SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K/A
Amendment No. 1
CURRENT REPORT
Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
Date of Report (date of earliest event reported) January 26, 1996
----------------
CINCINNATI MILACRON INC.
- ------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
Delaware 1-8475 31-1062125
- ---------------------------- ---------------- -------------------
(State or other jurisdiction Commission File (I.R.S. Employer
of incorporation) Number) Identification No.)
4701 Marburg Avenue, Cincinnati, Ohio 45209
- ---------------------------------------- ------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (513) 841-8100
-------------------
NONE
- ------------------------------------------------------------------------
(Former name or former address, if changed since last report)
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
------------------------------------
On January 26, 1996, pursuant to the Asset Purchase Agreement dated as
of January 23, 1996 (the "Purchase Agreement"), Cincinnati Milacron Inc.
and its subsidiaries (the "company") acquired from VSI Corporation, D-M-
E Europe (U.K.) Limited and D-M-E Normalien GmbH (the "Sellers," each
of which is a subsidiary of The Fairchild Corporation, the "Parent") all
of the assets, properties and other rights owned, used or held for use
by the Sellers in connection with the Sellers' business of developing,
producing, manufacturing, marketing, selling and distributing mold
bases, mold components, moldmaking tools and supplies, polishing
equipment, electronic temperature and pressure control equipment,
runnerless molding systems and process controls and computer aided
design and computer aided manufacturing hardware and software for the
plastics injection mold-making industry (the "Business"). The purchase
includes the Parent's and the Sellers' voting stock or other interests
in each of VSI International N.V., D-M-E France S.A.R.L., D-M-E of
Canada Ltd. and several joint ventures. A copy of the Purchase
Agreement is filed herewith as Exhibit 2.1 and reference is made thereto
for the complete terms and conditions thereof.
The purchase price (which is subject to adjustment following an audit
of the closing date balance sheet of the Business) was $245,376,555.
The purchase price was based on a target net tangible asset value,
representing the book value of all assets reflected on the closing date
balance sheet of the Business (excluding goodwill and net of any
applicable contra-asset accounts) and acquired by the company less the
amount of all liabilities reflected on the closing date balance sheet
and assumed by the company. The purchase price consisted of (i) a cash
payment to VSI Corporation in the amount of $62,300,000, (ii) an 8%
promissory note issued by the company to VSI Corporation in the
principal amount of $166,000,000 which is secured by a letter of credit,
(iii) an unsecured 8% promissory note issued by the company to VSI
Corporation in the principal amount of $5,376,555 and (iv) an unsecured
8% promissory note issued by the company to VSI Corporation in the
principal amount of $11,700,000. The promissory notes described in
clauses (ii) and (iii) above mature one year following the closing date;
provided that the Parent may require prepayment of, and the company may
at its option prepay, such notes after the six month anniversary of the
closing date. The promissory note described in clause (iv) above
matured on the second business day following receipt by the company of
all necessary clearances from the Belgian Competition Council. This
note was subsequently paid by the company in February, 1996.
The company obtained the cash portion of the purchase price from its
cash on hand arising principally from the sale proceeds of the company's
disposition of its Electronic Systems Division division in December,
1995.
In January, 1996, to finance the acquisition of D-M-E, the company
amended its revolving credit agreement facility to increase the amount
of credit available from $150 million to $300 million and extend the
term to January, 2000. The facility requires a facility fee of 1/4% per
annum on the total $300 million revolving loan commitment. The amended
facility 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. The company expects to complete an issuance of
equity in the form of common shares during 1996. The intended use of
proceeds from the equity offering is to repay a portion of the
promissory notes issued in the acquisition of D-M-E.
The company intends to continue to use the assets, properties and other
rights purchased from the Sellers in the operation of the Business.
No material relationship exists between the Sellers and the company or
any of its affiliates, directors or officers, or any associate of any
such directors or officers.
The Press Release of the company dated January 26, 1996, announcing the
completion of the acquisition described above is filed herewith as
Exhibit 99.1 and is incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
---------------------------------
(a) Financial statements of business acquired
The following financial statements of D-M-E Company are filed
herewith as Item 7(a):
Audited combined financial statements as of June 30, 1994 and 1995
and for each of the three years in the period ended June 30, 1995
including:
- Report of Independent Public Accountants
- Combined Balance Sheets as of June 30, 1994 and 1995
- Combined Statements of Income for the three years
ended June 30, 1995
- Combined Statements of Cash Flows for the three years
ended June 30, 1995
- Combined Statements of Stockholder's Equity for the
three years ended June 30, 1995
- Notes to Combined Financial Statements
Unaudited combined financial statements as of December 31, 1995
and for the six month period ended December 31, 1995:
- Combined Balance Sheet as of December 31, 1995
- Combined Statement of Income for the six month period
ended December 31, 1995
- Combined Statement of Cash Flows for the six month
period ended December 31, 1995
- Notes to Combined Financial Statements
(b) Pro forma financial information
The Pro Forma Consolidated Balance Sheet as of December 30,
1995 and the related pro forma Consolidated Statement of
Earnings for the twelve month period ended December 30,
1995 reflecting, on a pro forma basis, the acquisition of
D-M-E Company are filed herewith as Item 7(b).
D-M-E COMPANY
FINANCIAL STATEMENTS AS OF
JUNE 30, 1994 AND 1995
AND DECEMBER 31, 1995 (Unaudited)
TOGETHER WITH REPORT OF
INDEPENDENT PUBLIC ACCOUNTANTS
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To D-M-E Company:
We have audited the accompanying combined balance sheets of D-M-E Company
(as described in Note 1 to the financial statements) as of June 30, 1994 and
1995, and the related combined statements of income, cash flows and
stockholder's equity for each of the three years in the period ended June 30,
1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements 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 financial position of the Company as of June 30,
1994 and 1995, and the results of its operations and its cash flows for each
of the three years in the period ended June 30, 1995 in conformity with
generally accepted accounting principles.
As explained in Notes 7 and 11 to the combined financial statements,
effective July 1, 1993, the Company changed its methods of accounting for
postretirement benefits other than pensions and income taxes.
