $209 million increase
in sales of industrial products which resulted from the acquisition of Valenite
in February, 1993. The plastics machinery sales increase totaled $56 million,
or 19%, which resulted primarily from increased domestic sales of injection
molding machines and the acquisition of Ferromatik in November, 1993. Machine
tool sales declined by $25 million, or 7%, due to the decline in sales of
advanced machine tools for the aerospace market.
Sales of all segments to foreign markets totaled $298 million, compared to $243
million in 1992. Export shipments increased by $7 million due to the acquisition
of Valenite which more than offset reductions in exports of injection molding
machines and advanced machine tools to Europe.
NEW ORDERS AND BACKLOG
New orders for 1993 were $970 million, which represented a $208 million increase
over 1992. The increase was caused by a $60 million, or 20%, improvement in
plastics machinery orders and by orders totaling $209 million for Valenite.
Machine tool orders declined by $61 million, or 17%. This decline was caused
principally by (i) a large order (over $25 million) that was received in the
third quarter of 1992 that was not repeated in 1993, (ii) reduced demand from
customers in the aerospace industry and (iii) the discontinuation of certain
less profitable product lines. Export orders approximated $100 million in 1993
and 1992; in 1993, export orders for industrial products increased due to the
Valenite acquisition while export orders for plastics machinery and machine
tools declined.
At January 1, 1994, the backlog of unfilled orders was $246 million, down from
$250 million a year ago, reflecting reduced orders for aerospace equipment which
was partially offset by the acquisitions of Valenite and Ferromatik and the
increased backlog of orders for other plastics machinery products.
MARGINS, COSTS AND EXPENSES
Manufacturing margins increased from 22.4% in 1992 to 23.1% in 1993. Margins for
plastics machinery continued to be held back due to competitive pricing
pressures in the U.S. and Europe. Margins for machine tools declined primarily
due to the severe reduction in shipments of advanced machine tools to aerospace
customers that resulted in significant excess capacity costs late in 1993.
Margins for industrial products, excluding Valenite, declined in 1993 due in
part to reduced volume of European cutting fluids. The Valenite acquisition
contributed to the overall increase in manufacturing margins in 1993.
Selling and administrative expense for 1993 increased over 1992 due to increased
sales. Excluding the effects of the Valenite acquisition, selling expense
remained constant at approximately 14% of sales. Administrative expense
increased primarily due to the Valenite acquisition.
Interest expense, net of interest income, for 1993 decreased by $2.8 million
compared with 1992. This reduction resulted primarily from the redemption of
$60 million of the company's 12% Sinking Fund Debentures due 2010.
CONSOLIDATION CHARGE
A nonrecurring charge of $47.1 million was recorded in 1993 for the
consolidation of U.S. machine tool manufacturing into facilities in Cincinnati.
Production at the company's two machine tool facilities in Fountain Inn and
Greenwood, South Carolina are being phased out and the plants are expected to
be closed by year-end 1994. The consolidation will reduce the machine tool
group's employment by a net 235 people. The charge includes amounts for
severance, relocation of production and the sale of the two South Carolina
facilities.
The consolidation addresses excess manufacturing capacity created by two
factors: the company's successful Wolfpack program, which has significantly
reduced the hours and floorspace required to manufacture and assemble machine
tool products; and the unusually steep recession in the aerospace industry,
which has dramatically lowered demand for the company's advanced machine tool
systems.
The consolidation is expected to result in an incremental cash requirement for
1994, before considering any proceeds from the disposition of assets, of
approximately $18 million which will be funded by operations and bank
borrowings. The consolidation, once fully implemented, is expected to result in
annual cost savings of approximately $16 million.
DISPOSITION OF SUBSIDIARY
A nonrecurring charge of $22.8 million was recorded in 1993 to revalue the
company's Sano subsidiary in anticipation of its sale. The decision to sell Sano
was due in part to continuing operating losses. In addition, the Sano business
does not serve a major global market with good long-term growth and profit
potential and as a result, does not meet the company's criteria for a core
business. The business was sold in February, 1994 and the transaction is not
expected to affect the company's 1994 financial results.
INCOME TAXES AND EXTRAORDINARY TAX BENEFIT
The provision for income taxes in 1993 consists of domestic state and local
taxes and certain foreign taxes. Current tax benefits were not offset against
the domestic loss that was caused by the nonrecurring charges described above,
in accordance with new income tax accounting rules adopted in 1993. In addition,
current tax benefits could not be recognized for losses in certain foreign
jurisdictions. At the end of 1993, for U.S. Federal tax reporting purposes, the
company has a U.S. net operating loss carryforward of approximately $19 million
which expires in 2008.
The provision for income taxes in 1992 of approximately 40% includes the Federal
statutory rate as well as the effect of state and local and foreign income
taxes.
The extraordinary tax benefit in 1992 resulted from the utilization of a portion
of the company's net operating loss carryforward.
EARNINGS
For 1993, before extraordinary items and cumulative effect of changes in methods
of accounting, the company reported a loss of $45.4 million, or $1.41 per share,
compared with a profit of $16.1 million, or $.58 per share, for 1992. The
reduction in earnings from 1992 to 1993 was caused by the nonrecurring charges
described above that totaled $69.9 million.
The net loss for 1993 includes the effect of an extraordinary charge of $4.4
million, or $.14 per share, related to the early extinguishment of $60 million
of 12% Sinking Fund Debentures due 2010.
The net loss for 1993 also includes the effect of adopting two new accounting
standards resulting in charges to earnings totaling $52.1 million, or $1.61 per
share. The first new standard, SFAS No. 109, significantly changes existing
methods of accounting for income taxes and resulted in a charge of $4.2 million,
or $.13 per share. The second standard, SFAS No. 106, requires that certain
postretirement benefits, such as health care, be accounted for on the accrual
method. The adoption of this standard resulted in a charge of $47.9 million, or
$1.48 per share, to record the accrued liability for retiree health care
benefits. Because of limitations on the recognition of deferred tax assets
under SFAS No. 109, no income tax benefit could be recorded in connection with
the adoption of SFAS No. 106. Except for the cumulative effect, the new rules
regarding postretirement medical benefits did not significantly affect the
company's earnings for 1993, while the new rules regarding income taxes
precluded the recognition of tax benefits with respect to domestic and certain
foreign operating losses.
As discussed above, the company recorded an extraordinary tax benefit from the
utilization of loss carryforwards of $5.4 million, or $.19 per share, for 1992.
After the nonrecurring charges, extraordinary items and cumulative effect of
changes in methods of accounting, the company had a net loss of $101.9 million,
or $3.16 per share, for 1993, compared with net earnings of $21.5 million, or
$.77 per share, for 1992. The reduction in net earnings from 1992 to 1993 was
caused by the nonrecurring charges, the extraordinary item and the cumulative
effect of changes in methods of accounting that totaled $126.4 million.
1992 COMPARED TO 1991
- ---------------------
SALES
Sales in 1992 were $789 million, which represented a 5% increase from $754
million in 1991. The increase was caused by a 13% increase in plastics machinery
sales and a 5% increase in sales of industrial products. The plastics machinery
increase was due in large part to increased sales of injection molding machines
in the U.S. and Europe. Increased sales of industrial products resulted from
higher sales of grinding wheels in the U.S. and cutting fluids in Europe. Sales
of machine tools declined approximately 1%. The decrease is attributable to the
phase-out of certain less profitable turning center and grinding machine product
lines, which were formerly manufactured at the company's plants in Wilmington,
Ohio, and Worcester, Massachusetts, respectively, which have been closed. The
cost to close these plants, along with the cost to relocate certain product
lines to more modern facilities, was included in the $75 million closing and
relocation charge recorded in the third quarter of 1991.
Sales of all segments to foreign markets totaled $243 million in 1992 compared
to $236 million in 1991. Export shipments increased by $13 million, but sales
by the company's European subsidiaries to non-U.S. markets declined by $6
million due to the continuing recession in the European capital goods market.
NEW ORDERS AND BACKLOG
New orders in 1992 were $762 million compared to $770 million in 1991. Orders
for machine tools declined by $46 million due to reductions in orders for
advanced machine tool systems from the aerospace industry due to difficulties
in the commercial airline industry. Such aerospace orders remained soft in 1993.
Orders for plastics machinery increased by 12%, largely due to increased orders
for injection molding machines. Industrial products orders improved by 5%.
The backlog of unfilled orders decreased from $277 million in 1991 to $250
million in 1992 due to an unusually high level of aerospace sales in the 1992
fourth quarter, which were not replaced with new orders.
MARGINS, COSTS AND EXPENSES
The company's manufacturing margin in 1992 was 22.4% compared to 20.0% in 1991.
Margins improved for all business segments compared to 1991. Most significantly,
plastics machinery margins improved due to higher volume while machine tool
margins improved due to the aforementioned plant closing and phase-out of less
profitable product lines. Machine tool margins were held back in 1992 due to
continued price discounting in several soft metalworking markets and by cost
overruns on certain large aerospace systems.
Selling and administrative expense increased from $132 million in 1991 to $134
million in 1992. The increase resulted from increased selling expense associated
with the higher sales volume. Selling expense approximated 14% of sales in both
years. Administrative expense declined due to cost containment initiatives.
INCOME TAXES AND EXTRAORDINARY TAX BENEFIT
The company's effective tax rate of 40% in 1992 exceeded the Federal statutory
rate due principally to domestic state and local income taxes and the effect of
foreign operating losses for which tax benefits were not currently available.
The provision for income taxes in 1991 consisted of domestic state and local and
foreign income taxes, as well as a $4 million tax on a planned withdrawal of
surplus assets from the company's British pension fund that was completed in
1992. Because the company entered 1991 with a U.S. net operating loss
carryforward, domestic Federal income tax benefits could not be recognized
with respect to the losses incurred in that year.
The extraordinary tax benefit recognized in 1992 results from the utilization
of a portion of the company's U.S. net operating loss carryforward for financial
reporting purposes that arose principally from the 1991 closing and relocation
charge.
EARNINGS
In 1992, the company earned $16.1 million, or $.58 per share, from continuing
operations before extraordinary item, compared with a loss of $83.1 million, or
$3.04 per share, in 1991. The 1991 figures were adversely affected by a $75.1
million closing and relocation charge and the $4.0 million tax provision for the
anticipated withdrawal from the company's British pension plan.
