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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
[x] Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 (Fee Required). For the fiscal
year ended December 28, 1996.
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 (No Fee Required). For the
transition period from to
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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
(Address of principal executive offices)
Registrant's telephone number including area code
(513) 841-8000
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.
The aggregate market value of voting stock held by non-
affiliates of the registrant is $721,842,849 at 2/28/97.*
*Voting stock held by officers, directors and principal holders
is not included in the computation. The Company, however, has
not made a determination that such individuals are "affiliates"
within the meaning of Rule 405 under the Securities Act of
1933.
Number of shares of Common Stock, $1.00 par value, outstanding
as of February 28, 1997: 39,814,496
Documents incorporated by reference:
PART III - Proxy statement, dated March 21, 1997
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CINCINNATI MILACRON INC.
1996 FORM 10-K
TABLE OF CONTENTS
Page
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PART I
Item 1. Business 3
Executive Officers of the Registrant 18
Item 2. Properties 20
Item 3. Legal Proceedings 20
Item 4. Submission of Matters to a Vote
of Security-Holders 20
PART II
Item 5. Market for the Registrant's Common
Equity and Related Stockholder Matters 20
Item 6. Selected Financial Data 21
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 23
Item 8. Financial Statements and Supplementary Data 30
Item 9. Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure 48
PART III
Item 10. Directors and Executive Officers of
the Registrant 48
Item 11. Executive Compensation 48
Item 12. Security Ownership of Certain Beneficial
Owners and Management 48
Item 13. Certain Relationships and Related
Transactions 48
PART IV
Item 14. Exhibits, Financial Statement Schedules
and Reports on Form 8-K 49
Signatures 53
Index to Certain Exhibits and Financial
Statement Schedules 54
Exhibit 11 - Computation of Per-Share
Earnings 55
Exhibit 21 - Subsidiaries of the Registrant 56
Exhibit 23 - Consent of Experts and Counsel 58
Exhibit 27 - Financial Data Schedule 59
Schedule II - Valuation and Qualifying
Accounts and Reserves 60
PART I
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ITEM 1. BUSINESS
GENERAL
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The company is a leading global manufacturer of products and
provider of services and technology used to process engineered
materials. Incorporated in Delaware in 1983, the company is a
successor to a business established in 1884.
The company has three business segments: plastics machinery,
machine tools and industrial products. The company's plastics
machinery business includes injection molding machines, mold
bases and components for injection molding, extrusion systems,
blow molding machines and auxiliary equipment. The company's
machine tool business consists of turning and machining
centers, grinding machines, flexible manufacturing cells, and
advanced systems primarily for the aerospace industry. The
company's industrial products business includes metalcutting
tools, metalworking fluids, grinding wheels, carbide wear parts
and industrial magnets.
The company has gone through a major transformation over the
last four years, primarily through strategic acquisitions,
accelerated new product development, expanded distribution, and
the consolidation of its U.S. machine tool operations. As a
result, the company has achieved a more equal balance among its
segments' sales, and between its U.S. and non-U.S. sales, and
has become less dependent upon the capital goods market. From
1992 to 1996, the company's consolidated sales have grown at a
compound annual rate of 22% from $789 million to $1.7 billion.
In 1996, more than 40% of sales came from the industrial
products segment, making it the company's largest business
segment in that year. The plastics machinery segment was the
second-largest business segment in 1996, with approximately 38%
of sales, while the machine tools segment contributed about 22%
of sales. The company expects the growth in industrial
products and plastics machinery sales will make it less
susceptible to the historically severe business cycles and
lower margins characteristic of the machine tool business.
Today, the company sells products and provides services to
industrial customers throughout the world. Sales to customers
outside the U.S. increased from $298 million in 1993,
representing 29% of total sales, to $810 million in 1996,
representing 47% of total sales. The company has been
successful in penetrating international markets through
acquisitions, expanded distribution, increased exports, and
license and joint venture agreements. The company believes its
current geographic sales balance helps compensate for varying
economic cycles around the world and that its increased
presence outside the U.S. will reduce its dependence upon the
U.S. economy.
Largely as a result of the acquisitions, the company's product
mix has become more balanced. In 1996, 42% of sales were
generated through the sale of capital goods, with the balance
coming from durable goods, consumables, and components and
services.
The company has a long-standing reputation for quality and
technological leadership. Virtually all of the company's
plastics machinery products and machine tools are computer
controlled. Many of these machines are sold with advanced
application software, like software to control machine tools
that fabricate aircraft parts from composite materials.
STRATEGIC ACQUISITIONS AND DIVESTITURES
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The company continually explores acquisition, divestiture and
consolidation opportunities when it believes such actions could
expand markets, enhance product synergies or improve earnings
potential for the long term. Over the last four years, the
company has completed several strategic acquisitions and
divestitures which the company believes will increase its
potential for further growth. In its plastics machinery
segment, the company acquired FM Maschinenbau GmbH
(Ferromatik), the injection molding machine business, including
its international sales companies, from Kloeckner-Werke AG, in
1993 and The Fairchild Corporation's D-M-E business (D-M-E)
from The Fairchild Corporation in 1996.
Ferromatik is one of Europe's leading manufacturers of plastics
injection molding machines. With 1996 sales of approximately
$130 million, Ferromatik expanded the company's plastics
processing technology base and product line and enabled the
company to achieve its objective of establishing a plastics
machinery manufacturing and distribution base in Germany to
serve Europe and other markets.
D-M-E is the largest U.S. producer of mold bases, components
and supplies for the plastic injection moldmaking industry.
With sales of approximately $153 million for the eleven months
it was owned by the company in 1996, D-M-E serves customers
throughout the world with ten major manufacturing facilities,
plus several international joint-venture operations. The
company believes D-M-E will continue to enhance its plastics
machinery business because it provides the mold bases, supplies
and components used in the mold apparatus inside an injection
molding machine. D-M-E is the U.S. market leader with a
well-established reputation for high quality.
In 1993, the company disposed of its Sano plastics machinery
business, due in part to continuing operating losses. In
addition, the Sano business did not serve a major global market
with good long-term growth potential.
In the three years prior to 1996, the company made three
strategic acquisitions in its industrial products segment: GTE
Valenite Corporation (Valenite), Krupp Widia GmbH (Widia) and
Talbot Holdings, Ltd. (Talbot), all of which have metalcutting
tools as their primary product line. The company believes that
it is now the second-largest U.S. and third-largest worldwide
producer of carbide metalcutting tool systems.
Valenite was acquired in February, 1993. With principal
operations in the U.S. and Canada, it is a leading producer of
consumable industrial metalcutting tools. Valenite's 1996
sales approximated $230 million, excluding about $35 million of
European sales now managed by Widia.
Widia, acquired in February, 1995, is one of the world's
leading producers of industrial metalworking products, with
1996 sales approximating $310 million. Widia's strong presence
in Europe and India complements Valenite's strengths in the
North American and Japanese markets. Widia also enhances the
company's technological base, diversifies its industrial
consumable product line and expands its worldwide sales and
distribution network. During 1995, the company implemented an
integration plan to maximize the synergies between Valenite and
Widia worldwide. The plan was substantially completed in the
first half of 1996, except for certain personnel reductions at
Widia. As a result of the actions included in the plan, the
company is achieving annual cost savings in excess of $20
million.
The company acquired Talbot in July, 1995. With 1996 sales of
approximately $40 million, Talbot is a major supplier of round
high-speed steel and carbide metalcutting tools, such as mills
and taps, and is the largest U.S. producer of end mills. These
cutting tools, which are not produced by either Valenite or
Widia, are sold through independent distributors and a direct
sales force. The Talbot acquisition enabled the company to
increase its product coverage from approximately 40% to 65% of
the types of cutting tools consumed by the world market.
In 1995 the company sold American Mine Tool (AMT), a small
business that was purchased as part of the Valenite
acquisition. This business did not serve a major global market
with good long-term growth potential.
In its machine tools segment, the company sold its Electronic
Systems Division (ESD) in December, 1995 for $104 million.
Most of ESD's sales were to the company's other divisions. In
addition, ESD had sales to unaffiliated customers which totaled
approximately $30 million in 1995. ESD was sold to redeploy
assets into the company's remaining businesses as well as to
partially fund the acquisition of D-M-E. To maintain control
system continuity and development, the company entered into a
long-term supply and services agreement with the purchaser of
ESD to continue to provide the company's machine tool and
plastics machinery businesses with technologically advanced
control systems.
In 1994, the company completed a major consolidation of its
U.S. machine tool operations, closing two plants in South
Carolina and moving all of its U.S. production to its main
machine tool facilities in Cincinnati, Ohio.
PRODUCT DEVELOPMENT AND CAPITAL EXPENDITURES
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As part of its objective to enhance its growth potential and
global competitiveness, the company continues to invest in
research and development and in new capital equipment.
Research and development investment in 1996 totaled $49
million, or 2.8% of sales. In 1996, the company invested $65
million for capital additions, primarily to install advanced
systems throughout its operations worldwide. For 1997, the
company is budgeting an increase in capital expenditures to $83
million.
To enhance its research and development effort, in recent years
the company has undertaken a major program for product
development, process improvement and modernization. This
program is named "Wolfpack" because of its emphasis on teamwork
and fierce competitiveness. The objectives of Wolfpack are to
design and produce new products at world-competitive levels of
quality, performance, efficiency and cost. Substantially all
of the company's current machine designs have been developed
using the Wolfpack methodology.
PLASTICS MACHINERY BUSINESS
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The company believes it is the largest and broadest-line U.S.
producer of plastics machinery and one of the three largest in
the world, and the largest U.S. producer of mold bases,
standard components and supplies for the moldmaking industry.
In 1996, the company's plastics machinery segment sales were
$662 million. The company sells plastics machinery to
manufacturers in several key industries, including automotive,
construction, electronics, consumer goods and packaging. The
company believes it offers more varieties of machinery to
process plastic than any other U.S. company.
One of the company's strengths in the plastics machinery
business stems from having complete lines of machines for three
major plastics processing technologies: injection molding
machines, and systems for extrusion and blow molding machinery.
The company also sells specialty auxiliary equipment for
plastics processing and rebuilds and retrofits older injection
molding equipment manufactured by the company or others.
The company distributes all of its plastics machinery products
through a combination of a direct sales force and independent
agents who are geographically spread throughout the key markets
of the world. Its mold bases, supplies and components are sold
through a distribution network in the U.S. and Europe and
through a large network of joint venture sales and service
offices in Asia.
PLASTICS MACHINERY INDUSTRY
The market for plastics machinery has grown steadily over the
past four decades, as plastics have continued to replace
traditional materials such as metal, wood, glass and paper in
an increasing number of manufactured products, particularly in
the transportation, construction, housewares, electrical, and
medical industries. Advancements in both the development of
materials, which make plastic products more functional, and the
capabilities of plastics processing equipment have been major
contributors to the steady growth in the plastics machinery
market. In addition, consumer demand for safer, more
convenient and recyclable products has increased the general
demand for plastic products. Like other capital goods markets,
the plastics machinery market is subject to economic cycles,
but to a lesser degree than the machine tool market. In
particular, the market for injection molding machines is driven
by resin prices and production, the consumer economy and the
automotive industry. From 1992, plastics machinery orders have
been strong, although the company began to experience some
softening of demand in early 1996 due to an expected short-term
price increase in resin material, but demand picked up later in
the year and the company expects continued growth.
Custom molders, which produce a wide variety of components for
many industries, are the single largest group of plastics
machinery buyers. Other customer categories include the
automotive industry, the electrical and packaging industries,
the construction industry, manufacturers of housewares and
appliances and producers of medical supplies. Among the
factors that affect the plastics machinery market are the
health of the consumer economy, residential and commercial
construction and automotive production. Because of intense
competition from international plastics machinery producers,
currency exchange rates also have a significant impact.
Fluctuations in the supply and prices of petrochemical feed
stocks for resin supply may affect the businesses of the
customers for plastics machinery and, in turn, the market for
this equipment.
Environmental concerns about plastics may have the potential to
slow the growth of the plastics machinery market. However,
some plastics raw materials suppliers, machinery makers and
processors are developing methods of recycling to address
environmental issues. The company believes that environmental
concerns have not had any discernible negative effect on the
market to date. Nevertheless, the company, through its
membership in The Society of Plastics Industry (an industry
trade association) and its affiliate, The American Plastics
Council, is working with other leading companies within the
plastics industry to address the role of plastics in the
environment.
THE COMPANY'S PLASTICS MACHINERY BUSINESS
With the acquisition of D-M-E in January of 1996, the company's
plastics machinery segment consists of four major products
lines: injection molding machines, extrusions systems and blow
molding machines, as well as standardized mold bases,
components, and supplies for the plastics injection moldmaking
industry.
INJECTION MOLDING. The company believes it is the largest U.S.
producer of injection molding machines. Injection molding is
the most common and versatile method of processing plastic, and
it is used to make a wide variety of parts and products ranging
from housewares and consumer goods to medical supplies and
industrial components. The company manufactures many types of
injection molding machines, most all of which were developed
using Wolfpack principles. The injection molding machine line
includes machines powered conventionally (with hydraulics) as
well as ones that are driven by servo motors (fully electric).
Product standardization (which facilitates part commonality)
and the modernization of the company's manufacturing facilities
and methods, as well as increased volumes, have enabled the
company to achieve significant economies of scale for the
production of injection molding machines. The company believes
these factors have enabled it to become the lowest-cost U.S.
producer of these machines. Additionally, the company believes
its success in injection molding machines has been due in large
part to the development and marketing of its Vista line.
In November, 1993, the company acquired Ferromatik, one of
Europe's leading producers of injection molding machines.
Ferromatik is recognized for its high-end technology, including
multi-color machines, multi-component systems and other
specialty applications. The acquisition included the Ferromatik
lines of hydraulic and electric injection molding machines and
a modern manufacturing facility in Malterdingen, Germany, as
well as Ferromatik's worldwide marketing, sales and service
network. The Ferromatik acquisition expanded the company's
plastics processing technology base and product line and
enabled the company to achieve its objective of establishing a
plastics machinery manufacturing and distribution base in
Germany to serve Europe and other markets. Ferromatik has
provided a complementary fit with the company's other injection
molding machine businesses.
The company has completed a restructuring of Ferromatik to
derive synergies between Ferromatik and other company
operations and to improve Ferromatik operations through
implementation of manufacturing techniques and methods
currently being used in the company's U.S. plastics machinery
operations. For example, Ferromatik has now implemented
cellular manufacturing techniques which have significantly
reduced manufacturing lead time, in-process inventory, and
handling costs. In addition, using Wolfpack techniques, the
company redesigned several major product lines resulting in
lower product cost. The restructuring also reduced overall
marketing costs through the consolidation of the company's
former European marketing organization into the Ferromatik
marketing organization. The company believes that this
restructuring has helped, and will continue to help, it to
achieve its cost reduction goals in both marketing and
manufacturing.
The company sells several of its successful U.S. and Ferromatik
plastics machinery lines to European customers through
Ferromatik's sales and distribution network.
In May, 1995, the company announced the startup of a joint
venture, Cincinnati Milacron PL (CMPL), with a well-established
plastics machinery maker in Ahmedabad, India. This operation
builds entry-level injection molding machines for Asian and
South American markets. In 1995, CMPL completed the
implementation of its product introductions and opened sales
offices throughout the major cities of India. In addition,
CMPL announced their intent to build a new factory in Ahmedabad
to support other plastic machinery products as well.
EXTRUSION SYSTEMS. The company's extrusion systems business
consists of the manufacture, sale and distribution of
individual extruders and systems comprised of multiple units
which are tooled to extrude a specific product in quantity.
