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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
___________
FORM 10-Q
[x] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934.
For the quarter ended March 22, 1997
[ ] Transition Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934.
For the transition period from __________ to __________
Commission file number 1-8485
CINCINNATI MILACRON INC.
(Exact name of registrant as specified in its charter)
Delaware 31-1062125
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4701 Marburg Avenue
Cincinnati, Ohio 45209
(Address of principal executive offices)
(513)841-8100
(Registrant's telephone number, including area code)
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 [ ]
Number of shares of Common Stock, $1.00 par value,
outstanding as of April 30, 1997: 39,818,195
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CINCINNATI MILACRON INC. AND SUBSIDIARIES
INDEX
Page No.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Balance Sheet 3
Consolidated Condensed Statement of Earnings 4
Consolidated Condensed Statement of Cash Flows 5
Notes to Consolidated Condensed Financial
Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 12
PART II. OTHER INFORMATION
Item 6. (a) Exhibits 18
(b) Reports on Form 8-K 18
Signatures 19
Index to Exhibits 20
PART I. FINANCIAL INFORMATION
CINCINNATI MILACRON INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEET
(UNAUDITED)
(In millions)
MARCH 22, DEC. 28,
1997 1996
-------- --------
ASSETS
Current assets
Cash and cash equivalents $ 30.0 $ 27.8
Notes and accounts receivable, less
allowances of $13.1 in 1997 and
$13.7 in 1996 237.8 267.0
Inventories
Raw materials 25.5 27.8
Work-in-process and finished parts 204.5 202.7
Finished products 166.5 159.2
-------- --------
Total inventories 396.5 389.7
Other current assets 51.1 43.4
-------- --------
Total current assets 715.4 727.9
Property, plant and equipment 602.3 618.6
Less accumulated depreciation 294.3 299.5
-------- --------
Property, plant and equipment - net 308.0 319.1
Goodwill 225.8 229.9
Other noncurrent assets 62.1 59.4
-------- --------
TOTAL ASSETS $1,311.3 $1,336.3
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Amounts payable to banks and current
portion of long-term debt $ 77.5 $ 70.9
Trade accounts payable 125.1 134.9
Advance billings and deposits 35.6 34.5
Accrued and other current liabilities 165.3 169.3
-------- --------
Total current liabilities 403.5 409.6
Long-term accrued liabilities 178.1 178.6
Long-term debt 296.2 301.9
-------- --------
TOTAL LIABILITIES 877.8 890.1
-------- --------
Commitments and contingencies - -
SHAREHOLDERS' EQUITY
Preferred shares 6.0 6.0
Common shares (outstanding: 39.8 in 1997
and 1996) 423.3 429.9
Reinvested earnings 29.3 19.9
Cumulative foreign currency translation
adjustments (25.1) (9.6)
-------- --------
TOTAL SHAREHOLDERS' EQUITY 433.5 446.2
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,311.3 $1,336.3
======== ========
See notes to consolidated condensed financial statements.
CINCINNATI MILACRON INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF EARNINGS
(UNAUDITED)
(In millions, except share
and per-share amounts)
12 WEEKS ENDED
-------------------
MARCH 22, MARCH 23,
1997 1996
-------- --------
Sales $ 377.5 $ 353.4
Cost of products sold 283.6 262.9
------- ------
Manufacturing margins 93.9 90.5
------- ------
Other costs and expenses
Selling and administrative 68.9 66.2
Minority shareholders' interests - .1
Other - net 2.8 1.3
------- ------
Total other costs and expenses 71.7 67.6
------- ------
Operating earnings 22.2 22.9
Interest
Income .5 1.1
Expense (6.4) (8.3)
------- ------
Interest - net (5.9) (7.2)
------- ------
EARNINGS BEFORE INCOME TAXES 16.3 15.7
Provision for income taxes 3.3 3.1
------- ------
NET EARNINGS $ 13.0 $ 12.6
======= =======
EARNINGS PER COMMON SHARE $ .33 $ .36
======= =======
Dividends per common share $ .09 $ .09
Weighted average number of shares
and common share equivalents
outstanding (in thousands) 39,897 34,842
See notes to consolidated condensed financial statements.
