-----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, tdemoiPPwgb8xBtVnktPIr03oWdXU65M64UuuVXbUiGUf2EnL9jEnugbrnrErmYW ZO2Sscsb1K7o6xFz089pKw== 0000950130-95-001356.txt : 19950724 0000950130-95-001356.hdr.sgml : 19950724 ACCESSION NUMBER: 0000950130-95-001356 CONFORMED SUBMISSION TYPE: S-4/A PUBLIC DOCUMENT COUNT: 7 FILED AS OF DATE: 19950721 SROS: NONE 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: S-4/A SEC ACT: 1933 Act SEC FILE NUMBER: 033-60081 FILM NUMBER: 95555145 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 S-4/A 1 AMENDMENT NO. 1 TO FORM S-4 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 21, 1995 REGISTRATION NO. 33-60081 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------- AMENDMENT NO. 1 TO FORM S-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 --------------- CINCINNATI MILACRON INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) --------------- DELAWARE 3541 31-1062125 (STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) INDUSTRIAL CLASSIFICATION IDENTIFICATION CODE NUMBER) NO.) 4701 MARBURG AVENUE CINCINNATI, OHIO 45209 (513) 841-8100 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) --------------- WAYNE F. TAYLOR VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY CINCINNATI MILACRON INC. 4701 MARBURG AVENUE CINCINNATI, OHIO 45209 (513) 841-8100 (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE) --------------- COPIES TO: JAMES M. EDWARDS JOHN R. SAGAN CRAVATH, SWAINE & MOORE MAYER, BROWN & PLATT 825 EIGHTH AVENUE 190 SOUTH LASALLE STREET NEW YORK, NEW YORK 10019 CHICAGO, ILLINOIS 60603 (212) 474-1000 (312) 782-0600 --------------- APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF SECURITIES TO THE PUBLIC: As soon as practicable after the effective date of this Registration Statement. --------------- If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. [_] --------------- CALCULATION OF REGISTRATION FEE - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
PROPOSED PROPOSED AMOUNT MAXIMUM MAXIMUM AMOUNT OF TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE REGISTRATION SECURITIES TO BE REGISTERED REGISTERED PER UNIT OFFERING PRICE FEE - ----------------------------------------------------------------------------------------------------- 7 7/8% Notes Due 2000................... $100,000,000 $1,000(1) $100,000,000(1) $34,483
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (1) Estimated solely for the purpose of calculating the registration fee. THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CINCINNATI MILACRON INC. CROSS-REFERENCE SHEET (PURSUANT TO ITEM 501(B) OF REGULATION S-K SHOWING THE LOCATION IN THE PROSPECTUS OF THE RESPONSES TO THE ITEMS OF PART I OF FORM S-4)
ITEM ---- 1. Forepart of Registration Statement and Outside Front Facing Page of the Registration Statement; Cover Page of Prospectus.... Cross Reference Sheet; Outside Front Cover Page of Prospectus 2. Inside Front and Outside Back Cover Pages of Prospec- Available Information; Incorporation of tus......................... Certain Documents by Reference; Outside Back Cover Page of Prospectus 3. Risk Factors, Ratio of Earn- ings to Fixed Charges and Prospectus Summary; Risk Factors; Ratio of Other Information........... Earnings to Fixed Charges; Selected Historical Financial Data; Selected Historical Segment Information; Selected Historical Geographic Information; The Exchange Offer; Business; Description of the New Notes; Certain Federal Income Tax Considerations 4. Terms of the Transaction.... Prospectus Summary; The Exchange Offer; Description of the New Notes; Plan of Distribution; Certain Federal Income Tax Considerations 5. Pro Forma Financial Informa- tion........................ (Not Applicable) 6. Material Contacts with the Company Being Acquired...... (Not Applicable) 7. Additional Information Re- quired for Reoffering by Persons and Parties Deemed to be Underwriters.......... (Not Applicable) 8. Interests of Named Experts and Counsel................. Legal Matters; Experts 9. Disclosure of Commission Po- sition on Indemnification for Securities Act Liabili- ties........................ (Not Applicable) 10. Information with Respect to Available Information; Incorporation of S-3 Registrants............. Certain Documents by Reference; Prospectus Summary; Selected Historical Financial Data; Selected Historical Segment Information; Selected Historical Geographic Information; Management's Discussion and Analysis of Financial Condition and Results of Operations; Business 11. Incorporation of Certain In- Incorporation of Certain Documents by formation by Reference...... Reference 12. Information with Respect to S-2 or S-3 Registrants...... (Not Applicable) 13. Incorporation of Certain In- formation by Reference...... (Not Applicable) 14. Information with Respect to Registrants Other Than S-3 or S-2 Registrants.......... (Not Applicable) 15. Information with Respect to S-3 Companies............... (Not Applicable) 16. Information with Respect to S-2 or S-3 Companies........ (Not Applicable) 17. Information with Respect to Companies Other Than S-3 or S-2 Companies............... (Not Applicable) 18. Information if Proxies, Con- sents or Authorizations are to be Solicited............. (Not Applicable) 19. Information if Proxies, Con- sents or Authorizations are not to be Solicited or in an Available Information; Incorporation of Exchange Offer.............. Certain Documents by Reference; Prospectus Summary; The Exchange Offer