In 1991, the company announced its intention to sell LK Tool, its coordinate
measurement and inspection machine business, due in part to continuing operating
losses. The losses from discontinued operations of $17.1 million, or $.63 per
share, for 1991, included a $14.9 million nonrecurring charge to revalue for
sale the company's investment in LK Tool. The subsidiary was sold in 1993.
Net earnings were $21.5 million, or $.77 per share, in 1992, compared with a
$100.2 million net loss, or $3.67 per share, in 1991. The 1991 losses were
caused principally by the aforementioned nonrecurring charges totaling $94.0
million.
LIQUIDITY AND SOURCES OF CAPITAL
At January 1, 1994, the company had cash and cash equivalents of $19 million,
an increase of $4 million during the year. In 1993, operating activities
provided $22 million of cash. During 1993, the company sold interests in certain
accounts receivable resulting in cash proceeds of approximately $61 million. At
year-end 1992 the company had sold $13 million of domestic accounts receivable
under a separate agreement that was terminated early in 1993. The net cash
proceeds from these transactions of $48 million are included in cash provided
by operating activities.
Approximately $50 million of the $61 million proceeds in 1993 resulted from the
sale of accounts receivable under a three year receivables purchase agreement
with an independent issuer of receivables-backed commercial paper, pursuant to
which the company agreed to sell on an ongoing basis an undivided percentage
ownership interest in designated pools of accounts receivable. The remaining $11
million of such proceeds resulted from the sale of an undivided percentage
ownership interest in certain accounts receivable originated by Valenite in a
separate transaction that is expected to be incorporated into the three year
receivables agreement referred to above.
Expenditures for new property, plant and equipment for 1993 were $23.4 million,
as compared to $17.6 million for 1992. Capital expenditures for 1994 are
expected to be approximately $40 million. Proceeds from the disposal of
property, plant and equipment for 1993 were $22.2 million, compared to $11.1
million in 1992, and included amounts related to the sale of surplus assets
(including surplus land in 1993) and the sale and operating leaseback of certain
manufacturing equipment.
During 1993, the company issued 5.175 million shares of common stock, resulting
in net proceeds of $101 million, which were used principally to redeem $60
million of 12% debentures (plus a cash call premium of $4.7 million) and to
repay borrowings under revolving lines of credit and other bank debt.
In the fourth quarter of 1993, the company acquired Ferromatik for approximately
$56 million, which was financed by assuming $6 million of debt and utilizing $50
million of borrowings under bank lines of credit.
In addition, in 1993 the company recorded several large non-cash items: a $47.1
million consolidation charge, a $22.8 million charge for disposition of a
subsidiary and a $52.1 million charge for cumulative effects of changes in
methods of accounting. As a result of these and other factors, including
financing for the acquisitions, in 1993, the company's working capital decreased
by $78 million, the current ratio declined to 1.3 and the ratio of total debt
to total capital increased to 60%.
At January 1, 1994, the company had lines of credit of approximately $138
million with various U.S. and foreign banks. Additional borrowing capacity
available under committed lines of credit totaled approximately $40 million at
January 1, 1994.
SUBSEQUENT EVENT
On March 17, 1994 the company completed a private financing involving the
placement of $115 million of 8-3/8% notes due 2004. The proceeds will be used
to redeem $60 million of the company's outstanding 8-3/8% notes due 1997 and to
repay borrowings under bank lines of credit.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Beginning on page 27 and continuing through page 41 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.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
CONSOLIDATED STATEMENT OF EARNINGS
CINCINNATI MILACRON INC. AND SUBSIDIARIES
Fiscal year ends on Saturday closest to December 31.
(In millions, except per-share amounts) 1993 1992 1991
---- ---- ----
Sales $1,029.4 $789.2 $754.0
Cost of products sold 791.3 612.6 603.2
-------- ------- ------
Manufacturing margins 238.1 176.6 150.8
Other costs and expenses
Selling and administrative 191.3 133.6 132.2
Consolidation charge 47.1 - -
Disposition of subsidiary 22.8 - -
Closing and relocation charge - - 75.1
Other - net .7 (.2) 1.8
-------- ------- ------
Total other costs and expenses 261.9 133.4 209.1
-------- ------- ------
Operating earnings (loss) (23.8) 43.2 (58.3)
Interest
Income 2.3 2.9 4.0
Expense (15.7) (19.1) (19.1)
-------- ------- ------
Interest - net (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 (37.2) 27.0 (73.4)
Provision for income taxes 8.2 10.9 9.7
-------- ------- ------
Earnings (loss) from continuing operations
before extraordinary items and cumulative
effect of changes in methods of accounting (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)
-------- ------- -------
Net earnings (loss) $ (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 $(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)
-------- ------- -------
Net earnings (loss) $ (3.16) $ .77 $(3.67)
======== ======= =======
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) 1993 1992
----- -----
Assets
Current assets
Cash and cash equivalents $ 18.8 $ 14.9
Notes and accounts receivable less allowances 188.3 177.0
Inventories
Raw materials 21.5 11.8
Work-in-process and finished parts 155.7 161.6
Finished products 70.0 47.4
------ -----
Total inventories 247.2 220.8
Other current assets 29.3 16.2
------ -----
Total current assets 483.6 428.9
Property, plant and equipment - net 184.0 121.1
Other noncurrent assets 62.0 28.9
------ ------
Total assets $729.6 $578.9
====== ======
Liabilities and Shareholders' Equity
Current liabilities
Amounts payable to banks $ 74.2 $ 19.8
Long-term debt and lease obligations due within
one year 3.4 1.4
Trade accounts payable 84.6 75.3
Advance billings and deposits 36.9 41.6
Accrued and other current liabilities 170.2 99.0
------ ------
Total current liabilities 369.3 237.1
Long-term accrued liabilities 128.6 53.0
Long-term debt and lease obligations 107.6 154.4
------ ------
Total liabilities 605.5 444.5
------ ------
Commitments and contingencies - -
Shareholders' equity
4% Cumulative preferred shares 6.0 6.0
Common shares, $1 par value (outstanding:
33.5 in 1993 and 27.5 in 1992) 33.5 27.5
Capital in excess of par value 251.3 143.3
Accumulated deficit (151.2) (37.5)
Cumulative foreign currency translation adjustments (15.5) (4.9)
------ ------
Total shareholders' equity 124.1 134.4
------ ------
Total liabilities and shareholders' equity $729.6 $578.9
====== ======
See notes to consolidated financial statements.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
CINCINNATI MILACRON INC. AND SUBSIDIARIES
Fiscal year ends on Saturday closest to December 31.
Cumulative
4% Reinvested Foreign
Cumulative Common Capital in Earnings Currency Total
Preferred Shares, Excess of (Accumulated Translation Shareholders'
(In millions, except Shares $1 Par Value Par Value Deficit) Adjustments Equity
share amounts)
---------- ---------- --------- ---------- ----------- ------------
Balance at year-end 1990 $6.0 $27.3 $139.4 $ 68.9 $ 6.1 $247.7
Stock options exercised
and restricted stock
awarded for 68,357
common shares .1 .9 1.0
Net loss for the year (100.2) (100.2)
Cash dividends
Preferred shares
($4.00 per share) (.2) (.2)
Common shares
($.63 per share) (17.3) (17.3)
Foreign currency
translation adjustments (2.0) (2.0)
Balance at year-end 1991 6.0 27.4 140.3 (48.8) 4.1 129.0
---- ----- ------ -------- -------- ------
Stock options exercised
and restricted stock
awarded for 91,628
common shares .1 2.4 2.5
Sale of 42,640 treasury
shares .6 .6
Net earnings for the year 21.5 21.5
Cash dividends
Preferred shares
($4.00 per share) (.2) (.2)
Common shares
($.36 per share) (10.0) (10.0)
Foreign currency
translation adjustments (9.0) (9.0)
---- ----- ------ ------- ------ ------
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
==== ===== ====== ======= ====== ======
See notes to consolidated financial statements.
CONSOLIDATED STATEMENT OF CASH FLOWS
CINCINNATI MILACRON INC. AND SUBSIDIARIES
Fiscal year ends on Saturday closest to December 31.
(In millions) 1993 1992 1991
---- ---- ----
Increase (Decrease) in Cash and Cash Equivalents
Operating Activities Cash Flows
Net earnings (loss) $(101.9) $ 21.5 $(100.2)
Extraordinary loss on early extinguishment
of debt 4.4 - -
Cumulative effect of changes in methods of
accounting 52.1 - -
Other operating activities providing (using)
cash
Depreciation 26.1 20.9 24.0
Consolidation charge 47.1 - -
Disposition of subsidiary 22.8 - -
Closing and relocation charge (including
$14.9 applicable to discontinued
operations) - - 90.0
Deferred income taxes 1.5 1.5 3.3
Working capital changes
Notes and accounts receivable 31.6 13.0 2.4
Inventories 24.2 (16.5) 5.9
Other current assets 5.1 1.3 (.6)
Trade accounts payable (8.3) 9.6 (4.3)
Other current liabilities (61.5) (29.5) (18.9)
Increase in other noncurrent assets (2.1) (3.3) (.1)
Decrease in long-term accrued liabilities (10.1) (11.0) (1.1)
Other - net (8.8) (9.7) 3.6
------- ------- -------
Net cash provided (used) by operating
activities 22.2 (2.2) 4.0
------- ------- -------
Investing Activities Cash Flows
Capital expenditures (23.4) (17.6) (15.5)
Net disposals of property, plant and equipment 22.2 11.1 10.5
Acquisitions (112.5) - (9.0)
Divestitures 5.0 - 3.0
------- ------- -------
Net cash used by investing activities (108.7) (6.5) (11.0)
------- ------- -------
Financing Activities Cash Flows
Dividends paid (11.8) (10.2) (17.5)
Repayments of long-term debt and lease
obligations (61.9) (1.4) (1.3)
Increase (decrease) in amounts payable to banks 54.8 15.9 (4.2)
Net issuance of common shares 114.0 3.1 1.0
Redemption premium on early extinguishment
of debt (4.7) - -
------- ------- -------
Net cash provided (used) by financing
activities 90.4 7.4 (22.0)
------- ------- -------
Increase (decrease) in cash and cash equivalents 3.9 (1.3) (29.0)
Cash and cash equivalents at beginning of year 14.9 16.2 45.2
------- ------- -------
Cash and cash equivalents at end of year $18.8 $14.9 $16.2
======= ======= =======
See notes to consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
FISCAL YEAR END
The company's year ends on the Saturday closest to December 31 of each year.
