-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, F5YJk+mJfXDBFYIVSheacQRoR+D2CQuDCd+wtlafpQD2earcydwPKa/nihBnW1m1 es9ubFQo+opvQogZvWijwA== 0000716823-95-000004.txt : 19950417 0000716823-95-000004.hdr.sgml : 19950417 ACCESSION NUMBER: 0000716823-95-000004 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19931108 ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19950414 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CINCINNATI MILACRON INC /DE/ CENTRAL INDEX KEY: 0000716823 STANDARD INDUSTRIAL CLASSIFICATION: MACHINE TOOLS, METAL CUTTING TYPES [3541] IRS NUMBER: 311062125 STATE OF INCORPORATION: DE FISCAL YEAR END: 1230 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-08485 FILM NUMBER: 95529013 BUSINESS ADDRESS: STREET 1: 4701 MARBURG AVE CITY: CINCINNATI STATE: OH ZIP: 45209 BUSINESS PHONE: 5138418100 MAIL ADDRESS: STREET 1: 4701 MARBURG AVE CITY: CINCINNATI STATE: OH ZIP: 45209 FORMER COMPANY: FORMER CONFORMED NAME: CINCINNATI MILACRON HOLDINGS INC DATE OF NAME CHANGE: 19830503 FORMER COMPANY: FORMER CONFORMED NAME: CINCINNATI MILLING MACHINE CO DATE OF NAME CHANGE: 19600201 8-K/A 1 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) February 1, 1995 ---------------- 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 February 1, 1995 (the "Closing Date") pursuant to the Stock Purchase Agreement dated as of November 28, 1994 (the "Purchase Agreement"), Cincinnati Milacron Inc. (the "Registrant") indirectly acquired the capital stock of Krupp Widia GmbH, a German corporation ("Widia") from Fried. Krupp AG Hoesch-Krupp, a German corporation (the "Seller"). (The Registrant indirectly acquired 99.92% of Widia's capital stock and B.T. Foreign Investment Corp. holds the remainder.) The purchase includes Widia's 51% interest in Widia (India), Ltd., a public company ("Widia-India") and wholly-owned Widia subsidiaries in eleven other countries. 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 total purchase price, including assumed debt and liabilities of approximately 33,000,000 DM, is approximately 154,000,000 DM (approximately $99,000,000 using the exchange rate in effect on the Closing Date). Included in the assumed debt and liabilities is approximately 19,000,000 DM (approximately $12,000,000) of debt owed by Widia-India. The Registrant obtained the funds for the purchase through, or in connection with, an amendment to its revolving credit facility with its existing bank group, which was amended prior to the Closing Date to increase the Total Revolving Loan Commitment from $130,000,000 to $200,000,000 and to allow up to $100,000,000 of such amount to be drawn in Deutsch Marks (a copy of the Amended and Restated Revolving Credit Agreement dated as of December 31, 1994, is filed herewith as Exhibit 99.1 and reference is made thereto for the complete terms and conditions thereof (including the identity of the parties thereto)). 125,000,000 DM (approximately $80,000,000) of the Total Revolving Loan Commitment was drawn in connection with the acquisition. No material relationship exists between the Seller and the Registrant or any of its affiliates, directors or officers, or any associate of any such directors or officers. Widia is one of the world's leading producers of metalcutting products including carbide inserts and steel insert holders. Widia is also a leading supplier of carbide die and wear products and industrial magnets. The Registrant intends to operate Widia as a wholly-owned subsidiary of the Registrant and to have Widia continue to use a majority of its plant, equipment and other physical property substantially as it did prior to the Closing Date. The Press Release of the Registrant dated February 1, 1995, announcing the completion of the acquisition described above is filed herewith as Exhibit 99.2 and is incorporated herein by reference. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS --------------------------------- (a) Financial statements of business acquired The following financial statements of Widia GmbH are filed herewith as Item 7 (a): Report of Independent Auditors Combined statements of net assets as of December 31, 1994 and 1993 Combined statements of operations for the years ended December 31, 1994 and 1993 Combined statements of cash flows for the years ended December 31, 1994 and 1993 Notes to combined financial statements (b) Pro forma financial information The Pro Forma Consolidated Balance Sheet as of December 31, 1994, and the related Pro Forma Consolidated Statement of Earnings for the fiscal year ended December 31, 1994 reflecting, on a pro forma basis, the acquisition of Widia GmbH are filed herewith as Item 7 (b) ITEM 7(A) COMBINED FINANCIAL STATEMENTS WIDIA GMBH OF FRIED. KRUPP AG HOESCH-KRUPP SUBJECT TO THE STOCK PURCHASE AGREEMENT BETWEEN FRIED. KRUPP AG HOESCH-KRUPP AND CINCINNATI MILACRON INC. YEARS ENDED DECEMBER 31, 1994 AND 1993 WITH REPORT OF INDEPENDENT AUDITORS COMBINED FINANCIAL STATEMENTS WIDIA GMBH SUBJECT TO THE STOCK PURCHASE AGREEMENT BETWEEN FRIED. KRUPP AG HOESCH-KRUPP AND CINCINNATI MILACRON INC. CONTENTS Page ---- Report of Independent Auditors 6 Combined Financial Statements: Combined statements of net assets 7 Combined statements of operations 8 Combined statements of cash flows 9 Notes to combined financial statements 10-28 REPORT OF INDEPENDENT AUDITORS To the Board of Directors Cincinnati Milacron Inc. We have audited the accompanying combined statements of net assets of Widia GmbH (the "Acquired Business", see Note 1) subject to the Stock Purchase Agreement between Fried. Krupp AG Hoesch-Krupp and Cincinnati Milacron Inc. as of December 31, 1994 and 1993, and the related combined statements of operations, and cash flows for the years then ended. These financial statements are the responsibility of the Acquired Business' 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 in Germany and the United States. 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 combined net assets of the Acquired Business as of December 31, 1994 and 1993, and the combined results of their operations and their cash flows for the years then ended in conformity with generally accepted accounting principles in Germany. Generally accepted accounting principles in Germany vary in certain significant respects from generally accepted accounting principles in the United States. Application of generally accepted accounting principles in the United States would have affected the results of operations for the years ended December 31, 1994 and 1993, and net assets as of December 31, 1994 and 1993, to the extent summarized in Note 3 to the combined financial statements. Dusseldorf, Germany COOPERS & LYBRAND GMBH February 28, 1995 Wirtschaftsprufungsgesellschaft Buiting Wiegand Wirtschaftsprufer Wirtschaftsprufer and Certified Public Accountant WIDIA GMBH SUBJECT TO THE STOCK PURCHASE AGREEMENT BETWEEN FRIED. KRUPP AG HOESCH-KRUPP AND CINCINNATI MILACRON INC. Combined Statements of Net Assets (DM in thousands) December 31, 1994 1993 ---- ---- ASSETS Note ---- Non-current assets: Intangible assets 4 4,607 5,389 Fixed assets 5 115,161 133,026 Financial assets 6 1,431 4,333 ------- ------- Total non-current assets 121,199 142,748 ------- ------- Current assets: Inventories 7 93,913 98,165 Less payments