Such systems take longer to manufacture than injection molding
machines. Extrusion systems, which are manufactured in both
the U.S. and Austria, include twin-screw extruders and single-
screw extruders. The company believes it has a strong
competitive position in each of these lines, and is the largest
worldwide maker of twin-screw extruders. Twin-screw extruders
are used to produce continuous-flow products such as pipe,
residential siding, sheet lines and window frames. As a
result, the business is closely tied to construction market
cycles. Single-screw extruders are used in a variety of
applications and systems such as blow molding, blown-film and
cast-film systems, pipe and profiles and wire and cable
applications.
BLOW MOLDING MACHINES. The company's blow molding machine
business consists of the manufacture, sale and distribution of
extrusion blow molding machines, which are used to make a wide
variety of products, including industrial parts, outdoor
furniture, refuse containers, toys, and packaging containers.
MOLD BASES AND COMPONENTS. In January, 1996, the company
completed the acquisition of D-M-E, which the company believes
is the largest U.S. producer of mold bases, standard components
and supplies for the moldmaking industry, serving customers
throughout the world with ten major manufacturing facilities,
plus several international joint venture operations. Its sales
approximated $153 million for the eleven months of 1996 that it
was owned by the company. Like most of the company's plastics
business, D-M-E serves the largest segment of the market, the
injection molding process. D-M-E complements the company's
other businesses because D-M-E provides the mold bases,
supplies and components used in the mold apparatus inside the
injection molding machines. The company is beginning to
achieve synergies in a number of areas, including manufacturing
process, technology, marketing and distribution.
SPECIALTY EQUIPMENT. The company sells a variety of specialty
equipment used in the processing of plastics products,
including peripheral auxiliary equipment such as material
management systems, heat exchangers and product handling
systems, all of which are manufactured by third parties to the
company's specifications. The company also sells a line of
vertical injection molding machines which are manufactured to
the company's specifications by a third party. The company
also rebuilds and retrofits older types of injection molding
equipment sold by the company or others, refitting them with
new controls and software.
PRODUCTION FACILITIES.
For the plastics machinery segment, the company maintains the
following principal production facilities:
FACILITY PRODUCTS
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Ahmedabad, India (a) Injection molding machines.
Batavia, Ohio Injection and blow molding
machines.
Charlevoix, Michigan Mold components.
Cincinnati, Ohio Extrusion systems.
Hillside, New Jersey Special mold base components.
Lewistown, Pennsylvania Mold components.
Madison Heights, Michigan Mold base components.
Malterdingen, Germany Injection molding machines.
Mechelen, Belgium Mold base components.
Melrose Park, Illinois Special mold base components.
Monterey Park, California Special mold base components.
Mt. Orab, Ohio (b) Plastics machinery parts.
Neuenstadt am Kocher, Germany Special mold base components.
Vienna, Austria Extrusion systems.
Windsor, Ontario, Canada Special machinery for mold
bases.
Youngwood, Pennsylvania Steel Processing and mold
components.
(a) The plant in Ahmedabad, India is leased from another party.
(b) The plant in Mt. Orab, Ohio operates under a long-term
lease, which was financed by the sale of State of Ohio
Industrial Development Revenue Bonds. At the expiration of
the long-term lease, the company will acquire title to the
leased properties at a nominal cost.
SALES, MARKETING AND CUSTOMER SERVICE
The company maintains a large direct sales force in the U.S.
for its plastics machinery segment, which it supplements with
independent agents. Internationally, the company uses both a
direct sales force and independent agents. In the U.S., the
plastics machinery business uses the company's Cincinnati,
Ohio, headquarters, as well as sales and service centers in
Allentown, Pennsylvania; Charlotte, North Carolina; Chicago,
Illinois; Dallas, Texas; Detroit, Michigan; and Los Angeles,
California to market its products and provide customer support
and training. Through its Austrian and Ferromatik
subsidiaries, the company has an extensive sales, marketing,
service and distribution system throughout Europe. D-M-E
operates through distribution centers strategically located in
industrial and manufacturing areas where most injection molding
takes place. Distribution is through a broad distribution
network in the U.S. and Europe. In Asia, D-M-E sells through a
large network of joint venture sales and service offices.
COMPETITION
The markets for plastics machinery in North America and
worldwide are highly competitive and are made up of a number of
U.S., European and Asian competitors. The company believes it
has a significant share of the U.S. market for the types of
products it produces, and, with the D-M-E acquisition, the
company believes it is the broadest-line maker of equipment,
supplies and systems for plastics processing in the world. The
company's competitors vary in size and resources; some are
larger than the company, many are smaller, and only a few
compete in more than one product category. Principal
competitive factors in the plastics machinery industry are:
product features, technology, quality, performance,
reliability, speed of delivery, price and customer service.
The Wolfpack program is designed to maintain and enhance the
company's competitive position worldwide with respect to each
of these competitive factors.
MACHINE TOOL BUSINESS
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The company is a leading U.S. producer of machine tools. A
machine tool is a power-driven machine that is used to cut,
form or shape metal and other materials. Machine tools are
typically installed as capital equipment in metalworking
industries. In 1996, the company's machine tool segment sales
were $372 million.
MACHINE TOOL INDUSTRY
The primary customers for this $25-billion worldwide market for
metalcutting machine tools are the automotive industry; machine
shops; producers of farm, construction, off-road and power
generation equipment; manufacturers of bearings; the aerospace
industry; the die and mold industry; and a variety of other
metalworking manufacturers. The machine tool industry has
historically been cyclical with relatively long lead times
between orders and shipments. Machine tool sales are affected
by capital spending levels, interest rates, tax and
depreciation policies, international competition, currency
exchange rates and general economic conditions.
THE COMPANY'S MACHINE TOOL BUSINESS
The company designs, builds and sells a variety of standard and
advanced computer numerically controlled (CNC) metalcutting
machine tools for various industries, including industrial
components, job shops, automotive and aerospace. The company's
core machine tool operation, the standard machine tool
business, manufactures horizontal machining centers, vertical
machining centers, turning centers, centerless grinders and
automated flexible manufacturing cells for the metalworking
industry. The products of the company's advanced machine tool
systems business include large, multi-axis metalcutting and
composites processing systems for the aerospace industry;
large, multi-axis machines for manufacturers of farm,
construction, off-road vehicles and power generation equipment
and for the die and mold industry.
STANDARD MACHINE TOOL PRODUCTS
HORIZONTAL CNC MACHINING CENTERS. The company produces CNC
horizontal machining centers for basic metalworking operations
in a number of industries. These machines are suited to the
manufacture of prismatic components such as transmission and
gear casings, pump bodies or other box-like parts. Machines
are equipped with standard automatic parts and tool changers,
and precision rotary tables for multi-sided processing of a
single or several parts. Typical operations involve highly
precise milling, drilling, boring, tapping, reaming and
routing.
VERTICAL CNC MACHINING CENTERS. Similar to the horizontal
machining centers in the basic types of metal removal
operations performed, the vertical machining centers are better
suited to the manufacture of flat, plate-like parts for a broad
spectrum of industries including mold and die machining. All
models utilize automatic tool interchange for efficient
processing. Add-on features can further enhance productivity
by automating the loading and unloading of parts.
CNC TURNING CENTERS. Also called CNC lathes, turning centers
shape cylindrical parts which are rotated at high speed against
a stationary tool to perform metal removal operations. Typical
examples of parts manufactured with CNC lathes are shafts,
pulleys, spindles or similar rotating parts. Though primarily
designed to provide a symmetrical cross-section, some models
are capable of applying rotating tools such as milling cutters
or drills. This expanded capability allows for more
comprehensive part processing while the part is still in the
turning center, a feature that can eliminate additional
handling and processing on a separate machine.
CNC GRINDING MACHINES. CNC precision grinding machines are
used to bring a part surface into a more precise dimension or
surface. There are several kinds of grinding processes. The
company specializes in centerless grinding machines, which
grind external diameters of cylindrical parts such as bearings,
compressor shafts and cam shafts. The company believes that it
has a long-standing leadership position in the U.S. centerless
grinding business with an installed base of several thousand
machines.
AUTOMATED FLEXIBLE MANUFACTURING CELLS. Automated flexible
manufacturing cells consist of one or more processing machines
(usually standard machine tools), ancillary equipment for parts
and tools handling and computer hardware and software to
automate and integrate all necessary functions, allowing for
lightly-manned or unattended operation. These systems are used
widely throughout the metalworking industry and generally
feature a number of computer-driven functions, such as work and
tool scheduling and quality control. Automated flexible
manufacturing cells are a major focus of a number of U.S.
companies seeking to update plant and equipment to enhance
their productivity and international competitiveness. The
company believes that its Wolfpack-developed cell control
hardware and software have enabled it to obtain a leadership
position in the U.S. automated flexible manufacturing cells
market.
ADVANCED SYSTEMS
METALCUTTING AND COMPOSITES PROCESSING SYSTEMS FOR AEROSPACE.
The company believes it is one of the world's leading producers
of large five-axis machining centers and profilers. These
machines are generally used to create intricately contoured
surfaces in components manufactured by the aerospace industry.
Typical materials machined include aluminum and high-strength
alloys such as titanium.
The company is also a pioneer and world leader in the
development of new machines and systems to automate the
manufacture of components made of advanced composite materials,
such as carbon or graphite fibers in combination with epoxy.
These systems are used by the aerospace industry to manufacture
a variety of high strength-to-weight ratio structural and air
surface components. The company's unique fiber-placement
machine was honored by R&D Magazine as one of the most
significant inventions in 1995.
LARGE MACHINE TOOLS. The company makes large multi-axis
metalcutting machines and systems for the manufacturers of
heavy machinery such as farm and construction implements and
machinery, off-road vehicles and power generation equipment.
APPLIED PRODUCTION TURNING CENTERS AND CENTERLESS GRINDING
MACHINES. The company also specializes in the customized
application of production turning centers and centerless
grinding machines designed to meet exacting specifications and
high volume parts production. The company's applied CNC
turning centers are used by the automotive industry in a number
of applications, including those which require an extremely
accurate finishing process. Other significant users of these
machines are precision bearing manufacturers where machining
tolerances are measured in millionths of an inch.
ELECTRONIC SYSTEMS. In December, 1995, the company sold its
Electronic Systems Division. To maintain control system
continuity and development, the company entered into an
extensive seven-year supply contract with the purchaser for
electronic controls used on the company's machine tools and
plastics machinery. The company continues to develop and
maintain its own applications software. The decision to sell
ESD was made to redeploy assets to more strategic businesses.
PRODUCTION FACILITIES.
For the machine tools segment, the company maintains the
following principal production facilities:
FACILITY PRODUCTS
- -------- --------
Birmingham, England Standard vertical CNC machining centers
and CNC turning centers.
Cincinnati, Ohio Standard machine tool products and
(4 plants) advanced systems.
SALES, MARKETING AND CUSTOMER SERVICE
A strong distribution network is one of the cornerstones in the
company's strategy to improve its position in the global market
for standard machine tools. The company markets machine tools
in North America through a comprehensive network of independent
distributors assisted by the company's factory support and
direct sales force. Through these distributors, the company
currently has approximately 330 sales people representing its
machine tool business in North America.
The company believes that applications expertise, field-service
engineering and customer support are important for all its
products, especially for grinding machines, aerospace and
special machines and automated flexible manufacturing cells.
In addition to its marketing and service headquarters in
Cincinnati, Ohio, the company maintains regional offices in
Detroit, Michigan; Birmingham, England; Offenbach, Germany; and
Singapore.
COMPETITION
The worldwide machine tool industry is made up of a number of
competitors, none of which has a dominant market share. The
markets for the company's machine tools are highly competitive
in the U.S. and internationally, with strong competition from
U.S., European and Asian companies in all markets. The
company's competitors vary in size and resources; some are
larger than the company, many are smaller, and only a few
compete in more than one product category.
Principal competitive factors for products in the machine tool
business are product features or capabilities (including
controls and software), quality, performance, reliability,
technology, speed of delivery, price and customer service. The
Wolfpack program is designed to enhance the company's
competitive position with respect to each of these factors. In
certain aerospace and grinding machine lines, the company has
significant market positions and relatively few competitors.
However, in the case of standard machine tool products and
automated flexible manufacturing cells, there are many
competitors and no one company has market dominance.
INDUSTRIAL PRODUCTS BUSINESS
- ----------------------------
The company produces five basic types of industrial products:
metalcutting tools, metalworking fluids, precision grinding
wheels, carbide wear parts and industrial magnets, in total
representing over 150,000 different products. In 1996, sales
of the company's industrial products segment were $696 million.
The company believes it is a leader in many new product
technologies, including synthetic lubricants, use of synthetic
ceramic abrasives, high-performance cutting tool coatings, and
product designs using computer modeling. Over 75% of the
company's industrial products sales are of consumable products,
which means they are depleted during the process for which they
are used, offering the company a continuous opportunity to sell
replacement products to its customers. The company believes
that its industrial products business complements its plastics
machinery and machine tool businesses, because the industrial
products business is exposed to less pronounced business cycles
and, therefore, generates more consistent cash flows.
INDUSTRIAL PRODUCTS INDUSTRY
The company's industrial products business participates in a
$35 billion world market, which traditionally has grown at a
rate approximating the growth of the world GDP. The company's
products address approximately $20 billion of the world market
with heaviest market penetration in the U.S. and Europe, and in
the case of metalcutting tools, India. The company serves
customers in the industrial components and machinery,
automotive and electrical industries, as well as job shops.
THE COMPANY'S INDUSTRIAL PRODUCTS BUSINESS
METALCUTTING TOOLS. Metalcutting tools are made of carbide,
steel and other materials and include systems to hold
metalcutting tools that are used on machine tools for use in a
wide variety of metalcutting operations. The company believes
that, through its subsidiaries, Valenite, Widia and Talbot, it
is the second-largest producer of carbide metalcutting tool
systems in the U.S. and the third-largest worldwide. Valenite
manufactures over 38,000 products, including an extensive line
of cutting tool inserts in a wide variety of materials and
geometries for turning, boring, milling and drilling, and
standard and special steel insert holders. Valenite has an
excellent market position in the automotive, off-road vehicle
and truck industries and has strong market positions in carbide
wear parts for metalforming and in products requiring the wear
and corrosion-resistant properties of tungsten carbide.
In February, 1995, the company completed the acquisition of
Widia, a major European metalcutting tool maker with key
production facilities in Germany and other Western European
countries. Widia also owns a 51% interest in Widia (India)
Ltd., an Indian public company. Widia's product lines include
tungsten carbide cutting tool inserts and steel insert holders
needed for metalcutting operations, carbide wear parts used in
forming and stamping metal, and both soft and permanent
industrial magnets, used in automotive and other applications.
In 1995, the company initiated a $28 million plan to integrate
certain Valenite and Widia operations, primarily in Europe and
Japan. This plan involved the closing of two manufacturing
plants, the downsizing of another plant, as well as the
consolidation of numerous sales, customer service and
warehousing operations in Europe and Japan. In total, the
execution of the plan has resulted in the elimination of over
370 production and administrative personnel. As a result, the
company is achieving annual cost savings in excess of $20
million.
In July, 1995, the company completed the acquisition of Talbot,
a major supplier of round high-speed steel and carbide
metalcutting tools and the largest U.S. producer of end mills,
as well as a leading tap producer. Talbot, with annual sales
of approximately $40 million, enables the company to enter the
market for round tools, including high-speed steel and carbide
end mills, taps, countersinks, counterbores and reamers. These
products are highly complementary to the products made by
Valenite and Widia. The company expects to expand Talbot
products into non-U.S. markets.
METALWORKING FLUIDS. Metalworking fluids are proprietary
chemical compounds and emulsions used as lubricants, coolants
and corrosion inhibitors in a wide variety of metalcutting and
metalforming operations. Major customers are producers of
precision metal components for many industries, including
manufacturers of automotive power trains, aerospace engines and
bearings, as well as general metalworking shops. The company
is a full-line supplier, offering water-based fluids
(synthetics), waterbased oil-bearing fluids (semi-synthetics)
and oil-based fluids. Over the last four years, the company
expanded its lines of soluble oils, base oils and synthetic
fluids. The company has marketed these products under the
Cimcool brand since the mid - 1940s. With the acquisitions of
Valenite and Widia, the company has developed two additional
brands of fluids. In 1994, the company developed the Valcool
brand that is designed to work with all metalcutting tools
which is being marketed through Valenite's market channels.