Fiscal year ends are as follows:
1993: January 1, 1994
1992: January 2, 1993
1991: December 28, 1991
CONSOLIDATION
The consolidated financial statements include the accounts of the
company and its subsidiaries. All significant intercompany
transactions are eliminated.
FOREIGN CURRENCY TRANSLATION
Assets and liabilities of the company's foreign operations are
translated into U.S. dollars at period-end exchange rates, and
income and expense accounts are translated at weighted-average
exchange rates for the period. Net exchange gains or losses
resulting from such translation are excluded from net earnings
(loss) and accumulated in a separate component of shareholders'
equity. Gains and losses from foreign currency transactions are
included in other expense - net in the Consolidated Statement of
Earnings. Gains and losses on foreign exchange forward contracts
are recognized as part of the specific transaction hedged.
CASH AND CASH EQUIVALENTS
The company considers all highly liquid investments with a maturity
of three months or less to be cash equivalents.
INVENTORY VALUATION
Inventories are stated at the lower of cost or market. The
principal methods of determining costs are last-in, first-out
(LIFO) for U.S. inventories and average or standard cost, which
approximates first-in, first-out (FIFO), for other inventories.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, including capital leases, are stated
at cost. Equipment leased to customers is accounted for under the
operating lease method. For financial reporting purposes,
depreciation is generally determined on the straight-line method
using estimated useful lives of plant and equipment.
INCOME TAXES
The company provides deferred taxes for cumulative temporary
differences between the financial reporting basis and income tax
basis of its assets and liabilities. Provisions are made for any
additional taxes payable on anticipated distributions from
subsidiaries.
EARNINGS PER SHARE
Earnings per common share are based on the weighted-average number
of common shares and common share equivalents outstanding.
RETIREMENT BENEFIT PLANS
The company maintains various pension plans covering substantially
all employees. Pension benefits are based primarily on length of
service and highest consecutive average five-year compensation. The
company's policy is to fund the plans in accordance with applicable
laws and regulations.
CUMULATIVE EFFECT OF CHANGES IN METHODS OF ACCOUNTING
Effective January 3, 1993, the company adopted Statement of
Financial Accounting Standards No. 109, "Accounting for Income
Taxes". This standard requires the use of the liability method,
under which deferred income tax assets and liabilities related to
cumulative differences between an entity's financial reporting and
tax basis balance sheets are recognized using expected future tax
rates. Previously, the company had used the deferred method, under
which deferred income tax assets and liabilities were based on
historical differences between financial reporting income and
taxable income and recognized using historical income tax rates.
Financial results for prior years have not been restated in
connection with the adoption of this standard.
The company's domestic operations also adopted Statement of
Financial Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions", effective January 3,
1993. This standard requires that the expected cost of
postretirement benefits other than pensions, such as health care
benefits, that are provided to retirees be recognized on the
accrual method during the years that employees render service. The
company provides health care benefits to U.S. retirees and
previously recognized the related cost as the benefits were paid.
The standard does not permit the restatement of the financial
results of prior years. Certain of the company's foreign operations
also provide postretirement health care benefits to their
employees. The company expects to adopt the standard for these
operations in 1995.
The company has recorded the cumulative effect (to January 2,
1993) of adopting these standards as a charge to earnings in the
first quarter of 1993, as follows:
CUMULATIVE EFFECT OF CHANGES IN METHODS OF ACCOUNTING
1993
Charge to
Earnings Per
common
(In millions) share
------------ -------
Income taxes $ (4.2) $ (.13)
Retiree health care benefits
(with no current tax effect) (47.9) (1.48)
------ ------
$(52.1) $(1.61)
====== ======
The new standard for accounting for income taxes imposes
significant limitations on the recognition and valuation of
deferred tax assets related to future tax deductions previously
recognized for financial reporting purposes and to net operating
loss carryforwards. Because of these limitations, and because the
company entered 1993 with a U.S. net operating loss carryforward of
approximately $36 million, no income tax benefit could be
recognized on a net basis for the cumulative effect of adopting the
new accounting rules for postretirement health care benefits.
CONSOLIDATION CHARGE
In the fourth quarter of 1993, the company recorded a nonrecurring
charge of $47.1 million (with no current tax effect) for the
consolidation of all U.S. machine tool manufacturing into its
facilities in Cincinnati. Production at the company's two machine
tool facilities in South Carolina, Fountain Inn and Greenwood, will
be phased out during 1994. The consolidation is intended to
eliminate excess capacity that resulted from the introduction of
"Wolfpack" designed products that require less hours and
manufacturing floor space and from reduced demand from customers in
the aerospace industry. The charge includes amounts for severance,
relocation of production, and the sale of the two South Carolina
facilities.
DISPOSITION OF SUBSIDIARY
In November, 1993, the company announced its decision to sell its
Sano business. Accordingly, the company recorded charges in the
third and fourth quarters of 1993 totaling $22.8 million (with no
current tax effect) to adjust its investment in Sano to net
realizable value. The decision to sell Sano was due in part to its
continuing operating losses. In addition, the Sano business does
not serve a major global market with good long-term growth and
profit potential and as a result, does not meet the company's
criteria for a core business. The business was sold in February,
1994 and the completion of the transaction is not expected to
affect the company's 1994 financial results.
CLOSING AND RELOCATION CHARGE
In the third quarter of 1991, the company recorded a nonrecurring
charge aggregating $90.0 million (with no current tax effect) to
address problems in loss operations. Of the total charge, $75.1
million related to the relocation of centerless grinding machine
and turning center manufacturing operations, the sale or other
disposal of the company's remaining grinding machine assets and
product lines, and the closing of the company's turning center
factory in Wilmington, Ohio.
An additional $14.9 million, which is included in discontinued
operations in the Consolidated Statement of Earnings, related to
the revaluation for sale of the company's coordinate measurement
and inspection machine business, LK Tool.
DISCONTINUED OPERATIONS
In 1991, the company announced its intention to sell its coordinate
measurement and inspection machine business, LK Tool, and recorded
a provision for the anticipated loss on the sale of $14.9 million.
During the third quarter of 1993, the company completed the sale of
LK Tool for $5.0 million in cash. The completion of the transaction
did not affect the company's financial results for 1993.
ACQUISITIONS
On February 1, 1993, the company completed the acquisition of GTE
Valenite Corporation (Valenite) for $66 million in cash and $11
million of assumed debt. Valenite is a leading producer of
consumable industrial metalcutting products. The acquisition, which
is being accounted for under the purchase method, was financed
principally through the sale of $50 million of accounts receivable
and borrowings under a then new $85 million committed revolving
credit facility.
On November 8, 1993, the company completed the acquisition of
Ferromatik, the plastics injection molding machine business of
Kloeckner-Werke AG, for DM 82.8 million (approximately $50 million)
in cash and DM 10.6 million (approximately $6 million) in assumed
debt. A portion of the cash purchase price is expected to be
refunded in a post-closing adjustment. The acquisition, which is
being accounted for under the purchase method, was financed
primarily through borrowings under the company's existing lines of
credit, including its committed revolving credit facility, which
was amended to increase the lines of credit available thereunder.
Ferromatik, which is headquartered in Germany, is one of the
world's leading producers of injection molding machines and is
recognized for high-end technology and other specialty
applications.
The aggregate acquisition cost of the company's investments in
Valenite and Ferromatik, including professional fees and other
costs related thereto and after giving effect to the anticipated
refund of a portion of cash paid for Ferromatik, is expected to be
approximately $114.7 million. The following table presents the
allocation of the aggregate acquisition cost to the assets acquired
and liabilities assumed. The amounts included therein with respect
to Ferromatik are preliminary and are subject to revision once
appraisals, actuarial reviews and other studies of fair value are
completed. Goodwill arising from the Valenite acquisition, which is
included in other noncurrent assets in the following table, totaled
$8.7 million. No goodwill is expected to result from the Ferromatik
acquisition.
ALLOCATION OF ACQUISITION COST
(In millions)
Cash and cash equivalents $ 2.2
Accounts receivable 54.5
Inventories 77.1
Other current assets 15.5
Property, plant and equipment 89.5
Other noncurrent assets 25.1
------
Total assets 263.9
Amounts payable to banks and
long-term debt due
within one year 11.9
Other current liabilities 107.3
Long-term accrued liabilities 25.1
Long-term debt and lease obligations 4.9
------
Total liabilities 149.2
------
Total acquisition cost $114.7
======
As presented above, other current liabilities includes a reserve of
$44.0 million for the restructuring of Valenite for future
profitability. The restructuring plan includes the consolidation of
production through the closing of eleven production facilities, the
downsizing of two production facilities and a net employee
reduction in excess of 500. The total cost of the restructuring is
estimated to be $53.7 million ($25.8 million in cash) and includes
amounts for severance, relocation and losses on the sale of surplus
inventory, machinery and equipment and production facilities. The
restructuring, which began March 2, 1993, will be completed in
1994.
Other current liabilities also includes a reserve of $8.7 million
for the restructuring of Ferromatik during 1994. Due to general
economic conditions in Europe, the operations of Ferromatik's
manufacturing plant were restructured during 1993 and 1992 to
improve efficiency and reduce personnel levels. The company and
Ferromatik have identified additional restructuring actions,
including further personnel reductions, that are expected to
improve Ferromatik's profitability in the future. These actions,
which are intended to complement the actions already taken prior to
the acquisition, will be substantially completed during 1994.