/s/Arthur Andersen
- ---------------------------
Arthur Andersen LLP
Detroit, Michigan
September 8, 1995
D-M-E COMPANY
COMBINED BALANCE SHEETS
(in thousands of dollars)
June 30, December 31,
-------------------- ----------
1994 1995 1995
--------- ------ -----
(unaudited)
ASSETS
CURRENT ASSETS:
Cash and equivalents. . . . . . . . . . . . . . . . . . . $ 1,614 $ 2,253 $ 3,020
Trade accounts receivable, less allowance for doubtful
accounts of $1,116, $1,348, and $1,334 . . . . . . . . . 24,672 25,499 24,980 Inventories . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . 20,603 24,056 23,466
Prepaid expenses and other. . . . . . . . . . . . . . . . . 708 835 1,080
-------- -------- --------
Total Current Assets . . . . . . . . . . . . . . . . . . . 47,597 52,643 52,546
PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment . . . . . . . . . . . . . . . 56,604 60,184 59,230
Less - accumulated depreciation . . . . . . . . . . . . . . (18,287) (22,998) (23,822)
-------- -------- --------
Total Property, Plant and Equipment. . . . . . . . . . . 38,317 37,186 35,408
GOODWILL, less amortization of $8,023, $9,660, and
$10,478. . . . . . . . . . . . . . . . . . . . . . . . . . . 57,301 55,664 54,846
OTHER ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . 14,069 14,079 13,520
-------- -------- --------
$157,284 $159,572 $156,320
======== ======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Short-term borrowings . . . . . . . . . . . . . . . . . . . $ 232 $ 2,259 $ 1,266
Cash overdrafts . . . . . . . . . . . . . . . . . . . . . . 3,431 3,357 834
Trade accounts payable. . . . . . . . . . . . . . . . . . . 8,977 7,965 7,943
Accrued salaries, wages and commissions . . . . . . . . . . 4,409 4,844 4,685
Accrued employee benefit plan costs . . . . . . . . . . . . 2,471 1,965 2,025
Other accrued liabilities . . . . . . . . . . . . . . . . . 4,132 5,497 6,515
Deferred income taxes . . . . . . . . . . . . . . . . . . . 1,430 870 240
-------- -------- --------
Total Current Liabilities. . . . . . . . . . . . . . . . 25,082 26,757 23,508
LONG-TERM LIABILITIES:
Retiree health care liabilities . . . . . . . . . . . . . . 7,982 7,718 7,673
Deferred income taxes . . . . . . . . . . . . . . . . . . . 8,325 8,091 8,091
Minority interest in subsidiaries . . . . . . . . . . . . . 260 416 504
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . 121 - -
-------- -------- --------
Total Long-Term Liabilities. . . . . . . . . . . . . . . 16,688 16,225 16,268
COMMITMENTS AND CONTINGENCIES
STOCKHOLDER'S EQUITY:
Fairchild investment. . . . . . . . . . . . . . . . . . . . 113,040 111,727 112,158
Cumulative translation adjustment . . . . . . . . . . . . . 2,474 4,863 4,386
-------- -------- --------
Total Stockholder's Equity . . . . . . . . . . . . . . . 115,514 116,590 116,544
-------- -------- --------
$157,284 $159,572 $156,320
======== ======== ========
The accompanying notes are an integral part of these statements.
D-M-E COMPANY
COMBINED STATEMENTS OF INCOME
(in thousands of dollars)
Six Months
Ended
Year Ended June 30, December 31,
------------------------ -----------
1993 1994 1995 1995
---- ---- ---- ----
(unaudited)
Net Sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $151,745 $154,965 $167,769 $83,835
Cost of sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101,420 103,913 110,152 54,799
Selling, general and administrative expenses . . . . . . . . . . . . . . 29,019 29,023 31,234 16,285
Research and development . . . . . . . . . . . . . . . . . . . . . . . . 1,058 1,027 1,114 360
Amortization of goodwill . . . . . . . . . . . . . . . . . . . . . . . . 1,619 1,626 1,637 818
Other operating expenses . . . . . . . . . . . . . . . . . . . . . . . . 269 208 396 46
-------- -------- -------- -------
Operating income. . . . . . . . . . . . . . . . . . . . . . . . . . . 18,360 19,168 23,236 11,527
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101 7 42 36
Equity in (earnings) of affiliates . . . . . . . . . . . . . . . . . . . (522) (571) (762) (337)
Minority interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 52 156 88
-------- -------- -------- -------
Income before income taxes and cumulative
effect of accounting changes . . . . . . . . . . . . . . . . . . . 18,733 19,680 23,800 11,740
Income tax provision . . . . . . . . . . . . . . . . . . . . . . . . . . 7,739 8,847 10,013 4,939
-------- -------- -------- -------
Income before cumulative effect of accounting
changes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,994 10,833 13,787 6,801
Cumulative effect of change in accounting for
post-retirement benefits - net of related income
tax effects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 4,591 - -
Cumulative effect of change in accounting for
income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 4,445 - -
-------- --------- --------- -------
Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 10,994 $ 1,797 $ 13,787 $ 6,801
======== ========= ========= =======
The accompanying notes are an integral part of these statements.
D-M-E COMPANY
COMBINED STATEMENTS OF CASH FLOWS
(in thousands of dollars)
Six Months
Ended
Year Ended June 30, December 31,
------------------------------ -----------
1993 1994 1995 1995
---- ---- ---- ----
(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 10,994 $ 1,797 $ 13,787 $ 6,801
Adjustments to reconcile net income to net cash
provided by operating activities --
Change in accounting for
postretirement benefits. . . . . . . . . . . . . . . . . . . . - 4,591 - -
Change in accounting for income taxes. . . . . . . . . . . . . . . - 4,445 - -
Depreciation and amortization. . . . . . . . . . . . . . . . . . . 6,154 6,417 6,756 3,640
Loss on sale of property, plant,
and equipment. . . . . . . . . . . . . . . . . . . . . . . . . 101 201 62 -
Equity in (earnings) of affiliates . . . . . . . . . . . . . . . . (522) (571) (762) (337)
Minority interest. . . . . . . . . . . . . . . . . . . . . . . . . 48 52 156 88
(Increase) decrease in accounts receivable . . . . . . . . . . . . (964) (2,085) 376 190
(Increase) decrease in inventories . . . . . . . . . . . . . . . . 591 (1,079) (2,444) 529
Increase (decrease) in trade
accounts payable . . . . . . . . . . . . . . . . . . . . . . . 83 1,482 (1,485) 492
Change in other assets and liabilities . . . . . . . . . . . . . . 20 1,392 400 199
-------- --------- --------- -------
Net cash provided by operating activities. . . . . . . . . . . 16,505 16,642 16,846 11,602
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment. . . . . . . . . . . . . . (4,842) (3,829) (4,002) (940)
Sale of property, plant and equipment . . . . . . . . . . . . . . . . 312 508 1,244 91
Investments in affiliates . . . . . . . . . . . . . . . . . . . . . . - - (213) -
Dividends received from affiliates. . . . . . . . . . . . . . . . . . 256 310 312 447
-------- --------- --------- -------
Net cash used by investing activities. . . . . . . . . . . . . (4,274) (3,011) (2,659) (402)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net cash transactions with Fairchild. . . . . . . . . . . . . . . . . (12,995) (14,828) (15,372) (6,369)
Change in notes payable . . . . . . . . . . . . . . . . . . . . . . . (66) (883) 1,886 (957)
Change in cash overdrafts . . . . . . . . . . . . . . . . . . . . . . 767 1,839 (74) (2,523)
-------- --------- --------- -------
Net cash used by financing activities. . . . . . . . . . . . . . . (12,294) (13,872) (13,560) (9,849)
Effect of exchange rates on cash and equivalents . . . . . . . . . . . . 312 (175) 12 (584)
-------- --------- --------- -------
Net change in cash and equivalents . . . . . . . . . . . . . . . . . . . 249 (416) 639 767
Beginning of year balance of cash and equivalents. . . . . . . . . . . . 1,781 2,030 1,614 2,253
-------- --------- --------- -------
End of year balance of cash and equivalents. . . . . . . . . . . . . . . $ 2,030 $ 1,614 $ 2,253 $ 3,020
======== ========= ========= =======
SUPPLEMENTAL DISCLOSURES:
Cash interest payments. . . . . . . . . . . . . . . . . . . . . . . . $ 90 $ 16 $ 55 $ 52
======== ========= ========= =======
Cash income tax payments. . . . . . . . . . . . . . . . . . . . . . . $ 432 $ 495 $ 558 $ 64
======== ========= ========= =======
The accompanying notes are an integral part of these statements.