Valcool sales grew 66% in 1996. In 1996, the company
introduced through the Widia market channels the Widacool line
of fluid in Europe which is also being well received.
The company also is the leader in providing certain customers
with comprehensive fluid management programs. This involves
the company's engineers working full-time on site at the
customer's plant to oversee and optimize all wet chemistry,
including metalworking fluids used in the plant.
GRINDING WHEELS. Grinding wheels are rotating tools made of
granular abrasive materials bonded together with vitreous or
resin materials, which are used by manufacturers in the
metalworking industry. The company believes that it is now the
second-largest U.S. producer of grinding wheels. Major
customers are producers of precision metal components for many
industries, including manufacturers of automotive power trains,
aerospace engines and bearings, as well as general metalworking
machine shops. The company designs and manufactures a wide
variety of precision abrasive grinding wheels, including resin-
bonded, vitrified, cubic boron nitride (CBN), diamond and
synthetic ceramic abrasive types.
The company believes, based on tests in its laboratories, as
well as in customer plants, that the company's proprietary
formulae and modern production equipment and techniques for the
manufacture of precision grinding wheels give it advantages in
terms of product quality, lower production costs and faster
deliveries. The company believes that it has also benefited
from technologies common to both grinding wheels and
metalcutting fluids. The company achieves lower production
costs, in part, by finishing its wheels on CNC machines
designed and built by the company's machine tool business.
CARBIDE WEAR PARTS. Carbide wear parts represent various
components made from sintered tungsten carbides having physical
properties of very high hardness, wear resistance and
resistance to chemical activity. Valenite and Widia
manufacture three types of carbide wear parts: tooling
components for metalforming, carbide rod for use in round
tools, and metalforming and general wear parts to resist
frictional wear and chemical activity.
INDUSTRIAL MAGNETS. Widia manufactures permanent industrial
magnets and magnetic circuits for automotive, electrical and
other industrial applications, as well as soft magnets for the
telecommunications and construction industries.
PRODUCTION FACILITIES
For its industrial products segment, the company maintains the
following principal production facilities:
FACILITY PRODUCTS
- -------- --------
Andrezieux, France Carbide inserts.
Bangalore, India Carbide inserts, steel insert
holders, carbide wear parts
and special machine tools.
Carlisle, Pennsylvania Resin grinding wheels.
Cincinnati, Ohio Metalworking fluids and precision
grinding wheels.
Detroit, Michigan
(metro area) (3 plants)(a) Carbide inserts, special steel
products and gauging systems
and ceramic inserts.
Essen, Germany (3 plants) Carbide inserts, magnets and
carbide rods.
Gainesville, Texas (a) Turning tools, milling cutters
and boring bars.
Hardenberg, The Netherlands Carbide wear parts.
Lichtenau, Germany Steel insert holders.
Millersburg, Pennsylvania
(2 plants) End mills, taps and
counterbores.
Nogales, Mexico (a) Resin grinding wheels.
Patancheru, India Rock tools.
Sinsheim, Germany (a) Special steel tooling products.
Tokyo, Japan (a) Carbide inserts and steel tools.
Valley View, Ohio (a) End mills.
Vlaardingen, The Netherlands Metalworking fluids.
West Branch, Michigan
(2 plants) Powder production and carbide
wear parts.
Westminster and Seneca,
South Carolina (6 plants) Carbide and diamond inserts.
(a)The Gainesville, Texas plant, Nogales, Mexico plant, Tokyo,
Japan plant, Sinsheim, Germany plant, Valley View, Ohio
plants and three plants in the Detroit, Michigan (metro area) are
leased from unrelated third parties.
SALES, MARKETING AND CUSTOMER SERVICE
The company generally sells its industrial products under
multiple brands through parallel market channels, using direct
sales, industrial distributors, agents and manufacturers'
representatives, as well as industrial catalog sales. Most of
the company's sales are of products manufactured by the company
and sold under company-owned brands. In addition, the company
sells its products under the brand names of other companies
through their market channels, as well as products under the
Milacron brand names that are made by other companies.
COMPETITION
The company's main global competitors in its metalworking
fluids business are large petrochemical companies and smaller
companies specializing in similar fluids. There are a few
large competitors in the U.S. grinding wheel market, one of
which is significantly larger than the company. The company
has many competitors for metalcutting tools but only two have
higher worldwide sales.
PATENTS
- -------
The company holds a number of patents, none of which is
material to any business segment.
EMPLOYEES
- ---------
During 1996, the company employed an average of 12,581 people,
of whom 5,991 were employed outside the U.S. As of year-end
1996, the company employed 12,598 people.
BACKLOG
- -------
The backlog of unfilled orders was $373 million at the end of
1996 and $344 million at the end of 1995. The backlog at year-
end 1996 is believed to be firm and, in general, is expected to
be delivered in 1997 and early 1998.
SEGMENT INFORMATION
- -------------------
Financial data for the past three years for the company's
business segments are shown in the following tables. The 1996
increases for plastics machinery are primarily attributable to
the acquisition of D-M-E on January 26, 1996. The 1996
decreases for machine tools are partially attributable to the
sale of ESD on December 30, 1995. The 1995 increases for
industrial products are partially attributable to the
acquisitions of Widia on February 1, 1995 and Talbot on July
20, 1995.
(IN MILLIONS) FISCAL YEAR
-----------------------------
1996 1995 1994
-------- -------- --------
SALES
- -----
Plastics machinery $ 662.4 $ 570.1 $ 503.8
Machine tools 371.8 409.0 338.5
Industrial products 695.5 670.2 354.8
-------- -------- --------
Total sales $1,729.7 $1,649.3 $1,197.1
======== ======== ========
BACKLOG OF UNFILLED ORDERS
- --------------------------
Plastics machinery $ 105.6 $ 108.1 $ 122.3
Machine tools 160.6 118.1 117.4
Industrial products 107.0 118.0 47.4
-------- -------- --------
Total backlog $ 373.2 $ 344.2 $ 287.1
======== ======== ========
OPERATING EARNINGS
- ------------------
Plastics machinery $ 59.2 $ 54.3 $ 45.9
Machine tools 4.9 7.7 6.8
Industrial products 73.7 62.1 36.3
Disposition of businesses (a) - 71.0 -
Integration charge (b) - (9.8) -
Corporate expenses (16.8) (15.7) (18.0)
Other unallocated expenses (c) (9.9) (10.5) (6.8)
-------- -------- --------
Operating earnings 111.1 159.1 64.2
Interest expense - net (29.8) (24.8) (15.3)
-------- -------- --------
Earnings before income
taxes $ 81.3 $ 134.3 $ 48.9
======== ======== ========
IDENTIFIABLE ASSETS
- -------------------
Plastics machinery $ 612.6 $ 335.3 $ 295.0
Machine tools 233.3 232.8 270.8
Industrial products 458.9 468.1 195.0
Unallocated corporate assets (d) 31.5 137.5 26.8
-------- -------- --------
Total assets $1,336.3 $1,173.7 $ 787.6
======== ======== ========
CAPITAL EXPENDITURES
- --------------------
Plastics machinery $ 20.6 $ 16.6 $ 13.8
Machine tools 15.7 8.6 11.6
Industrial products 28.9 27.1 17.6
-------- -------- --------
Total capital expenditures $ 65.2 $ 52.3 $ 43.0
======== ======== ========
DEPRECIATION AND AMORTIZATION
- -----------------------------
Plastics machinery $ 21.4 $ 11.8 $ 9.2
Machine tools 5.0 7.4 7.2
Industrial products 24.5 24.4 12.2
-------- -------- --------
Total depreciation
and amortization $ 50.9 $ 43.6 $ 28.6
======== ======== ========
(a)$66.0 million relates to the machine tools segment and
$5.0 million relates to the industrial products segment.
(b)Relates to the industrial products segment.
(c)Includes financing costs related to the sale of accounts
receivable and minority shareholders' interests in
earnings of subsidiaries.
(d)Includes cash and cash equivalents and the assets of the
company's insurance and utility subsidiaries.
GEOGRAPHIC INFORMATION
- ----------------------
The following table summarizes the company's U.S. and non-U.S.
operations.
Sales of U.S. operations include export sales of $179.2
million in 1996, $166.9 million in 1995, and $142.0 million
in 1994.
Total sales of the company's U.S. and non-U.S. operations to
unaffiliated customers outside the U.S. were $809.9 million,
$784.2 million, and $417.6 million in 1996, 1995 and 1994,
respectively.
FISCAL YEAR
--------------------------
(IN MILLIONS) 1996 1995 1994
------ ------ ------
U.S. OPERATIONS
- ---------------
Sales $969.8 $938.3 $873.9
Operating earnings 81.4 71.8 67.9
Disposition of businesses - 62.1 -
Integration charge - (2.9) -
Identifiable assets 731.6 484.1 471.4
Capital expenditures 41.7 31.4 33.2
Depreciation and amortization 28.9 21.6 19.2
Non-U.S. operations
- -------------------
Sales 759.9 711.0 323.2
Operating earnings 56.4 52.3 21.1
Disposition of businesses - 8.9 -
Integration charge - (6.9) -
Identifiable assets 573.2 552.1 289.4
Capital expenditures 23.5 20.9 9.8
Depreciation and amortization 22.0 22.0 9.4
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
(60) Executive Officer, Executive Officer in
Director November, 1991. Has served
as Director since 1985.
Also, is a member of the
Executive Committee.
Raymond E. Ross President and Chief Elected President and Chief
(60) Operating Officer, Operating Officer in Director
November, 1991. Has served as
Director since 1991.
Harold J. Faig Group Vice President- Elected Group Vice
(48) Plastics Machinery President - Plastics
Machinery in February, 1994.
Prior thereto was Vice
President - Injection Molding
from 1990.
Alan L. Shaffer Group Vice President- Elected Group Vice
(46) Industrial Products President - Industrial
Products in 1986.
Ronald D. Brown Vice President- Elected Vice President -
(43) Finance and Finance and Chief Financial
Chief Financial Officer in 1993. Prior
Officer thereto was Treasurer and
Assistant Secretary from 1989.
James R. Christie Vice President- Elected Vice President -
(51) Industrial Industrial Products in 1997.
Products Has served as President of
Valenite since 1993. Prior to
joining the company, was
Chairman and Chief Executive
Officer of the Applied
Chemicals and World Timber
Divisions of Hickson
International, PLC from 1987.
D. Michael Clabaugh Vice President- Elected Group Vice
(54) Machine Tool President - Machine Tools
Marketing and in 1993. Prior thereto was
International Vice President - Advanced
Business Systems from 1990.
William J. Gruber Vice President - Elected Vice President -
(43) U.S. Plastics U.S. Plastics Machinery in
Machinery 1996. Prior thereto was
Manager of U.S. Plastics
Machinery from 1995 and
General Manager, Products
Division from 1984.
Richard L. Kegg Vice President - Elected Vice President -
(61) Technology and Technology and
Manufacturing Manufacturing Development
Development in 1993. Prior thereto was
Director, Corporate Research
and Manufacturing Development
from 1990.
Theodore Mauser Vice President- Elected Vice President -
(57) Human Resources Human Resources in 1984.
James M. Stergiopoulos Vice President- Elected Vice President -
(58) Plastics Machinery, Plastics Machinery Europe
Europe in 1995. Prior thereto was
Director, Plastics Machinery
Europe from 1994 and General
Manager, Cincinnati Milacron
Austria from 1987.
Wayne F. Taylor Vice President- Elected Vice President -
(53) General Counsel General Counsel and
and Secretary Secretary in 1990.
Robert P. Lienesch Controller Elected Controller in
(51) 1989.
Kenneth W. Mueller Treasurer and Elected Treasurer and
(63) Assistant Assistant Secretary
Secretary in 1993. Prior thereto
was Acting Director of
Standard Machine Tools
from 1992 and Tool
Group Controller from 1989.
Notes:
Parenthetical figure below name of individual indicates age
at most recent birthday prior to December 28, 1996.
There are no family relationships among the executive
officers of the Registrant.
Officers of the company are elected each year by the Board of
Directors.
ITEM 2. PROPERTIES
The information required by Item 2 is included in Part I on
pages 8, 11 and 14 of this Form 10-K.
ITEM 3. LEGAL PROCEEDINGS
In the opinion of management and counsel, there are no material
pending legal proceedings to which the company or any of its
subsidiaries is a party or of which any of its property is the
subject.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF STOCKHOLDERS
There were no matters submitted to a vote of stockholders
during the fourth quarter of 1996.
PART II
- -------
ITEM. 5 MARKET FOR THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
The company's common shares are listed on the New York Stock
Exchange. Such shares are also traded on the Cincinnati Stock
Exchange, Boston Stock Exchange, Pacific Stock Exchange,
Philadelphia Stock Exchange and Midwest Stock Exchange, with
options traded on the Philadelphia Stock Exchange. As of
February 28, 1997, there were approximately 6,100 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
1995 and 1996, 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 1995 and 1996.
COMMON STOCK
PRICE RANGE
-------------------
FISCAL 1995, QUARTER ENDED HIGH LOW
------ ------
March 25 $25.00 $19.88
June 17 28.00 20.75
October 7 33.63 26.75
December 30 27.63 23.00
FISCAL 1996, QUARTER ENDED
March 23 $29.25 $20.75
June 15 27.88 23.13
October 5 24.00 18.38
December 28 22.38 18.50
ITEM 6. SELECTED FINANCIAL DATA
(Dollars in millions, except per-share amounts)
1996 1995 1994 1993 1992
-------- -------- -------- -------- -------
Summary of Operations
Sales $1,729.7 $1,649.3 $1,197.1 $1,029.4 $ 789.2
Cost of products sold 1,298.5 1,238.3 904.8 791.3 612.6
-------- -------- -------- -------- -------
Manufacturing margins 431.2 411.0 292.3 238.1 176.6
Other costs and expenses
Selling and administrative 316.3 301.4 222.2 191.3 133.6
(Gain) loss on disposition
of businesses - (71.0)(a) - 22.8(c) -
Integration and consolidation
charges - 9.8 (b) - 47.1(d) -
Minority shareholders'
interests 3.1 2.3 - - -
Other- net .7 9.4 5.9 .7 (.2)
-------- -------- -------- -------- -------
Total other costs
and expenses 320.1 251.9 228.1 261.9 133.4
-------- -------- -------- -------- -------
Operating earnings (loss) 111.1 159.1 64.2 (23.8) 43.2
Interest - net (29.8) (24.8) (15.3) (13.4) (16.2)
-------- -------- -------- -------- -------
Earnings (loss) before
income taxes, extraordinary
items and cumulative
effect of changes in methods
of accounting 81.3 134.3 48.9 (37.2) 27.0
Provision for income taxes 15.0 28.7 11.2 8.2 10.9
-------- -------- -------- -------- -------
Earnings (loss) before
extraordinary items and
cumulative effect of changes
in methods of accounting 66.3 105.6 37.7 (45.4) 16.1
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) -
-------- -------- -------- -------- -------
Net earnings (loss) $ 66.3 $ 105.6 $ 37.7 $ (101.9) $ 21.5
======== ======== ======== ======== =======
Earnings (loss) per common share
Earnings (loss) before
extraordinary items
and cumulative effect
of changes in methods
of accounting $ 1.73 $ 3.04 $ 1.10 $ (1.41) $ .58
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) -
-------- -------- -------- -------- -------
Net earnings (loss) $ 1.73 $ 3.04 $ 1.10 $ (3.16) $ .77
======== ======== ======== ======== =======
See notes on page 22.