received on orders 2,486 1,307 ------- ------- 91,427 96,858 Trade receivables 8 69,002 69,299 Receivables from related entities 7,813 36,644 Other assets 8 3,672 5,832 Cash 4,426 6,219 ------- ------- Total current assets 176,340 214,852 ------- ------- Prepaid expenses 844 1,034 ------- ------- Total assets 298,383 358,634 ======= ======= LIABILITIES Accruals: Accruals for pensions and similar obligations 9 44,170 57,627 Tax accruals 10 2,251 3,480 Other accruals 11 23,221 32,752 ------- ------- 69,642 93,859 ------- ------- Other liabilities: 12 Bank borrowings 8,816 14,342 Trade payables 22,154 15,297 Bills of exchange 666 932 Payables to related entities 9,494 11,340 Other liabilities 34,413 41,088 ------- ------- 75,543 82,999 ------- ------- Total liabilities 145,185 176,858 ======= ======= Minority interest 10,108 9,487 Reserve for special depreciation 26,922 28,397 ------- ------- 37,030 37,884 ------- ------- Net Assets 13 116,168 143,892 ======= ======= See notes to combined financial statements. WIDIA GMBH SUBJECT TO THE STOCK PURCHASE AGREEMENT BETWEEN FRIED. KRUPP AG HOESCH-KRUPP AND CINCINNATI MILACRON INC. Combined Statements of Operations (DM in thousands) Year Ended December 31, 1994 1993 ---- ---- Note ---- Sales 17 364,036 371,137 Decrease in inventories 3,376 14,333 -------- -------- Total output 360,660 356,804 Other operating income 18 13,202 10,548 Cost of materials and services 16 93,436 101,189 Personnel expenses 20 173,999 185,874 Depreciation and amortization 4-5 22,188 29,377 Other operating expenses 21 82,116 84,686 -------- ------- Operating profit/loss 2,123 (33,774) Minority interest in earnings of affiliated entities 1,909 1,658 Interest expense, net 22 2,078 6,628 -------- -------- Loss from ordinary business activities 1,864 42,060 (Loss) profit transfer from Krupp Medizintechnik GmbH (2,401) 808 Extraordinary income 23 20,468 Extraordinary expenses 24 11,217 20,068 Income taxes 2,218 2,110 Other taxes 8,362 8,093 -------- -------- Net loss before loss transfer agreement with Krupp 26,062 51,055 Loss transfer to Krupp 50,161 -------- -------- Net loss 26,062 894 ======== ======== See notes to the combined financial statements. WIDIA GMBH SUBJECT TO THE STOCK PURCHASE AGREEMENT BETWEEN FRIED. KRUPP AG HOESCH-KRUPP AND CINCINNATI MILACRON INC. Combined Statements of Cash Flows (DM in thousands) Year Ended December 31, 1994 1993 ---- ---- Cash flows from operating activities: Net loss before loss transfer agreement with Krupp 26,062 51,055 Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 23,463 39,145 Change in special depreciation (1,475) (5,081) Net gain on disposals of non-current assets (1,012) (565) Changes in assets and liabilities: Inventories 5,431 33,978 Trade receivables 297 7,197 Trade payables 6,857 (5,609) Accrued liabilities (11,867) (13,871) Other liabilities (6,941) 341 Other assets 2,271 1,128 -------- -------- Cash (used for) provided by operating activities (9,038) 3,650 Cash flows from investing activities: Purchases of fixed assets (8,747) (11,469) Disposals of fixed assets 2,751 1,283 Net cash provided by financial investments 2,890 2,604 Change in minority interest 621 1,128 -------- -------- Cash provided by investing activities (2,485) (6,454) Cash flows from financing activities: Loss transfer to Krupp 50,161 Proceeds from bank borrowings 7,642 Repayments of bank borrowings (13,168) (53,850) Proceeds from related entities, net 16,481 15,498 Payments to related entities, net (1,846) (11,680) -------- -------- Cash provided by financing activities 9,109 129 Exchange rate impacts on cash 621 848 -------- -------- Net decrease in cash (1,793) (1,827) Cash at beginning of year 6,219 8,046 -------- -------- Cash at end of year 4,426 6,219 ======== ======== See notes to combined financial statements. WIDIA GMBH SUBJECT TO THE STOCK PURCHASE AGREEMENT BETWEEN FRIED. KRUPP AG HOESCH-KRUPP AND CINCINNATI MILACRON INC. Years Ended December 31, 1994 and 1993 Notes to Combined Financial Statements 1. PURCHASE AND SALE OF THE ACQUIRED BUSINESS On November 28, 1994, a Stock Purchase Agreement ("the Agreement") was entered into between Fried. Krupp AG Hoesch-Krupp ("Krupp"), a German company, and Cincinnati Milacron Inc. ("Milacron"), a United States company. Krupp agreed to sell to Milacron the Widia GmbH entity and certain Widia GmbH foreign sales and service subsidiaries, collectively referred to hereafter as the "Acquired Business", and the related assets, liabilities and shareholdings as specified in the Agreement. The Agreement specifies that, among other things, effective on or prior to the closing date, Krupp is to contribute the elements of the Acquired Business to the wholly-owned subsidiary, Widia GmbH, which will then be transferred to Milacron. As of December 31, 1994, not all of the transactions as specified in the agreement have been completed. The Acquired Business includes the manufacturing, assembling, selling and distributing tools and wear parts of sintered carbide and other hard materials and magnets. These operations are accounted for in one industry segment, Industrial Products. Due to the organization and reporting structure of Krupp, summarized financial records of the acquired business were not maintained as one consolidated group. Further, certain services such as financing and administration were provided by Krupp to the acquired business. Therefore, the accompanying financial statements do not purport to present the net assets or results of operations and cash flows of the acquired business as if it had been operated as a separate, unaffiliated entity, but rather as a component of Krupp's overall business during the periods presented. 2. SIGNIFICANT ACCOUNTING POLICIES The accounting principles and valuation methods of the Acquired Business have been consistently applied for both years presented. ALL MONETARY AMOUNTS HEREIN ARE SHOWN IN THOUSANDS OF DEUTSCHE MARKS. Principles of Combination - The entities included in the accompanying combined financial statements and the related equity ownership interest of the Acquired Business at December 31, 1994 are as follows: Name City, Country Ownership % ---- ------------- ----------- Widia Heinlein GmbH Lichtenau, Germany 100 Meturit AG Zug, Switzerland 100 Krupp Widia Nederland B.V. Woerden, Netherlands 100 Widia Iberica S.A. Vitoria, Spain * 100 (former division of Krupp Hispania S.A.) Herko Vitoria S.A. Vitoria, Spain * 100 Krupp Widia U.K. Limited High Wycombe, UK * 100 Krupp Widia S.P.A. Milan, Italy 100 Krupp Widia Vertriebs- gesellschaft m.b.H. Perchtoldsdorf, Austria 100 Krupp Widia Svenska A.B. Stockholm, Sweden 100 Krupp Widia S.E. Asia (Pte.) Limited Singapore, Singapore 100 Krupp Widia Korea Limited Seoul, Korea 100 Krupp Widia Japan Limited Kobe, Japan 100 Krupp Widia France S.A. Vernouileet, France * 100 Widia (India) Limited Bangalore, India 51 Widaroc India Limited Bangalore, India 100 (shares held by Widia (India) Limited Widaroc India Limited in the process of being merged upon Widia (India) Limited without affecting the shareholding of Meturit AG in Widia (India) Limited. * As of December 31, 1994, these entities have not yet been obtained by Widia GmbH. For all of the above listed entities, in which the Acquired Business