Unaudited pro forma sales and earnings information for 1993 and
1992 prepared under the assumption that the acquisitions had been
completed at the beginning of 1992 is as follows:
PRO FORMA INFORMATION
(In millions, except per-share amounts) 1993 1992
---- ----
Sales $1,128.4 $1,187.5
======== ========
Earnings (loss) before extraordinary
items and cumulative effect of changes
in methods of accounting $ (48.2) $ 19.3
Extraordinary items
Loss on early extinguishment of debt (4.4) -
Tax benefit from loss carryforward - 4.0
Cumulative effect of changes
in methods of accounting (52.1) -
-------- --------
Net earnings (loss) $(104.7) $ 23.3
======= ========
Earnings (loss) per common share
Earnings (loss) before extraordinary
items and cumulative effect of
changes in methods of accounting $ (1.50) $ .69
Extraordinary items
Loss on early extinguishment of debt (.14) -
Tax benefit from loss carryforward - .15
Cumulative effect of changes
in methods of accounting (1.61) -
------- --------
Net earnings (loss) $ (3.25) $ .84
======= ========
Based on a comprehensive analysis, the company and Valenite had
originally estimated that the annual improvement in pretax earnings
that would result from the completion of the restructuring plan
would be approximately $15.6 million. The pro forma amounts
presented above include favorable adjustments based on the original
estimate. However, it is expected that the annual savings will
exceed the original estimate on an ongoing basis by as much as 20%.
During its fiscal year ended September 30, 1993, Ferromatik
incurred significant operating losses due principally to general
economic conditions in Europe and its inability to adjust personnel
levels to reduced customer demand. The company and Ferromatik
estimate that the minimum annual pretax earnings improvement that
will result from the restructuring actions taken prior to the
acquisition and those that will occur subsequent thereto will be no
less than $4.2 million. Accordingly, the pro forma amounts
presented above include favorable adjustments based on this
estimate, which is based principally on reductions in personnel
levels that have occurred since the acquisition and that are
expected to occur in 1994. The actual savings from the completion
of the restructuring plan are expected to be higher than $4.2
million.
In 1991, the company completed the acquisition of the assets and
business of SL Abrasives, Inc., a manufacturer of resin-bonded
grinding wheels. This transaction, which has been accounted for
using the purchase method, did not significantly affect the
company's financial position at December 28, 1991, or its results
of operations for the year then ended.
RESEARCH AND DEVELOPMENT
Charges to operations for research and development activities are
summarized below. The amounts include expenses related to the
company's Wolfpack product development and process improvement
program.
RESEARCH AND DEVELOPMENT
(In millions) 1993 1992 1991
---- ---- ----
Research and development $41.9 $34.1 $35.8
Percent of sales 4.1% 4.3% 4.7%
RETIREMENT BENEFIT PLANS
Summarized in the following tables are the company's pension cost
(income) and funded status of its major pension plans.
PENSION COST (INCOME)
(In millions) 1993 1992 1991
---- ---- ----
Service cost (benefits earned
during the period) $ 6.3 $ 6.3 $ 6.4
Interest cost on projected
benefit obligation 31.5 29.0 29.6
Actual return on plan assets (54.8) (24.0) (65.1)
Net amortization and deferral 14.3 (18.7) 26.0
----- ----- -----
Pension cost (income) $(2.7) $(7.4) $(3.1)
===== ===== =====
FUNDED STATUS OF PENSION PLANS AT YEAR-END
(In millions) 1993 1992
---- ----
Vested benefit obligation $(340.2) $(263.8)
======= =======
Accumulated benefit obligation $(353.7) $(269.8)
======= =======
Plan assets at fair value,
primarily listed
stocks and debt securities,
including company stock of
$14.0 in 1993 and $10.6 in 1992 $ 396.9 $ 370.8
Projected benefit obligation (416.9) (332.3)
------- -------
Excess (deficiency) of plan assets
in relation to projected benefit
obligation (20.0) 38.5
Unrecognized net (gain ) loss 46.8 (6.5)
Unrecognized net transition asset (30.2) (35.8)
------- -------
Accrued pension liability $ (3.4) $ (3.8)
======= =======
At January 1, 1994, the projected benefit obligation of the
company's domestic plan exceeded its assets by $37.9 million, while
the assets of the plan for United Kingdom employees exceeded the
projected benefit obligation by $17.9 million. Because of the
current funded status of the plans, no contributions were required
or made in 1993, 1992 and 1991.
For 1993 and 1992, the assumed discount rates used in determining
the projected benefit obligation were 7 1/2 % and 9%, respectively.
The assumed rate of increase in renumeration was
4 1/2 % for 1993 and 6% for 1992. The weighted-average expected
long-term rate of return on plan assets used to determine pension
income was 9 1/2 % in all years presented.
In addition to pension benefits, the company also provides
varying levels of postretirement health care benefits to most U.S.
employees who retire from active service after having attained age
55 and ten years of service. The plan is contributory in nature.
Prior to 1993, retiree contributions were based on varying
percentages of the average per-contract cost of benefits, with the
company funding any excess over these amounts. However, the plan
was amended in 1992 to freeze the dollar amount of the company's
contributions in future years for employees retiring after 1980
based on specified percentages of the 1993 per-contract cost.
Effective January 3, 1993, the company's domestic operations
adopted Statement of Financial Accounting Standards No. 106,
"Employers' Accounting for Postretirement Benefits Other Than
Pensions". The change did not significantly affect earnings before
extraordinary items and cumulative effect of changes in methods of
accounting for 1993.
The following table presents the components of the company's
liability for future retiree health care benefits.
ACCRUED POSTRETIREMENT HEALTH CARE BENEFITS
(In millions) 1993 1992
---- ----
Accumulated postretirement benefit obligation
Retirees $(42.6) $(40.5)
Fully eligible active participants (7.4) (4.1)
Other active participants (8.1) (4.5)
------ ------
(58.1) (49.1)
Unrecognized net loss 9.8 -
------ ------
(48.3) (49.1)
Unrecognized transition obligation - 47.9
------ ------
$(48.3) $ (1.2)
====== ======
At year-end 1993, $1.4 million of the total liability for
postretirement health care benefits is included in current
liabilities in the Consolidated Balance Sheet.
The retiree health care costs for 1993 were $4.5 million, of
which service cost and interest cost were $.3 million and $4.2
million, respectively.
Prior to 1993, the company recognized the cost of health care
benefits paid to U.S. retirees as incurred. Such costs totaled $5.8
million and $5.1 million in 1992 and 1991, respectively.
The discount rates used in calculating the accumulated
postretirement benefit obligation were 7% for 1993 and 8 1/2 % for
1992. For 1994, the assumed rate of increase in health care costs
used to calculate the accumulated postretirement benefit obligation
is 10.6%. This rate is assumed to decrease to varying degrees
annually to 5.0% for years 2005 and thereafter. Because of the
effect of the 1992 plan changes that froze the dollar amount of the
company's contributions for future years, a one percent change in
each year in relation to the above assumptions would not
significantly change the accumulated postretirement benefit
obligation or the total cost of the plan.
Certain foreign operations of the company also provide
postretirement health care benefits to their employees. The company
expects to adopt Statement of Financial Accounting Standards No.
106 for these operations in 1995.
Statement of Financial Accounting Standards No. 112, "Employers'
Accounting for Postemployment Benefits", was issued in late 1992
and requires that certain benefits provided by an employer to
former or inactive employees be accounted for on the accrual method
beginning no later than 1994. The effect of adopting the new
standard on the company's operating results and financial position
is not material.
INCOME TAXES
Effective January 3, 1993, the company adopted Statement of
Financial Accounting Standards No. 109, "Accounting for Income
Taxes". The standard requires the use of the liability method to
recognize deferred income tax assets and liabilities using expected
future tax rates. The tax effects of temporary differences that
give rise to the recorded deferred tax assets and deferred tax
liabilities at year-end 1993 are presented in the following table.
COMPONENTS OF DEFERRED TAX ASSETS AND LIABILITIES
(In millions) 1993
----
Deferred tax assets
Net operating loss and various tax credit
carryforwards $ 40.8
Accrued postretirement health care benefits 16.9
Consolidation, restructuring and other reserves 34.8
Inventories, principally due to obsolescence reserves
and additional costs inventoried for tax purposes
pursuant to the Tax Reform Act of 1986 5.6
Accrued pension costs 5.3
Accrued warranty costs 2.2
Accrued employee benefits other than pensions and
retiree health care benefits 3.2
Accounts receivable, principally due to allowances
for doubtful accounts 1.3
Foreign investments 9.2
Other 13.1
------
Total deferred tax assets 132.4
Less valuation allowance (95.7)
-----
Net deferred tax assets $ 36.7
======
Deferred tax liabilities
Property, plant and equipment, principally due to
differences in depreciation methods $ 26.1
Undistributed earnings of foreign subsidiaries 3.9
Pension assets 2.9
Other 4.2
------
Total deferred tax liabilities $ 37.1
======
Net deferred tax liability $ (.4)
======
Summarized in the following tables are the company's earnings
(loss) from continuing operations before income taxes,
extraordinary items and cumulative effect of changes in methods of
accounting, its provision for income taxes, and a reconcilement of
the U.S. statutory rate to the tax provision rate.
EARNINGS (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES,
EXTRAORDINARY ITEMS AND CUMULATIVE EFFECT OF CHANGES IN METHODS OF
ACCOUNTING
(In millions) 1993 1992 1991
---- ---- ----
United States $(41.5) $28.0 $(73.8)
Foreign 4.3 (1.0) .4
------ ----- ------
$(37.2) $27.0 $(73.4)
====== ===== ======
PROVISION FOR INCOME TAXES
Liability
Method Deferred Method
(In millions) 1993 1992 1991
-------- -------- -----
Current provision
United States $ - $ - $ -
State and local 2.4 1.7 2.3
Foreign 4.3 2.3 4.1
---- ----- ----
6.7 4.0 6.4
---- ----- ----
Deferred provision
United States - .6 .4
Foreign 1.5 .9 2.9
---- ----- ----
1.5 1.5 3.3
---- ----- ----
Provision recognized as
extraordinary benefit - 5.4 -
---- ----- ----
$8.2 $10.9 $9.7
==== ===== ====
In 1991, the current provision for foreign income taxes included
$4.0 million related to a planned withdrawal from the company's
United Kingdom pension fund that was completed in 1992.