(Dollars in millions, except employees and per-share amounts)
1996 1995 1994 1993 1992
-------- -------- ------ ------ ------
FINANCIAL POSITION AT YEAR END
------------------------------
Working capital $ 318.3 $ 392.7 $151.4 $114.3 $191.8
Property, plant and equipment-
net 319.1 265.5 198.8 184.0 121.1
Total assets 1,336.3 1,173.7 787.6 729.6 578.9
Long-term debt 301.9 332.2 143.0 107.6 154.4
Total debt 372.8 355.8 226.9 185.2 175.6
Shareholders' equity 446.2 270.7 157.8 124.1 134.4
Per common share 11.06 7.72 4.50 3.53 4.67
OTHER DATA
----------
Dividends paid to common
shareholders 13.4 12.3 12.2 11.6 10.0
Per common share .36 .36 .36 .36 .36
Capital expenditures 65.2 52.3 43.0 23.4 17.6
Depreciation and amortization 50.9 43.6 28.6 26.1 20.9
Backlog of unfilled orders at
year-end 373.2 344.2 287.1 246.0 249.6
Employees (average) 12,581 11,701 8,395 7,885 6,135
(a) Represents a gain of $66.0 million ($52.4 million after
tax) on the sale of the company's Electronic Systems
Division and a gain of $5.0 million ($4.0 million after
tax) on the sale of the company's American Mine Tool
business.
(b) Represents a charge of $9.8 million ($7.8 million after
tax) for the integration of certain Widia and Valenite
operations.
(c) Represents charges (with no current tax effect) for the
disposition of a plastics machinery subsidiary.
(d) Represents a charge (with no current tax effect) for
the consolidation of U.S. machine tool manufacturing
operations.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The company operates in three business segments: plastics
machinery, machine tools and industrial products. In the last
three years, the company has achieved record sales in each
succeeding year. The sales increases have resulted principally
from the growth of the plastics machinery and industrial
products segments, largely as a result of three major
acquisitions. Machine tool sales increased in 1995, but
decreased in 1996 due primarily to the sale of a division.
On January 26, 1996, the company acquired D-M-E, which is
included in the company's plastics machinery segment for eleven
months of 1996. This acquisition had the effect of increasing
new orders and sales by approximately $153 million in 1996.
In 1995, the company acquired two businesses: Widia in February
and Talbot in July. Both businesses are included in the
industrial products segment. The timing of these acquisitions
caused an increase in new orders and sales in 1996 by
approximately $50 million.
On December 30, 1995, the company sold its Electronic Systems
Division (ESD), which was included in the machine tools
segment. While most of its sales were made to other Milacron
businesses, ESD also contributed approximately $35 million and
$30 million of new orders and sales, respectively, to external
customers in 1995. ESD's operating earnings were $14.2 million
in 1995, and its disposition resulted in a 1995 gain of $66.0
million before tax ($52.4 million after tax).
On January 27, 1995, the company sold its American Mine Tool
(AMT) business which was formerly part of the industrial
products segment. AMT's new orders, sales and operating
earnings in 1995 were immaterial, but its disposition resulted
in a gain of $5.0 million before tax ($4.0 million after tax)
in 1995.
PRESENCE OUTSIDE THE U.S.
Because of the company's recent acquisitions, as well as the
company's internal growth in non-U.S. markets, over 40% of
sales and segment earnings are now being generated outside the
U.S. Foreign currency exchange rate fluctuations affect the
translation of these sales and earnings, as well as
consolidated shareholders' equity. However, the company's major
foreign operations are in European countries which have not
experienced significant currency exchange rate fluctuations in
recent years. In 1996, the financial statement effects of a
weaker German Mark were in large part offset by the effects of
a stronger British Pound. As a result, the company experienced
a translation effect of decreasing new orders by $52 million,
sales by $43 million and net earnings by $2.1 million. In
addition, in 1996 there was a $7 million decrease in
shareholders' equity due to cumulative foreign currency
translation adjustments. A further strengthening of the U.S.
dollar would have a negative effect on translating the
company's 1997 operating results.
1996 COMPARED TO 1995
NEW ORDERS AND BACKLOG
New orders for 1996 were $1,753 million, which represented a
$118 million, or 7%, increase over 1995. Excluding the effects
of acquisitions and divestitures, new orders decreased by $51
million, which approximates the decline caused by changes in
currency exchange rates.
Orders for plastics machinery increased $100 million.
Excluding the effects of the D-M-E acquisition, however, new
orders for plastics machinery declined by $53 million, or 10%,
due primarily to weaker order levels for injection molding
machines in the U.S. in the first half of 1996. Machine tool
orders totaled $414 million, virtually unchanged from 1995
level. However, after excluding the effect of the ESD
divestiture, new orders for machine tools increased $31
million, or 8%, largely due to increased orders for U.K.-built
standard machine tools and U.S.-built aerospace products. This
segment experienced reduced orders for U.S.-built standard
machine tools throughout much of the year, but orders improved
in the fourth quarter. Orders for industrial products were $685
million. After excluding the effect of the Talbot and Widia
acquisitions, new orders for industrial products declined $28
million, or 4%, due primarily to the weakening German Mark
throughout the year, and a weakening of the market for European
cutting tools and industrial magnets in the last half of 1996.
U.S. export orders increased to $202 million in 1996, up over
20% from 1995 due primarily to the D-M-E acquisition.
At December 28, 1996, the backlog of unfilled orders was $373
million, up from $344 million at December 30, 1995. The
increase relates primarily to increased orders for U.S.-built
machine tools, including aerospace products.
SALES
Sales in 1996 were $1,730 million, which represented an $80
million, or 5%, increase over 1995. The increase was caused
primarily by the D-M-E acquisition. Excluding the effect of
acquisitions and divestitures, sales decreased by approximately
$90 million, of which $43 million was due to the effect of
currency translation adjustments.
Sales of plastics machinery increased by $92 million.
Excluding the effects of the D-M-E acquisition, however,
sales of plastics machinery declined by $61 million, or 11%,
due primarily to weaker orders for U.S.-built injection molding
machines in the first half of 1996 and European-built injection
molding machines throughout the year. Machine tool sales
declined $37 million. After excluding the ESD divestiture
effect, however, sales for machine tools declined $7 million,
or 2%, due to reduced sales of U.S.-built standard machine
tools, in part offset by increased sales of U.K.-built standard
machine tools and U.S.-built aerospace products. Industrial
products' sales increased, although after excluding the
acquisitions, sales declined $22 million, or 3%, due to
currency translation effects and the weakening European market
described above.
Sales of all segments to non-U.S. markets totaled $810 million,
an increase in 1996 of $26 million, and export sales totaled
$179 million, an increase of $12 million. The increases
resulted primarily from the D-M-E acquisition. In both 1996 and
1995, products manufactured outside the U.S. approximated 44%
of sales while products sold outside the U.S. approximated 47%
of sales.
MARGINS, COSTS AND EXPENSES
Manufacturing margins, as a percent to sales, were 24.9% in
both 1996 and 1995; however, excluding ESD's margins from 1995,
the ongoing business' margins increased from 24.2% in 1995 to
24.9% in 1996. Plastics machinery margins increased in the U.S.
despite continued price pressures, but declined in Germany due
to temporary excess staffing levels. Machine tool margins also
increased, after excluding ESD's margins from 1995 results.
Industrial products' margins improved for the year but declined
in the fourth quarter due to reduced sales volume in Widia's
European businesses.
Selling and administrative expense increased in 1996 due to the
D-M-E acquisition and increased sales. As a percent to sales,
however, selling expense continued to approximate 16% of sales
and administrative expense continued to approximate 2% of
sales.
The expense for minority shareholders' interests in earnings of
subsidiaries relates principally to Widia's subsidiary in
India. The increased expense reflects a 49% offset to the
subsidiary's improved profitability.
Other-net declined in 1996 to $.7 million from $9.4 million in
1995 due to reduced costs associated with the sale of accounts
receivable, increased gains on sales of fixed assets, favorable
settlement of legal claims and other similar items which may
not recur in the future.
Interest expense, net of interest income, was $29.8 million in
1996 compared to $24.8 million in 1995. The expense increase
was primarily attributable to the temporary use of debt to fund
the D-M-E acquisition. This debt was later repaid from the
proceeds of the equity offering described below and,
accordingly, interest expense declined during the second half
of the year.
INCOME TAXES
The provision for income taxes in 1996, 1995 and 1994 includes
U.S. federal and state and local income taxes, and income taxes
in other jurisdictions outside the U.S. The company entered all
three years with sizeable net operating loss (NOL)
carryforwards, along with valuation allowances in certain
jurisdictions against the NOL carryforwards and other deferred
tax assets.
By December 30, 1995, the company had fully utilized its U.S.
NOL carryforwards, but as of December 28, 1996, its non-U.S.
NOL carryforwards totaled $125 million, most of which have no
expiration dates.
The company's practice is to periodically reevaluate the future
realization of all of its deferred tax assets. During 1996 and
1995, the company concluded that it is more likely than not
that a portion of these assets will be offset against future
taxable income. As a result, the company reversed valuation
allowances in certain jurisdictions which caused the provision
for income taxes to be less than the statutory rate. The
company expects the utilization of these NOL carryforwards and
reversal of additional valuation allowances to continue to
cause the effective tax rate to be less than the U.S. statutory
rate through at least 1997, and most likely through
1998.
EARNINGS
Net earnings in 1996 were $66.3 million, or $1.73 per share,
compared with $105.6 million, or $3.04 per share in 1995. The
1995 net earnings included $48.6 million, or $1.40 per share,
resulting from the combined effects of the gain on the
disposition of two businesses, offset by the integration
charge, both of which are described below. Excluding those
items, 1996 net earnings increased by $9.3 million, or 16%,
while per share earnings increased by $.09, or 5%, which also
includes the effect of an increase in outstanding common
shares.
1995 COMPARED TO 1994
NEW ORDERS AND BACKLOG
New orders for 1995 were $1,635 million, which represented a
$397 million, or 32%, increase over 1994. Of the $397 million
increase, $271 million resulted from the Widia and Talbot
acquisitions.
Orders for plastics machinery increased $16 million, or 3%,
primarily due to increased orders for German-built injection
molding machines. Although the segment experienced increased
orders for the year, new business in the fourth quarter
decreased compared to the exceptionally strong order level in
the fourth quarter of 1994. Machine tool orders increased in
1995 by $84 million, or 25%, as all major U.K. and U.S. product
lines, including aerospace products, showed increases. Machine
tool orders in the fourth quarter of 1995 were $85 million, up
14% over the fourth quarter of 1994; however, the $85 million
was not as strong as earlier 1995 quarters. This decline
affected sales in the first quarter of 1996. Orders for
industrial products, excluding the acquisitions, increased by
$26 million, or 7%, primarily as a result of increased
industrial activity in the U.S. and Europe.
U.S. export orders approximated $164 million in 1995 compared
to $124 million in 1994. This represents a 32% increase, which
was primarily attributable to increased machine tool orders
from European customers.
At December 30, 1995, the backlog of unfilled orders was $344
million. This figure was reduced by ESD's backlog of unfilled
orders from non-Milacron customers as a result of the ESD sale
in December, 1995. Despite this reduction, the backlog
increased in 1995 by $57 million, primarily as a result of the
Widia acquisition.
SALES
Sales in 1995 were $1,649 million, which represented a $452
million, or 38%, increase over 1994. Of the $452 million
increase, $276 million represented sales from the 1995
acquisitions, Widia and Talbot. The rest of the increase was
attributable to a $66 million, or 13%, increase in sales of
plastics machinery resulting primarily from growth in the
company's European injection molding and extrusion businesses;
a $71 million, or 21%, increase in sales of machine tools
resulting primarily from increased sales of U.K.-built vertical
machining centers; and excluding the acquisitions, a $39
million, or 11%, increase in industrial products' sales due to
increased sales of all businesses: cutting fluids, grinding
wheels and Valenite cutting tools.
Sales of all segments to non-U.S. markets totaled $784 million,
an increase in 1995 of $367 million primarily due to the Widia
acquisition. Export sales totaled $167 million, an increase of
$25 million, or 18%, primarily due to increased sales of
machine tools in Europe. In 1995, products manufactured outside
the U.S. constituted 43% of consolidated sales as compared to
27% in 1994, while products sold outside the U.S. were
approximately 47% of consolidated sales as compared to 35% in
1994.
MARGINS, COSTS AND EXPENSES
Manufacturing margins increased to 24.9% in 1995 compared to
24.4% in 1994, due primarily to the increased proportion of
industrial products' sales which have higher margins than the
machinery businesses. Plastics machinery margins were unchanged
for the year although they were lower in the last half of 1995,
largely due to increased exports and reduced automotive sales.
Machine tools experienced a slight decline largely due to
phasing out some older product lines. Industrial products'
margins declined slightly because of the mix of product sales.
Selling and administrative expense increased due to the
acquisitions and increased sales. As a percent to sales,
selling expense increased from 16.1% to 16.3% due to the higher
proportion of industrial products' sales which have higher
selling costs. Administrative expense increased because the
administrative costs of the newly acquired
subsidiaries exceeded a reduction in corporate overhead
expenses, although the 1995 total was slightly less than 2% of
sales.
The $71.0 million gain on disposition of businesses resulted
from the $66.0 million before tax gain on the sale of ESD,
which was sold in the fourth quarter of 1995, and the $5.0
million before tax gain on the sale of AMT, which was sold in
the first quarter of 1995. These transactions had the effect of
increasing 1995 net earnings by $56.4 million, or $1.63 per
share. The ESD sale had the effect of reducing 1996 operating
results by the amount of ESD's sales to non-Milacron customers
and its before tax operating profit which totaled $30 million
and $14.2 million, respectively, in 1995. However, the proceeds
from the sale were used to repay bank borrowings and to
partially fund the D-M-E acquisition which increased 1996
earnings.
The $9.8 million pretax integration charge ($7.8 million after
tax) relates to the company's February, 1995 acquisition of
Widia. The Widia acquisition allows the company to capitalize
on synergistic opportunities with Valenite, an existing
subsidiary which manufactures similar products. Accordingly, in
May, 1995, management formally approved a plan to integrate
certain operations of these businesses at an expected cost of
$17.1 million, which was increased to $28.1 million in
December, 1995, to include additional actions at Widia. That
portion of the cost directly related to Widia, totaling $18.3
million, was recorded as a purchase accounting adjustment,
while the remaining $9.8 million, which is directly related to
Valenite, was recorded as a charge to earnings. The $28.1
million plan involved the closing or downsizing of three
manufacturing plants and the consolidation of numerous sales,
service and warehouse operations in Europe and Asia. The $9.8
million integration charge included $5.8 million for severance
and other termination benefits and $4.0 million for facility
exit costs and asset write downs. As a result of the actions
included in the $28.1 million plan, which began in 1995 and
were substantially completed in the first half of 1996 except
for certain personnel reductions at Widia, the company is
achieving annual cost savings in excess of $20 million. The
total cash cost of $21 million was funded by operations and
bank borrowings.
Other-net increased by $3.5 million due to a $1.5 million
increase in financing fees on the sale of receivables, as well
as the effects of the acquisitions.
Interest expense, net of interest income, was $24.8 million in
1995 compared to $15.3 million in 1994. The primary cause of
the increase was higher borrowing levels to support the Widia
and Talbot acquisitions.
EARNINGS
Net earnings in 1995 were $105.6 million, or $3.04 per share,
compared to $37.7 million, or $1.10 per share in 1994. The net
earnings in 1995 included $48.6 million, or $1.40 per share,
resulting from the combined effects of the gain on the
disposition of two businesses, offset by the integration
charge. Excluding these items, 1995 net earnings increased by
$19.3 million, or $.54 per share.
LIQUIDITY AND SOURCES OF CAPITAL
At December 28, 1996, the company had cash and cash equivalents
of $28 million, a decrease of $105 million during the year.
The decrease was caused primarily by the
D-M-E acquisition, offset in part by the proceeds from the
equity offering described below.