SUBJECT TO COMPLETION (DATED JULY 21, 1995) PROSPECTUS CINCINNATI MILACRON Offer to Exchange its 7 7/8% Notes Due 2000, which have been registered under the Securities Act of 1933, as amended, for any and all of its outstanding 7 7/8% Notes Due 2000 The Exchange Offer will expire at 5:00 p.m., New York City time, on August 22, 1995, unless extended. -------- Cincinnati Milacron Inc. (the "Company") hereby offers, upon the terms and subject to the conditions set forth in this Prospectus and the accompanying letter of transmittal (the "Letter of Transmittal" and together with this Prospectus, the "Exchange Offer"), to exchange its 7 7/8% Notes due 2000 (the "New Notes") which have been registered under the Securities Act of 1933, as amended (the "Securities Act"), pursuant to a Registration Statement of which this Prospectus is a part, for an equal principal amount of its outstanding 7 7/8% Notes due 2000 (the "Old Notes"), of which $100,000,000 aggregate principal amount is outstanding as of the date hereof. The New Notes and the Old Notes are collectively referred to herein as the "Notes". The Company will accept for exchange any and all Old Notes that are validly tendered and not withdrawn on or prior to 5:00 P.M., New York City time, on the date the Exchange Offer expires (the "Expiration Date"), which will be August 22, 1995, unless the Exchange Offer is extended. Tenders of Old Notes may be withdrawn at any time prior to 5:00 P.M., New York City time, on the Expiration Date. The Exchange Offer is not conditioned upon any minimum principal amount of Old Notes being tendered for exchange. However, the Exchange Offer is subject to certain customary conditions which may be waived by the Company. Old Notes may be tendered only in integral multiples of $1,000. The Company has agreed to pay the expenses of the Exchange Offer. See "The Exchange Offer". The New Notes will be obligations of the Company evidencing the same indebtedness as the Old Notes and will be entitled to the benefits of the same Indenture (as defined), which governs both the Old Notes and the New Notes. The form and terms of the New Notes are the same as the form and terms of the Old Notes, except that the New Notes have been registered under the Securities Act and therefore will not bear legends restricting the transfer thereof. See "Description of the New Notes". The New Notes will bear interest at the rate of 7 7/8% per annum from the most recent date to which interest has been paid on the Old Notes or, if no interest has been paid on the Old Notes, from May 17, 1995. Interest on the New Notes is payable semi-annually on May 15 and November 15 of each year, commencing November 15, 1995. Holders of Old Notes whose Old Notes are accepted for exchange will not receive any payment in respect of accrued and unpaid interest on such Old Notes. See "The Exchange Offer". Prior to this Exchange Offer, there has been no public market for the Old Notes or New Notes. If such a market were to develop, the New Notes could trade at prices that may be higher or lower than their principal amount. The Company does not intend to apply for listing or quotation of the New Notes on any securities exchange or stock market. Therefore, there can be no assurance as to the liquidity of any trading market for the New Notes or that an active public market for the New Notes will develop. CS First Boston Corporation, BT Securities Corporation and J.P. Morgan Securities Inc. (the "Initial Purchasers") have agreed that one or more of them will act as market-makers for the New Notes. However, the Initial Purchasers are not obligated to so act and they may discontinue any such market-making at any time without notice. FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY HOLDERS OF OLD NOTES WHO TENDER THEIR OLD NOTES IN THE EXCHANGE OFFER, SEE "RISK FACTORS" ON PAGE 11 OF THIS PROSPECTUS. ----------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ----------- The date of this Prospectus is , 1995. Information contained herein is subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This prospectus shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any State in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state. AVAILABLE INFORMATION The Company is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance therewith files reports, proxy statements and other information with the Securities and Exchange Commission (the "SEC"). Such reports, proxy statements and other information concerning the Company can be inspected and copied at the public reference facilities maintained by the SEC at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, as well as at the following regional offices of the SEC: Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661, and 13th Floor, 7 World Trade Center, New York, New York 10048. Copies of such material can be obtained from the SEC's Public Reference Section, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The common stock of the Company is listed on the New York Stock Exchange, and reports, proxy statements and other information concerning the Company may be inspected at the offices of the New York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005. The Company has filed a registration statement on Form S-4 (herein, together with all amendments and exhibits, referred to as the "Registration Statement") under the Securities Act with respect to the New Notes offered hereby. This Prospectus, which forms a part of the Registration Statement, does not contain all of the information set forth in the Registration Statement and the exhibits and schedules thereto, certain parts of which are omitted in accordance with the rules and regulations of the SEC. For further information with respect to the Company and the New Notes offered hereby, reference is made to the Registration Statement. Statements made in this Prospectus as to the contents of certain documents are not necessarily complete and, in each instance, reference is made to the copy of the document filed as an exhibit to the Registration Statement. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994 (the "Company's 1994 Form 10-K"), the Company's Quarterly Report on Form 10-Q for the quarter ended March 25, 1995 (the "Company's 1995 Form 10-Q") and the Company's Current Report on Form 8-K dated February 1, 1995 (as amended by the Company's Form 8-K/A relating thereto filed April 14, 1995), the Company's Current Report on Form 8-K dated May 17, 1995 and the Company's Current Report on Form 8-K dated May 31, 1995 (such Current Reports on Form 8- K, the "Company's 1995 Form 8-Ks"), each of which has been filed previously with the SEC pursuant to the Exchange Act, are incorporated by reference into this Prospectus. All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to the termination of the offering of the New Notes shall be deemed to be incorporated by reference herein and to be a part hereof from the date of the filing of such reports and documents. Any statement contained in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus. THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THE COMPANY WILL PROVIDE A COPY OF ANY OR ALL DOCUMENTS INCORPORATED BY REFERENCE HEREIN (EXCLUSIVE OF EXHIBITS UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE THEREIN), WITHOUT CHARGE, TO EACH PERSON TO WHOM THIS PROSPECTUS IS DELIVERED, UPON WRITTEN OR ORAL REQUEST TO WAYNE F. TAYLOR, VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY, CINCINNATI MILACRON INC., 4701 MARBURG AVENUE, CINCINNATI, OHIO 45209 (TELEPHONE (513) 841-8100). TO ENSURE TIMELY DELIVERY, ANY REQUEST FOR DOCUMENTS SHOULD BE MADE AT LEAST FIVE BUSINESS DAYS PRIOR TO THE EXPIRATION DATE. 2 PROSPECTUS SUMMARY The following information is qualified in its entirety by the detailed information and financial statements found elsewhere in this Prospectus and in the Company's 1994 Form 10-K, the Company's 1995 Form 10-Q and the Company's 1995 Form 8-Ks, each referred to herein under "Incorporation of Certain Documents by Reference". THE COMPANY Cincinnati Milacron Inc. (together with its consolidated subsidiaries, except where the context otherwise requires, the "Company" or "Cincinnati Milacron") is one of the world's leading manufacturers of plastics machinery, machine tools and industrial consumable products for metalworking, as well as related computer controls and software for factory automation. Incorporated in Delaware in 1983, the Company is a successor to a business established in 1884. The Company sells products and provides services to industrial customers throughout the world. The Company has a long-standing reputation for quality and technological leadership. Virtually all of the Company's plastics machinery products and machine tools are computer-controlled and many include advanced applications software. The Company has three business segments: plastics machinery, machine tools and industrial products. Through strategic acquisitions, accelerated new product development and consolidation of its U.S. machine tool operations, the Company has made significant progress since the beginning of 1993 toward achieving a better balance between its businesses in