COMPONENTS OF THE PROVISION FOR DEFERRED INCOME TAXES
Liability
Method Deferred Method
(In millions) 1993 1992 1991
-------- ---- ----
Tax effects of consolidation,
restructuring and other reserves $ (9.2) $1.2 $3.3
Change in deferred revenue (16.3) - -
Depreciation 1.3 - -
Change in valuation allowance 25.5 - -
Reversal of prior year's deferred
taxes related to operating loss
carryforward - (.2) -
Other .2 .5 -
------ ----- ----
$ 1.5 $1.5 $3.3
====== ==== ====
RECONCILEMENT OF THE U.S. STATUTORY RATE TO THE TAX PROVISION RATE
Liability
Method Deferred Method
(In percent) 1993 1992 1991
--------- ---- ----
U.S. statutory tax rate (35.0)% 34.0% (34.0)%
Increase (decrease) resulting from
Losses without current tax benefits 56.1 5.1 38.2
Effect of operations outside
the U.S. (5.5) (2.7) 5.3
State and local taxes, net of
federal benefit 6.5 4.2 2.1
Other (.1) (.2) 1.6
----- ---- -----
22.0% 40.4% 13.2%
===== ==== =====
In 1992, in accordance with accounting rules then in effect, the
company recognized an extraordinary tax benefit of $5.4 million, or
$.19 per share, from the realization of its U.S. net operating loss
carryforward that originated principally from the 1991 closing and
relocation charge and a pretax special charge of $32.8 million
recorded in 1990 for product discontinuance and the reorganization
of grinding machine and certain other machine tool manufacturing
operations.
For U.S. tax reporting purposes, at year-end 1993 the company had
a net operating loss carryforward of approximately $19 million
which expires in 2008.
Undistributed earnings of foreign subsidiaries which are intended
to be indefinitely reinvested aggregated $30 million at the end of
1993.
Income taxes of $16.1 million, $5.0 million and $4.9 million were
paid in 1993, 1992 and 1991, respectively.
RECEIVABLES
The components of notes and accounts receivable less allowances are
shown in the following table.
NOTES AND ACCOUNTS RECEIVABLE LESS ALLOWANCES
(In millions) 1993 1992
---- ----
Notes receivable $ 6.0 $ 8.8
Accounts receivable 190.2 174.1
------ ------
196.2 182.9
Less allowances for doubtful accounts 7.9 5.9
------ ------
$188.3 $177.0
====== ======
Notes receivable include amounts not due within one year of $.7
million and $2.2 million in 1993 and 1992, respectively.
The acquisition of Valenite was financed in part through the sale
of $50.0 million of the company's domestic accounts receivable. The
sale transaction, which resulted in costs of $2.2 million in 1993,
occurred under a three year receivables purchase agreement with an
independent issuer of receivables-backed commercial paper, pursuant
to which the company agreed to sell on an ongoing basis and without
recourse, an undivided percentage ownership interest in designated
pools of accounts receivable. In order to maintain the balance in
the designated pools of accounts receivable sold, the company is
obligated to sell undivided percentage interests in new receivables
as existing receivables are collected. At January 1, 1994, the
undivided interest in the company's gross accounts receivable that
had been sold to the purchaser aggregated $50.0 million. The
company also sold an additional $11.4 million of accounts
receivable in the fourth quarter of 1993 under a separate
receivables purchase agreement. Costs related to both sales are
included in other expense - net in the Consolidated Statement of
Earnings. The proceeds are reported as providing operating cash
flow in the Consolidated Statement of Cash Flows for 1993.
INVENTORIES
Inventories amounting to $134.8 million for 1993 and $156.3 million
for 1992 are stated at LIFO cost. Such inventories if stated at
FIFO cost would be greater by approximately $57.4 million in 1993
and $54.2 million in 1992.
PROPERTY, PLANT AND EQUIPMENT
The components of property, plant and equipment are shown in the
following table.
PROPERTY, PLANT AND EQUIPMENT - NET
(In millions) 1993 1992
---- ----
Land $ 5.7 $ 5.1
Buildings 108.5 108.9
Machinery and equipment 317.1 269.1
------ ------
431.3 383.1
Less accumulated amortization and
allowances for depreciation 247.3 262.0
------ ------
$184.0 $121.1
====== ======
LIABILITIES
The components of accrued and other current liabilities and
long-term accrued liabilities are shown in the following tables.
ACCRUED AND OTHER CURRENT LIABILITIES
(In millions) 1993 1992
---- ----
Accrued salaries, wages and
other compensation $ 21.5 $16.3
Consolidation reserve 38.7 -
Restructuring reserves 17.1 -
Other accrued expenses 92.9 82.7
------ -----
$170.2 $99.0
====== =====
LONG-TERM ACCRUED LIABILITIES
(In millions) 1993 1992
---- ----
Accrued pension and
other compensation $ 24.1 $19.1
Accrued postretirement
health care benefits 46.9 -
Accrued and deferred taxes 30.5 8.0
Other 27.1 25.9
------ -----
$128.6 $53.0
====== =====
LONG-TERM DEBT AND LEASE OBLIGATIONS
Long-term debt and lease obligations are shown in the following
table.
LONG-TERM DEBT AND LEASE OBLIGATIONS
(In millions) 1993 1992
----- ----
Long-term debt
8 3/8 % Senior Notes due 1997 $ 60.0 $ 60.0
12% Sinking Fund Debentures due 2010 10.8 70.8
Industrial Development Revenue
Bonds due 2008 10.0 10.0
Revolving credit facility 10.0 -
Other 8.8 2.5
------ ------
99.6 143.3
Capital lease obligations
6 3/4 % Bonds due 2004 7.6 7.6
6 3/8 % Bonds due 1994 - 1997 3.4 4.2
6 1/2 % Bonds due 1994 .4 .7
------ ------
11.4 12.5
------ ------
111.0 155.8
------ ------
Current maturities (3.4) (1.4)
------ -------
$107.6 $154.4
====== ======
The carrying amount of the company's long-term debt approximates
fair value, which is determined using discounted cash flow analysis
based on the company's incremental borrowing rate for similar types
of financing arrangements.
The 8 3/8 % Senior Notes due 1997 are redeemable at par beginning
in 1994 at the company's option.
The 12% Sinking Fund Debentures due 2010 have annual sinking fund
installments commencing in 1996. The debentures are redeemable at
any time at the company's option subject to possible premiums and
other restrictions.
The Industrial Development Revenue Bonds due 2008 are tax-exempt
variable-rate bonds. The interest rate is established weekly and
averaged 2.4% in 1993. The bonds are supported by a bank letter of
credit, which requires a fee of 1 1/4 % per annum on the amount
outstanding.
Certain of the above long-term debt obligations contain various
restrictions and financial covenants relating principally to
additional secured indebtedness.
At January 1, 1994, $10.0 million of borrowings under the
company's revolving credit facility are included in long-term debt
based on the expectation that such amount will remain outstanding
for more than one year.
Interest paid was $19.0 million in 1993, $18.9 million in 1992
and $19.2 million in 1991.
Maturities of long-term debt for the five years after 1993 are:
1994: $ 2.4 million
1995: 2.0 million
1996: 2.0 million
1997: 67.2 million
1998: 5.4 million
The capitalized lease assets are included in property, plant and
equipment. Amortization of leased properties is included in
depreciation and interest on lease obligations is included in
interest expense.
Future minimum payments for principal and interest on capitalized
leases during the next five years and in the aggregate thereafter are:
1994: $ 1.9 million
1995: 1.5 million
1996: 1.5 million
1997: 1.5 million
1998: .5 million
After 1998: 10.7 million
The company also leases certain equipment under operating leases,
some of which include varying renewal and purchase options. Future
minimum rental payments applicable to noncancelable operating
leases during the next five years and in the aggregate thereafter
are:
1994: $14.6 million
1995: 12.0 million
1996: 8.6 million
1997: 5.5 million
1998: 4.2 million
After 1998: 8.6 million
Rent expense was $14.7 million and $9.6 million in 1993 and 1992,
respectively, and was not material in 1991.
LINES OF CREDIT
At the end of 1993, the company had formal and informal lines of
credit with various domestic and foreign banks of $276.1 million,
including a revolving credit facility and other committed lines
totaling $137.5 million. These credit facilities support letters of
credit and leases in addition to providing borrowings under varying
terms. Additional borrowing capacity available under all lines of
credit totaled approximately $40 million at January 1, 1994.
In January, 1993, in connection with the acquisition of Valenite,
the company replaced its previous $55.0 million revolving credit
agreement with a new $85.0 million committed revolving credit
facility. In connection with the acquisition of Ferromatik, the
facility was amended to increase the lines of credit available
thereunder to $130.0 million. The facility allows borrowings
through July, 1995 and requires a facility fee of 1/2 % per annum
on the total $130.0 million revolving loan commitment.
The revolving credit facility requires compliance with certain
financial loan covenants related to tangible net worth, interest
and fixed charge coverages and debt leverage. The company has
remained in compliance with these covenants since the inception of
this facility.
SHAREHOLDERS' EQUITY
On April 15, 1993, the company completed the issuance of an
additional 5.175 million common shares through a public offering,
resulting in net proceeds (after deducting issuance costs) of
$100.6 million. The proceeds of the offering were used to redeem
$60.0 million of the company's 12% Sinking Fund Debentures due 2010
and to repay borrowings under revolving lines of credit and other
bank debt. The redemption of the 12% Sinking Fund Debentures due
2010 effective May 17, 1993 resulted in a pretax extraordinary loss
on early extinguishment of debt of $5.2 million ($4.4 million after
tax) in the second quarter. The pretax extraordinary loss included
a cash call premium of $4.7 million and the write-off of deferred
financing fees of $.5 million.
SHAREHOLDERS' EQUITY - PREFERRED AND COMMON SHARES
(Dollars in millions, except per-share amounts) 1993 1992
---- ----
4% Cumulative Preferred shares authorized,
issued and outstanding, 60,000 shares at
$100 par value, redeemable at $105 a share $ 6.0 $ 6.0
Common shares, $1 par value authorized
50,000,000 shares, issued and outstanding,
1993: 33,531,723 shares, 1992: 27,505,772 33.5 27.5
The company has authorized ten million serial preference shares
with $1 par value. None of these shares has been issued.