Operating activities provided $60 million in 1996, compared
with $41 million provided in 1995. Operating activities cash
flows have been reduced by cash costs of $13 million in 1996
for the Widia/Valenite integration and restructuring, and $11
million in 1995 for the integration and the machine tool
consolidation.
Investing activities in 1996 resulted in a $308 million use of
cash, mostly due to the D-M-E acquisition, as well as $65
million of capital expenditures. Net cash used by investing
activities in 1995 includes $79 million for the Widia
acquisition and $33 million for the Talbot acquisition. Also
affecting 1995 was $120 million provided from the divestitures
of ESD and AMT.
Financing activities provided $143 million of cash in 1996,
primarily due to $129 million of net proceeds from the issuance
of 5.5 million additional shares of common stock. In 1995,
financing activities provided $106 million of cash, primarily
due to the issuance of $100 million of 7 7/8 % notes.
As of December 28, 1996, the company's current ratio was 1.8,
down from 2.0 at December 30, 1995.
At December 28, 1996, the company had lines of credit with
various U.S. and non-U.S. banks of approximately $527 million,
including a $300 million committed revolving credit facility.
The facility imposes a number of restrictions, including
restrictions on total indebtedness in relation to total
capital. The company has remained in compliance with the
restrictions imposed by the facility since its inception. Under
the provisions of the facility, the company's additional
borrowing capacity totaled approximately $213 million at
December 28, 1996.
The company had a number of short-term intercompany loans and
advances denominated in various currencies totaling $44 million
at December 28, 1996, that were subject to foreign currency
exchange risk. The company also enters into various
transactions, in the ordinary course of business, for the
purchase and sale of goods and services in various currencies.
The company hedges its exposure to currency fluctuations
related to short-term intercompany loans and advances and the
purchase and sale of goods under firm commitments by entering
into foreign currency exchange contracts to minimize the effect
of foreign currency exchange rate fluctuations. The company is
currently not involved with any additional derivative financial
instruments.
The interest rates on the lines of credit and the financing
fees on the receivables purchase agreement fluctuate based on
changes in prevailing interest rates in the countries in which
amounts are borrowed or receivables are sold. At December 28,
1996, approximately $224 million was subject to the effects of
fluctuations in interest rates under these arrangements. Future
changes in interest rates will affect the company's interest
expense and other financing costs.
Total debt was $373 million at December 28, 1996, an increase
of $17 million over December 30, 1995, primarily as a result of
the D-M-E acquisition. Total shareholders' equity was $446
million at December 28, 1996, an increase of $176 million over
December 30, 1995, primarily due to the sale of additional
common shares, as well as the net earnings in 1996. As a
result, the ratio of total debt to total capital (debt plus
equity) improved to 46% at December 28, 1996, from 57% at
December 30, 1995.
In 1997, the company anticipates repurchasing 250,000 to
300,000 shares of the company's common stock on the open market
to meet the needs of management incentive, employee benefit and
dividend reinvestment plans. In addition, 1997 capital
expenditures are expected to range between $70 million and $83
million, dependent upon the timing of certain projects. In the
first quarter of 1997, the company plans to implement a cost-
cutting program to reduce staffing at Ferromatik in Germany
resulting in a $3 million cash expense. The company believes
that its cash flow from operations and available credit lines
will be sufficient to meet these and other operating
requirements.
OUTLOOK
The company expects net earnings in the first quarter of 1997
to be a little below year-ago levels due to the expense
associated with the German cost-cutting program. On an annual
basis, the company has set average annual growth targets of 7%
to 8% in sales and 15% or more in earnings per share. Assuming,
among other things, that the European economy does not worsen
significantly, the company believes these financial targets are
attainable in 1997.
The above forward-looking statements involve
risks and uncertainties that could significantly impact
expected results, as described more fully in the Cautionary
Statement below.
============================================================
CAUTIONARY STATEMENT
- --------------------
The company wishes to caution readers that all its forward-
looking statements in the "Outlook" section above and
elsewhere, which include all statements which, at the time
made, speak about the future, are based upon the company's
interpretation of what it believes are significant factors
affecting its businesses. The company believes the following
important factors, among others, in some cases have
affected, and, in the future, could affect, the company's
actual results and could cause the company's actual
consolidated results for 1997, and beyond, to differ
materially from those expressed in any forward-looking
statements made by, or on behalf of, the company:
* global economic conditions, consumer
spending and industrial production in the
United States and Europe, particularly in
segments related to the level of automotive
production and spending in the aerospace
and construction industries;
* fluctuations in the exchange rates of
U.S. and foreign currencies, including
those of countries in Europe and Asia where
the company has several principal
manufacturing facilities and where many of
the company's competitors and suppliers are
based;
* production and pricing levels of
important raw materials, including plastic
resins, which are a key raw material used
by purchasers of the company's plastics
machinery products, and steel, cobalt,
tungsten and industrial grains used in the
production of metalworking products;
* lower than anticipated levels of plant
utilization resulting in production
inefficiencies and higher costs, whether
related to the delay of new product
introductions, improved production
processes or equipment, or labor relation
issues;
* any major disruption in production at
key customer or supplier facilities;
* alterations in trade conditions in and
between the U.S. and non-U.S. countries
where the company does business, including
export duties, import controls, quotas and
other trade barriers;
* changes in tax, environmental and
other laws and regulations in the U.S. and
non-U.S. countries where the company does
business.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Beginning on page 31 and continuing through page 47 are the
consolidated financial statements with applicable notes and
the related Report of Independent Auditors, and the
supplementary financial information specified by Item 302 of
Regulation S-K.
CONSOLIDATED STATEMENT OF EARNINGS
CINCINNATI MILACRON INC. AND SUBSIDIARIES
FISCAL YEAR ENDS ON SATURDAY CLOSEST TO DECEMBER 31.
- ------------------------------------------------------------
(In millions, except per-share amounts)
1996 1995 1994
- -------------------------------------------------------------
Sales $1,729.7 $1,649.3 $1,197.1
Cost of products sold 1,298.5 1,238.3 904.8
-------- -------- --------
Manufacturing margins 431.2 411.0 292.3
Other costs and expenses
Selling and administrative 316.3 301.4 222.2
Gain on disposition
of businesses - (71.0) -
Integration charge - 9.8 -
Minority shareholders' interests
in earnings of subsidiaries 3.1 2.3 -
Other - net .7 9.4 5.9
-------- -------- --------
Total other costs
and expenses 320.1 251.9 228.1
-------- -------- --------
Operating earnings 111.1 159.1 64.2
Interest
Income 4.8 3.2 2.6
Expense (34.6) (28.0) (17.9)
-------- -------- --------
Interest - net (29.8) (24.8) (15.3)
-------- -------- --------
Earnings before
income taxes 81.3 134.3 48.9
Provision for
income taxes 15.0 28.7 11.2
-------- -------- --------
Net earnings $ 66.3 $ 105.6 $ 37.7
-------- -------- --------
Net earnings per
common share $ 1.73 $ 3.04 $ 1.10
-------- -------- --------
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, except par value) 1996 1995
- ---------------------------------------------------------------------------
Assets
- ---------------------------------------------------------------------------
Current assets
Cash and cash equivalents $ 27.8 $ 133.1
Notes and accounts receivable
(less allowances of $13.7 in
1996 and $12.9 in 1995) 267.0 242.8
Inventories
Raw materials 27.8 22.1
Work-in-process and finished parts 202.7 188.1
Finished products 159.2 141.5
-------- --------
Total inventories 389.7 351.7
Other current assets 43.4 50.2
-------- --------
Total current assets 727.9 777.8
Property, plant and equipment - net 319.1 265.5
Goodwill 229.9 73.6
Other noncurrent assets 59.4 56.8
-------- --------
Total assets $1,336.3 $1,173.7
======== ========
- ----------------------------------------------------------------------------
Liabilities and Shareholders' Equity
- ----------------------------------------------------------------------------
Current liabilities
Amounts payable to banks $ 65.7 $ 20.3
Long-term debt due within one year 5.2 3.3
Trade accounts payable 134.9 109.9
Advance billings and deposits 34.5 42.7
Accrued and other current liabilities 169.3 208.9
-------- --------
Total current liabilities 409.6 385.1
Long-term accrued liabilities 178.6 185.7
Long-term debt 301.9 332.2
-------- --------
Total liabilities 890.1 903.0
======== ========
Commitments and contingencies - -
Shareholders' equity
4% Cumulative Preferred shares 6.0 6.0
Common shares, $1 par value
(outstanding: 39.8 in 1996 and 34.3 in 1995) 39.8 34.3
Capital in excess of par value 390.1 266.0
Reinvested earnings (deficit) 19.9 (32.8)
Cumulative foreign currency translation
adjustments (9.6) (2.8)
Total shareholders' equity 446.2 270.7
-------- --------
Total liabilities and shareholders' equity $1,336.3 $1,173.7
======== ========
See notes to consolidated financial statements.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
CINCINNATI MILACRON INC.
FISCAL YEAR ENDS ON SATURDAY CLOSEST TO DECEMBER 31.
(In millions, except share amounts)
Cumulative
4% Foreign
Cumulative Common Capital in Reinvested Currency Total
Preferred Shares, Excess of Earnings Translation Shareholders'
Shares $1 Par Value Par Value (Deficit) Adjustments Equity
Balance at
year-end 1993 $6.0 $33.5 $251.3 $(151.2) $(15.5) $124.1
Stock options
exercised and
restricted
stock awarded
for 203,404
common shares .2 4.1 4.3
Issuance of
6,998 treasury
shares .1 .1
Net earnings
for the year 37.7 37.7
Cash dividends
Preferred shares
($4.00 per share) (.2) (.2)
Common shares
($.36 per share) (12.2) (12.2)
Foreign currency
translation
adjustments 4.0 4.0
- -----------------------------------------------------------------------------------------------
Balance at
year-end 1994 6.0 33.7 255.5 (125.9) (11.5) 157.8
Contribution of
118,180 common
shares to
pension plan .1 3.3 3.4
Stock options
exercised and
restricted stock
awarded for
414,131
common shares .5 7.4 7.9
Net purchase of
8,756 treasury
shares (.2) (.2)
Net earnings
for the year 105.6 105.6
Cash dividends
Preferred shares
($4.00 per share) (.2) (.2)
Common shares
($.36 per share) (12.3) (12.3)
Foreign currency
translation
adjustments 8.7 8.7
- -----------------------------------------------------------------------------------------------
Balance at
year-end 1995 6.0 34.3 266.0 (32.8) (2.8) 270.7
Issuance of
5,500,000
common shares
in public
offering 5.5 123.0 128.5
Stock options
exercised and
restricted stock
awarded for
69,619common
shares 1.0 1.0
Issuance of 6,474
treasury shares .1 .1
Net earnings
for the year 66.3 66.3
Cash dividends
Preferred shares
($4.00 per share) (.2) (.2)
Common shares
($.36 per share) (13.4) (13.4)
Foreign currency
translation
adjustments (6.8) (6.8)
- -----------------------------------------------------------------------------------------------
Balance at
year-end 1996 $6.0 $39.8 $390.1 $19.9 $(9.6) $446.2
===============================================================================================
See notes to consolidated financial statements.
CONSOLIDATED STAEMENT OF CASH FLOWS
CINCINNATI MILACRON INC.
FISCAL YEAR ENDS ON SATURDAY CLOSEST TO DECEMBER 31.
(In millions) 1996 1995 1994
------- ------- ------
Increase (Decrease) in Cash
and Cash Equivalents
Operating Activities Cash Flows
Net earnings $ 66.3 $ 105.6 $ 37.7
Operating activities
providing (using) cash
Depreciation and
amortization 50.9 43.6 28.6
Gain on disposition
of businesses - (71.0) -
Integration charge - 9.8 -
Deferred income taxes (7.0) (25.3) .5
Working capital changes
Notes and accounts
receivable (5.6) 3.9 4.8
Inventories (20.7) (27.3) (19.8)
Other current assets 7.4 (1.4) (.4)
Trade accounts payable 16.8 4.2 13.3
Other current liabilities (50.6) (1.3) (42.5)
Increase in other
noncurrent assets (1.9) (2.0) (3.6)
Increase (decrease) in
long-term accrued
liabilities 8.8 9.6 (6.2)
Other - net (4.5) (7.5) (4.4)
------- ------- ------
Net cash provided by
operating activities 59.9 40.9 8.0
------- ------- ------
Investing Activities Cash Flows
Capital expenditures (65.2) (52.3) (43.0)
Net disposals of property,
plant and equipment 4.3 10.3 4.3
Acquisitions (246.8) (113.5) (1.9)
Disposition of businesses - 120.4 3.2
------- ------- ------
Net cash used by investing
activities (307.7) (35.1) (37.4)
------- ------- ------
Financing Activities Cash Flows
Dividends paid (13.6) (12.5) (12.4)
Increase in long-term debt - 190.0 115.4
Repayments of long-term debt (21.1) (33.0) (62.8)
Increase (decrease) in
amounts payable to banks 47.6 (49.8) (12.5)
Net issuance of common shares 129.6 11.1 4.4
------- ------- ------
Net cash provided by
financing activities 142.5 105.8 32.1
------- ------- ------
Increase (decrease) in cash
and cash equivalents (105.3) 111.6 2.7
Cash and cash equivalents
at beginning of year 133.1 21.5 18.8
------- ------- ------
Cash and cash equivalents
at end of year $ 27.8 $ 133.1 $ 21.5
======= ======= ======
See notes to consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
FISCAL YEAR END
The company's fiscal year ends on the Saturday closest to
December 31 of each year. Fiscal year ends are as follows:
1996: December 28, 1996
1995: December 30, 1995
1994: December 31, 1994
USE OF ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported
in the financial statements and accompanying notes. Actual
results could differ from those estimates.
CONSOLIDATION
The consolidated financial statements include the accounts of
the company and its subsidiaries. All significant intercompany
transactions are eliminated.
FOREIGN CURRENCY TRANSLATION
Assets and liabilities of the company's non-U.S. operations are
translated into U.S. dollars at period-end exchange rates. Net
exchange gains or losses resulting from such translation are
excluded from net earnings and accumulated in a separate
component of shareholders' equity. Income and expense accounts
are translated at weighted-average exchange rates for the
period. Gains and losses from foreign currency transactions are
included in other costs and expenses - net in the Consolidated
Statement of Earnings. Gains and losses on foreign exchange
contracts that are designated as hedges of foreign currency
commitments are recognized as part of the specific transactions
hedged.
RECLASSIFICATION OF FINANCIAL STATEMENT
Certain amounts in the 1995 Consolidated Balance Sheet have
been reclassified to conform to the 1996 presentation.
CASH AND CASH EQUIVALENTS
The company considers all highly liquid investments with a
maturity of three months or less to be cash equivalents.
INVENTORY VALUATION
Inventories are stated at the lower of cost or market,
including provisions for obsolescence commensurate with known
or estimated exposures. The principal methods of determining
costs are last-in, first-out (LIFO) for certain 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 are stated at cost or, for assets
acquired through business combinations, at fair value at the
dates of the respective acquisitions. For financial reporting
purposes, depreciation is generally determined on the straight-
line method using estimated useful lives of the assets.
Depreciation expense was $45.1 million, $42.1 million and $28.2
million for 1996, 1995 and 1994, respectively.
Property, plant and equipment that are idle and held for sale
are valued at the lower of historical cost less accumulated
depreciation or fair value less cost to sell. Carrying costs
through the expected disposal dates of such assets are accrued
at the time expected losses are recognized or, in the case of
assets to be sold at a gain, charged to expense as incurred.
GOODWILL
Goodwill, which represents the excess of acquisition cost over
the net assets acquired in business combinations, is amortized
on the straight-line method over periods ranging from 25 to 40
years. The carrying amount of goodwill is reviewed annually
using estimated undiscounted cash flows for the businesses
acquired over the remaining amortization periods. Amortization
expense charged to earnings amounted to $5.8 million, $1.5
million and $.4 million in 1996, 1995 and 1994, respectively.