terms of product, customer and geographic mix. The Company currently expects 1995 sales to approach $1.6 billion, approximately 40% of which is expected to come from the Company's industrial products segment, making this the Company's largest business segment. The plastics machinery segment is expected to be the Company's second largest business segment in 1995. The Company expects the growth in industrial consumable products and plastics machinery sales to make the Company less susceptible to the business cycles and historically low margins characteristic of the machine tool business. In addition, the Company expects that almost half of its sales for 1995 will come from sales outside the United States. The Company also expects that its growing foreign sales, over time, will decrease the Company's dependence upon the U.S. economy. STRATEGIC ACQUISITIONS Early in 1993, the Company acquired GTE Valenite Corporation ("Valenite"), expanding the Company's industrial products segment. With the acquisition of Valenite, the Company believes that it is the second largest U.S. and third largest worldwide producer of carbide metalcutting tool systems. In 1993, the Company also acquired FM Maschinenbau GmbH ("Ferromatik"), one of Europe's leading manufacturers of plastics injection molding machines. The Ferromatik acquisition expanded the Company's plastics processing technology base and product line and enabled the Company to achieve its objective of establishing a plastics machinery manufacturing and distribution base in Germany to serve Europe and other markets. In February 1995, the Company completed the acquisition of Germany-based Krupp Widia GmbH ("Widia"). Widia, with 1994 sales of approximately $225 million, is one of the world's leading producers of industrial metalworking products. Widia also owns a 51% interest in Widia (India) Ltd., an Indian public company. The Company's acquisition of Widia complemented Valenite's geographic balance, enhanced the Company's technological base, diversified its industrial consumable product line and expanded its worldwide sales and distribution network. 3 On July 20, 1995, the Company consummated the acquisition of Talbot Holdings Ltd. ("Talbot"). With annual sales of approximately $40 million, Talbot is a major supplier of round high-speed steel and carbide metalcutting tools. The total consideration for the acquisition, including assumed debt of approximately $5 million, was approximately $38 million. The transaction will be accounted for under the purchase method and was financed through available cash and existing credit lines. ACCELERATED NEW PRODUCT DEVELOPMENT In recent years, the Company has undertaken a major program for product development, process improvement and modernization, known as "Wolfpack". The objectives of Wolfpack are to design and produce new products at world- competitive levels of quality, performance, efficiency and cost. Key principles of the Wolfpack philosophy are: teamwork, a market-driven approach, "simultaneous engineering", reduction and standardization of parts, design for manufacturability and integrated, just-in-time manufacturing. Compared to the products they replace, Wolfpack-developed products typically have achieved a 30 to 50 percent reduction in product development cycles, number of total parts, manufacturing lead time, installation time and overall cost. Today, most of the Company's plastics processing machinery lines have been developed through the Wolfpack approach, and about 90% of the Company's machine tool sales consist of Wolfpack designs. MACHINE TOOL CONSOLIDATION During 1994, the Company completed a major consolidation of its U.S. machine tool operations that addressed excess manufacturing capacity. Production at the Company's two machine tool facilities in South Carolina was phased out, and the facilities were closed. The Company transferred most of the machines and systems in South Carolina used to manufacture horizontal machining centers and turning centers to its Cincinnati facilities. Presently, the Company manufactures all of its machine tool products in Cincinnati, Ohio and Birmingham, England. ---------------- Cincinnati Milacron's principal executive office is located at 4701 Marburg Avenue, Cincinnati, Ohio 45209 and its telephone number is (513) 841-8100. 4 THE EXCHANGE OFFER Registration Rights The Old Notes were sold by the Company on May 17, Agreement.................. 