CINCINNATI MILACRON INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
(UNAUDITED)
(In millions)
12 WEEKS ENDED
--------------------
MARCH 22, MARCH 23,
1997 1996
-------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
OPERATING ACTIVITIES CASH FLOWS
Net earnings $ 13.0 $ 12.6
Operating activities providing
(using) cash
Depreciation and amortization 10.8 9.6
Deferred income taxes (6.3) (.5)
Working capital changes
Notes and accounts receivable 19.9 26.4
Inventories (18.0) (8.6)
Other current assets (5.8) .6
Trade accounts payable and other
current liabilities (4.5) (23.1)
Decrease (increase) in other
noncurrent assets 1.5 (1.2)
Increase in long-term
accrued liabilities 1.6 6.1
Other - net (1.7) (1.2)
------- -------
Net cash provided by
operating activities 10.5 20.7
------- -------
INVESTING ACTIVITIES CASH FLOWS
Capital expenditures (6.6) (8.0)
Net disposals of property, plant
and equipment .2 .5
Acquisitions - (73.2)
------- -------
Net cash used by
investing activities (6.4) (80.7)
------- -------
FINANCING ACTIVITIES CASH FLOWS
Dividends paid (3.7) (3.1)
Issuance of long-term debt .6 -
Repayments of long-term debt (1.7) (.2)
Increase in amounts payable to banks 9.5 3.8
Net issuance of common shares .2 .7
Net purchase of treasury shares (6.8) -
------- -------
Net cash (used) provided by
financing activities (1.9) 1.2
------- -------
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 2.2 (58.8)
Cash and cash equivalents at
beginning of period 27.8 133.1
------- -------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 30.0 $ 74.3
======= =======
See notes to consolidated condensed financial statements.
CINCINNATI MILACRON INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
BASIS OF PRESENTATION
- ---------------------
In the opinion of management, the accompanying unaudited
consolidated condensed financial statements contain all
adjustments, including only normal recurring adjustments,
necessary to present fairly the company's financial position,
results of operations and cash flows.
The Consolidated Condensed Balance Sheet at December 28, 1996,
has been derived from the audited consolidated financial
statements at that date.
The accounting policies followed by the company are set forth
in the "Summary of Significant Accounting Policies" note to the
consolidated financial statements included in the company's
Annual Report on Form 10-K for the year ended December 28,
1996.
ACQUISITION
- -----------
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.
The D-M-E acquisition was accounted for under the purchase
method. The aggregate cost of the acquisition, including
professional fees and other related costs, was $248.1 million.
The allocation of the acquisition cost to the assets acquired
and the liabilities assumed is presented in the table that
follows.
(In millions)
1996
------
Cash and cash equivalents $ 1.3
Accounts receivable 25.5
Inventories 29.6
Other current assets 1.2
Property, plant and equipment 43.9
Goodwill 162.5
Other noncurrent assets 7.9
------
Total assets 271.9
Current accrued liabilities (18.9)
Long-term accrued liabilities (4.9)
------
Total liabilities (23.8)
------
Total acquisition cost $248.1
======
Unaudited pro forma sales and earnings information for the 12
weeks ended March 23, 1996, is presented in the following
table. The amounts assume that the acquisition of D-M-E had
taken place at the beginning of 1996.
(In millions, except
per-share amounts)
12 Weeks Ended
March 23,
1996
--------
Sales $ 368.9
========
Net earnings $ 12.7
========
Per common share $ .36
========
SEVERANCE EXPENSE
- -----------------
In the first quarter of 1997, the company recorded severance
expense of approximately $2.0 million before tax ($1.6 million
after tax) related to a workforce reduction plan involving
approximately 60 employees at the company's German plastics
machinery business, Ferromatik. The plan, approved by
management and the Works Council in the first quarter of 1997,
will result in a total cash cost of about $2.0 million, all of
which will be expended in 1997. The company expects to achieve
annual cost savings of approximately $3.5 million as a result
of the workforce reduction and other actions at Ferromatik,
some of which will begin to be realized in the second quarter
of 1997.
INCOME TAXES
- ------------
In both 1997 and 1996, the provision for income taxes consists
of U.S. federal and state and local income taxes, non-U.S.
income taxes in certain jurisdictions, and the effects of the
reversal of U.S. and certain non-U.S. valuation allowances.
The company entered 1996 with non-U.S. net operating loss
carryforwards totaling $144 million, the deferred tax assets
related to which had been partially or substantially fully
reserved through valuation allowances at year-end 1995. The
company reviews the valuation of all deferred tax assets on an
ongoing basis and concluded in 1996 that it is more likely than
not that a portion of these assets will be realized in the
future. Accordingly, U.S. and certain non-U.S. valuation
allowances were reversed, resulting in an effective tax rate
less than the U.S. statutory rate.