D-M-E COMPANY
COMBINED STATEMENTS OF STOCKHOLDER'S EQUITY
(in thousands of dollars)
Currency Total
Fairchild Translation Stockholder's
Investment Adjustment Equity
---------- ----------- -------------
Balance July 1, 1992 . . . . . . . . . . . . . . . . . . $ 123,558 $ 3,797 $ 127,355
Net income. . . . . . . . . . . . . . . . . . . . . . 10,994 - 10,994
Cumulative translation adjustment . . . . . . . . . . - (506) (506)
Net transactions with Fairchild . . . . . . . . . . . (11,044) - (11,044)
--------- --------- ---------
Balance June 30, 1993. . . . . . . . . . . . . . . . . . 123,508 3,291 126,799
Net income. . . . . . . . . . . . . . . . . . . . . . 1,797 - 1,797
Cumulative translation adjustment . . . . . . . . . . - (817) (817)
Net transactions with Fairchild . . . . . . . . . . . (12,265) - (12,265)
--------- --------- ---------
Balance June 30, 1994. . . . . . . . . . . . . . . . . . 113,040 2,474 115,514
Net income. . . . . . . . . . . . . . . . . . . . . . 13,787 - 13,787
Cumulative translation adjustment . . . . . . . . . . - 2,389 2,389
Net transactions with Fairchild . . . . . . . . . . . (15,100) - (15,100)
--------- --------- ---------
Balance June 30, 1995. . . . . . . . . . . . . . . . . . $ 111,727 $ 4,863 $ 116,590
========= ========= =========
The accompanying notes are an integral part of these statements.
D-M-E COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS
(1) Basis of Presentation
These historical financial statements include the accounts of the D-
M-E division of VSI Corporation ("VSI"), as well as the accounts of
certain direct and indirect subsidiaries of VSI (collectively,
"D-M-E Company", the "Company" or "DME"). All of the operations included
herein are involved in the design, development, manufacture, and sale of
tooling and supplies for the plastics injection molding industry. The
financial statements are prepared on a combined basis and the effects of
transactions between the entities included herein have been eliminated.
VSI Corporation is an indirect wholly-owned subsidiary of The
Fairchild Corporation ("Fairchild"). Transactions between the Company
and Fairchild are reflected in "Fairchild Investment" (Stockholder's
Equity) in the financial statements. Such transactions primarily include
dividends, payments for services, interest and current income taxes, and
non-cash transactions relating to pensions and deferred taxes.
The Company maintains facilities in the United States, Canada and
several European countries. In addition, the Company conducts operations
in a number of other geographical areas under various joint ventures
(Note 10).
The Company's fiscal year-end is June 30. European subsidiaries are
included on a one-month lag.
The interim financial statements as of and for the six months ended
December 31, 1995 have been prepared by the Company without audit,
pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant
to such rules and regulations. The Company believes that the disclosures
are adequate to make the information presented not misleading when read
in conjunction with the financial statements and notes thereto as of and
for the period ended June 30, 1995. The unaudited interim financial
statements presented reflect all adjustments (consisting only of normal
recurring adjustments) which are, in the opinion of management, necessary
for a fair statement of the results of operations and statements of
financial position for the interim periods presented. These results are
not necessarily indicative of a full year's results of operations.
(2) Summary of Significant Accounting Policies
Foreign Currency Translation
All balance sheet accounts of foreign subsidiaries and balances of
investments in foreign affiliates are translated at the current exchange
rate as of the end of the accounting period. Statement of income items
are translated at average currency exchange rates. The resulting
translation adjustment is recorded as a separate component of
stockholder's equity.
Gains and losses related to transactions denominated in foreign
currencies are recorded in the statement of income in the period in which
they occur. The amount of such gains and losses was not material for any
period presented.
Goodwill
This asset, which resulted from the acquisition of the Company by
Fairchild, is being amortized on a straight-line basis over forty years.
The Company continually evaluates whether later events and circumstances
have occurred that indicate the remaining useful life of goodwill may
warrant revision or that the remaining balance of goodwill may not be
recoverable. When factors indicate that goodwill should be evaluated for
possible impairment, the Company uses an estimate of undiscounted
operating income over the remaining life of the goodwill in determining
whether any such impairment exists.
Research and Development
Costs incurred in connection with the development of new products
and manufacturing methods are charged to operations as incurred.
Fair Value of Financial Instruments
For all financial instruments, the carrying value is a reasonable
estimate of fair value due to the short-term nature of such instruments.
Cash Equivalents
The Company considers all highly liquid investments with a maturity
of three months or less at date of purchase to be cash equivalents.
(3) Plant Shutdown
During the year ended June 30, 1994, the Company adopted a plan to
shutdown operations at its manufacturing plant located in Mt. Clemens,
Michigan. In connection with this plan, the Company recorded a charge
of $880,000, which is included in cost of sales, in the year ended June
30, 1994 to recognize the expected costs of the shutdown. Approximately
$280,000 of such costs were incurred prior to June 30, 1994. During the
year ended June 30, 1995, the Company incurred approximately $564,000 in
costs related to the shutdown and incurred a loss on the sale of plant
and equipment of approximately $36,000.
(4) Inventory
Inventories include material, labor and overhead and are stated at
the lower of cost or market using the last-in, first-out (LIFO) method.
The major classes of inventory are summarized as follows (in
thousands):
June 30, December 31,
------------------- -----------
1994 1995 1995
(unaudited)
---- ---- ----------
Finished goods $ 13,500 $ 16,220 $ 14,964
Work in process 6,261 7,118 6,779
Raw material 2,545 2,997 4,000
LIFO reserve (1,703) (2,279) (2,277)
-------- -------- --------
$ 20,603 $ 24,056 $ 23,466
======== ======== ========
(5) Property, Plant and Equipment
Property, plant and equipment are stated at historical acquisition
or construction cost. Depreciable property is depreciated over the
estimated useful lives of the assets, using principally the straight-line
method as follows:
Buildings and land improvements 10 to 40 years
Machinery and equipment 10 years
The major classes of property, plant and equipment, at cost, are
summarized as follows (in thousands):
June 30, December 31,
-------------- -----------
1994 1995 1995
(unaudited)
---- ---- ----------
Land and improvements $ 4,028 $ 4,030 $ 4,024
Buildings and improvements 11,927 11,618 11,607
Machinery and equipment 38,367 42,523 42,637
Construction in process 2,282 2,013 962
------- ------- -------
$56,604 $60,184 $59,230
======= ======= =======
(6) Short-term Borrowings
Short-term borrowings are comprised of borrowings from banks at
interest rates ranging from 8 to 11.5 percent as of June 30, 1994 and
from 8 to 10.25 percent as of June 30, 1995.
(7) Pensions and Postretirement Plans
Pensions
The Company has defined benefit pension plans covering substantially
all United States employees. A large portion of such employees are
covered through the Company's participation in Fairchild-sponsored
pension plans. Employees of foreign subsidiaries participate in local
plans which are in the aggregate insignificant and are not included in
the following disclosures. The Company's and Fairchild's funding policy
is to make the minimum annual contribution required by applicable
regulations.
The following table provides a summary of the components of net
periodic pension expense for the plans (in thousands):
Year Ended June 30,
--------------------------------
1993 1994 1995
---- ---- ----
Service cost of benefits
earned during the period $ 657 $ 702 $ 679
Interest cost of projected
benefit obligation 1,433 1,501 1,571
Return on plan assets (4,292) (45) (3,578)
Net amortization and
deferrals 2,768 (2,175) 1,544
-------- -------- -------
Net periodic pension
cost (income) $ 566 $ (17) $ 216
======== ======== =======
The following table sets forth the funded status and amounts
recognized in the Company's balance sheet (in thousands):
June 30,
-----------------
1994 1995
------- -------
Actuarial present value of:
Vested benefit obligation $13,686 $16,044
Non-vested benefit obligation 1,035 834
------- -------
Accumulated benefit obligation 14,721 16,878
Effects of projected future
compensation increases 3,772 4,966
------- -------
Projected benefit obligation 18,493 21,844
Fair value of plan assets 26,454 30,220
------- -------
Plan assets in excess of
projected benefit obligation 7,961 8,376
Unrecognized net (gain)/loss 1,789 888
Unrecognized prior service cost 248 213
------- -------
Prepaid pension cost $ 9,998 $ 9,477
======= =======
The significant assumptions used in the pension valuations above
were consistent for all periods presented. These assumptions include a
discount rate of 8.5%, an expected rate of increase in salaries of 4.5%,
and an expected long-term rate of return on plan assets of 9.0%.