has more than a 50% equity ownership interest (the "affiliated entities"), the full consolidation method has been used, except that in 1994 the subsidiary in Kobe, Japan, Krupp Widia Japan Limited, is not consolidated, but is effectively accounted for under the equity method of accounting. This subsidiary represented in 1993 less than one-half of one percent of the net loss before transfer to Krupp and less than three percent of sales of the acquired business. In regard to net assets, the subsidiary represented in 1994 and 1993 approximately one- half of one percent of the net assets of the acquired business. Management believes that in 1994, the results and net assets of Widia Japan Limited, would again have an immaterial impact on the consolidated accounts and therefore has deemed this presentation appropriate due to the natural disasters in that area. Profit and Loss Transfer Agreements - The acquired business maintained a profit and loss transfer agreement with Krupp whereby the majority of the losses of the acquired business were transferred to Krupp. This agreement was terminated for the 1994 fiscal year. The acquired business also maintained a profit and loss transfer agreement with Krupp Medizintechnik GmbH, which is not part of the acquired business, whereby the results of Krupp Medizintechnik GmbH were transferred to the acquired business. Foreign Currency Translation - The foreign currency amounts representing foreign affiliated entities in the combined statements of net assets have been translated into DM at the fiscal year-end exchange rates. Amounts in the combined statements of operations have been translated into DM using the average exchange rates for the periods involved. Translation gains or losses are included in net assets. Intangible Assets - Intangible assets consist mainly of goodwill arising on the acquisition of Widia Heinlein GmbH and purchased computer software. Amortization is provided using the straight-line method over fifteen years for goodwill and generally four years for computer software. Fixed Assets - Fixed assets are valued at acquisition cost. Depreciation is provided using the straight-line method over the assets' useful lives as follows: Fixed Assets Buildings - 25 - 50 years Technical facilities and machinery - 3 - 10 years Facilities, factory and office equipment - 4 - 10 years Inventories - Raw materials, manufacturing supplies and goods purchased for resale are valued at the lower of cost, determined on an average, or market. Finished goods are valued at the lower of manufacturing cost, determined on an average or net realizable value and comprise direct material and labor and applicable manufacturing overheads including depreciation charges. Obsolescence provisions are made to the extent that inventory risks are determinable. Trade Accounts Receivable - Receivables are presented net of allowances for doubtful accounts. Allowances are provided for both the specific and general risks inherent in receivables. The Acquired Business evaluates the credit worthiness of each customer, but it does not normally require its trade accounts receivable to be collateralized. Income Taxes - The entities comprising the Acquired Business maintain substantially the same tax and financial reporting bases for assets and liabilities and therefore deferred taxes generally do not result. Pension Obligations - Accruals and provisions for pensions and similar obligations are actuarially determined and are based on discounted amounts. Liabilities - Liabilities are presented at their repayment amounts. Other Accruals - Accruals for employee termination indemnity are based on contractual agreements between management and the Workers' Council. Accruals and provisions for estimated costs related to product warranty are made at the time the products are sold. Revenue Recognition - Revenue is recognized when title passes or services are rendered, net of discounts and rebates granted. Foreign Currency Transactions - Foreign currency receivables and payables are recorded at historical rates unless using the exchange rate at the fiscal year-end would result in an unrealized foreign currency exchange loss. This results in unrealized losses being recognized currently and unrealized gains being deferred until they are realized. Unrealized gains on foreign exchange forward contracts are deferred and recognized as part of the specific transaction hedged, but unrealized losses are recognized currently. Total Cost Method - The statements of operations have been presented using the total cost (or type of expenditure) method which is a common German GAAP method in use. In this format, production and all other expenses incurred during the period are classified by type of expense. Sales for the period, and the net decrease in finished goods and work in process are classified as Total Output. 3. SIGNIFICANT DIFFERENCES BETWEEN GERMAN GAAP AND US GAAP The combined financial statements of the Acquired Business comply with German GAAP as prescribed by the German Commercial Code, which differs in certain significant respects from US GAAP. The significant differences which affect the combined net loss and combined net assets of the Acquired Business are as follows: a. Pensions - The Acquired Business provides for pension costs based on actuarial studies using the entry age method as defined in the German tax code. US GAAP, as defined by SFAS No. 87, "Employers' Accounting for Pensions", is more prescriptive, particularly as to the use of actuarial assumptions, and requires that a different actuarial method (the projected unit credit method) be used. The application of this method is further described in Note 9. b. Special Depreciation - As allowed by German GAAP, depreciation may be calculated utilizing accelerated depreciation methods with the difference resulting between the accelerated and straight-line method being regarded as a special depreciation reserve. Under US GAAP, this practice is not acceptable. c. Financial Closing Accrual - In accordance with German GAAP, the acquired business records an accrual at the end of the year for the estimated future costs to be incurred in conjunction with the financial close and reporting. This is not acceptable for US GAAP. d. Loss Transfer - As allowed by German GAAP, the acquired business had a profit and loss transfer agreement with Krupp whereby the majority of the loss of the acquired business is transferred to Krupp. This agreement was cancelled in 1994. This presentation is not acceptable for US GAAP. e. Profit Transfer - As allowed by German GAAP, the acquired business also had a profit and loss transfer agreement with Krupp Medizintechnik GmbH, which is not part of the acquired business, whereby the results of Krupp Medizintechnik GmbH were transferred to the acquired business. This presentation is not acceptable for US GAAP. In 1994, the results of Krupp Medizintechnik GmbH were funded by Krupp and included with other operating income (see Note 18) and therefore no adjustment is required in 1994. f. Investment Grants - As allowed by German GAAP, the acquired business records investment grants as other income. In accordance with US GAAP, investment grants of this nature are to be recorded as a reduction of the cost