Due in part to the reduction of the aggregate net operating
loss carryforward from $144 million to $125 million at year-end
1996, and the expectation of additional loss carryforward
utilization in 1997 and 1998, the 1997 provision for income
taxes includes the reversal of additional valuation allowances
in the U.S. and in certain non-U.S. jurisdictions. As a result,
the 1997 effective tax rate is less than the U.S. statutory
rate.
RECEIVABLES
- -----------
In accordance with the company's receivables purchase agreement
with an independent party, the company sells on an ongoing
basis undivided percentage ownership interests of up to $75
million in designated pools of accounts receivable. The amount
of undivided interests that have been sold at various balance
sheet dates is as follows: $75 million at March 23, 1997 and
December 28, 1996, $64 million at March 23, 1996, and $69
million at December 30, 1995. Any increases or decreases in
the amount sold are reported as operating cash flows in the
Consolidated Condensed Statement of Cash Flows. Costs related
to the sales are included in other costs and expenses - net in
the Consolidated Condensed Statement of Earnings.
LIABILITIES
- -----------
The components of accrued and other current liabilities and
long-term accrued liabilities are shown in the following
tables.
(In millions)
Mar. 22, Dec. 28,
1997 1996
------- -------
ACCRUED AND OTHER CURRENT LIABILITIES
Accrued salaries, wages and
other compensation $ 52.4 $ 51.9
Accrued and deferred income taxes 17.3 13.6
Other accrued expenses 95.6 103.8
------ ------
$165.3 $169.3
====== ======
LONG-TERM ACCRUED LIABILITIES
Accrued pension and other compensation $ 66.6 $ 67.1
Accrued postretirement health
care benefits 48.2 48.4
Accrued and deferred income taxes 28.1 26.9
Minority shareholders' interests 12.7 12.7
Other 22.5 23.5
------ ------
$178.1 $178.6
====== ======
LONG-TERM DEBT
- --------------
The components of long-term debt are shown in the following
table.
(In millions)
Mar. 22, Dec. 28,
1997 1996
------- -------
Long-term debt
7-7/8% Notes due 2000 $ 100.0 $ 100.0
8-3/8% Notes due 2004 115.0 115.0
Revolving credit facility 74.4 80.3
Other 10.5 11.8
------- -------
Total long-term debt 299.9 307.1
Less current maturities (3.7) (5.2)
------- -------
$ 296.2 $ 301.9
======= =======
Outstanding borrowings under the company's revolving credit
facility of DM 125 million ($74.4 million at March 22, 1997 and
$80.3 million at December 28, 1996) are included in long-term
debt based on the expectation that these borrowings will remain
outstanding for more than one year.
LINES OF CREDIT
- ---------------
In March, 1997, at the company's request, the committed
revolving credit facility was reduced from $300 million to $200
million and the term of the agreement was extended to January,
2002. The restriction on total indebtedness in relation to
total capital was replaced by a covenant of debt in relation to
earnings before interest, income taxes, depreciation and
amortization (EBITDA). In addition, the borrowing rate spread
was reduced to .425% over LIBOR and the facility fee was
reduced to .20% of the total line of credit as of March 22,
1997. The pricing under this amended facility fluctuates with
changes to the debt to EBITDA ratios.
At March 22, 1997, the company had lines of credit with various
U.S. and non-U.S. banks of approximately $419 million,
including the $200 million committed revolving credit facility.
These credit facilities support letters of credit and leases in
addition to providing borrowings under varying terms. Under
the provisions of the amended revolving credit facility, the
company's additional borrowing capacity totaled approximately
$242 million at March 22, 1997.
SHAREHOLDERS' EQUITY
- --------------------
In the first quarter of 1997, the company repurchased
approximately 300,000 common shares on the open market at a
total cost of $6.8 million to meet the needs of management
incentive, employee benefit and shareholder dividend
reinvestment plans.
On May 20, 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.
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 in accordance with American
Institute of Certified Public Accountants Statement of Position
No. 96-1 (which became effective in 1997) 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.
ORGANIZATION
- ------------
The company has three business segments: plastics machinery,
machine tools, and industrial products. Financial information
for each of these segments for the twelve weeks ended March 22,
1997 and March 23, 1996 is presented below.