Plan assets include common stock of Fairchild valued at $998,000
and $869,000 as of June 30, 1994 and 1995, respectively. Substantially
all of the plan assets are invested in listed stocks and bonds. Prepaid
pension cost is included in other assets in the accompanying balance
sheets.
Post-Retirement Health Care Benefits
The Company provides health care benefits for most retired
employees. Effective July 1, 1993, the Company adopted Statement of
Financial Accounting Standards No. 106 ("SFAS 106"), "Employers
Accounting for Postretirement Benefits Other than Pensions". This
standard requires that the expected cost of postretirement benefits be
accrued and charged to expense during the years the employees render the
service. This is a significant change from the Company's previous policy
of expensing these costs when paid.
The Company elected the cumulative catch-up method of adoption, and
therefore recorded a charge of $7,405,000, and a related income tax
benefit of $2,814,000, as a cumulative effect of change in accounting as
of July 1, 1993, representing the actuarial present value of the accrued
benefits at that date.
The components of post-retirement health care expense are as
follows for the period since the adoption of SFAS 106 (in thousands):
Year Ended June 30,
------------------
1994 1995
---- ----
Service cost of
benefits earned $ 176 $ 154
Interest cost on
liabilities 651 546
Net amortization
and deferral (37) (34)
------ ------
Net periodic
postretirement
benefit cost $ 790 $ 666
====== ======
The following table sets forth the funded status for the Company's
postretirement health care benefits (in thousands):
Year Ended June 30,
-------------------
1994 1995
---- ----
Accumulated postretirement benefit
obligations ("APBO"):
Retirees $ 3,313 $ 2,954
Fully eligible active
participants 295 313
Other active participants 2,915 3,336
-------- --------
Accumulated postretirement
benefit obligations: 6,523 6,603
Unrecognized net gain 1,459 1,115
-------- --------
Accrued postretirement benefit
liability $ 7,982 $ 7,718
======== =========
The APBO as of June 30, 1994 and 1995 and the net postretirement
benefit cost in fiscal years 1994 and 1995 were calculated using an
assumed discount rate of 8.5%. Health care costs were assumed to rise 8%
for pre-age-65 persons and 7% for post-age-65 persons in 1995, with the
assumed rate of increase decreasing gradually to a minimum of 4.5% for
both groups in 2003 and thereafter. To illustrate the significance of
these assumptions, a rise in the assumed rate of health care cost
increases of 1% each year would increase the APBO as of June 30, 1995 by
$806,000 and increase the net post-retirement benefit expense by $88,000
for the year ended June 30, 1995.
Prior to July 1, 1993, postretirement benefit costs were expensed as
incurred. Benefit payments were approximately $421,000 for the year ended
June 30, 1993.
(8) Leases
The Company maintains operating leases covering certain of its
facilities and equipment. The leases extend for varying periods of time
and, in some cases, contain renewal options. As of June 30, 1995,
minimum future rental payments on all operating leases were (in
thousands):
Year Ended
June 30
----------
1996 $ 2,219
1997 1,560
1998 942
1999 562
2000 245
-------
Total $ 5,528
=======
Total rent expense charged to income for all operating leases was
$2,710,000, $3,175,000 and $3,632,000 for the years ended June 30, 1993,
1994 and 1995, respectively.
(9) Litigation and Contingencies
The Company is from time to time subject to litigation incidental
to its business. The Company believes that the results of such
litigation and other pending legal proceedings will not have a material
adverse effect on the Company's future results of operations or financial
position.
The Company routinely disposes of waste matter through licensed
transporters and routinely surveys plant properties to ensure no on-site
disposal. The Company believes that the cost of any environmental
remediation efforts will not have a material adverse effect on the
Company's future results of operations or financial position.
Pursuant to certain provisions in the debt agreements of Fairchild
and certain of its other subsidiaries, the Company cannot enter into any
agreement restricting its ability to pay dividends, if necessary, to
service indebtedness of Fairchild or these other subsidiaries of
Fairchild.
All of the Company's assets are pledged as security under VSI's
bank credit agreement.
(10) Investments in Affiliates
As noted above, the Company conducts operations in certain foreign
countries through affiliates and joint ventures. This includes
investments in companies in Italy, Australia, Spain, India, Mexico,
Japan, Singapore, and Hong Kong. Each of the businesses in which the
Company maintains investments is involved in a business similar to the
Company's. The Company's ownership in each of these affiliates ranges
from 40 to 50 percent, and the investments are accounted for under the
equity method of accounting, except where circumstances have caused the
Company to adopt the cost method of accounting for certain affiliate
investments.
As of June 30, 1994 and 1995, the aggregate investment in
affiliates was $3,410,000 and $4,272,000 respectively. Dividends of
approximately $256,000, $310,000 and $312,000 were received from
affiliates in the years ended June 30, 1993, 1994, and 1995,
respectively.
The Company had sales to these affiliates of $4,019,000,
$4,069,000, and $4,159,000 in the years ended June 30, 1993, 1994 and
1995, respectively. As of June 30, 1994 and 1995, accounts receivable
from these affiliates were $1,117,000 and $1,053,000, respectively.
(11) Income Taxes
The Company, as a wholly-owned subsidiary of Fairchild, is a part
of a consolidated group for United States income tax purposes. As such,
the Company will not make payments for income taxes to the United States
government. The Company will make payments to or receive payments from
Fairchild based on the amounts it would have paid or received had it
filed a separate federal income tax return.
The operations included herein are an independently operating
division of a subsidiary of Fairchild. The financial statements reflect
an allocation of income tax provision and the related deferred income tax
accounts calculated as if the Company had been a stand-alone taxpayer.
Effective July 1, 1993, Fairchild changed its method of accounting
for income taxes from the deferred method to the liability method
required by Statement of Financial Accounting Standards No. 109 ("SFAS
109"), "Accounting for Income Taxes". Under the liability method,
deferred tax assets and liabilities are determined based on differences
between financial reporting and tax bases of assets and liabilities, and
are measured using the enacted tax rates and laws that will be in effect
when the differences are expected to reverse. Under the deferred method,
deferred tax expense was based on items of income and expense that were
reported in different years in the financial statements and tax returns
and were measured at the tax rate in effect in the year the difference
originated. As permitted under SFAS 109, prior years' financial
statements have not been restated. Fairchild elected the cumulative
catch-up method of adoption and the Company therefore recorded a charge
of $4,445,000 as the cumulative effect of the change in accounting in the
year ended June 30, 1994.