Holders of company common stock have one vote per share until
they have held their shares for at least 36 consecutive months,
after which they are entitled to ten votes per share.
CONTINGENCIES
The Internal Revenue Service has conducted examinations of the
company's federal income tax returns for the years 1981 through
1986 and had proposed various adjustments to increase taxable
income. During 1993, all issues for these years were resolved with
no significant effect on the company's consolidated financial
position or results of operations.
Various lawsuits arising during the normal course of business are
pending against the company and its consolidated subsidiaries. In
the opinion of management, the ultimate liability, if any,
resulting from these matters will have no significant effect on the
company's consolidated financial position or results of operations.
FOREIGN EXCHANGE CONTRACTS
The company enters into foreign exchange contracts to hedge foreign
currency transactions on a continuing basis for periods
commensurate with its known or expected exposures. The purpose of
this practice is to minimize the effect of foreign currency
exchange rate fluctuations on the company's operating results. The
company does not engage in speculation.
At January 1, 1994, the company had outstanding foreign exchange
contracts totaling $45.3 million, which generally mature in periods
of six months or less. These contracts require the company and its
subsidiaries to exchange currencies at the maturity dates at
exchange rates agreed upon at inception.
LONG-TERM INCENTIVE PLANS
The 1991 Long-Term Incentive Plan ("1991 Plan"), which expired
December 31, 1993, permitted the company to grant its common shares
in the form of non-qualified stock options, incentive stock
options, stock appreciation rights (SARs), restricted stock and
performance awards. A summary of amounts issued under the 1991 Plan
and prior plans is presented in the tables. The 1994 Long-Term
Incentive Plan ("1994 Plan") was approved by the company's Board of
Directors on February 10, 1994 and, subject to shareholder
approval, will provide for issuance of the same types of grants as
were permitted by the 1991 Plan with the exception of SARs, which
may no longer be granted.
STOCK OPTIONS, RESTRICTED STOCK AWARDS AND SARS
Price
Shares(a) SARs Range
-------- ---- -----
Outstanding at year-end 1990 1,222,537 530,322 $9 - 29
Activity during 1991 - Granted 837,607 110,750 9 - 13
- Exercised (68,357) - 9 - 10
- Canceled (139,759) (125,310) 13 - 29
--------- --------
Outstanding at year-end 1991 1,852,028 515,762 9 - 29
Activity during 1992 - Granted 462,920 - 15 - 16
- Exercised (91,628) - 9 - 25
- Canceled (148,167) - 9 - 25
- SARs
Canceled 515,762 (515,762) 9 - 28
--------- --------
Outstanding at year-end 1992 2,590,915 - 9 - 29
Activity during 1993 - Granted 118,025 - 17 - 24
- Exercised (854,918) - 9 - 25
- Canceled (136,947) - 13 - 29
--------- ---------
Outstanding at year-end 1993 1,717,075 - $9 - 28
========= =========
EXERCISABLE STOCK OPTIONS AND SARS AT YEAR-END
Stock
Options(a) SARs
---------- -------
1991 955,838 276,286
1992 1,748,565 -
1993 1,474,262 -
(a) Excludes stock options granted in tandem with SARs.
The non-qualified stock options and incentive stock options are
issued at market and, under the terms of the 1991 Plan, may be
granted in tandem with SARs. However, during 1992, all previously
granted SARs were canceled with the consent of the holders. Stock
options become excercisable under varying terms and expire in ten
years. Shares of restricted stock are subject to three-year
restrictions against selling, encumbering or otherwise disposing of
these Shares. Performance awards may be earned based on achievement
of predetermined return-on-capital targets over specified periods.
The maximum number of shares available for grant under the 1991
Plan was 1,650,000, of which 262,100 were available for grant at
year-end 1992. Additional shares may no longer be granted under the
1991 Plan. The maximum number of shares that may be granted under
the 1994 Plan is expected to be 2,000,000.
GEOGRAPHIC INFORMATION
The following table summarizes the company's U.S. and foreign
operations which are located principally in Western Europe.
Sales of U.S. operations include export sales of $118.7 million
in 1993, $111.7 million in 1992 and $98.6 million in 1991.
Total sales of the company's U.S. and foreign operations to
unaffiliated customers outside the U.S. were $298.4 million, $242.6
million and $236.0 million, in 1993, 1992 and 1991, respectively.
U.S. AND FOREIGN OPERATIONS
(In millions) 1993 1992 1991
---- ---- ----
U.S. operations
Sales $831.9 $654.1 $613.0
Operating earnings 49.6 47.9 23.3
Consolidation charge and closing
and relocation charge (47.1) - (75.1)
Disposition of subsidiary (22.8) - -
Identifiable assets 420.6 410.8 413.9
Liabilities 469.9 403.3 404.7
Capital expenditures 21.3 13.9 11.8
Depreciation 19.1 16.3 19.3
Foreign operations
Sales 197.5 135.1 141.0
Operating earnings 8.0 1.5 3.0
Identifiable assets 285.9 148.7 163.6
Liabilities 135.6 41.2 64.7
Capital expenditures 2.1 3.7 3.7
Depreciation 7.0 4.6 4.7
SEGMENT INFORMATION
Cincinnati Milacron is one of the world's leading manufacturers of
plastics machinery, machine tools, computer controls and software
for factory automation. In addition, the company is a leading
producer of precision grinding wheels, metalworking fluids and
metalcutting tools.
Financial data for the past three years for the company's
business segments are shown in the following tables.
SALES BY SEGMENT
(In millions) 1993 1992 1991
---- ---- ----
Plastics machinery $357.2 $301.4 $267.6
Machine tools 355.0 379.7 383.7
Industrial products (a) 317.2 108.1 102.7
-------- ------ ------
$1,029.4 $789.2 $754.0
======== ====== ======
OPERATING INFORMATION BY SEGMENT
(In millions) 1993 1992 1991
---- ---- ----
Operating earnings (loss)
Plastics machinery (b) $ 26.6 $22.8 $14.6
Machine tools 3.9 8.9 (6.6)
Industrial products (a) 27.1 17.7 18.3
Consolidation charge and closing
and relocation charge (c) (47.1) - (75.1)
Disposition of subsidiary (d) (22.8) - -
Unallocated corporate expenses (e) (11.5) (6.2) (9.5)
------ ----- -----
Operating earnings (loss) (23.8) 43.2 (58.3)
Interest expense-net (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 $(37.2) $27.0 $(73.4)
====== ===== ======
Identifiable assets
Plastics machinery $289.0 $219.9 $202.9
Machine tools 243.1 282.8 310.9
Industrial products (a) 174.4 56.8 63.7
Unallocated corporate assets (f) 23.1 19.4 20.9
------ ------ ------
Total assets $729.6 $578.9 $598.4
====== ====== ======
Capital expenditures
Plastics machinery $ 4.2 $ 6.2 $ 6.5
Machine tools 8.8 7.1 7.5
Industrial products (a) 10.4 4.3 1.5
------ ------ ------
Total capital expenditures $ 23.4 $ 17.6 $ 15.5
====== ====== ======
Depreciation
Plastics machinery $ 6.2 $ 7.7 $ 7.0
Machine tools 9.4 10.6 14.2
Industrial products (a) 10.5 2.6 2.8
------ ------ ------
Total depreciation $ 26.1 $ 20.9 $ 24.0
====== ====== ======
(a) The 1993 increases in the industrial products segment are
largely attributable to the inclusion of Valenite as of
February 1, 1993.
(b) The 1993 amount includes a $2.5 million gain on sale of
surplus land.
(c) These amounts relate to the machine tool segment.
(d) This amount relates to the plastics machinery segment.
(e) Includes corporate research and development and certain
administrative expenses. The 1993 amount includes
amortization of financing costs and costs related to the
sale of receivables totaling $3.0 million.
(f) Includes cash and cash equivalents and the assets of the
company's insurance and utility subsidiaries.
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Cincinnati Milacron Inc.
We have audited the accompanying Consolidated Balance Sheet of
Cincinnati Milacron Inc. and subsidiaries as of January 1, 1994 and
January 2, 1993, and the related Consolidated Statements of Earnings,
Changes in Shareholders' Equity, and Cash Flows for each of the three
years in the period ended January 1, 1994. Our audits also included
the financial statement schedules listed in the Index at Item 14(a).
These financial statements and schedules are the responsibility of
the company's management. Our responsibility is to express an
opinion on these financial statements and schedules based on our
audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position
of Cincinnati Milacron Inc. and subsidiaries at January 1, 1994 and
January 2, 1993, and the consolidated results of their operations and
their cash flows for each of the three years in the period ended
January 1, 1994, in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement
schedules, when considered in relation to the basic financial
statements taken as a whole, present fairly in all material respects
the information set forth therein.
As discussed in the Note to Consolidated Financial Statements,
Cumulative Effect of Changes in Methods of Accounting, in 1993 the
company changed its method of accounting for postretirement benefits
other than pensions and its method of accounting for income taxes.
/s/ ERNST & YOUNG
Cincinnati, Ohio
February 28, 1994
SUPPLEMENTARY FINANCIAL INFORMATION
OPERATING RESULTS BY QUARTER (Unaudited)
1993 (a) 1992 (a)
-------------------------------------------- ------------------------------------------
(In millions, except
per-share amounts) 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Year 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Year
------- ------- ------- ------- -------- ------- ------- ------- ------- ------
Sales $219.3 $236.6 $300.7 $272.8 $1,029.4 $160.0 $185.6 $225.5 $218.1 $789.2
Manufacturing margins 52.4 57.2 71.3 57.2 238.1 34.9 38.1 52.2 51.4 176.6
Percent of sales 23.9% 24.2% 23.7% 21.0% 23.1% 21.8% 20.5% 23.1% 23.6% 22.4%
Earnings (loss) before
extraordinary items
and cumulative effect
of changes in methods
of accounting 3.6 6.2 (7.9)(b)(47.3)(b) (45.4)(b) 1.1 2.8 5.3 6.9 16.1
Per common share .13 .19 (.23) (1.40) (1.41)(c) .04 .10 .19 .25 .58
Extraordinary items
Loss on early
extinguishment of debt,
net of income taxes - (4.4) - - (4.4) - - - - -
Per common share - (.14) - - (.14) - - - - -
Tax benefit from loss
carryforward - - - - - .2 .7 2.0 2.5 5.4
Per common share - - - - - .01 .02 .07 .09 .19
Cumulative effect of changes
in methods of accounting (52.1) - - - (52.1) - - - - -
Per common share (1.86) - - - (1.61)(c) - - - - -
Net earnings (loss) (48.5) 1.8 (7.9) (47.3) (101.9) 1.3 3.5 7.3 9.4 21.5
Per common share (1.73) .05 (.23) (1.40) (3.16)(c) .05 .12 .26 .34 .77
(a) The fiscal year consists of thirteen four-week periods in 1993 and
twelve four-week periods and one five week period in 1992. The first and
second quarters consist of twelve weeks each, and the third quarter,
sixteen weeks. The fourth quarter of 1993 consists of twelve weeks and
the fourth quarter of 1992 consists of thirteen weeks.