(In millions)
12 Weeks Ended
-------------------
Mar. 22, Mar. 23,
1997 1996
------- -------
Sales
Plastics machinery $ 149.2 $ 122.8
Machine tools 89.8 81.1
Industrial products 138.5 149.5
------- -------
$ 377.5 $ 353.4
======= =======
Operating earnings
Plastics machinery $ 9.2 $ 10.7
Machine tools 1.8 .9
Industrial products 16.6 16.6
Corporate expenses (3.8) (3.4)
Other unallocated expenses (a) (1.6) (1.9)
------- -------
$ 22.2 $ 22.9
======= =======
New orders
Plastics machinery $ 151.1 $ 120.2
Machine tools 97.2 97.9
Industrial products 143.7 152.4
------- -------
$ 392.0 $ 370.5
======= =======
Ending backlog $ 387.7 $ 365.3
======= =======
(a)Includes financing costs related to the sale of accounts
receivable and minority shareholders' interests in earnings
of subsidiaries.
EARNINGS PER COMMON SHARE
- -------------------------
Earnings per common share are based on the weighted average
number of common shares and common share equivalents
outstanding.
In February, 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 128,
"Earnings per Share," which is effective for financial periods
ending after December 15, 1997. Earlier application is not
permitted. When it becomes effective, the new standard will
require the presentation of both "basic earnings per share,"
which is based on the weighted-average number of common shares
outstanding during a period, and "diluted earnings per share,"
which includes the effects of stock options and other
potentially dilutive securities. At year-end 1997, all
previously reported earnings per common share amounts must be
restated based on the provisions of the new standard. However,
the restated amounts for the first quarters of 1997 and 1996,
will not vary significantly from the amounts reported herein.
CINCINNATI MILACRON INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(UNAUDITED)
RESULTS OF OPERATIONS
The company operates in three business segments: plastics
machinery, machine tools and industrial products. The plastics
machinery and industrial products businesses have benefited
from a number of strategic acquisitions since the beginning of
1995. The most recent was the January 26, 1996, acquisition of
D-M-E, which is included in the company's plastics machinery
segment for seven weeks in the first quarter of 1996, and the
entire 12 weeks in 1997. This had the effect of increasing new
orders and sales by approximately $16 million in the first
quarter of 1997.
In recent years, the company's growth outside the U.S. has
allowed the company to be less dependent on the U.S. industrial
sector. With sales to non-U.S. markets accounting for 30% to
40% of sales, foreign currency exchange rate fluctuations
affect the translation of sales and earnings, as well as
consolidated shareholders' equity. Throughout much of 1996 the
financial statement effects of a weaker German Mark were to
some degree offset by the effects of a stronger British Pound.
In the first quarter of 1997, the U.S. dollar strengthened
against both the British Pound and German Mark resulting in a
translation effect of decreasing new orders by $19 million and
sales by $9 million. Net earnings were not negatively affected
in the first quarter of 1997 primarily because of the favorable
translation effect of a $3.5 million operating loss at
Ferromatik in Germany, as described below. In addition, in
1997 there was a $16 million decrease in shareholders' equity
due to cumulative foreign currency translation adjustments. If
the German Mark remains at current levels or weakens further in
1997, the company will experience a negative effect on
translating its European new orders, sales and earnings in 1997
when compared with 1996 results.
NEW ORDERS AND BACKLOG
New orders in the first quarter of 1997 were $392 million,
which represented a $21 million, or 6%, increase from the $371
million in the first quarter of 1996. Excluding the effects of
the D-M-E acquisition and the stronger U.S. dollar, new orders
increased by $25 million, or 7%.
Orders for plastics machinery increased $31 million, or 26%, to
$151 million from $120 million in the first quarter of 1997 as
the D-M-E acquisition and increased orders for U.S.-built
injection molding machines offset currency effects. Machine
tool orders were $97 million in 1997, about the same as 1996.
New orders for U.S.-built machine tools and aerospace products
continued to improve while orders for U.K.-built products
softened. Orders for industrial products were $144 million,
down from $152 million in 1996, due primarily to the weaker
German Mark and reduced orders for Widia's industrial magnets
in Europe.
U.S. export orders approximated $40 million in the first
quarter of 1997 compared with $41 million in the first quarter
of 1996.
The company's backlog of unfilled orders continued to increase
from $365 million at March 23, 1996, to $373 million at
December 28, 1996, to $388 million at March 22, 1997. These
increases are being driven by increased orders for U.S.-built
machine tools, including and most importantly, orders for
aerospace products.