The provision for federal income taxes consists of the following
(in thousands):
Years Ended June 30,
--------------------
1993 1994 1995
---- ---- ----
Current provision:
State $1,060 $1,093 $ 1,362
U.S. Federal 5,414 6,483 8,828
Foreign 564 775 617
------ ------ -------
7,038 8,351 10,807
Deferred provision:
State 55 39 (63)
U.S. Federal 646 457 (731)
------ ------ -------
701 496 (794)
------ ------ -------
$7,739 $8,847 $10,013
====== ====== =======
The provision for income taxes differs from that computed using the
statutory United States Federal income tax rate of 34% in the year ended
June 30, 1993 and 35% in the years ended June 30, 1994 and 1995 as
follows (in thousands):
Years Ended June 30,
--------------------
1993 1994 1995
---- ---- ----
Income before income
taxes multiplied by
the statutory
U.S. Federal income
tax rate $6,369 $6,888 $ 8,330
State income taxes, net of
related Federal income tax
benefit 736 736 844
Nondeductible goodwill
amortization 550 569 557
Impact of change in enacted
tax rate - 235 -
Other 84 419 282
------ ------ -------
$7,739 $8,847 $10,013
====== ====== =======
The components of deferred income taxes were as follows (in
thousands):
June 30
------------------------------------------
1994 1995
------------------- -------------------
Deferred Deferred Deferred Deferred
Tax Tax Tax Tax
Assets Liabilities Assets Liabilities
-------- ----------- -------- -----------
Property, plant and equipment
basis differences $ - $ 6,773 $ - $ 6,357
Pensions and employee
benefits 4,058 3,800 4,510 3,601
LIFO and UNICAP basis
differences - 3,698 - 3,683
Equity in earnings of
affiliates over dividends
received - 826 - 1,065
Other 1,284 - 1,235 -
------- ------- ------- -------
$ 5,342 $15,097 $ 5,745 $14,706
======= ======= ======= =======
Deferred taxes have not been provided on earnings of the Company's
foreign subsidiaries as it is not anticipated that such earnings will
be remitted. The cumulative undistributed earnings at June 30, 1995 on
which the Company had not provided deferred income taxes were
approximately $9,150,000.
(12) Transactions with Fairchild and Affiliates
The Company has had certain transactions with other affiliates of
Fairchild. These transactions have been conducted in the ordinary
course of business at prices which management believes are comparable
to those available in transactions with third parties. Sales to other
Fairchild affiliates were $3,296,000, $2,280,000, and zero in the years
ended June 30, 1993, 1994 and 1995, respectively. There were no
receivables from other Fairchild affiliates as of June 30, 1994 and
1995.
The Company has received the following services from Fairchild for
which it has paid or been allocated the costs thereof including direct
costs and an allocation of the related overhead costs: (i)
participation in Fairchild's property, general liability, product
liability, workers' compensation, fiduciary and general insurance
programs; (ii) use of Fairchild's tax services for United States tax
return preparation; and (iii) participation in Fairchild's employee
benefit programs. The amount of overhead charged to the Company was
$722,000, $905,000, and $1,026,000 for the years ended June 30, 1993,
1994 and 1995, respectively. Such allocation was calculated based on
the Company's net sales relative to the net sales of all Fairchild
subsidiaries. Management of the Company and Fairchild believe this to
be a reasonable method of allocating such costs, however, such
allocation may not be representative of the costs of such services from
third parties.
(13) Geographic Segment Data
The Company conducts operations in two geographic segments, United
States and Foreign, which includes operations in Canada and Europe.
Intersegment transactions are not significant. Information for these
two segments is as follows (in thousands):
Years Ended June 30,
-----------------------------
1993 1994 1995
---- ---- ----
Net Sales:
United States $107,551 $112,454 $116,547
Foreign 44,194 42,511 51,222
-------- -------- --------
$151,745 $154,965 $167,769
======== ======== ========
Operating Income:
United States $ 16,821 $ 17,630 $ 21,054
Foreign 1,539 1,538 2,182
-------- -------- --------
$ 18,360 $ 19,168 $ 23,236
======== ======== ========
Identifiable Assets
United States $127,977 $129,692 $128,809
Foreign 27,307 27,592 30,763
-------- -------- --------
$155,284 $157,284 $159,572
======== ======== ========
(14) Quarterly Financial Information (Unaudited)
The following table of quarterly financial data has been prepared
from the financial records of the Company without audit, and reflects
all adjustments which are, in the opinion of management, necessary for
a fair presentation of the results of operations for the interim periods
presented (in thousands):
Quarter Ended
-----------------------------------------
October 2, January 1, April 2, June 30,
1994 1995 1995 1995
--------- --------- ------- -------
Net sales $39,967 $41,347 $43,656 $42,799
Gross profit 13,440 13,739 15,682 14,756
Net income 3,218 3,191 4,182 3,196
Quarter Ended
-----------------------------------------
October 3, January 2, April 3, June 30,
1993 1994 1994 1994
--------- --------- -------- -------
Net sales $37,130 $37,161 $40,860 $39,814
Gross profit 12,108 12,003 13,507 13,434
Income before
cumulative effect of
change in accounting 2,459 2,332 3,188 2,854
Net income (loss) (6,577) 2,332 3,188 2,854
(15) Subsequent Event -- Unaudited
In November 1995, Fairchild entered into a letter of intent to
sell the assets and operations of the Company to Cincinnati Milacron
Inc. On January 26, 1996, this transaction was consummated. The
accompanying financial statements do not include any adjustments or
provisions that might arise out of this transaction.
ITEM 7 (b)
CINCINNATI MILACRON INC. AND SUBSIDIARIES
PRO FORMA FINANCIAL INFORMATION
(In millions, except per share data)
(Unaudited)
On February 1, 1995, Cincinnati Milacron Inc. (the "company")
completed the acquisition of 99.92% of the outstanding shares of
Krupp Widia GmbH ("Widia") from Fried. Krupp AG Hoesch-Krupp
("Krupp") for DM 120.8 million (approximately $79 million based on
the exchange rate in effect on that date), which included DM 7.1
million (approximately $4 million) for the settlement of all
intercompany liabilities to Krupp as of February 1, 1995. Widia is
one of the world's leading producers of metalcutting products and
industrial magnets. The company financed the purchase by drawing on
its revolving credit facility with its existing bank group which had
been amended in December, 1994, to increase the amount of borrowings
available thereunder from $130.0 million to $200.0 million, including
borrowings denominated in German marks up to an equivalent of $100.0
million.
On July 20, 1995, the company completed the acquisition of Talbot
Holdings, Ltd. ("Talbot") for approximately $33 million in cash.
Talbot is a major supplier of round high-speed steel and carbide
metalcutting tools. The transaction was financed through available
cash and existing credit lines.
On December 30, 1995, the company completed the sale of its
Electronic Systems Division ("ESD") for $105 million in cash subject
to post closing adjustments. ESD designs and produces computer
controls, software and drives used on the company's machine tools and
plastics machinery. It also manufactures electronics and provides
contract services for outside customers. In conjunction with the
sale, the company entered into a seven-year supply contract with the
purchaser for electronic controls used on the company's machine tools
and plastics machinery. The proceeds from the sale were used to
repay existing bank borrowings and to partially fund the acquisition
of D-M-E Company as described below.
On January 26, 1996, the company completed the acquisition of D-M-E
Company ("D-M-E") for approximately $245 million, subject to post
closing adjustments. D-M-E is a major U.S. producer of mold bases,
standard components and supplies for the plastics injection mold-
making industry. The acquisition, which will be accounted for by the
purchase method, was financed initially through the execution of
promissory notes to the seller of $183 million and cash of $62
million. One promissory note of approximately $12 million was
subsequently paid. The other notes mature on January 26, 1997, but
are subject to prepayment at the option of either the buyer or the
seller at any time after July 26, 1996.