of the related asset. g. Deferred Taxes - Under German GAAP, deferred taxes are calculated on the liability method, but are recognized only to the extent that consolidated deferred tax liabilities exceed consolidated deferred tax assets. Under US GAAP, as prescribed by SFAS No. 109 "Accounting for Income Taxes", deferred taxes are provided for all temporary differences using enacted tax rates. There is, however, no deferred tax adjustment below as deferred tax assets exceed deferred tax liabilities and that a valuation allowance has been recorded as of December 31, 1994 and 1993 to the extent that deferred tax assets exceed deferred tax liabilities due to the past poor operating results and uncertainty of the future profitability of the acquired business. Reconciliation to US GAAP - The following is a summary of the significant adjustments to net loss for the years ended December 31, 1994 and 1993 and to net assets as of December 31, 1994 and 1993, which would be required if US GAAP had been applied instead of German GAAP. Note 1994 1993 ---- ---- ---- Net loss as reported in the combined statements of opera- tions under German GAAP (26,062) (894) Adjustment required to conform with US GAAP - Pensions a (1,786) (1,822) - Special depreciation b (1,475) (3,017) - Financial closing accrual c (41) (85) - Loss transfer d (50,161) - Profit transfer e (808) - Investment grants f (2,090) (190) ------- ------- NET LOSS IN ACCORDANCE WITH US GAAP (31,454) (56,977) ======== ======== Note 1994 1993 ---- ---- ---- Net assets as reported in the combined statements of net assets under German GAAP 116,168 143,892 Adjustment required to conform with US GAAP - Pensions a (3,944) (2,158) - Special depreciation b 26,922 28,397 - Financial closing accrual c 881 965 - Investment grants f (1,520) (1,330) -------- -------- NET ASSETS IN ACCORDANCE WITH US GAAP 138,507 169,766 ======== ======== 4. INTANGIBLE ASSETS 1994 1993 ---- ---- Balance at beginning of year 9,993 10,443 Additions 241 78 Disposals 641 559 Translation (165) 31 -------- -------- Balance at end of year 9,428 9,993 Accumulated amortization 4,821 4,604 -------- -------- Net Book Value 4,607 5,389 ======== ======== Amortization for the year 861 1,093 ======== ======== 5. FIXED ASSETS
Other equipment Advance Technical factory payments equipment and and Land and and office construction buildings machinery equipment in progress Total --------- --------- --------- ----------- ----- Balance at January 1,1993 72,103 234,987 63,675 6,526 377,291 Additions 478 7,998 2,112 881 11,469 Reclassifications 1,091 3,399 456 (4,946) Disposals 92 14,275 4,276 207 18,850 Translation (357) (843) (239) (130) (1,569) ------- -------- ------- ------- -------- 73,223 231,266 62,728 2,124 368,341 Accumulated depreciation 16,898 169,614 48,210 593 235,315 ------- -------- ------- ------- -------- Net Book Value at December 31, 1993 56,325 61,652 13,518 1,531 133,026 ======= ======== ======= ======= ======== Depreciation for the year 1,805 28,679 7,359 209 38,052 ======= ======== ======= ======= ======== Balance at January 1, 1994 73,223 231,266 61,728 2,124 368,341 Additions 277 7,011 1,190 269 8,747 Reclassifications 1,235 72 (1,307) Disposals 283 26,707 5,241 330 32,561 Translation (426) (1,727) (75) (43) (2,271) ------- -------- ------- ------- -------- 72,791 211,078 57,674 713 342,256 Accumulated depreciation 19,192 159,768 47,621 514 227,095 ------- -------- ------- ------ -------- Net Book Value at December 31, 1994 53,599 51,310 10,053 199 115,161 ======= ======== ======= ====== ======== Depreciation for the year 2,562 15,617 4,279 144 22,602 ======= ======== ======= ====== ========
During 1993, write-downs of fixed assets of 11,020 were recorded. Of this amount, 9,768 was recorded as extra-ordinary expense. These amounts are shown with the depreciation for the year. During 1994, write-downs of fixed assets of 1,275 were recorded, which are shown as extra-ordinary expense. 6. FINANCIAL ASSETS Investments in associated Long-term entities receivables Total -------- ----------- ----- Balance at January 1, 1993 5,420 937 6,357 Additions 78 78 Write-down to fair market value 1,155 1,155 Disposals 1,042 46 1,088 Translation 139 2 141 ------- ----- ------ Net Book Value at December 31, 1993 3,362 971 4,333 ====== ===== ====== Balance at January 31, 1994 3,362 971 4,333 Additions 461 45 506 Disposals 3,362 34 3,396 Translation (12) (12) ------- ------ ------ Net Book Value at December 31, 1994 461 970 1,431 ====== ======= ======= 7. INVENTORIES 1994 1993 ---- ---- Raw materials and manufacturing supplies 13,805 13,560 Work in process 27,143 30,309 Finished goods and goods purchased for resale 52,297 53,603 Advance payments to suppliers 668 693 ------ ------ 93,913 98,165 ====== ====== 8. RECEIVABLES AND OTHER ASSETS Trade receivables are due within one year (1993: 37 were due after one year). Receivables from related entities are all due within one year. Other assets consist primarily of non-trade receivables of 3,165 (1993: 5,354), of which amounts maturing after more than one year are 14 (1993: 16). 9. PENSION OBLIGATIONS The Acquired Business operates two defined benefit pension plans in Germany, both based on years of service, to substantially all employees. One plan is for the benefit of non-exempt employees while the other plan is for exempt employees. Pensions are related to average earnings near retirement or earlier death or disability as well as to fixed amounts. Some of the foreign affiliated entities operate immaterial defined benefit and defined contribution pension plans. Pension benefit obligations are determined based on actuarial studies using the entry age method as defined in the German tax code and are based on an assumed interest rate of 6%. All of the material pension plans are unfunded. The following information for the Acquired Business' material pension plans is provided on a US GAAP basis (see Note 3) in accordance with the US GAAP disclosure requirements of SFAS No. 87. The net periodic pension cost of the Acquired Business for the retirement plans comprised: 1994 1993 ---- ---- Service cost: present value of benefits earned during the year 1,150 1,263 Interest cost on projected benefit obligation 4,387 4,461 Amortization of transition amount 562 562 ------ ------ Total Pension Cost 6,099 6,286 ====== ====== The status of the Acquired Business' retirement plans is as follows: 1994 1993 ---- ---- Actuarial present value of benefits: Vested 45,505 55,839 Nonvested 2,551 3,543 ------- ------- Accumulated benefit obligation 48,056 59,382 Effect of projected future salary increase 9,532 5,408 ------- ------- Projected benefit obligation 57,588 64,790 Unrecognized transition amount 7,308 7,870 Unrecognized net loss (gain) 1,239 (2,575) ------- ------- Pension Liability 49,041 59,495 ======= ======= For both 1994 and 1993, the assumed discount rate and rates of increase in remuneration and post-retirement pension increases used in calculating the projected benefit obligation were 7%, 4%, and 3%, respectively. As part of the sales agreement, Krupp agreed to maintain the liability as of December 31, 1994 resulting from pension rights concerning those employees who left the acquired business before June 1, 1983. This amount of approximately 12,000 has therefore been excluded from the total pension liability as of December 31, 1994 and decreased the receivable from related entities as specified by the Agreement. 