SALES
Sales in the first quarter of 1997 of $378 million increased by
$24 million over the first quarter of 1996. Excluding the
effects of the D-M-E acquisition and currency exchange rate
effects, sales increased by $17 million, or 5%. Plastics
machinery sales, excluding the D-M-E acquisition effect,
increased by $10 million due to increased sales of U.S.-built
injection molding machines. Machine tool sales increased $9
million from last year's first quarter as a result of increased
sales of U.S.-built standard machine tools. Industrial
products sales decreased $11 million from the first quarter of
1996, more than half of which is due to currency exchange rate
fluctuations, with the balance being related mostly to reduced
sales of industrial magnets in Europe.
Export sales increased from $40 million in the first quarter of
1996 to $42 million in the first quarter of 1997, primarily due
to the acquisition effect of D-M-E.
MARGINS, COSTS AND EXPENSES
The consolidated manufacturing margin percent of 24.9% for the
first quarter of 1997 decreased from 25.6% in the first quarter
of 1996, almost solely due to reduced margins from the
company's European injection molding machine business,
Ferromatik. Plastics machinery margins were further held back
by competitive pricing in a difficult market, a trend that is
expected to continue during the second quarter. Manufacturing
margins for both machine tools and industrial products
improved.
Selling and administrative expense in the first quarter of 1997
increased, as expected, with increased sales and the effect of
the acquisition. As a percent to sales, however, selling
expense declined compared with the first quarter of 1996.
Administrative expense increased, primarily due to the D-M-E
acquisition.
Other-net represented a $2.8 million expense in 1997 versus a
$1.3 million expense in the first quarter of 1996. The
increase was caused primarily by an expense for severance
benefits of approximately $2.0 million relating to
approximately 60 employees at Ferromatik. As a result of this
and other actions at Ferromatik, the company expects to achieve
annualized savings of $3.5 million, which will begin to phase
in during the second quarter of 1997. Also included in other-
net is $.6 million of income related to the early termination
of a technology license agreement which benefited the
industrial products group in 1997.
Interest expense - net decreased by $1.3 million in the first
quarter of 1997 compared to the first quarter of 1996 due to
repayment of debt using the proceeds from the May, 1996 equity
offering.
EARNINGS BEFORE INCOME TAXES
In the first quarter of 1997, the company's Ferromatik
subsidiary incurred a pretax operating loss of $3.5 million, of
which about $2.0 million represents severance expense to
implement a workforce reduction plan. Despite this loss, the
company's earnings before income taxes of $16.3 million in 1997
represented a 4% improvement over the comparable quarter of
1996.
INCOME TAXES
The provision for income taxes in 1997 and 1996 includes U.S.
federal and state and local income taxes, and income taxes in
other jurisdictions outside the U.S. The company entered both
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 the beginning of 1996, 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 1997 and
1996, 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.
NET EARNINGS
Net earnings were $13.0 million, or $.33 per share, in the
first quarter of 1997 compared with $12.6 million, or $.36 per
share, in the first quarter of 1996. Even though net earnings
increased, earnings per share decreased due to the issuance of
additional common shares in May, 1996. Net earnings and
earnings per share for the first quarter of 1997 were reduced
by $1.6 million after-tax, or $.04 per share, for the
Ferromatik severance expense. Excluding the severance expense,
1997 net earnings and earnings per share would have increased
by $2.0 million, or $.01 per share, over the 1996 net earnings
of $12.6 million and earnings per share of $.36.
LIQUIDITY AND SOURCES OF CAPITAL
- --------------------------------
At March 22, 1997, the company had cash and cash equivalents of
$30 million, an increase of $2 million during the first quarter
of 1997.
Operating activities provided $11 million of cash in 1997,
compared with $21 million provided in the first quarter of
1996. This decline was caused primarily by higher inventory
levels in the company's machinery businesses related to
increased order levels. Operating activities cash flows were
reduced by cash costs of $2 million in 1996 for the integration
and restructuring of Valenite and Widia which had begun in
1995.
Investing activities in 1997 resulted in a $6 million use of
cash, mostly due to capital expenditures. Net cash used by
investing activities totaled $81 million in 1996, including $73
million for the D-M-E acquisition.
Financing activities used $2 million of cash in 1997. In the
first quarter of 1997, the company used $7 million of cash to
repurchase approximately 300,000 common shares on the open
market to meet the needs of management incentive, employee
benefit and dividend reinvestment plans. Amounts payable to
banks also increased by $10 million, although total debt
increased by only $1 million during the quarter due to currency
exchange rate effects.
As of March 22, 1997, the company's current ratio of 1.8 was
unchanged from 1.8 at December 28, 1996, but down from 2.0 at
March 23, 1996.
At March 22, 1997, the company had lines of credit with various
U.S. and non-U.S. banks of approximately $419 million,
including a $200 million committed revolving credit facility.