The following pro forma consolidated balance sheet and consolidated
statement of earnings (collectively, the "pro forma consolidated
statements") are based on the historical consolidated financial
statements of the company, adjusted to give effect to the
acquisitions of Widia, Talbot and D-M-E and the sale of ESD. The pro
forma consolidated balance sheet assumes that the acquisition of D-M-
E occurred on the last day of the company's 1995 fiscal year. The
effects of the acquisitions of Widia and Talbot and the sale of ESD
are reflected in the consolidated balance sheet included in the
company's Annual Report on Form 10-K for its fiscal year ended
December 30, 1995. The pro forma consolidated statement of earnings
assumes that all transactions occurred as of the first day of the
company's 1995 fiscal year. The pro forma consolidated statement of
earnings includes one month of Widia's earnings and seven months of
Talbot's earnings in the "Historical Widia and Talbot" column.
Consistent with the purchase method of accounting used for the
acquisitions, the remaining 1995 sales and earnings of Widia and
Talbot are included in the "Historical Cincinnati Milacron" column.
The company filed a Current Report on Form 8-K dated February 1, 1995
relating to the acquisition of Widia, which was amended by a filing
on Form 8-K/A, Amendment No. 1. The amended filing included audited
financial statements of Widia and pro forma financial statements
giving effect to the acquisition of Widia as of and for the year
ended December 31, 1994. The company also filed a Current Report on
Form 8-K dated December 30, 1995, relating to the sale of ESD, which
was amended by a filing on Form 8-K/A, Amendment No. 1. A Current
Report on Form 8-K for the Talbot acquisition was not required to be
filed.
The pro forma consolidated statements reflect the purchase method of
accounting for the acquisition of D-M-E using estimated purchase
accounting adjustments which are subject to revision once appraisals,
actuarial reviews and other studies of the fair value of the assets
and liabilities of D-M-E are completed. The purchase price of D-M-E
is also subject to post-closing adjustments which may also affect the
purchase accounting adjustments reflected herein. Final purchase
accounting adjustments may differ from the pro forma adjustments
presented herein and described in the accompanying notes.
The pro forma consolidated statements do not purport to present what
the company's financial position and results of operations would
actually have been had the acquisition of D-M-E occurred on the last
day of the company's 1995 fiscal year for the pro forma consolidated
balance sheet, or had the acquisitions of Widia, Talbot and D-M-E and
the sale of ESD occurred on the first day of the company's 1995
fiscal year for the pro forma consolidated statement of earnings, or
purport to project the company's results of operations for any future
period. The pro forma consolidated statements reflect certain
assumptions described in the accompanying notes. The pro forma
consolidated statements and accompanying notes should be read in
conjunction with the audited consolidated financial statements of the
company and the related notes thereto which are included in the
company's Annual Report on Form 10-K for its fiscal year ended
December 30, 1995, and the company's Current Report on Form 8-K dated
January 26, 1996 (both filed with the Securities and Exchange
Commission) and the combined financial statements of D-M-E that are
filed herewith as Item 7(a).
CINCINNATI MILACRON INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEET
(In millions)
Historical Cincinnati
Cincinnati Milacron
Milacron Acquisition and
Dec. 30, Historical Pro Forma D-M-E
1995 D-M-E (a) Adjustments Consolidated
----------- ---------- ----------- ------------
Assets
Current assets
Cash and cash equivalents. . . . . . . . . . . $ 133.1 $ 3.0 $ (74.2)(b) $ 60.8
(1.1)(c)
Notes and accounts receivable,
less allowances . . . . . . . . . . . . . . 242.8 25.0 (.1)(c) 267.7
Inventories. . . . . . . . . . . . . . . . . . 351.7 23.4 5.8 (e) 380.9
Other current assets . . . . . . . . . . . . . 54.7 1.1 - 55.8
-------- ------ ------ --------
Total current assets . . . . . . . . . . . . 782.3 52.5 (69.6) 765.2
Property, plant and
equipment - net. . . . . . . . . . . . . . . . 265.5 35.4 - 300.9
Other noncurrent assets. . . . . . . . . . . . . 149.3 68.4 .2 (b) 330.5
(64.7)(c)
177.3 (d)
-------- ------ ------- --------
TOTAL ASSETS . . . . . . . . . . . . . . . . . . $1,197.1 $156.3 $ 43.2 $1,396.6
======== ====== ======= ========
Liabilities and Shareholders' Equity
Current liabilities
Amounts payable to banks
and current portion of
long-term debt $ 23.6 $ 1.3 $ (1.3)(c) $ 23.6
Trade accounts payable . . . . . . . . . . . . 109.9 8.8 (.8)(c) 117.9
Advance billings and deposits. . . . . . . . . 42.7 - - 42.7
Accrued and other
current liabilities. . . . . . . . . . . . . 213.4 13.4 5.0 (b) 228.6
(3.2)(c)
-------- ------ ------- --------
Total current liabilities. . . . . . . . . 389.6 23.5 (.3) 412.8
Long-term accrued liabilities. . . . . . . . . . 204.6 16.3 (11.4)(c) 209.5
Long-term debt and
lease obligations. . . . . . . . . . . . . . . 332.2 - 171.4 (b) 503.6
-------- ------ ------- --------
TOTAL LIABILITIES 926.4 39.8 159.7 1,125.9
Commitments and contingencies. . . . . . . . . . - - - -
SHAREHOLDERS' EQUITY
Preferred shares . . . . . . . . . . . . . . . 6.0 - - 6.0
Common shares and net
assets purchased . . . . . . . . . . . . . . 34.3 112.2 (250.4)(b) 34.3
(49.2)(c)
177.3 (d)
10.1 (e)
Capital in excess of par value . . . . . . . . 266.0 - - 266.0
Accumulated deficit. . . . . . . . . . . . . . (32.8) - - (32.8)
Cumulative foreign currency
translation adjustments. . . . . . . . . . . (2.8) 4.3 (4.3)(e) (2.8)
-------- ------ ------- --------
TOTAL SHAREHOLDERS' EQUITY . . . . . . . . 270.7 116.5 (116.5) 270.7
-------- ------ ------- --------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY . . . . . . . . . . . . $1,197.1 $156.3 $ 43.2 $1,396.6
======== ====== ======= ========
See notes to Pro Forma Consolidated Balance Sheet.
CINCINNATI MILACRON INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEET
Year Ended December 30, 1995
(In millions)
(a) The amounts in the "Historical D-M-E" column are derived from the
unaudited combined balance sheet of D-M-E as of December 31,
1995.
(b) The acquisition of D-M-E was financed as shown in the following
table.
Available cash:
Paid to seller at closing. . . . . . . . . $ 62.3
Repayment of promissory note to seller . . 11.7
Payment of financing fees. . . . . . . . . .2
-------
Total usage of available cash . . . . . 74.2
Promissory notes to seller . . . . . . . . . 171.4
-------
Total consideration and financing costs $ 245.6
=======
The promissory note to seller of $11.7 million reflected as a use
of available cash in the above table was issued in lieu of the
payment of cash at closing pending receipt by the company of
certain approvals from the Belgian Competition Council. Such
approvals were received and the note was repaid in February,
1996.
In connection with the acquisition, in January, 1996, the company
amended its revolving credit agreement facility to increase the
amount of credit available from $150.0 million to $300.0 million
and to extend the term to January, 2000. Financing fees paid in
connection with the amendment totaled $.2 million.
The following table depicts the calculation of the company's
acquisition cost and its preliminary allocation to D-M-E's assets
and liabilities using estimated purchase accounting adjustments,
which are subject to post-closing adjustments and to further
revision once appraisals, actuarial reviews and other studies of
the fair value of D-M-E's assets and liabilities are completed.
Final purchase accounting adjustments may differ from the amounts
shown below. Under the terms of the purchase agreements, the
expected purchase price of D-M-E as of January 26, 1996 was
$245.4 million.