RETIREMENT BENEFIT PLANS
The company maintains various defined benefit and defined
contribution pension plans covering substantially all U.S.
employees and certain non-U.S. employees. For defined benefit
plans, pension benefits are based primarily on length of
service and compensation. The company's policy is to fund the
plans in accordance with applicable laws and regulations.
STOCK-BASED COMPENSATION
The company accounts for stock-based compensation under the
provisions of Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees," and the related
interpretations.
INCOME TAXES
The company provides deferred income taxes for cumulative
temporary differences between the financial reporting basis and
income tax basis of its assets and liabilities. Provisions are
made for all currently payable federal and state and local
income taxes at applicable tax rates. Provisions are also made
for any additional taxes on anticipated distributions from
subsidiaries.
EARNINGS PER SHARE
Earnings per common share are based on the weighted-average
number of common shares and common share equivalents
outstanding.
RECENTLY ISSUED PRONOUNCEMENTS
American Institute of Certified Public Accountants Statement
of Position No. 96-1, "Environmental Remediation Liabilities,"
establishes specific criteria for the recognition and
measurement of environmental remediation liabilities. The
adoption of the statement in 1997 is not expected to have a
significant effect on the company's financial condition or
results of operations.
Effective in 1997, Statement of Financial Accounting Standards
No. 125, "Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities," establishes
criteria for the classification of transfers of financial
assets, such as accounts receivable, as either sales or secured
borrowings. Based on these criteria, the company will continue
to account for purchases of its accounts receivable by an
independent party as sales. As a result, the new standard will
have no effect on the company's financial condition or results
of operations.
DISPOSITION OF BUSINESSES
In December, 1995, the company completed the sale of its
Electronic Systems Division (ESD) for approximately $104
million in cash and recorded a fourth quarter pretax gain of
$66.0 million ($52.4 million after tax). The company also
entered into a seven year supply contract with the purchaser
for electronic controls used on the company's machine tools and
plastics machinery. The decision to sell ESD was made to
redeploy assets to more strategic businesses. ESD's 1995 sales
to unaffiliated customers were approximately $30 million.
In January, 1995, the company completed the sale of its
American Mine Tool (AMT) business for $15 million resulting in
a pretax gain of $5.0 million ($4.0 million after tax). The
sale did not have a significant effect on the company's ongoing
sales or operating earnings.
INTEGRATION CHARGE
In the second quarter of 1995, the company recorded a pretax
charge of $9.8 million ($7.8 million after tax) to eliminate or
downsize certain operations of Valenite in connection with the
acquisition of Widia earlier in the year. The charge was
recorded as a result of a plan formally approved by management
in May, 1995, and later revised in December, 1995, which also
involved the integration of certain Widia operations with
Valenite. The total cost of the plan was $28.1 million. That
portion of the overall plan that related directly to Widia was
recorded through purchase accounting adjustments totaling $18.3
million. As it related to Valenite, the plan involved the
closure of one manufacturing plant, the downsizing of another
and the consolidation of numerous sales, customer service and
warehousing operations in Europe and Japan. The $9.8 million
charge included reserves for the cash costs of the integration
of $7.0 million, including $5.8 million for severance and other
termination benefits related to approximately eighty production
and sales personnel and $1.2 million for facility exit costs.
The charge also included $2.8 million to adjust the basis of
various assets to net realizable value. Charges against the
$7.0 million reserve for severance and other cash costs totaled
$4.6 million in 1995 and substantially all of the remaining
balance of $2.4 million was utilized during 1996. The total
cash cost of the $28.1 million plan was approximately $21
million and was funded by operations and bank borrowings. As a
result of the actions that were included in the integration
plan, the company has achieved annual cost reductions in excess
of $20 million.
ACQUISITIONS
On February 1, 1995, the company acquired Krupp Widia GmbH
(Widia) for DM 120.8 million in cash (approximately $79
million), which included DM 7.1 million (approximately $4
million) for the settlement of all intercompany liabilities to
the seller as of the closing date, and $13 million of assumed
debt. Headquartered in Germany, Widia is one of the world's
leading producers of industrial metalcutting products.
On July 20, 1995, the company acquired Talbot Holdings, Ltd.
(Talbot) for approximately $33 million in cash and $5 million
of assumed debt. Talbot is a major supplier of round high-speed
steel and carbide metalcutting tools.
On January 26, 1996, the company acquired The Fairchild
Corporation's D-M-E business (D-M-E) for approximately $246
million. D-M-E is the largest U.S. producer of mold bases,
standard components and supplies for the plastics injection
mold-making industry. The company financed the acquisition
through the execution of promissory notes to the seller in the
amount of $182 million and cash on hand of $64 million. The
promissory notes were subsequently repaid using the proceeds
from an equity offering (see Shareholders' Equity), available
cash and borrowings under the company's existing lines of
credit.
All of these acquisitions were accounted for under the purchase
method. The aggregate cost of the acquisitions, including
professional fees and other related costs, was $248.1 million
in 1996 and $111.1 million in 1995. The following table
presents the allocation of the aggregate acquisition cost to
the assets acquired and liabilities assumed.
ALLOCATION OF ACQUISITION COST
(In millions) 1996 1995
------ -------
Cash and cash equivalents $ 1.3 $ 3.1
Accounts receivable 25.5 51.7
Inventories 29.6 68.9
Other current assets 1.2 .6
Property, plant and
equipment 43.9 60.6
Goodwill 162.5 51.9
Other noncurrent assets 7.9 14.3
------ -------
Total assets 271.9 251.1
------ -------
Amounts payable to banks and
long-term debt due within
one year - (9.3)
Other current liabilities (18.9) (70.6)
Long-term accrued liabilities (4.9) (50.7)
Long-term debt - (9.4)
------ -------
Total liabilities (23.8) (140.0)
------ -------
Total acquisition cost $248.1 $ 111.1
====== =======
In the 1995 allocation, other current liabilities includes a
reserve of $16.9 million for the further restructuring of Widia
and its integration with Valenite. Certain of Widia's worldwide
operations, including its principal plant in Essen, Germany,
had already been restructured by the seller during 1993 and
1994. Prior to the acquisition, the company`s management began
to develop a plan for the integration of certain operations of
Widia and Valenite and for additional restructuring actions to
further improve Widia's profitability. In May, 1995, the
company's management formally approved this integration plan at
an expected total cost of $17.1 million. The portion directly
related to Valenite was recorded as a $9.8 million pretax
charge to earnings in the second quarter of 1995.
Immediately following the approval of the original plan, the
management of Widia began to develop a plan to further reduce
personnel levels at its plant and corporate headquarters in
Essen, Germany. This revision of the original plan was formally
approved by the managements of the company and Widia in
December, 1995. As a result, the total cost of the integration
plan was $28.1 million. As it related to Widia, the revised
plan involved the closure of one manufacturing plant, the
reduction of employment levels at the Essen plant and
headquarters, and the consolidation of numerous sales, customer
service and warehouse operations in Europe and Asia at a total
cost of $18.3 million, including write downs of certain assets
to net realizable value totaling $1.4 million. The $16.9
million reserve included $14.6 million for severance and other
termination benefits related to the expected elimination of
approximately 290 production, sales and administrative
personnel and $2.3 million for facility exit costs.
At year-end 1996, the balance of the $16.9 million reserve was
$1.3 million, which will be utilized for continuing obligations
with respect to employees terminated in 1996 and prior years.
Charges against the reserve for 1996 and 1995 were $11.6
million and $3.2 million, respectively. Foreign currency
exchange rate fluctuations had the effect of reducing the
reserve by $.8 million in 1996.
Unaudited pro forma sales and earnings information for 1996 and
1995 are presented in the following table. The amounts for 1996
assume that D-M-E had been acquired at the beginning of 1996,
while the amounts for 1995 assume that all three acquisitions
had been completed on the first day of that year.
PRO FORMA INFORMATION
(In millions, except per-share amounts) 1996 1995
-------- --------
Sales $1,742.2 $1,864.8
======== ========
Net earnings (a) $ 66.4 $ 108.5
======== ========
Earnings per common share (a) $ 1.74 $ 3.13
======== ========
(a) In 1995, includes a gain of $66.0 million ($52.4 million
after tax) on the sale of ESD, a gain of $5.0 million
($4.0 million after tax) on the sale of AMT and a charge
of $9.8 million ($7.8 million after tax) for the
integration of certain Widia and Valenite operations.
The pro forma net earnings amounts for 1996 and 1995 reflected
above do not include adjustments for cost savings related to
the company's $28.1 million integration plan because the
actions were completed as of various dates and therefore the
incremental savings cannot be precisely quantified for specific
years.
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. The decrease in 1996 relates principally
to the sale of ESD in December, 1995.
RESEARCH AND DEVELOPMENT
(In millions) 1996 1995 1994
----- ----- -----
Research and development $49.0 $57.8 $46.8
===== ===== =====
RETIREMENT BENEFIT PLANS
Pension cost for all defined benefit plans is summarized in the
following table. For all years presented, the table includes
amounts for plans for certain U.S. and United Kingdom (U.K.)
employees. The 1996 and 1995 columns also include amounts for
two plans for certain employees in Germany. These amounts are
included as a result of acquisitions.
PENSION COST (INCOME)
(In millions) 1996 1995 1994
------ ------ ------
Service cost (benefits earned
during the period) $ 9.5 $ 7.6 $ 7.6
Interest cost on projected
benefit obligation 37.5 37.0 32.2
Actual (return) loss on
plan assets (53.3) (87.9) 4.8
Net amortization and
deferral 11.1 46.3 (47.0)
------ ------ ------
Pension cost (income) $ 4.8 $ 3.0 $ (2.4)
====== ====== ======
The following table sets forth the funded status of the defined
benefit pension plans that cover certain U.S. and U.K.
employees.
FUNDED STATUS AT YEAR-END
(In millions) 1996 1995
------- -------
Vested benefit obligation $(372.8) $(373.7)
======= =======
Accumulated benefit
obligation $(389.4) $(392.0)
======= =======
Projected benefit obligation $(445.6) $(462.4)
Plan assets at fair value 464.4 429.3
------- -------
Excess (deficiency)
of plan assets in relation
to projected
benefit obligation 18.8 (33.1)
Unrecognized net loss 5.2 55.5
Unrecognized net
transition asset (13.8) (19.2)
------- -------
Prepaid pension cost $ 10.2 $ 3.2
======= =======
The plans' assets consist principally of stocks, debt
securities and mutual funds. The U.S. plan also includes common
shares of the company with a market value of $16.5 million in
1996 and $19.8 million in 1995. Contributions of $7.5 million
and $3.4 million were made to the U.S. plan in 1996 and 1995,
respectively. Because of the funded status of the U.K. plan, no
contributions were required in the three year period ended
December 28, 1996.
The following table sets forth the status of the company's
defined benefit pension plans for certain employees in Germany.
Consistent with customary practice in Germany, these plans have
not been funded.
STATUS AT YEAR-END
(In millions) 1996 1995
------ ------
Vested benefit obligation $(34.8) $(36.3)
====== ======
Accumulated benefit
obligation $(38.6) $(39.2)
====== ======
Projected benefit obligation $(42.6) $(43.2)
Unrecognized net gain (.1) (1.0)
------ ------
Accrued pension cost $(42.7) $(44.2)
====== ======
The following table presents the weighted average actuarial
assumptions used for all defined benefit plans in 1996, 1995
and 1994.
ACTUARIAL ASSUMPTIONS
1996 1995 1994
---- ---- ----
Discount rate 8.0% 7.5% 9.0%
Expected long-term rate
of return on plan assets 9.6% 9.6% 9.6%
Rate of increase in future
compensation levels 5.1% 4.3% 5.1%
The company also maintains certain defined contribution and
401(k) plans. Participation in these plans is available to
certain U.S. employees. Costs for these plans were $7.7
million, $6.4 million and $5.7 million in 1996, 1995 and 1994,
respectively.
In addition to pension benefits, the company also provides
varying levels of postretirement health care benefits to
certain U.S. employees. Substantially all such employees are
covered by the company's principal plan, under which benefits
are provided to employees who retire from active service after
having attained age 55 and ten years of service. The plan is
contributory in nature. For employees retiring prior to 1980,
such contributions are based on varying percentages of the
current per-contract cost of benefits, with the company funding
any excess over these amounts. For employees retiring after
1979, the dollar amount of the company's current and future
contributions is frozen.
The following table presents the components of the company's
liability for retiree health care benefits under the principal
U.S. plan.
ACCRUED POSTRETIREMENT HEALTH CARE BENEFITS
(In millions) 1996 1995
------ ------
Accumulated postretirement
benefit obligation
Retirees $(29.1) $(31.5)
Fully eligible active
participants (4.9) (5.4)
Other active participants (6.3) (7.4)
------ ------
(40.3) (44.3)
Unrecognized net gain (5.0) (.1)
------ ------
Accrued postretirement
health care benefits $(45.3) $(44.4)
====== ======
In the Consolidated Balance Sheet, accrued and other current
liabilities includes $1.4 million of the total liability for
postretirement health care benefits at year-end 1996 and 1995.
POSTRETIREMENT HEALTH CARE COST
(In millions) 1996 1995 1994
---- ---- ----
Service cost (benefits earned
during the period) $ .3 $ .3 $ .5
Interest cost on accumulated
postretirement benefit
obligation 3.2 3.9 4.0
Net amortization and deferral - - .3
---- ---- ----
Postretirement health care cost $3.5 $4.2 $4.8
==== ==== ====
The discount rates used in calculating the accumulated
postretirement benefit obligation were 8.0% for 1996 and 7.5%
for 1995. For 1997, the assumed rate of increase in health care
costs used to calculate the accumulated postretirement benefit
obligation is 9.4%. This rate is assumed to decrease to varying
degrees annually to 5.0% for years 2005 and thereafter. Because
the dollar amount of the company's contributions for most
employees is frozen, a one percent change in each year in
relation to the above assumptions would not significantly
change the accumulated postretirement benefit obligation or the
total cost of the plan.
INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts
used for income tax purposes. The significant components of the
company's deferred tax assets and liabilities as of year-end
1996 and 1995 are as follows:
COMPONENTS OF DEFERRED TAX ASSETS AND LIABILITIES
(In millions) 1996 1995
------ ------
Deferred tax assets
Net operating loss and tax credit
carryforwards $ 59.7 $ 62.8
Accrued postretirement health
care benefits 15.2 15.3
Inventories, principally due to
obsolescence reserves and
additional costs inventoried
for tax purposes 8.7 9.5
Accrued employee benefits other
than pensions and retiree
health care benefits 10.7 9.4
Accrued pension costs 4.1 5.8
Accrued warranty costs 3.1 3.8
Accrued taxes 3.0 3.1
Accounts receivable,
principally due to allowances
for doubtful accounts 3.0 2.2
Accrued liabilities and other 20.5 19.9
------ ------
Total deferred tax assets 128.0 131.8
Less valuation allowances (59.4) (66.1)
------ ------
Deferred tax assets net
of valuation allowances $ 68.6 $ 65.7
====== ======
Deferred tax liabilities
Property, plant and equipment,
principally due to differences
in depreciation methods $ 23.7 $ 27.4
Accounts receivable and inventories 3.0 5.2
Prepaid pension costs 6.2 3.7
Undistributed earnings of
non-U.S. subsidiaries 1.3 1.0
Other 7.1 7.8
------ ------
Total deferred tax liabilities $ 41.3 $ 45.1
------ ------
Net deferred tax assets $ 27.3 $ 20.6
====== ======
Valuation allowances totaling $13.2 million will be applied to
reduce goodwill related to the acquisition of Widia when tax
benefits related to Widia's net operating loss carryforwards
are recognized in future years. During 1996, reversals of
valuation allowances applied to reduce goodwill totaled $1.9
million.