10. TAX ACCRUALS Tax accruals include mainly income taxes and relate primarily to taxes payable in countries other than Germany. Cash paid for income taxes totalled 3,447 (1993: 2,162). 11. OTHER ACCRUALS 1994 1993 ---- ---- Bonuses, vacation pay and related social benefit costs 9,758 8,288 Employee termination indemnity 2,694 8,370 Product warranties 630 1,155 Outstanding invoices 2,066 2,209 Litigation 1,071 1,205 Sales commissions 1,179 268 Restructuring reserves 1,040 6,929 Other 4,783 4,328 ------ ------ 23,221 32,752 ====== ====== 12. LIABILITIES 1994 1993 ---- ---- Bank borrowings, of which due within one year 8,096 (1993: 13,168); in more than one year and less than five years 720 (1993: 1,174) 8,816 14,342 ===== ====== Other liabilities: Payroll withholding and value added tax, all due within one year 5,688 5,212 Social benefits, all due within one year 5,074 5,301 Wages and salaries, all due within one year 4,689 5,153 Other borrowings, due within one year 3,943 (1993: 6,515), in more than one year and less than five years 7,568 (1993: 9,598), in more than five years 510 (1993: 1,890) 12,029 18,003 Other, all due within one year 6,933 7,419 ------ ------ Total other liabilities 34,413 41,088 ====== ====== Maturities of long-term bank borrowings by year after December 31, 1994 are 1995: 180; 1996: 180; 1997: 180; 1998: 180; 1999: 180. Weighted average interest rates on bank borrowings were 13.0% (1993: 12.1%). Bank and other borrowings of 12,007 (1993: 14,087) are secured by mortgages and hypothecations of fixed assets with net book values totalling 37,088 (1993: 38,799). Cash paid for interest totalled 1,263 (1993: 3,390). Trade payables, bills of exchange and payables to related entities are all due within one year. 13. NET ASSETS 1994 1993 ---- ---- Balance at beginning of year 143,892 145,248 Net loss before loss transfer agreement with Krupp 51,055 Loss transfer to Krupp 50,161 Net loss for the year 26,062 Translation differences (1,662) (462) -------- -------- Balance at end of year 116,168 143,892 ======== ======== 14. CONTINGENT LIABILITIES 1994 1993 ---- ---- Issuance and transfer of bills of exchange 8,630 5,807 Guarantees 5,900 5,856 Security for third party liabilities 1,419 630 ------- ------- 15,949 12,293 ======= ======= Various lawsuits arising during the normal course of business are pending against the Acquired Business. In the opinion of the Acquired Business' management, the ultimate liability, if any, resulting from these matters will have no significant effect on the Acquired Business' combined net assets. The significance of these matters on the Acquired Business' future operating results depends on the level of future results of operations as well as on the timing and amount of the ultimate outcomes. 15. COMMITMENTS Commitments to purchase fixed assets were 151 (1993: 875). The Acquired Business leases certain property, machinery and office equipment under operating leases, some of which include varying renewal and purchase options. Included in the combined statements of operations are operating lease expenses totalling 5,824 (1993: 7,635). At December 31, 1994, future operating lease commitments with initial remaining terms of more than one year are 1995: 2,991; 1996: 2,182; 1997: 1,758; 1998: 1,270; 1999: 1,012; after 1999: 15,978. Included in these amounts are leases from related parties for the administration building and hire of real estate with initial remaining terms of more than one year as follows: 1995-1999: 708 each year; after 1999: 15,896. The leases from related parties are generally at below market rates. 16. COST OF MATERIALS AND SERVICES 1994 1993 ---- ---- Raw materials, consumables, supplies and merchandise 72,739 83,584 Purchased services 20,697 17,605 ------ ------- 93,436 101,189 ====== ======= 17. GEOGRAPHIC INFORMATION An analysis of operations by geographic region is as follows: Rest of Germany Europe Asia Other Total ------- ------ ---- ----- ----- 1994 ---- Net sales 171,485 110,044 63,066 19,441 364,036 Inter-regional sales 35,202 (34,443) (759) Operating profit 1,000 642 368 113 2,123 Identifiable assets 200,173 45,661 52,549 298,383 Depreciation and amortization 17,541 1,678 2,969 22,188 Capital expenditures 5,154 1,098 2,495 8,747 1993 ---- Net sales 172,093 111,821 72,718 14,505 371,137 Inter-regional sales 26,825 (23,206) (3,619) Operating loss (15,655) (10,179) (6,620) (1,320) (33,774) Identifiable assets 244,685 58,731 54,757 461 358,634 Depreciation and amortization 22,897 2,964 3,516 29,377 Capital expenditures 3,802 1,342 6,325 11,469 The Acquired Business' manufacturing facilities are located in Germany, The Netherlands, Spain, France and India, and its operations in other countries are carried out through the entities described in Note 2. The operating profit/loss is allocated to the geographic regions based on net sales. 18. OTHER OPERATING INCOME 1994 1993 ---- ---- Release of special depreciation reserve 4,504 1,258 Transfer from Krupp for loss of Krupp Medizintechnik GmbH 2,401 Government grant 1,900 Gain on sales of fixed assets 1,696 1,002 Gain on sale of financial investments 2,115 Reversal of accruals 559 1,038 Bad debt recoveries 363 2,020 Exchange gains 127 1,393 Other 1,652 1,722 ------ ------ 13,202 10,548 ====== ====== 19. RESEARCH AND DEVELOPMENT Costs incurred for product research and development were 12,918 (1993: 11,931). 20. PERSONNEL EXPENSES\EMPLOYMENT Personnel expenses: 1994 1993 ---- ---- Wages and salaries 139,855 150,980 Social levies and pensions, of which for pensions 5,675 (1993: 6,020) 34,144 34,894 ------- ------- 173,999 185,874 ======= ======= Employment (as of the end of the year): 1994 1993 ---- ---- Hourly employees 2,195 2,345 Salaried employees 1,132 1,306 ------- ------- 3,327 3,651 ======= ======= The above employment figures include those at foreign affiliated and associated entities totalling 1,978 (1993: 2,040) of which are employed in India 1,509 (1993: 1,486). The total weighted average number of employees was 3,533 (1993: 3,811). 