Calculation of acquisition cost:
Purchase of D-M-E. . . . . . . . . . . $ 245.4
Accrual for transaction fees . . . . . 5.0
-------
Total acquisition cost. . . . . . . $ 250.4
=======
Allocation of acquisition cost:
Cash and cash equivalents. . . . . . . . $ 1.9
Accounts receivable. . . . . . . . . . . 24.9
Inventories. . . . . . . . . . . . . . . 29.2
Other current assets . . . . . . . . . . 1.1
Property, plant and equipment. . . . . . 35.4
Goodwill and agreement not to compete. . 177.3
Other noncurrent assets. . . . . . . . . 3.7
Historical liabilities assumed . . . . . (23.1)
-------
Total acquisition cost $ 250.4
=======
(c) Adjustment of D-M-E's historical balance sheet to exclude certain
assets not purchased and certain liabilities not assumed by the
company under the terms of the purchase agreements including:
Cash and cash equivalents. . . . . $ 1.1
Notes and accounts receivable. . .1
Other noncurrent assets
Historical goodwill . . . . . 54.8
Prepaid pension asset . . . . 9.3
Other . . . . . . . . . . . . .6
-------
64.7
-------
Reduction in total assets . 65.9
-------
Amounts payable to banks . . . . 1.3
Trade accounts payable . . . . . .8
Accrued and other current liabilities.. 3.2
Long-term accrued liabilities
Postretirement health care liability.. 3.3
Deferred income taxes . . . . . . . 8.1
-------
11.4
-------
Reduction in total liabilities. 16.7
-------
Reduction in net assets . . $ 49.2
=======
(d) Purchase accounting adjustments to D-M-E's historical asset values as
follows:
Recording of a five year agreement
not to compete . . . . . . . . . . . . $ 2.0
Recording of acquisition basis goodwill. . 175.3
-------
$ 177.3
=======
(e) Elimination of D-M-E's historical LIFO reserve and other inventory
reserves to state inventories at fair value and cumulative foreign
currency translation adjustment as follows:
Inventory. . . . . . . . . . . . . . . . $ 5.8
Cumulative translation adjustment. . . . 4.3
-------
$ 10.1
=======
CINCINNATI MILACRON INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS
(In millions, except per share amounts)
Year ended December 30, 1995
---------------------------------------------------------
Cincinnati
Historical Historical Acquisition Milacron,
Cincinnati Widia and Pro Forma Widia and
Milacron(a) Talbot(b) Adjustments Talbot
----------- ---------- ----------- ----------
Sales . . . . . . . . . . . . . . . . . . . . . . . . $ 1,649.3 $ 45.2 $ - $ 1,694.5
Cost of products sold. . . . . . . . . . . . . . . . . 1,238.3 31.5 0.3 (c) 1,270.2
0.1 (d)
--------- ------ ------ ---------
Manufacturing margins. . . . . . . . . . . . . . . . 411.0 13.7 (0.4) 424.3
Other costs and expenses
Selling and administrative . . . . . . . . . . . . . 301.4 9.0 - 310.4
(Gain) on disposition of
businesses. . . . . . . . . . . . . . . . . . . . (71.0) - - (71.0)
Integration charge. . . . . . . . . . . . . . . . . 9.8 - - 9.8
Minority shareholders' interests in
earnings of subsidiaries. . . . . . . . . . . . . 2.3 - - 2.3
Other - net. . . . . . . . . . . . . . . . . . . . . 9.4 1.7 - 11.1
-------- ------ ------ ---------
Total other costs and expenses . . . . . . . . . . 251.9 10.7 - 262.6
-------- ------ ------ ---------
Operating earnings . . . . . . . . . . . . . . . . . . 159.1 3.0 (0.4) 161.7
Interest
Income . . . . . . . . . . . . . . . . . . . . . . 3.2 .2 - 3.4
Expense. . . . . . . . . . . . . . . . . . . . . . . (28.0) (.2) (1.5)(e) (29.7)
-------- ------ ------ ---------
Interest - net. . . . . . . . . . . . . . . . . . (24.8) - (1.5) (26.3)
-------- ------ ------ ---------
Earnings before income taxes . . . . . . . . . . . . . 134.3 3.0 (1.9) 135.4
Provision for income taxes . . . . . . . . . . . . . . 28.7 1.0 - 29.7
-------- ------ ------ ---------
Net earnings . . . . . . . . . . . . . . . . . . . . . $ 105.6 $ 2.0 $ (1.9) $ 105.7
======== ====== ====== =========
Earnings per common share. . . . . . . . . . . . . . . $3.04 $ 3.05
===== ======
Weighted average number of
common shares and common
share equivalents
outstanding. . . . . . . . . . . . . . . . . . . . . 34.6 34.6
===== ======
See Notes to Pro Forma Consolidated Statement of Earnings.
CINCINNATI MILACRON INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS (Continued)
(In millions, except per share amounts)
Year ended December 30, 1995
------------------------------------------------------
Cincinnati
Cincinnati Milacron,
Milacron, Divestiture Widia,
Widia and Historical Pro Forma Talbot,
Talbot ESD (f) Adjustments Less ESD
---------- ---------- ----------- ----------
Sales . . . . . . . . . . . . . . . . . . . . . . . . $ 1,694.5 $ (90.7) $ 60.7 (g) $1,664.5
Cost of products sold. . . . . . . . . . . . . . . . . 1,270.2 (71.6) 61.3 (g) 1,260.3
.4 (h)
--------- -------- ------ --------
Manufacturing margins. . . . . . . . . . . . . . . . 424.3 (19.1) (1.0) 404.2
Other costs and expenses
Selling and administrative . . . . . . . . . . . . . 310.4 (5.2) - 305.2
(Gain) on disposition of
businesses. . . . . . . . . . . . . . . . . . . . (71.0) - - (71.0)
Integration charge. . . . . . . . . . . . . . . . . 9.8 - - 9.8
Minority shareholders' interests in
earnings of subsidiaries. . . . . . . . . . . . . 2.3 - - 2.3
Other - net . . . . . . . . . . . . . . . . . . . . 11.1 - - 11.1
-------- -------- ------ --------
Total other costs and expenses. . . . . . . . . . 262.6 (5.2) - 257.4
--------- ------- ------ --------
Operating earnings . . . . . . . . . . . . . . . . . . 161.7 (13.9) (1.0) 146.8
Interest
Income . . . . . . . . . . . . . . . . . . . . . . 3.4 - - 3.4
Expense. . . . . . . . . . . . . . . . . . . . . . . (29.7) - 7.1 (i) (22.6)
--------- ------- ------ --------
Interest - net. . . . . . . . . . . . . . . . . . (26.3) - 7.1 (19.2)
--------- ------- ------ --------
Earnings before income taxes . . . . . . . . . . . . . 135.4 (13.9) 6.1 127.6
Provision for income taxes . . . . . . . . . . . . . . 29.7 - (1.4)(j) 28.3
--------- ------- ------ --------
Net earnings . . . . . . . . . . . . . . . . . . . . . $ 105.7 $ (13.9) $ 7.5 $ 99.3
========= ======= ====== ========
Earnings per common share. . . . . . . . . . . . . . . $3.05 $ 2.87
===== ======
Weighted average number of
common shares and common
share equivalents
outstanding. . . . . . . . . . . . . . . . . . . . . 34.6 34.6
===== ======
See Notes to Pro Forma Consolidated Statement of Earnings.