In March, 1997, at the company's request, the revolving credit
facility was reduced from $300 million to $200 million and the
term was extended to January 2002. The restriction on total
indebtedness in relation to total capital was removed and a
covenant of debt to earnings before interest, income taxes,
depreciation and amortization (EBITDA) was substituted. Under
the provisions of the facility, the company's additional
borrowing capacity totaled approximately $242 million at March
22, 1997.
The company had a number of short-term intercompany loans and
advances denominated in various currencies totaling $48.3
million at March 22, 1997, 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 March 22,
1997, approximately $227.6 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 $374 million at March 22, 1997, an increase of
$1 million over December 28, 1996. Total shareholders' equity
was $434 million at March 22, 1997, a decrease of $13 million
from December 28, 1996, primarily due the $16 million effect of
the stronger U.S. dollar on the cumulative foreign currency
translation adjustment. The ratio of total debt to total
capital (debt plus equity) remained at 46% at March 22, 1997,
compared with December 28, 1996, but down from 65% at March 23,
1996.
Capital expenditures in 1997 are expected to range between $70
million and $83 million, dependent upon the timing of certain
projects, and the company expects to expend about $2 million
for Ferromatik severance payments. 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's outlook for the North American and Asian markets
remains positive, but it is less confident in the European
outlook. Assuming Europe picks up in the last half of 1997,
the company believes it is positioned to meet its annual
targets of 7% to 8% sales growth and 15% or greater increases
in earnings per share. If the European rebound is delayed, the
company expects to show less significant increases in 1997 over
1996.
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 its 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 interest rates currency exchange rates
of U.S. and foreign countries, 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; and
* changes in tax, environmental and other laws and
regulations in the U.S. and non-U.S. countries where the
company does business.
PART II. OTHER INFORMATION
CINCINNATI MILACRON INC. AND SUBSIDIARIES
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- -----------------------------------------
(a) Exhibits
Exhibit (3) - Articles of Incorporation and Bylaws
Exhibit (4) - Instruments Defining the Rights of
Security Holders, Including
Indentures
Exhibit (10) - Material Contracts
Exhibit (11) - Statement Regarding Computation of Per Share
Earnings - filed as a part of Part I
Exhibit (27) - Financial Data Schedule - filed as part of
Part I
(b) Reports on Form 8-K
There were no reports on Form 8-K filed
during the quarter ended March 22, 1997.
CINCINNATI MILACRON INC. AND SUBSIDIARIES
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 thereunto duly authorized.
Cincinnati Milacron Inc.
Date: May 1, 1997 By:/s/Robert P. Lienesch
----------------- ---------------------
Robert P. Lienesch
Controller
Date: May 1, 1997 By:/s/Ronald D. Brown
----------------- ---------------------
Ronald D. Brown
Vice President - Finance
and Administration
and Chief Financial Officer
CINCINNATI MILACRON INC. AND SUBSIDIARIES
INDEX TO EXHIBITS
EXHIBIT NO. PAGE NO.
- ----------- --------
2 Plan of Acquisition,
Reorganization, Arrangement,
Liquidation or Succession
- Not Applicable.
3 Articles of Incorporation and By-laws
3.1 - Incorporated herein by
reference to the company's annual
report on Form 10-K for the fiscal
year ended December 28, 1996.
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 Amendment No. 3 to
Form S-4 Registration Statement
(Registration No. 33-53009).
4.3 7-7/8% Notes due 2000
- Incorporated herein by reference
to the company's Registration
Statement on Form S-4
(Registration 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 the
long-term debt for securities
authorized thereunder which do not
exceed 10% of the registrant's total
consolidated assets.
10 Material Contracts
10.1 - Incorporated herein by
reference to the company's annual
report on Form 10-K for the fiscal
year ended December 28, 1996.
10.2 Amendment Number Four, Dated as of March (Bound
14, 1997, to the Amended and Restated Separately)
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.
11 Statement Regarding Computation of
Per Share Earnings 22
15 Letter re: Unaudited Interim
Financial Information
- Not Applicable.
18 Letter Regarding Change in
Accounting Principles
- Not Applicable.
19 Report Furnished to Security Holders
- Not Applicable.
22 Published Report Regarding Matters
Submitted To Vote of Security Holders -
Not Applicable.
23 Consents of Experts and Counsel -
Not Applicable.
24 Power of Attorney - Not Applicable.
27 Financial Data Schedule 23
99 Additional Exhibits - Not Applicable.