21. OTHER OPERATING EXPENSES 1994 1993 ---- ---- Selling 11,432 10,603 Maintenance and repairs 10,715 10,037 External data processing 7,744 8,541 Travel 7,037 7,710 Rental 5,824 7,635 Related party administration fees 5,060 5,208 Other employee social 3,893 4,851 Mail 3,507 3,881 Advertising 3,385 3,525 Legal and consulting 2,396 1,038 Additions to special depreciation reserve 3,029 1,797 Bad debt 2,458 2,905 Insurance 2,207 2,554 Office supplies 1,538 1,873 Public levies and dues 1,210 1,352 Loss on disposals of fixed assets 684 876 Investment write-offs 1,155 Loss on disposals of financial assets 521 Other 9,997 8,624 ------ ------ 82,116 84,686 ====== ====== 22. INTEREST EXPENSE, NET 1994 1993 ---- ---- Interest income from long-term loans 71 59 Other interest and similar income, of which from related entities 1,558 (1993: 626) 2,139 1,221 Interest expense, of which from related entities 265 (1993: 1,031) 4,288 7,908 ------ ------ 2,078 6,628 ====== ====== 23. EXTRAORDINARY INCOME 1993 ---- Restructuring expense transfer Krupp 13,910 Income related to special depreciation write-offs 3,556 Reversal of accrual for restructuring activities 3,002 ------ 20,468 ====== 24. EXTRAORDINARY EXPENSE 1994 1993 ---- ---- Write-off fixed assets 1,275 9,768 Expense for restructuring activities 9,942 10,300 ------ ------ 11,217 20,068 ====== ====== 25. FOREIGN EXCHANGE CONTRACTS The Acquired Business enters into foreign exchange contracts to hedge foreign currency transactions on a continuing basis for periods commensurate with its known or expected exposures, primarily related to machinery sales and purchase of production materials denominated in foreign currencies. The purpose of this practice is to minimize the effect of foreign currency exchange rate fluctuations on operating results. At December 31, 1994, the Acquired Business had outstanding foreign exchange contracts totalling 9,246, which generally mature in periods of one year or less. These foreign exchange contracts are legal agreements between two parties to purchase and sell a foreign currency, for a price specified at the contract date, with delivery and settlement in the future. The Acquired Business does not engage in speculation. Management does not anticipate any material adverse effect on its financial position resulting from its involvement in these instruments. 26. CONCENTRATION OF CREDIT RISK Financial instruments that potentially subject the Acquired Business to significant concentrations of credit risk consist principally of cash and accounts receivable. The carrying amount of these items are a reasonable estimate of their fair market value due to their short-term nature. Concentrations of credit risk with respect to accounts receivable are generally diversified due to the large number of entities comprising the customer base of the Acquired Business and their disposition across many different industries and geographic locations. No single customer accounted for a significant amount of the sales of the Acquired Business and there was no significant accounts receivable from a single customer. ITEM 7(B) CINCINNATI MILACRON INC. AND SUBSIDIARIES PRO FORMA FINANCIAL INFORMATION (In millions, except per share data) (Unaudited) On February 1, 1995 (the "Closing Date"), 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 (the "seller") for DM 120.8 million (approximately $80 million based on the exchange rate in effect on the Closing Date), which included DM 7.1 million (approximately $5 million) for the settlement of all intercompany liabilities to the seller as of the Closing Date. 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. Certain of Widia's worldwide operations, including its principal European plant located in Essen, Germany, were restructured by the seller during 1993 and 1994 to improve manufacturing efficiency, divest marginal business and product lines and reduce personnel levels. The Company has identified additional restructuring actions that are intended to improve Widia's profitability in the future. It is expected that these additional actions, which are intended to complement the actions already taken prior to the acquisition, will be substantially completed during 1995. The Company estimates that the annual savings in relation to Widia's historical 1994 operations that will result from all of these actions will be no less than $9.0 million (see note (d) to Pro Forma Consolidated Statement of Earnings). The following pro forma consolidated balance sheet and statement of earnings (collectively the "pro forma consolidated statements") are based on the historical financial statements of the Company and Widia adjusted to give effect to the acquisition (and, in the case of the pro forma consolidated statement of earnings, the restructuring) of Widia. The pro forma consolidated statement of earnings assumes that the acquisition and the restructuring of Widia occurred as of the first day of the Company's 1994 fiscal year, and the pro forma consolidated balance sheet assumes that the acquisition (but not the restructuring) of Widia occurred on the last day of the Company's 1994 fiscal year. The pro forma consolidated statements reflect the purchase method of accounting for the acquisition of Widia 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 Widia are completed. 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 and restructuring of Widia occurred on the first day of the Company's 1994 fiscal year or on the last day of the Company's 1994 fiscal year, as specified above, 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, including the Company's expectations of anticipated cost savings from the restructuring of Widia. The actual savings may vary from these expectations. 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 31, 1994, the Company's Current Report on Form 8-K dated February 1, 1995 (both filed with the Securities and Exchange Commission), and the audited combined financial statements of Widia that are filed herewith as Item 7(a). CINCINNATI MILACRON INC. AND SUBSIDIARIES PRO FORMA CONSOLIDATED BALANCE SHEET (In millions)
December 31, 1994 ------------------------------------------------------- Cincinnati Historical Acquisition Milacron Cincinnati Historical Pro Forma and Widia Milacron Widia (a) Adjustments Consolidated ---------------------------------------------------------- ASSETS Current assets Cash and cash equivalents . . . . . . . . . . . $ 21.5 $ 2.9 $ 80.4 (b) $ 24.1 (74.9)(c) (5.8)(e) Notes and accounts receivable, less allowances. . . . . . . . . . . . 188.0 44.5 232.5 Receivables from seller . . . . . . 5.0 4.8 (d) - (9.8)(e) Inventories. . . . . . . . . . . . . 267.2 60.2 (1.3)(f) 326.1 Other current assets. . . . . . . . 38.0 3.0 41.0 ----------------------------------------------------- Total current assets. . . . . . . 514.7 115.6 (6.6) 623.7 Property, plant and equipment - net . . . . . . . . . . 198.8 73.3 (4.8)(d) 251.3 (16.0)(f) Other noncurrent assets. . . . . . . . 74.1 4.2 .2 (b) 99.9 21.4 (f) ----------------------------------------------------- Total assets. . . . . . . . . . . . $ 787.6 $ 193.1 $ (5.8) $ 974.9 ===================================================== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Amounts payable to banks and current portion of long-term debt . . . . . . . $ 83.9 $ 8.0 $ 80.6 (b) $ 172.5 Trade accounts payable. . . . . . 99.2 14.7 113.9 Payables to seller. . . . . . . . 6.1 9.5 (d) - (15.6)(e) Advance billings and deposits. . . . . . . . . . 39.6 39.6 Accrued and other current liabilities . . . . . . 140.6 34.5 1.6 (c) 183.8 7.1 (f) ---------------------------------------------------- Total current liabilities. . . . . . . . 363.3 63.3 83.2 509.8 Long-term accrued liabilities . . . . . . . . . . . 123.5 34.8 .3 (f) 158.6 Long-term debt and lease obligations . . . . . . . . 143.0 5.7 148.7 ----------------------------------------------------- Total liabilities . . . . . . . 629.8 103.8 83.5 817.1 Commitments and contingencies . . . . . . . . . . - - - - Shareholders' equity Preferred shares. . . . . . . . . 6.0 6.0 Common shares and net assets purchased. . . . . . . . 289.2 89.3 (76.5)(c) 289.2 (9.5)(d) (3.3)(f) Accumulated deficit . . . . . . . (125.9) (125.9) Cumulative foreign currency translation adjustments . . . . . . . . . . (11.5) (11.5) ----------------------------------------------------- Total shareholders' equity . . . . . . . . . . . 157.8 89.3 (89.3) 157.8 ----------------------------------------------------- Total liabilities and shareholders' equity. . . . . . $ 787.6 $ 193.1 $ (5.8) $ 974.9 =====================================================