CINCINNATI MILACRON INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS (Continued)
(In millions, except per share amounts)
Year ended December 30, 1995
-----------------------------------------------------
Cincinnati
Cincinnati Milacron,
Milacron, Widia,
Widia, D-M-E Talbot,
Talbot, Historical Pro Forma D-M-E,
Less ESD D-M-E (k) Adjustments Less ESD
----------- ---------- ----------- ------------
Sales . . . . . . . . . . . . . . . . . . . . . . . . $1,664.5 $170.3 $ - $1,834.8
Cost of products sold. . . . . . . . . . . . . . . . . 1,260.3 112.5 4.4 (l) 1,375.4
(1.6)(m)
(.6)(n)
.4 (o)
--------- ------ ------ --------
Manufacturing margins. . . . . . . . . . . . . . . . 404.2 57.8 (2.6) 459.4
Other costs and expenses
Selling and administrative . . . . . . . . . . . . . 305.2 33.0 (1.0)(p) 337.2
(Gain) on disposition of
businesses. . . . . . . . . . . . . . . . . . . . (71.0) - - (71.0)
Integration charge. . . . . . . . . . . . . . . . . 9.8 - - 9.8
Minority shareholders' interests in
earnings of subsidiaries. . . . . . . . . . . . . 2.3 .2 - 2.5
Other - net . . . . . . . . . . . . . . . . . . . . 11.1 - .1 (q) 11.2
--------- ------- ------ --------
Total other costs and expenses. . . . . . . . . . 257.4 33.2 (.9) 289.7
--------- ------- ------ --------
Operating earnings . . . . . . . . . . . . . . . . . . 146.8 24.6 (1.7) 169.7
Interest
Income . . . . . . . . . . . . . . . . . . . . . . 3.4 - - 3.4
Expense. . . . . . . . . . . . . . . . . . . . . . . (22.6) (.1) (19.2)(r) (41.9)
--------- ------- ------ --------
Interest - net. . . . . . . . . . . . . . . . . . (19.2) (.1) (19.2) (38.5)
--------- ------- ------ --------
Earnings before income taxes . . . . . . . . . . . . . 127.6 24.5 (20.9) 131.2
Provision for income taxes . . . . . . . . . . . . . . 28.3 10.3 (9.5)(s) 29.1
--------- ------- ------ --------
Net earnings . . . . . . . . . . . . . . . . . . . . . $ 99.3 $ 14.2 $(11.4) $ 102.1
========= ======= ====== ========
Earnings per common share. . . . . . . . . . . . . . . $2.87 $ 2.95
===== ======
Weighted average number of
common shares and common
share equivalents
outstanding. . . . . . . . . . . . . . . . . . . . . 34.6 34.6
===== ======
See Notes to Pro Forma Consolidated Statement of Earnings.
CINCINNATI MILACRON INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS
Year Ended December 30, 1995
(In millions)
(a) In the "Historical Cincinnati Milacron" column, the gain on
the sale of ESD of $66.0 million ($52.4 million after tax) is
included on the line captioned "(Gain) on disposition of
businesses."
(b) The amounts in the "Historical Widia and Talbot" column
represent the following:
- Unaudited historical results of operations of
Widia for the month of January, 1995, which
were derived from Widia's internal financial
statements. (Results of operations for Widia
for the remainder of 1995 are included in the
"Historical Cincinnati Milacron" column.)
- Unaudited historical results of operations of
Talbot for the first seven months of 1995,
which were derived from the internal financial
statements of Talbot. (Results of operations
for Talbot for the remainder of 1995 are
included in the "Historical Cincinnati
Milacron" column.)
(c) Amortization expense of $.3 million related to acquisition-
basis goodwill. Total goodwill recorded for the acquisitions
was $51.4 million and is being amortized over 40 years on the
straight-line method.
(d) Additional depreciation expense of $.1 million related to the
adjustment of the historical value of Talbot's property,
plant and equipment to fair value.
(e) Interest expense of $.4 million for Widia for one month on
borrowings totaling $80.6 million and $1.1 million for Talbot
for seven months on borrowings totaling $34.4 million.
(f) The amounts in the "Historical ESD" column are derived from
the audited combined statement of revenues and direct
operating expenses of ESD for the fiscal year ended December
30, 1995.
(g) Adjustment to eliminate the effects of intercompany sales of
$60.7 million by ESD to other divisions and subsidiaries of
the company, the related cost of products sold of $50.1
million, and the related intercompany profit of $11.2
million. In the "Historical Cincinnati Milacron" column, the
effects of intercompany transactions have been eliminated but
they are included in the amounts related to ESD in the
"Historical ESD" column.
(h) Reversal of direct corporate charges of $.4 million
representing fees for ESD's use of certain centralized
functions such as accounts payable, payroll and computer
services, the cost of which will not be eliminated as a
result of the sale.
(i) Reduction of historical interest expense of $7.1 million
assuming that the proceeds from the sale of ESD were utilized
to repay the company's existing bank borrowings.
(j) Reduction of the provision for income taxes relating to both
the historical ESD earnings and the divestiture pro forma
adjustments utilizing the company's effective tax rate.
(k) The amounts in the "Historical D-M-E" column are comprised of the
historical results of operations of D-M-E for the first six
months of 1995, which were derived from the audited combined
financial statements of D-M-E for the fiscal year ended June 30,
1995, and the historical results of operations of D-M-E for the
last six months of 1995, which were derived from D-M-E's
unaudited internal financial statements for the six months ended
December 31, 1995.
(l) Amortization expense of $4.4 million related to acquisition-basis
goodwill. Total goodwill related to the acquisition of D-M-E is
expected to be approximately $176.6 million and will be amortized
over 40 years on the straight-line method.
(m) Elimination of charges to earnings of $1.6 million for
amortization of historical (preacquisition) goodwill.
(n) Elimination of charges to earnings related to the use of the LIFO
inventory method in D-M-E's historical financial statements. The
company intends to value D-M-E's inventories using the FIFO
method.
(o) Amortization of the covenant not to compete received in
connection with the acquisition of D-M-E on the straight-line
method over five years.
(p) Elimination of charges for services (net of expected cost to
replace) and overhead allocations from D-M-E's former parent.
(q) Amortization expense on the straight-line method over four years
of $.2 million of additional commitment fees incurred in
connection with the amendment of the company's revolving credit
facility.
(r) Interest expense of $19.2 million on assumed borrowings and
promissory notes issued to the seller totaling $245.4 million.
(s) Adjustment of the consolidated provision for income taxes based
on the company's pro forma effective tax rate to reflect the
acquisition of D-M-E and the related financing.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
Cincinnati Milacron Inc.
------------------------
(Registrant)
By: /s/ Ronald D. Brown
-----------------------
Ronald D. Brown
Vice President - Finance
and Chief Financial Officer
Date: April 4, 1996
CINCINNATI MILACRON INC. AND SUBSIDIARIES
INDEX TO EXHIBITS
The following Exhibits are included with this Form 8-K.
Exhibit Sequential
Number Description of Exhibit Page
Number
2.1 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. (Schedules and Exhibits
have been omitted pursuant to Rule
6.01(b)(2) of Regulation S-K. Such
Schedules are listed and described in
the Asset Purchase Agreement. The
Registrant hereby agrees to furnish to
the Securities and Exchange Commission,
upon its request, any or all such
Schedules and Exhibits.)
23.1 Consent of Arthur Andersen, L.L.P. 33
99.1 Press release of the company dated *
January 26, 1996.
* Previously filed.
EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of
our report dated September 8, 1995 on the combined financial
statements of D-M-E Company included in Cincinnati Milacron Inc.'s
Form 8-K/A File No. 1-8475.
/s/ Arthur Andersen LLP
-----------------------
Arthur Andersen LLP
Detroit, Michigan,
April 1, 1996