(b) The fourth quarter includes a charge of $47.1 million (with no current
tax effect) for the consolidation of domestic machine tool manufacturing
operations. Earnings were also reduced by charges of $18.1 million in the
third quarter and $4.7 million in the fourth quarter (with no current tax
effect) for the disposition of the company's Sano business.
(c) Because the quarter per-share amounts are based on the weighted-average
shares outstanding in each period, their sum does not equal the annual
calculation.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by Item 10 is (i) incorporated herein by reference to
the "Election of Directors" section of the company's proxy statement dated March
25, 1994 and (ii) included in Part I on pages 16 through 17 of this Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
The "Executive Compensation" section of the company's proxy statement dated
March 25, 1994 is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The "Principal Holders of Voting Securities" section of the company's proxy
statement dated March 25, 1994 is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The paragraph captioned "Stock Option Loan Programs" of the company's proxy
statement dated March 25, 1994 is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
ITEM 14(A)(1)&(2)-- LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT
SCHEDULES
The following consolidated financial statements of Cincinnati Milacron Inc. and
subsidiaries are included in Item 8:
Page No.
--------
Consolidated Statement of Earnings- 1993, 1992 and 1991 27
Consolidated Balance Sheet- 1993 and 1992 28
Consolidated Statement of Changes in Shareholders' Equity-
1993, 1992 and 1991 29
Consolidated Statement of Cash Flows- 1993, 1992 and 1991 30
Notes to Consolidated Financial Statements 31
Report of Independent Auditors 40
Supplementary Financial Information 41
The following consolidated financial statement schedules of
Cincinnati Milacron Inc. and subsidiaries are included in
Item 14(d) for the years ended 1993, 1992 and 1991:
Page No.
--------
Schedule II- Amounts Receivable From Related Parties
and Underwriters, Promoters and Employees Other
Than Related Parties 52
Schedule V- Property, Plant and Equipment 53
Schedule VI- Accumulated Depreciation, Depletion and
Amortization of Property, Plant and Equipment 54
Schedule VIII- Valuation and Qualifying Accounts and
Reserves 55
Schedule IX- Short-Term Borrowings 56
Schedule X- Supplementary Income Statement Information 57
All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable, and therefore have been omitted.
Item 14 (a)(3) - LIST OF EXHIBITS
(3) Articles of Incorporation and By-Laws
3.1 Restated Certificate of Incorporation filed with the Secretary of
State of the State of Delaware on June 16, 1983
- Incorporated herein by reference to the company's Form 10-K for the
fiscal year ended December 28, 1985, as amended by Amendment No. 1
thereto on Form 8 dated June 30, 1986, and Amendment No. 2 thereto
on Form 8 dated July 17, 1986 (File No. 1-8485)
3.2 Certificate of Amendment of the Restated Certificate ofIncorporation
dated April 22, 1986, and filed with the Secretary of State of the
State of Delaware on April 22, 1986
- Incorporated herein by reference to the company's Form 10-Q for the
quarter ended March 22, 1986 (File No. 1-8485)
3.3 Certificate of Amendment of the Restated Certificate of Incorporation
dated June 11, 1987, and filed with the Secretary of State of the
State of Delaware on June 15, 1987
- Incorporated herein by reference to the company's Form 10-Q for the
quarter ended March 28, 1987 (File No. 1-8485)
3.4 By-laws, as amended
- Incorporated herein by reference to the company's Registration
Statement on Form S-8 (Registration No. 33-33623)
(4) Instruments Defining the Rights of Security Holders, Including Indentures:
4.1 12% Sinking Fund Debentures due July 15, 2010
- Incorporated herein by reference to the company's Registration
Statement on Form S-3 (Registration No. 2-98653)
4.2 8-3/8% Notes due 1997
- Incorporated herein by reference to the company's Form 8-K dated
February 25, 1987 (File No. 1-8485)
4.3 Cincinnati Milacron Inc. hereby agrees to furnish to the Securities
and Exchange Commission, upon its request, the instruments with
respect to long-term debt for securities authorized thereunder which
do not exceed 10% of the registrant's total consolidated assets
(9) Voting Trust Agreement- not applicable
(10) Material Contracts:
10.1 Cincinnati Milacron 1984 Long-Term Incentive Plan
- Incorporated herein by reference to the company's Registration
Statement on Form S-8 (Registration No. 2-89499)
10.2 Cincinnati Milacron 1987 Long-Term Incentive Plan
- Incorporated herein by reference to the company's Proxy Statement
dated March 27, 1987
10.3 Cincinnati Milacron 1991 Long-Term Incentive Plan
- Incorporated herein by reference to the company's Form 10-Q for the
quarter ended June 15, 1991
10.4 Cincinnati Milacron Inc. Short-Term Management Incentive Program
- Incorporated herein by reference to the company's Form 10-K for the
fiscal year ended January 3, 1987
10.5 Cincinnati Milacron Inc. Supplemental Pension Plan
- Incorporated herein by reference to the company's Form 10-K for the
fiscal year ended December 31, 1988
10.6 Cincinnati Milacron Inc. Supplemental Retirement Plan #2
- Incorporated herein by reference to the company's Form 10-K for the
fiscal year ended December 31, 1988
10.7 Cincinnati Milacron Retirement Savings Plan
- Incorporated herein by reference to the company's Registration
Statement on Form S-8 (Registration No. 33-33623)
10.8 Cincinnati Milacron Inc. Plan for the Deferral of Directors'
Compensation
- Incorporated herein by reference to the company's Form 10-Q for the
quarter ended June 15, 1991
10.9 Underwriting Agreement between Cincinnati Milacron Inc. and the
First Boston Corporation
- Incorporated herein by reference to the company's Registration
Statement on Form S-3 (Registration No. 33-35097)
10.10 Cincinnati Milacron Inc. 1988 Restricted Stock Plan for Non-Employee
Directors
- Incorporated herein by reference to the company's Form 10-K for the
fiscal year ended December 29, 1990
10.11 Cincinnati Milacron Inc. Retirement Plan for Non-Employee Directors
- Incorporated herein by reference to the company's Form 10-K for the
fiscal year ended December 29, 1990
10.12 Cincinnati Milacron Inc. 1991 Restricted Stock Plan for Non-Employee
Directors
- Incorporated herein by reference to the company's Form 10-K for the
fiscal year ended December 29, 1990
10.13 Valenite Stock Purchase Agreement between GTE Corporation and Cincinna
Milacron, Inc.
- Incorporated herein by reference to the company's Form 8-K dated
February 1, 1993.
10.14 Purchase Agreement between Kloeckner Ferromatik Desma GmbH, Kloeckner
Werke Aktiengesellschaft and Cincinnati Milacron Inc.
- Incorporated herein by reference to the company's Form 8-K dated
November 8, 1993.
10.15 Cincinnati Milacron Supplemental Executive Retirement Plan
- Filed herewith
10.16 Amended and Restated Revolving Credit Agreement dated as of January
28, 1993, and amended and restated as of July 20, 1993
- Incorporated herein by reference to the company's Form 10-Q for the
quarter ended October 9, 1993.
10.17 Amendment Number One, dated as of October 26, 1993, to the Amended and
Restated Revolving Credit Agreement dated as of January 28, 1993, and
amended and restated as of July 20, 1993, among Cincinnati Milacron
Inc., the Lenders listed therein and Bankers Trust Company, as Agent
- Incorporated herein by reference to the company's Form 8-K dated
November 8, 1993.
10.18 Amendment Number Two, dated as of December 31, 1993, to the Amended
and Restated Revolving Credit Agreement dated as of January 28, 1993,
as amended and restated as of October 26, 1993, among Cincinnati
Milacron Inc., the Lenders listed therein and Bankers Trust Company,
as Agent
- Filed herewith
(11) Statement Regarding Computation of Per-Share Earnings
(12) Statement Regarding Computation of Ratios- not applicable
(18) Letter Regarding Change in Accounting Principles- not applicable
(21) Subsidiaries of the Registrant
(22) Published Report Regarding Matters Submitted to Vote of Security
Holders
- Incorporated by reference to the company's Proxy Statement
dated March 25, 1994.
(23) Consent of Independent Auditors
(24) Power of Attorney- not applicable
(27) Financial Data Schedule - not applicable
(28) Information from Reports Furnished to State Insurance Regulatory
Authorities- not applicable
(99) Additional Exhibits- not applicable
ITEM 14(B)-- REPORTS ON FORM 8-K
One report on Form 8-K was filed during the fourth quarter of 1993.
(i) November 8, 1993 - The company reported the closing of the purchase
of the Ferromatik business of Kloeckner Ferromatik Desma GmbH
ITEM 14(C)&(D)-- EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
The responses to these portions of Item 14 are submitted as a separate
section of this report.
SIGNATURES
- ----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
CINCINNATI MILACRON INC.