Summarized in the following tables are the company's earnings
before income taxes, its provision for income taxes, the
components of the provision for deferred income taxes and a
reconciliation of the U.S. statutory rate to the tax provision
rate.
EARNINGS BEFORE INCOME TAXES
(In millions) 1996 1995 1994
----- ----- -----
United States $33.9 $ 87.8 $32.7
Non-U.S. 47.4 46.5 16.2
----- ------ -----
$81.3 $134.3 $48.9
===== ====== =====
PROVISION FOR INCOME TAXES
(In millions) 1996 1995 1994
------ ------ -----
CURRENT PROVISION
United States $ 6.4 $ 32.6 $ 4.1
State and local 2.8 8.9 3.4
Non-U.S. 12.8 12.5 3.2
------ ------ -----
22.0 54.0 10.7
------ ------ -----
DEFERRED PROVISION
United States (2.9) (23.0) -
Non-U.S. (4.1) (2.3) .5
------ ------ -----
(7.0) (25.3) .5
------ ------ -----
$ 15.0 $ 28.7 $11.2
====== ====== =====
COMPONENTS OF THE PROVISION FOR DEFERRED INCOME TAXES
(In millions) 1996 1995 1994
----- ------ ------
Tax effects of consolidation,
restructuring and
other reserves $ .4 $ 1.6 $ 32.8
Depreciation (3.7) 8.9 (7.6)
Change in valuation
allowances (6.7) (19.6) (10.0)
Change in deferred taxes
related to operating
loss carryforwards 3.2 (6.0) (16.0)
Accrued pension and other
employee costs .5 (5.3) (1.5)
Other (.7) (4.9) 2.8
----- ------ ------
$(7.0) $(25.3) $ .5
===== ====== ======
RECONCILIATION OF THE U.S. STATUTORY RATE TO THE
TAX PROVISION RATE
1996 1995 1994
----- ----- -----
U.S. statutory tax rate 35.0% 35.0% 35.0%
Increase (decrease) resulting
from
Losses without current
tax benefits 5.3 3.0 5.6
Tax benefits from net
reversal of U.S.
temporary differences (4.4) (15.8) (15.1)
U.S. federal income tax
credits (5.9) - -
Effect of operations outside
the U.S. (15.1) (7.3) (9.5)
State and local income taxes,
net of federal benefit 2.3 6.6 7.0
Other 1.3 (.1) (.1)
----- ----- -----
18.5% 21.4% 22.9%
===== ===== =====
At year-end 1996, certain of the company's non-U.S.
subsidiaries had net operating loss carryforwards aggregating
approximately $125 million, substantially all of which have no
expiration dates.
Undistributed earnings of foreign subsidiaries which are
intended to be indefinitely reinvested aggregated $107 million
at the end of 1996.
Income taxes of $33.8 million, $21.0 million and $10.4 million
were paid in 1996, 1995 and 1994, respectively.
RECEIVABLES
In January, 1996, the company entered into a three year
receivables purchase agreement with an independent issuer of
receivables-backed commercial paper, pursuant to which the
company agreed to sell on an ongoing basis and without
recourse, an undivided percentage ownership interest in
designated pools of accounts receivable. To maintain the
balance in the designated pools of accounts receivable sold,
the company is obligated to sell undivided percentage interests
in new receivables as existing receivables are collected. The
agreement permits the sale of up to $75 million of undivided
interests in accounts receivable through January, 1999. This
agreement replaced a similar agreement that expired in January,
1996. At December 28, 1996 and December 30, 1995, the undivided
interests in the company's gross accounts receivable that had
been sold to the purchasers aggregated $75.0 million and $69.0
million, respectively. Increases and decreases in the amount
sold are reported as operating cash flows in the Consolidated
Statement of Cash Flows. Costs related to the sales are
included in other costs and expenses-net in the Consolidated
Statement of Earnings.
INVENTORIES
Inventories amounting to $129.0 million in 1996 and $130.6
million in 1995 are stated at LIFO cost. If stated at FIFO
cost, such inventories would be greater by approximately $64.6
million in 1996 and $65.8 million in 1995.
As presented in the Consolidated Balance Sheet, inventories are
net of reserves for obsolescence of $45.6 million and $53.5
million in 1996 and 1995, respectively.
PROPERTY, PLANT AND EQUIPMENT
The components of property, plant and equipment are shown in
the following table.
PROPERTY, PLANT AND EQUIPMENT - NET
(In millions) 1996 1995
------ ------
Land $ 13.6 $ 8.8
Buildings 178.0 165.2
Machinery and equipment 427.0 353.0
------ ------
618.6 527.0
Less accumulated depreciation 299.5 261.5
------ ------
$319.1 $265.5
====== ======
OTHER CURRENT AND NONCURRENT ASSETS
The company holds for sale certain idle production facilities
having an aggregate carrying value of $6.1 million and $6.0
million at year-end 1996 and 1995, respectively. One of these
properties with a value of $1.6 million and $2.0 million in
1996 and 1995, respectively, is included in other current
assets because it is expected to be sold within one year.
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) 1996 1995
------ ------
Accrued salaries, wages and
other compensation $ 51.9 $ 37.8
Integration and restructuring
reserves 2.3 18.3
Accrued and deferred
income taxes 13.6 29.0
Other accrued expenses 101.5 123.8
------ ------
$169.3 $208.9
====== ======
LONG-TERM ACCRUED LIABILITIES
(In millions) 1996 1995
------ ------
Accrued pension and other
compensation $ 67.1 $ 69.9
Accrued postretirement
health care benefits 48.4 43.0
Accrued and deferred
income taxes 26.9 33.9
Minority shareholders'
interests 12.7 8.7
Other 23.5 30.2
------ ------
$178.6 $185.7
====== ======
LONG-TERM DEBT
The components of long-term debt are shown in the following
table.
LONG-TERM DEBT
(In millions) 1996 1995
------ ------
Long-term debt
7 7/8 % Notes due 2000 $100.0 $100.0
8 3/8 % Notes due 2004 115.0 115.0
12% Sinking Fund
Debentures due 2010 .8 10.8
Revolving credit facility 80.3 87.1
Other 11.0 22.6
------ ------
307.1 335.5
Current maturities (5.2) (3.3)
------ ------
$301.9 $332.2
====== ======
Except for the 7 7/8% Notes due 2000 and the 8 3/8% Notes due
2004, the carrying amount of the company's long-term debt
approximates fair value, which is determined using discounted
cash flow analysis based on the company's incremental borrowing
rate for similar types of financing arrangements. At year-end
1996, the fair value of the 7 7/8% Notes due 2000 was $103.7
million and the fair value of the 8 3/8% Notes due 2004 was
$118.4 million. Such amounts are based on recent trade prices
through registered securities brokers.
The 12% Sinking Fund Debentures due 2010 have annual sinking
fund requirements which commenced in 1996. The terms of the
indenture require the company to redeem at par $5.0 million of
the debentures to meet the annual sinking fund requirement and
the company could, at its option, increase such payment to a
total of $10.0 million. In accordance with the terms of the
indenture, the company elected to exercise this option and
redeemed at par value $10.0 million of the debentures during
1996.
Certain of the above long-term debt obligations contain various
restrictions and financial covenants relating principally to
additional secured indebtedness.
Outstanding borrowings under the company's revolving credit
facility of DM 125 million ($80.3 million and $87.1 million at
year-end 1996 and 1995, respectively) are included in long-term
debt based on the expectation that these borrowings will remain
outstanding for more than one year. These borrowings are at a
variable interest rate which was 4% at year-end 1996.
Interest paid was $35.1 million in 1996, $27.7 million in 1995
and $17.1 million in 1994.
Maturities of long-term debt for the five years after 1996 are:
1997: $ 5.2 million
1998: 1.8 million
1999: .8 million
2000: 180.7 million
2001: .4 million
The company 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:
1997: $21.4 million
1998: 14.6 million
1999: 10.4 million
2000: 8.2 million
2001: 6.1 million
After 2001: 22.2 million
Rent expense was $23.6 million, $19.8 million and $17.4 million
in 1996, 1995 and 1994, respectively.
LINES OF CREDIT
At year-end 1996, the company had lines of credit with various
U.S. and non-U.S. banks of approximately $527 million,
including a $300 million committed revolving credit facility.
These credit facilities support letters of credit and leases in
addition to providing borrowings under varying terms. In
January, 1996, to finance the acquisition of D-M-E, the company
amended the revolving credit facility to increase the amount of
credit available thereunder from $150 million to $300 million
and to extend the term to January, 2000. The amended facility
requires a facility fee of 1/4 % per annum on the total $300
million revolving loan commitment and continues to impose
restrictions on total indebtedness in relation to total
capital. The company anticipates that it will be able to
continue to comply with these restrictions throughout the
extended term of the facility. Under the provisions of the
revolving credit facility, the company's additional borrowing
capacity totaled approximately $213 million at year-end 1996.
The weighted average interest rate on short-term borrowings
outstanding as of year-end was 6.6% and 6.5% for 1996 and 1995,
respectively.
SHAREHOLDERS' EQUITY
In May 1996, the company completed the issuance of an
additional 5.5 million common shares through a public offering,
resulting in net proceeds (after deducting issuance costs) of
$128.5 million. The proceeds of the offering were used to repay
a portion of the promissory notes issued to the seller in
connection with the acquisition of D-M-E.
SHAREHOLDERS' EQUITY - PREFERRED AND COMMON SHARES
(In millions, except share and per-share amounts)
1996 1995
----- -----
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,
1996: 39,846,397 shares, 1995: 34,270,304 39.8 34.3
The company has authorized ten million serial preference shares
with $1 par value. None of these shares have been issued.
Holders of company common stock have one vote per share until
they have held their shares for at least 36 consecutive months,
after which they are entitled to ten votes per share.
CONTINGENCIES
The company is involved in remedial investigations and actions
at various locations, including former plant facilities, and
EPA Superfund sites where the company and other companies have
been designated as potentially responsible parties. The company
accrues remediation costs when it is probable that a liability
has been incurred and the amount of the liability can be
reasonably estimated. Environmental costs have not been
material in the past.
Various lawsuits arising during the normal course of business
are pending against the company and its consolidated
subsidiaries.
In the opinion of management, the ultimate liability, if any,
resulting from these matters will have no significant effect on
the company's consolidated financial position or results of
operations.
FOREIGN EXCHANGE CONTRACTS
The company enters into forward contracts to hedge foreign
currency commitments on an ongoing basis for periods
commensurate with known exposures. The purpose of this practice
is to minimize the effect of foreign currency exchange rate
fluctuations on the company's operating results. The company
does not engage in speculation. The company's exposure to
credit-related losses from these transactions is considered to
be minimal due to the high credit ratings of the parties
involved.
At December 28, 1996, the company had outstanding forward
contracts totaling $32.6 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. Due
to the short-term nature of these contracts, the fair value of
the contracts approximates their contract values as of December
28, 1996.
STOCK BASED COMPENSATION
The 1994 Long-Term Incentive Plan (1994 Plan) permits the
company to grant its common shares in the form of non-qualified
stock options, incentive stock options, restricted stock and
performance awards.
Non-qualified and incentive stock options outstanding under the
1994 Plan are granted at market value, vest in increments over
a five year period, and expire ten years subsequent to the
award. Of the 2,706,569 options outstanding at year-end 1996,
140,000 are incentive stock options.
Summaries of amounts issued under the 1994 Plan and prior plans
are presented in the following tables.
STOCK OPTION ACTIVITY
Weighted-
Average
Exercise
Shares Price
--------- ---------
Outstanding at year-end 1993 1,717,075 $17.13
- Granted 503,300 23.43
- Exercised (225,157) 16.92
- Canceled (25,782) 21.66
--------- ---------
Outstanding at year-end 1994 1,969,436 18.73
- Granted 581,009 20.69
- Exercised (382,854) 18.77
- Canceled (30,595) 21.15
--------- ---------
Outstanding at year-end 1995 2,136,996 19.22
- Granted 626,800 25.75
- Exercised (31,045) 20.51
- Canceled (26,182) 22.95
--------- ---------
Outstanding at year-end 1996 2,706,569 $20.70
========= =========
EXERCISABLE STOCK OPTIONS AT YEAR-END
Stock Options
-------------
1994 1,437,636
1995 1,054,663
1996 1,147,869
SHARES AVAILABLE FOR FUTURE GRANT AT YEAR-END
Stock Options
-------------
1994 1,481,950
1995 871,150
1996 131,675
The following tables summarize information about stock options
outstanding at December 28, 1996.
COMPONENTS OF OUTSTANDING STOCK OPTIONS
Average Weighted-
Range of Remaining Average
Exercise Number Contract Exercise
Prices Outstanding Life Price
------------- ----------- --------- ---------
$8.50 - 14.50 607,500 4.5 $13.31
17.13 - 25.75 2,099,069 7.1 22.83
------------- ----------- --------- ---------
$8.50 - 25.75 2,706,569 6.5 $20.70
============= =========== ========= =========
COMPONENTS OF EXERCISABLE STOCK OPTIONS
Weighted-
Range of Average
Exercise Number Exercise
Prices Exercisable Price
------------- ----------- ---------
$8.50 - 14.50 607,500 $13.31
17.13 - 25.75 540,369 22.18
------------- ----------- ---------
$8.50 - 25.75 1,147,869 $18.62
============= =========== =========
Under the 1994 Plan, performance awards are earned based on the
achievement of specified annual earnings objectives and, at the
discretion of the recipient, may be paid in the form of company
common shares or cash. Participants who elect payment in common
shares also receive an equal number of shares of restricted
stock. Restricted stock awards generally vest three years from
the date of grant. During the restriction period, restricted
stock awards entitle the holder to all the rights of a holder
of common shares, including dividend and voting rights.
Unvested shares are restricted as to disposition and subject to
forfeiture under certain circumstances. The amount of
compensation recognized as expense for restricted stock was $.9
million, $.7 million and $.6 million in 1996, 1995 and 1994,
respectively. Restricted stock award activity is as follows:
RESTRICTED STOCK ACTIVITY
1996 1995 1994
------ ------ ------
Restricted stock awarded 58,746 47,600 15,150
Weighted-average market value
on date of grant $25.55 $23.00 $23.38
Cancellations of restricted stock, including shares canceled to
pay employee withholding taxes at maturity, totaled 20,172,
16,323 and 36,903 in 1996, 1995 and 1994, respectively.
Pro forma earnings amounts prepared under the assumption that
the stock options granted in 1996 and 1995 were accounted for
based on their fair value as determined under Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-
Based Compensation," are as follows:
PRO FORMA EARNINGS
(In millions, except per-share amounts)
1996 1995
----- ------
Net earnings $63.5 $104.4
Net earnings per common share $1.67 $ 3.02
The weighted-average fair value of options granted during 1996
and 1995 was $8.66 and $7.75, respectively. The fair value of
each option granted during 1996 and 1995 is calculated as of
the date of grant using the Black-Scholes option pricing model
using the following assumptions:
FAIR VALUE ASSUMPTIONS
1996 1995
--------- ---------
Dividend yield 1.40% 1.74%
Expected volatility 30 - 41% 33 - 43%
Risk free interest rate
at grant date 5.3 - 5.6% 7.3 - 7.5%
Expected life in years 2 - 7 2 - 7
The pro forma effects of applying Statement of Financial
Accounting Standards No. 123 presented above are not
indicative of future amounts. Statement of Financial Accounting
Standards No. 123 does not apply to awards prior to 1995, and
additional awards in future years are anticipated.
The 1997 Long-Term Incentive Plan (1997 Plan) was approved by
the company's Board of Directors on February 7, 1997, and,
subject to shareholder approval, will provide for grants of up
to 2,000,000 common shares in the form of restricted stock, non-
qualified stock options and incentive stock options. In certain
circumstances, the vesting of restricted stock awards will be
contingent on the attainment of specified earnings objectives
over a three year period.