See notes to Pro Forma Consolidated Balance Sheet. CINCINNATI MILACRON INC. AND SUBSIDIARIES NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEET (In millions) (a) The amounts in the "Historical Widia" column are derived from the audited combined statement of net assets of Widia GmbH as of December 31, 1994, which was prepared based on accounting principles generally accepted in the Federal Republic of Germany. The balance sheet of Widia presented herein reflects all material adjustments necessary to present Widia's financial position in conformity with accounting principles generally accepted in the United States. (b) The acquisition of Widia was financed as shown in the following table. Funds provided: Borrowings under revolving credit facility . . . . . . . . . . . . . . . . . . $ 80.6 Payment of facility transaction costs . . . . . . . . (.2) ------ Total funds provided . . . . . . . . . . . . . . . $ 80.4 ====== (c) The following tables depict the calculation of the Company's purchase price and its preliminary allocation to Widia's assets 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 Widia are completed. Final purchase accounting adjustments may differ from the amounts shown below. Under the terms of the purchase agreement, the cash purchase price of the shares of Widia as of February 1, 1995 was $74.9 million. Calculation of acquisition cost: Purchase of Widia . . . . . . . . . . . . . . . . . . $ 74.9 Accrual for transaction fees. . . . . . . . . . . . . 1.6 ------ Total acquisition cost . . . . . . . . . . . . . . $ 76.5 ====== Allocation of acquisition cost: Cash and cash equivalents . . . . . . . . . . . . . . $ 2.9 Accounts receivable . . . . . . . . . . . . . . . . . 44.5 Receivables from seller . . . . . . . . . . . . . . . 9.8 Inventories . . . . . . . . . . . . . . . . . . . . . 58.9 Other current assets. . . . . . . . . . . . . . . . . 3.0 Property, plant and equipment . . . . . . . . . . . . 52.5 Other noncurrent assets . . . . . . . . . . . . . . . 25.6 Historical liabilities assumed (including $.3 previously not recorded) . . . . . . . . . . . . . . . . . . (98.0) Payables to seller. . . . . . . . . . . . . . . . . . (15.6) Accrual for future restructuring costs . . . . . . . . . . . . . . . . (7.1) ------ Total acquisition cost . . . . . . . . . . . . . $ 76.5 ====== (d) During January, 1995, certain intercompany transactions occurred between the seller and Widia that were required to be completed prior to the Closing Date under the terms of the purchase agreement. These included the sale to the seller by Widia of two buildings and the purchase from the seller by Widia of three subsidiaries that it had not previously owned. The effects of these transactions are not included in the "Receivables from seller" and "Payables to seller" balances that are included in the "Historical Widia" column of the Pro Forma Consolidated Balance Sheet. (e) Under the terms of the purchase agreement, Widia's actual intercompany liability to the seller (net of its intercompany receivables from the seller) as of the Closing Date of $4.6 million was settled in cash. Such intercompany receivables and payables as of December 31, 1994 (adjusted to include amounts related to the transactions described in note (d), above), were as follows: Payables to seller. . . . . . . . . . . . . . . . . . . $ 15.6 Receivables from seller . . . . . . . . . . . . . . . . (9.8) ------ Net additional cash to be paid as of December 31, 1994 . . . . . . . . . . . . . . . $ (5.8) ====== (f) Purchase accounting adjustments to Widia's historical asset values as follows: Adjustment of inventory values to reflect the Company's valuation methods. Adjustment of property, plant and equipment to fair value. Recording of goodwill arising from the purchase of Widia by the Company of $24.0 million, partially offset by the elimination of historical goodwill of $2.6 million. Adjustment of the pension liability of one of Widia's subsidiaries by $.3 million. Recording of reserves for the further restructuring of Widia of $7.1 million. Certain of Widia's worldwide operations, including its principal European plant located in Essen, Germany, were restructured by the seller during 1993 and 1994 to improve manufacturing efficiency, divest marginal business and product lines and reduce personnel levels. The Company has identified additional restructuring actions that are intended to improve Widia's profitability in the future. It is expected that these additional actions, which are intended to complement the actions already taken prior to the acquisition, will be substantially completed during 1995. CINCINNATI MILACRON INC. AND SUBSIDIARIES PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS (In millions, except per share amounts)
Year ended December 31, 1994 ------------------------------------------------------- Cincinnati Historical Acquisition Milacron Cincinnati Historical Pro Forma and Widia Milacron Widia (a) Adjustments Consolidated ------------------------------------------------------- Sales. . . . . . . . . . . . . . . . $1,197.1 $ 224.7 $1,421.8 Cost of products sold. . . . . . . . 904.8 171.7 $ (5.6)(d) 1,067.8 (1.0)(f) (.8)(h) (.5)(i) (.8)(j) ----------------------------------------------------- Manufacturing margins . . . . . . 292.3 53.0 8.7 354.0 Other costs and expenses Selling and administrative. . . . . . . . . 222.2 57.2 (3.4)(d) 275.3 (.3)(h) (.3)(i) (.1)(j) Other - net . . . . . . . . . . . 5.9 12.5 .2 (c) 12.4 (6.8)(e) (.3)(g) .9 (k) ------------------------------------------------------ Total other costs and expenses . . . . . . . . 228.1 69.7 (10.1) 287.7 ------------------------------------------------------ Operating earnings (loss). . . . . . 64.2 (16.7) 18.8 66.3 Interest Income. . . . . . . . . . . . . . 2.6 1.3 3.9 Expense . . . . . . . . . . . . . (17.9) (2.6) (4.8)(b) (25.6) (.3)(l) ------------------------------------------------------- Interest - net. . . . . . . . . (15.3) (1.3) (5.1) (21.7) ------------------------------------------------------- Earnings (loss) before income taxes. . . . . . . . . . . 48.9 (18.0) 13.7 44.6 Provision for income taxes. . . . . . . . . . . 11.2 1.4 12.6 ------------------------------------------------------- Net earnings (loss). . . . . . . . . $ 37.7 $ (19.4) $ 13.7 $ 32.0 ======================================================= Net earnings (loss) per common share . . . . . . . . . . $ 1.10 $ .93 ========= ========= Weighted average number of common shares and common share equivalents outstanding . . . . . . . . . . . 34.1 34.1 ========= =========