BY: /s/ Daniel J. Meyer
----------------------------------------------
Daniel J. Meyer; Chairman and Chief
Executive Officer, Director
(Chief Executive Officer)
BY: /s/ Raymond E. Ross
-----------------------------------------------
Raymond E. Ross; President and Chief Operating
Officer, Director
(Chief Operating Officer)
BY: /s/ Ronald D. Brown
-----------------------------------------------
Ronald D. Brown; Vice President- Finance
(Chief Financial Officer)
BY: /s/ Robert P. Lienesch
-----------------------------------------------
Robert P. Lienesch; Controller
(Chief Accounting Officer)
Date: March 25, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
/s/ Neil A. Armstrong /s/ Darryl F. Allen
- ------------------------------------ ----------------------------------
Neil A. Armstrong; March 25, 1994 Darryl F. Allen; March 25, 1994
(Director) (Director)
/s/ Harry A. Hammerly /s/ James A. D. Geier
- ----------------------------------- ----------------------------------
Harry A. Hammerly; March 25, 1994 James A. D. Geier; March 25, 1994
(Director) (Director)
ITEM 14(C) AND (D)-- INDEX TO CERTAIN EXHIBITS AND FINANCIAL STATEMENT
SCHEDULES
Page No.
--------
Exhibit 11 Computation of Per-Share Earnings 49
Exhibit 21 Subsidiaries of the Registrant 50
Exhibit 23 Consent of Independent Auditors 51
Schedule II Amounts Receivable From Related Parties
and Underwriters, Promoters and
Employees Other Than Related Parties 52
Schedule V Property, Plant and Equipment 53
Schedule VI Accumulated Depreciation, Depletion and
Amortization of Property, Plant and
Equipment 54
Schedule VIII Valuation and Qualifying Accounts and
Reserves 55
Schedule IX Short-Term Borrowings 56
Schedule X Supplementary Income Statement Information 57
CINCINNATI MILACRON INC. AND SUBSIDIARIES
SCHEDULE II-AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS,
PROMOTERS AND EMPLOYEES OTHER THAN RELATED PARTIES
Year Ended 1993 and 1992
(In Thousands)
COL. A COL. B COL.C COL. D COL. E
- --------------------------------------------------------------------------------------------
Deductions Balance at End of Period
---------------------- ------------------------
Balance at (1) (2)
Beginning Amounts Amounts (1) (2)
Name of Debtor of Period Additions Collected Written off Current Not Current
- --------------------------------------------------------------------------------------------
YEAR ENDED 1993
William E. Buchholz $176(a) - $176 - - -
YEAR ENDED 1992
William E. Buchholz - $176(a) - - $176 -
(a) Represents borrowings under the company's Key Employee Stock Option
Loan Program, which bear interest at 6%.
CINCINNATI MILACRON INC. AND SUBSIDIARIES
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT
Years Ended 1993, 1992 and 1991
(In Thousands)
COL. A COL. B COL.C COL. D COL. E COL. F
- ------------------------------------------------------------------------------------------
Balance at Other changes- Balance
Beginning Additions Add(Deduct)- at End of
Classification of Period at Cost Retirements Describe Period
- --------------------------------------------------------------------------------------------
YEAR ENDED 1993
Land $ 5,071 $ 10 $ 660 $ (353)(a) $ 5,661
1,593 (b)
Buildings 108,960 1,653 5,796 (5,745)(a) 108,522
9,450 (b)
Machinery and
equipment 267,709 21,759 46,897 (4,670)(a) 316,315
78,414 (b)
Equipment leased
to customers 1,377 - 458 (121)(a) 798
-------- ------- ------- -------- --------
$383,117 $23,422 $53,811 $ 78,568 $431,296
======== ======= ======= ======== ========
YEAR ENDED 1992
Land $ 5,640 $ 25 $ 428 $ (166)(a) $ 5,071
Buildings 117,882 2,340 8,946 (2,316)(a) 108,960
Machinery and
equipment 308,683 15,151 47,608 (8,517)(a) 267,709
Equipment leased
to customers 2,589 67 1,089 (190)(a) 1,377
-------- ------- ------- -------- --------
$434,794 $17,583 $58,071 $(11,189) $383,117
======== ======= ======= ======== ========
YEAR ENDED 1991
Land $ 4,969 $ - $ 32 $ 253 (a) $ 5,640
450 (c)
Buildings 115,402 1,925 164 (113)(a) 117,882
832 (c)
Machinery and
equipment 320,795 13,025 25,271 (2,617)(a) 308,683
2,751 (c)
Equipment leased
to customers 3,271 495 1,600 423 (a) 2,589
-------- ------- ------- -------- --------
$444,437 $15,445 $27,067 $ 1,979 $434,794
======== ======= ======= ======== ========
(a) Consists principally of foreign currency translation adjustments and
in 1993 includes amounts related to the revaluation for sale of certain
Valenite assets.
(b) Assets acquired through the purchase of Valenite Inc. in February,
1993 and Ferromatik Milacron Maschinenbau GmbH in November, 1993.
(c) Assets acquired through the purchase of the assets and business of SL
Abrasives, Inc. in January, 1991.
Note: Depreciation has been computed principally in accordance with the
following general range of useful lives: buildings (20 to 45 years),
building equipment (5 to 30 years), automobiles and trucks (3 to 7
years), and other machinery and equipment (2 to 20 years).
CINCINNATI MILACRON INC. AND SUBSIDIARIES
SCHEDULE VI - ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION
OF PROPERTY, PLANT AND EQUIPMENT
Years Ended 1993, 1992 and 1991
(In Thousands)
COL. A COL. B COL.C COL. D COL. E COL. F
- ----------------------------------------------------------------------------------------
Additions Other
Balance at Charged to changes- Balance
Beginning Costs and Add(Deduct)- at End
Classification of Period Expenses Retirements Describe of Period
- -----------------------------------------------------------------------------------------
YEAR ENDED 1993
Buildings $ 60,526 $ 4,900 $ 3,107 $ (506)(a) $ 61,813
Machinery and
equipment 200,779 21,094 27,905 (7,466)(a) 185,118
(1,384)(b)
Equipment leased
to customers 652 74 322 (9)(a) 395
-------- ------- ------- --------- --------
$261,957 $26,068 $31,334 $ (9,365) $247,326
======== ======= ======= ========= ========
YEAR ENDED 1992
Buildings $ 65,447 $ 3,371 $ 7,447 $ (845)(a) $ 60,526
Machinery and
equipment 237,553 17,412 39,123 (6,625)(a) 200,779
(8,438)(b)
Equipment leased
to customers 2,128 99 1,050 (525)(a) 652
-------- ------- ------- -------- --------
$305,128 $20,882 $47,620 $(16,433) $261,957
======== ======= ======= ======== ========
YEAR ENDED 1991
Buildings $ 61,895 $ 5,015 $ 129 $ (1,334)(a) $ 65,447
Machinery and
equipment 222,139 17,378 15,862 (502)(a) 237,553
14,400 (b)
Equipment leased
to customers 1,169 1,465 1,019 513 (a) 2,128
-------- ------- ------- -------- --------
$285,203 $23,858 $17,010 $ 13,077 $305,128
======== ======= ======= ======== ========
(a) Consists principally of foreign currency translation adjustments and in
1993 includes amounts related to the revaluation for sale of certain
Valenite assets.
(b) Relates to 1993 consolidation charge and 1991 closing and relocation
charge.
CINCINNATI MILACRON INC. AND SUBSIDIARIES
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
Years Ended 1993, 1992 and 1991
(In Thousands)
COL. A COL. B COL.C COL. D COL. E
- ------------------------------------------------------------------------------------------
Additions
-----------------------
Balance at Charged to Balance
Beginning Costs and Other Deductions at End
Description of Period Expenses -Describe -Describe of Period
- ------------------------------------------------------------------------------------------
YEAR ENDED 1993
Allowances for
doubtful accounts $ 5,913 $ 4,535 $ 3,205 (c) $ 4,781 (a) $ 7,884
988 (b)
Amounts related to
restructuring reserves
and to consolidation,
closing and relocation
and special charges $10,568 $40,200 $52,749 (c) $45,252 (a) $58,265 (d)
YEAR ENDED 1992
Allowances for
doubtful accounts $ 5,802 $ 2,972 $ - $ 2,518 (a) $ 5,913
343 (b)
Amounts related to
closing and relocation
and special charges $46,800 $ - $ - $36,232 (a) $10,568 (e)
YEAR ENDED 1991
Allowances for
doubtful accounts $ 5,582 $ 2,927 $ - $ 2,622 (a) $ 5,802
85 (b)
Amounts related to
closing and relocation
and special charges $18,900 $53,200 $ - $25,300 (a) $46,800 (f)
(a) Represents amounts charged against the reserves during the year.
(b) Represents foreign currency translation adjustments in all years
and in 1993 includes reserves of subsidiaries sold during the year.
(c) Consists of reserves of subsidiaries purchased during the year.
(d) Includes $1,500 in long-term accrued liabilities.
(e) Includes $4,670 in long-term accrued liabilities.
(f) Includes $8,900 in long-term accrued liabilities.
SCHEDULE IX - SHORT-TERM BORROWINGS
Years Ended 1993, 1992 and 1991
(In Thousands)
COL. A COL. B COL.C COL. D COL. E COL. F
- -------------------------------------------------------------------------------------------
Maximum Average Weighted
Category of Amount Amount Average
Aggregate Balance Weighted Outstanding Outstanding Interest Rate
Short-Term at End Average During the During the During the
Borrowings of Period Interest Rate Period Period Period
- -------------------------------------------------------------------------------------------
AMOUNTS PAYABLE
TO BANKS (a)
YEAR ENDED:
1993 $74,194 5.52% $104,722 $65,925 6.09%
1992 $19,826 5.53% $ 67,775 $28,316 6.73%
1991 $ 5,562 9.25% $ 32,290 $22,764 9.45%
(a) These balances represent borrowings under formal lines of credit. These
arrangements provide for borrowings at prevailing market rates.
CINCINNATI MILACRON INC. AND SUBSIDIARIES
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION
Years Ended 1993, 1992 and 1991
(In Thousands)
COL. A COL. B
- -------------------------------------------------------------------------------
Item Charged to Costs and Expenses
- -------------------------------------------------------------------------------
1993 1992 1991
------- ------- -------
Maintenance and repairs $14,752 $11,430 $12,828
======= ======= =======
Taxes, other than payroll
and income taxes $ 9,879 $10,145 $ 8,196
======= ======= =======
Advertising $ 9,908 $ 9,573 $ 7,462
======= ======= =======
Note: Amounts for royalties and amortization of intangible assets are not
presented, as such amounts are less than 1% of total sales.