ORGANIZATION
Cincinnati Milacron Inc. is a worldwide manufacturer of
plastics machinery, machine tools and industrial products for
metalworking. The company has operations in the United States
and other countries located principally in Western Europe.
The plastics machinery business includes the production of
injection molding machines, mold bases, systems for extrusion
and blow molding and various other specialty equipment. The
market is driven by the consumer economy and the automotive
industry. The machine tools segment serves a broad range of
markets, including the automotive industry, job shops and the
aerospace industry. The industrial products segment serves a
variety of metalworking industries, including the automotive
industry. It produces five basic types of industrial products:
metalcutting tools, metalworking fluids, precision grinding
wheels, carbide wear parts and industrial magnets. The markets
for all three business segments are highly competitive and can
be cyclical in nature.
Financial data for the past three years for the company's
business segments are shown in the following tables. The 1996
increases for plastics machinery are primarily attributable to
the acquisition of D-M-E on January 26, 1996. The 1996
decreases for machine tools are partially attributable to the
sale of ESD on December 30, 1995. The 1995 increases for
industrial products are partially attributable to the
acquisitions of Widia on February 1, 1995 and Talbot on July
20, 1995.
SALES BY SEGMENT
(In millions) 1996 1995 1994
-------- -------- --------
Plastics machinery $ 662.4 $ 570.1 $ 503.8
Machine tools 371.8 409.0 338.5
Industrial products 695.5 670.2 354.8
-------- -------- --------
$1,729.7 $1,649.3 $1,197.1
======== ======== ========
OPERATING INFORMATION BY SEGMENT
(In millions) 1996 1995 1994
-------- -------- -------
Operating earnings
Plastics machinery $ 59.2 $ 54.3 $ 45.9
Machine tools 4.9 7.7 6.8
Industrial products 73.7 62.1 36.3
Disposition of businesses (a) - 71.0 -
Integration charge (b) - (9.8) -
Corporate expenses (16.8) (15.7) (18.0)
Other unallocated expenses (c) (9.9) (10.5) (6.8)
-------- -------- -------
Operating earnings 111.1 159.1 64.2
Interest expense-net (29.8) (24.8) (15.3)
-------- -------- -------
Earnings before income taxes $ 81.3 $ 134.3 $ 48.9
======== ======== =======
Identifiable assets
Plastics machinery $ 612.6 $ 335.3 $ 295.0
Machine tools 233.3 232.8 270.8
Industrial products 458.9 468.1 195.0
Unallocated corporate assets (d) 31.5 137.5 26.8
-------- -------- -------
Total assets $1,336.3 $1,173.7 $ 787.6
======== ======== =======
Capital expenditures
Plastics machinery $ 20.6 $ 16.6 $ 13.8
Machine tools 15.7 8.6 11.6
Industrial products 28.9 27.1 17.6
-------- -------- -------
Total capital expenditures $ 65.2 $ 52.3 $ 43.0
======== ======== =======
Depreciation and amortization
Plastics machinery $ 21.4 $ 11.8 $ 9.2
Machine tools 5.0 7.4 7.2
Industrial products 24.5 24.4 12.2
-------- -------- -------
Total depreciation and
amortization $ 50.9 $ 43.6 $ 28.6
======== ======== =======
(a) $66.0 million relates to the machine tools segment and $5.0 million
relates to the industrial products segment.
(b) Relates to the industrial products segment.
(c) Includes financing costs related to the sale of accounts receivable
andminority shareholders' interests in earnings of subsidiaries.
(d) Includes cash and cash equivalents and the assets of the company's
insurance and utility subsidiaries.
Sales of U.S. operations include export sales of $179.2 million in 1996,
$166.9 million in 1995, and $142.0 million in 1994.
Total sales of the company's U.S. and non-U.S. operations to unaffiliated
customers outside the U.S. were $809.9 million, $784.2 million, and $417.6
million in 1996, 1995 and 1994, respectively.
The following table summarizes the company's U.S. and non-U.S. operations.
U.S. AND NON-U.S. OPERATIONS
(In millions) 1996 1995 1994
------ ------ ------
U.S. OPERATIONS
Sales $969.8 $938.3 $873.9
Operating earnings 81.4 71.8 67.9
Disposition of businesses - 62.1 -
Integration charge - (2.9) -
Identifiable assets 731.6 484.1 471.4
Capital expenditures 41.7 31.4 33.2
Depreciation and
amortization 28.9 21.6 19.2
NON-U.S. OPERATIONS
Sales 759.9 711.0 323.2
Operating earnings 56.4 52.3 21.1
Disposition of businesses - 8.9 -
Integration charge - (6.9) -
Identifiable assets 573.2 552.1 289.4
Capital expenditures 23.5 20.9 9.8
Depreciation and
amortization 22.0 22.0 9.4
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Cincinnati Milacron Inc.
We have audited the accompanying Consolidated Balance Sheet of Cincinnati
Milacron Inc. and subsidiaries as of December 28, 1996 and December 30, 1995,
and the related Consolidated Statements of Earnings, Changes in Shareholders'
Equity, and Cash Flows for each of the three years in the period ended
December 28, 1996. Our audits also included the financial statement schedule
listed in the Index at Item 14(a). These financial statements and schedule
are the responsibility of the company's management. Our responsibility is
to express an opinion on these financial statements and schedule based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Cincinnati
Milacron Inc. and subsidiaries at December 28, 1996 and December 30, 1995,
and the consolidated results of their operations and their cash flows for
each of the three years in the period ended December 28, 1996, in conformity
with generally accepted accounting principles. Also, in our opinion, the
related financial statement schedule, when considered in relation to the
basic financial statements taken as a whole, presents fairly in all material
respects the information set forth therein.
/s/ ERNST & YOUNG LLP
Cincinnati, Ohio
February 13, 1997
SUPPLEMENTARY FINANCIAL INFORMATION
OPERATING RESULTS BY QUARTER (UNAUDITED)
(In millions, except per-share amounts)
1996 (a)
---------------------------------------------
Qtr 1 Qtr 2 Qtr 3 Qtr 4
------ ------ ------ ------
Sales $353.4 $411.4 $511.1 $453.8
Manufacturing margins 90.5 100.1 128.1 112.5
Percent of sales 25.6% 24.3% 25.1% 24.8%
Net earnings 12.6 14.7 19.1 19.9
Per common share .36 .40 .47 .50
1995 (a)
---------------------------------------------
Sales $331.4 $413.5 $486.5 $417.9
Manufacturing margins 81.2 103.5 121.7 104.6
Percent of sales 24.5% 25.0% 25.0% 25.0%
Net earnings 13.0(b) 8.4(c) 16.0 68.2(d)
Per common share .38 .24 .46 1.96
(a) The fiscal year consists of thirteen four-week periods.
The first, second and fourth quarters consist of twelve
weeks each, and the third quarter, sixteen weeks.
(b) Includes a gain of $5.0 million ($4.0 million after tax,
or $.12 per share) on the sale of the company's American
Mine Tool business.
(c) Includes a charge of $9.8 million ($7.8 million after tax,
or $.23 per share) for the integration of certain Widia
and Valenite operations.
(d) Includes a gain of $66.0 million ($52.4 million after tax,
or $1.51 per share) on the sale of the company's
Electronic Systems Division.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
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 21, 1997 and
(ii) included in Part I on pages 18 through 19 of this Form
10-K.
ITEM 11. EXECUTIVE COMPENSATION
The "Components of Compensation" section of the company's
proxy statement dated March 21, 1997 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 21, 1997 is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The paragraph captioned "Stock Loan Programs" of the
company's proxy statement dated March 21, 1997 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 -
1996, 1995 and 1994 31
Consolidated Balance Sheet - 1996 and 1995 32
Consolidated Statement of Changes in
Shareholders' Equity - 1996, 1995 and 1994 33
Consolidated Statement of Cash Flows -
1996, 1995 and 1994 34
Notes to Consolidated Financial Statements 35
Report of Independent Auditors 46
Supplementary Financial Information 47
The following consolidated financial statement schedule of
Cincinnati Milacron Inc. and subsidiaries is included in
Item 14(d) for the years ended 1996, 1995 and 1994:
Page No.
-------
Schedule II- Valuation and Qualifying
Accounts and Reserves 60
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
(2) Plan of Acquisition, Reorganization, Arrangement,
Liquidation, or Succession - not applicable
(3) Articles of Incorporation and By-Laws
3.1 Restated Certificate of Incorporation filed with the Secretary
of State of the State of Delaware on 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 of
Incorporation 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 2004
- Incorporated herein by reference to the
company's Form S-4 dated July 7, 1994 (File No.
33-53009)
4.3 7-7/8% Notes due 2000
- Incorporated by reference to the
company's Form S-4 dated July 21, 1995
(File No. 33-60081)
4.4 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 1987 Long-Term Incentive Plan
- Incorporated herein by reference to the
company's Proxy Statement dated March 27, 1987.
10.2 Cincinnati Milacron 1991 Long-Term Incentive Plan
- Incorporated herein by reference to the
company's Proxy Statement dated March 22, 1991.
10.3 Cincinnati Milacron 1994 Long-Term Incentive Plan
- Incorporated herein by reference to the
company's Proxy Statement dated March 24, 1994.
10.4 Cincinnati Milacron Short-Term Management Incentive Plan
- Filed herewith.
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 Proxy Statement dated March 22, 1991.
10.9 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.
10.10 Cincinnati Milacron Supplemental Executive
Retirement Plan
- Incorporated herein by reference to the
company's Form 10-K for the fiscal year ended
January 1,1994.
10.11 Amended and Restated Revolving Credit Agreement
dated as of December 31, 1994 among Cincinnati
Milacron Inc., Cincinnati Milacron Kunststoffmaschinen
Europe GmbH, the lenders listed therein and Bankers
Trust Company, as agent.
- Incorporated herein by reference to the
company's Form 8-K dated February 1, 1995.
10.12 Amendment Number One, dated as of May 31, 1995
to the Amended and Restated Revolving Credit
Agreement dated as of December 31, 1994, among
Cincinnati Milacron Inc., Cincinnati
Milacron Kunststoffmaschinen Europe GmbH
the lenders listed therein, and Bankers Trust
Company, as agent.
- Incorporated herein by reference to
the company's Form 8-K dated May
31, 1995.
10.13 U.S. Asset Purchase Agreement dated as of
December 15, 1995 between Cincinnati Milacron
Inc. and TRINOVA Corporation.
- Incorporated herein by reference to
the company's Form 8-K dated
December 30, 1995.
10.14 U.K. Asset Purchase Agreement dated
as of December 15, 1995, between
Cincinnati Milacron U.K. Limited and
TRINOVA Limited.
- Incorporated herein by reference to
the company's Form 8-K dated
December 30, 1995.
10.15 Amendment Number Two, dated as of
January 23, 1996 to the Amended and
Restated Revolving Credit Agreement
dated as of December 31, 1994 among
Cincinnati Milacron Inc, Cincinnati
Milacron Kunststoffmaschinen Europe
GmbH, the lenders listed therein, and
Bankers Trust Company, as agent.
- Incorporated herein by reference to
the company's Form 10-K dated
December 30, 1995.
10.16 Amendment Number Three, dated as of
April 26, 1996 to the Amended and
Restated Revolving Credit Agreement
dated as of December 31, 1994 among
Cincinnati Milacron Inc, Cincinnati
Milacron Kunststoffmaschinen Europe
GmbH, the lenders listed therein, and
Bankers Trust Company, as agent.
- Filed herewith.
10.17 Underwriting Agreement between
Cincinnati Milacron Inc, and CS First
Boston Corporation, BT Securities
Corporation, Merrill Lynch, Pierce,
Fenner & Smith Incorporated and J.P.
Morgan Securities Inc.
- Incorporated herein by reference to
the company's Registration Statement on Form S-3
(Registration No. 333-01739)
10.18 Asset Purchase Agreement dated as of
January 23, 1996, between Cincinnati
Milacron Inc., a Delaware
corporation, The Fairchild
Corporation, a Delaware corporation,
RHI Holdings, Inc., a Delaware
corporation, and the Designated
Purchasers and Sellers named therein.
- Incorporated herein by reference to
the company's Form 8-K dated January
26, 1996.
(11) Statement Regarding Computation of Per-Share Earnings
(12) Statement Regarding Computation of Ratios - not
applicable
(13) Annual report to security holders, Form 10-Q or
quarterly report to security holders - not applicable
(16) Letter re Change in Certifying Accountant - 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 21, 1997.
(23) Consent of Experts and Counsel
(24) Power of Attorney - not applicable
(27) Financial Data Schedule
(99) Additional Exhibits - not applicable
ITEM 14(B)-- REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the fourth quarter
of 1996.
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 19, 1997
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed by the following persons on
behalf of the registrant and in the capacities and on the dates
indicated.
/s/ Darryl F. Allen /s/ Neil A. Armstrong
- ----------------------------- ---------------------
Darryl F. Allen; Neil A. Armstrong;
March 19, 1997 March 19, 1997
(Director) (Director)
/s/ Barbara Hackman Franklin /s/ Harry A. Hammerly
- ----------------------------- ------------------------
Barbara Hackman Franklin; Harry A. Hammerly;
March 19, 1997 March 19, 1997
(Director) (Director)
ITEM 14(C) AND (D)-- INDEX TO CERTAIN EXHIBITS AND FINANCIAL
STATEMENT SCHEDULES
Page No.
--------
Exhibit 10.4 Cincinnati Milacron Short-Term
Management Incentive Plan Bound Separately
Exhibit 10.16 Amendment Number Three, dated as
of April 26, 1996, to the Amended
and Restated Revolving Credit
Agreement dated as of December 31,
1994, among Cincinnati Milacron
Inc, Cincinnati Milacron
Kunststoffmaschinen Europe GmbH,
the lenders listed herein, and
Bankers Trust Company, as agent Bound Separately
Exhibit 11 Computation of Per-Share Earnings 55
Exhibit 21 Subsidiaries of the Registrant 56
Exhibit 23 Consent of Experts and Counsel 58
Exhibit 27 Financial Data Schedule 59
Schedule II Valuation and Qualifying
Accounts and Reserves 60
CINCINNATI MILACRON INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
YEARS ENDED 1996, 1995 AND 1994
(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 1996
Allowances for
doubtful accounts $12,935 $ 4,667 $ 1,429 (a) $ 4,687 (b) $13,715
629 (c)
Restructuring and
integration charge
reserves $18,336 $ - $ - $14,646 (b) $ 2,324
766 (c)
600 (d)
Allowances for inventory
obsolescence $53,458 $10,805 $ 1,598 (a) $18,557 (b) $45,649
1,655 (c)
YEAR ENDED 1995
Allowances for
doubtful accounts $ 8,718 $ 4,963 $ 5,855 (a) $ 7,382 (b) $12,935
781 (c)
Restructuring and
integration and
consolidation charge
reserves $ 6,164 $ 7,006 $16,883 (a) $11,762 (b) $18,336
45 (c)
Allowances for inventory
obsolescence $38,567 $18,402 $13,058 (a) $18,147 (b) $53,458
2,028 (c) 450 (e)
YEAR ENDED 1994
Allowances for
doubtful accounts $ 7,884 $ 4,944 $ 207 (c) $ 4,317 (b) $ 8,718
Restructuring and
consolidation, closing
and relocation and
special charge reserves $58,265 $ (726) $ 443 (c) $54,478 (b) $ 6,164
2,660 (f)
Allowances for inventory
obsolescence $33,764 $10,066 $ 1,507 (c) $10,334 (b) $38,567
3,564 (f)
(a) Consists of reserves of subsidiaries purchased during the year.
(b) Represents amounts charged against the reserves during the year.
(c) Represents foreign currency translation adjustments during the year.
(d) Reversal of excess Valenite restructuring reserve established in 1993.
(e) Consists of reserves of businesses sold during the year.
(f) Finalization of purchase price allocation for Ferromatik which was
purchased in November, 1993.