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 31, 1994 (In millions) (a) The amounts in the "Historical Widia" column are derived from the audited combined statement of operations of Widia GmbH for the fiscal year ended December 31, 1994, which was prepared based on accounting principles generally accepted in the Federal Republic of Germany. The statement of earnings of Widia for the fiscal year ended December 31, 1994 presented herein reflects all material adjustments necessary to present Widia's results of operations for that period in conformity with accounting principles generally accepted in the United States. Widia's historical statement of operations for the fiscal year ended December 31, 1994, includes nonrecurring charges totaling $6.8 million for severance and other costs incurred in connection with the restructuring of its operations (see notes (d) and (e) below). In the "Historical Widia" column of the Pro Forma Consolidated Statement of Earnings, this amount is included in the line captioned "Other - net" and it is eliminated in the column captioned "Acquisition Pro Forma Adjustments. Widia's historical statement of operations also includes nonrecurring charges for inventory obsolescence and a charge from the seller for the write off of its EDP center of $2.2 million and $.9 million, respectively. These charges are not eliminated in the "Acquisition Pro Forma Adjustments" column and have the effect of decreasing consolidated pro forma net earnings by $3.1 million, or $.09 per share. (b) Interest expense of $4.8 million on borrowings totaling $80.6 million under the Company's $200.0 million committed revolving credit facility (see note (c) below). (c) Amortization expense on straight line basis over one and one half years of $.2 million of additional commitment fees incurred in connection with the amendment of the Company's committed revolving credit facility to increase the lines of credit available thereunder to $200.0 million (see note (b) to Pro Forma Consolidated Balance Sheet). (d) Certain of Widia's worldwide operations, including its principal European plant located in Essen, Germany, were restructured by the seller during 1993 and 1994 to improve manufacturing efficiency, divest marginal business and product lines and reduce personnel levels. The Company has identified additional restructuring actions that are intended to improve Widia's profitability in the future. It is expected that these additional actions, which are intended to complement the actions already taken prior to the acquisition, will be substantially completed during 1995. Based on a comprehensive analysis, the Company estimates that the minimum annual savings in relation to Widia's historical 1994 operations that will result from all of the actions described above will be no less than $9.0 million. Accordingly, pro forma adjustments of this amount are included in the Pro Forma Consolidated Statement of Earnings for the fiscal year ended December 31, 1994 as follows: Increase (Decrease) ---------- Cost of products sold . . . . . . . . . . . . . . . . . $ (5.6) --------- Manufacturing margins . . . . . . . . . . . . . . . . 5.6 Other costs and expenses. . . . . . . . . . . . . . . . Selling and administrative. . . . . . . . . . . . . . (3.4) --------- Total other costs and expenses . . . . . . . . . . (3.4) --------- Operating earnings (loss) . . . . . . . . . . . . . . . $ 9.0 ========= The above amounts are based principally on the savings that will be realized from the known reductions of Widia's employment level that have already occurred during 1995 and those that will occur later in the year. The actual annual savings from all of the restructuring actions completed to date (including those that occurred in 1994) and the additional actions that will be completed in the future are expected to be considerably higher than $9.0 million. However, these additional savings have not been included in the Pro Forma Consolidated Statement of Earnings because the Company cannot accurately and precisely quantify them at this time. In addition, certain nonrecurring charges recorded by Widia during 1994 totaling $3.1 million have not been eliminated in the "Acquisition Pro Forma Adjustments" column. As a result, the Pro Forma Consolidated Statement of Earnings" reflects a reduction in net earnings in relation to the Company's historical results for 1994. However, management expects that Widia will generate sufficient pretax earnings in 1995 to cover the interest expense the Company will incur to finance the acquisition. (e) Elimination of $6.8 million nonrecurring charges for severance and other costs incurred in connection with the restructuring of Widia's operations during 1994. (f) Elimination of depreciation expense and other costs totaling $1.0 million related to two buildings that were retained by the seller (see note (d) to Pro Forma Consolidated Balance Sheet). (g) Elimination of charges to earnings of $.3 million for amortization of historical (preacquisition) goodwill. (h) Reduction of pension expense by $1.1 million to reflect the retention of pension obligations related to certain retirees by the seller. (i) Elimination of charges for services (net of cost to replace) and allocations from Widia's former parent totaling $.8 million. (j) Reduction in depreciation expense by $.9 million to reflect the adjustment of the historical value of Widia's property, plant and equipment to fair value (see note (f) to Pro Forma Consolidated Balance Sheet). (k) Amortization charge of $.9 million related to acquisition-basis goodwill (see note (f) to Pro Forma Consolidated Balance Sheet). (l) Interest expense of $.3 million related to estimated borrowings of $5.3 million to finance cash expenditures related to the further restructuring of Widia (see note (d) above). 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 14, 1995 -------------- CINCINNATI MILACRON INC. AND SUBSIDIARIES INDEX TO EXHIBITS The following Exhibits are included with this Form 8-K/A. Sequential Exhibit Page Number Description of Exhibit Number - ------ ----------------------------------- ---------- 2.1 Stock Purchase Agreement dated as * of November 28, 1994, between Cincinnati Milacron B.V., a Dutch corporation, Cincinnati Milacron Kunststoffmaschinen Europe GmbH, a Germany corporation and Fried. Krupp A.G. Hoesch-Krupp, a German corporation (Schedules and Exhibits have been omitted pursuant to Rule 6.01(b) (2) of Regulation S-K. Such Schedules and Exhibits are listed and described in the Stock Purchase Agreement. The Registrant hereby agrees to furnish to the Securities and Exchange Commission, upon its request, any or all of such omitted Schedules and Exhibits). 7.1 Consent of Coopers & Lybrand GmbH 41 99.1 Amended and Restated Revolving * Credit Agreement dated as of December 31, 1994 among Cincinnati Milacron Inc., Cincinnati Milacron Kunststoffmaschinen Europe GmbH, the lenders listed therein and Bankers Trust Company, as agent. 99.2 Press release of the Registrant * dated February 1, 1995. * Previously filed EX-1 2 CONSENT OF INDEPENDENT AUDITORS As independent auditors, we hereby consent to the use of our report dated February 28, 1995, relating the combined financial statements of Widia GmbH of Friedr. Krupp AG Hoesch-Krupp, and all references to our Firm included in or made a part of the Form 8-K/A (Amendment No. 1) of Cincinnati Milacron Inc. dated April 14, 1995. Dusseldorf, Germany April 14, 1995 Wirschaftsprufungsgesellschaft Buiting Wiegand Wirtschaftsprufer Wirtschaftsprufer and Certified Public Accountant -----END PRIVACY-ENHANCED MESSAGE-----