1995, to the Initial Purchasers, which placed the Old Notes with institutional investors. In connection therewith, the Company executed and delivered for the benefit of the holders of the Old Notes the Registration Rights Agreement (as defined) providing, among other things, for the Exchange Offer. The Exchange Offer.......... New Notes are being offered in exchange for an equal principal amount of Old Notes. As of the date hereof, $100,000,000 aggregate principal amount of Old Notes are outstanding. Since the New Notes will be recorded in the Company's accounting records at the same carrying value as the Old Notes, no gain or loss will be recognized by the Company upon the consummation of the Exchange Offer. See "The Exchange Offer-- Accounting Treatment". Holders of the Old Notes do not have appraisal or dissenter's rights in connection with the Exchange Offer under the Delaware General Corporation Law, the state of incorporation of the Company. Generally, holders of Old Notes (other than any holder who is an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act) who exchange their Old Notes for New Notes pursuant to the Exchange Offer may offer such New Notes for resale, resell such New Notes and otherwise transfer such New Notes without compliance with the registration and prospectus delivery provisions of the Securities Act; provided such New Notes are acquired in the ordinary course of the holder's business and such holders have no arrangement or understanding with any person to participate in a distribution of such New Notes. Each broker-dealer that receives New Notes for its own account in exchange for Old Notes, where such Old Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such New Notes. See "Plan of Distribution". To comply with the securities laws of certain jurisdictions, it may be necessary to qualify for sale or register the New Notes prior to offering or selling such New Notes. The Company has agreed, pursuant to the Registration Rights Agreement and subject to certain specified limitations therein, to register or qualify the New Notes for offer or sale under the securities or "blue sky" laws of such jurisdictions as may be necessary to permit the holders of New Notes to trade the New Notes without any restrictions or limitations under the securities laws of the several states of the United States. If a holder of Old Notes does not exchange such Old Notes for New Notes pursuant to the Exchange Offer, such Old Notes will continue to be subject to the restrictions on transfer contained in the legend thereon. In general, the Old Notes may not be offered or sold, unless registered under the Securities Act, except pursuant to an 5 exemption from, or in a transaction not subject to, the Securities Act and applicable state securities laws. See "Risk Factors--Consequences of Failure to Exchange" and "Description of the New Notes--Exchange Offer; Registration Rights". Expiration Date............. 5:00 p.m., New York City time, on August 22, 1995, unless the Exchange Offer is extended, in which case the term "Expiration Date" means the latest date and time to which the Exchange Offer is extended. Accrued Interest on the New Notes and Old Notes........ The New Notes will bear interest at the rate of 7 7/8% per annum from the most recent date to which interest has been paid on the Old Notes or, if no interest has been paid on the Old Notes, from May 17, 1995. In addition, holders of New Notes will receive, on the next interest payment date following the Expiration Date, a payment equal to the amount of accrued and unpaid Additional Interest (as defined), if any, on the Old Notes exchanged for such New Notes. Holders of Old Notes whose Old Notes are accepted for exchange will not receive any payment in respect of accrued and unpaid interest (including Additional Interest, if any) on such Old Notes. See "The Exchange Offer--Acceptance of Old Notes for Exchange; Delivery of New Notes". Conditions to the Exchange The Exchange Offer is subject to certain Offer...................... customary conditions, which may be waived by the Company. See "The Exchange Offer--Conditions". Except for the requirements of applicable Federal and state securities laws, there are no Federal or state regulatory requirements or approvals to be complied with or obtained by the Company in connection with the Exchange Offer. NO VOTE OF THE COMPANY'S SECURITY HOLDERS IS REQUIRED TO EFFECT THE EXCHANGE OFFER, AND NO SUCH VOTE (OR PROXY THEREFOR) IS BEING SOUGHT HEREBY. Procedures for Tendering Each holder of Old Notes wishing to accept the Old Notes.................. Exchange Offer must complete, sign and date the Letter of Transmittal, or a facsimile thereof, in accordance with the instructions contained herein and therein, and mail or otherwise deliver such Letter of Transmittal, or such facsimile, together with the Old Notes to be exchanged and any other required documentation to the Exchange Agent (as defined) at the address set forth herein and therein. See "The Exchange Offer-- Procedures for Tendering". Withdrawal Rights........... Tenders may be withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration Date. To withdraw a tender of Old Notes, a written or facsimile transmission notice of withdrawal must be received by the Exchange Agent at its address set forth below under "Exchange Agent" prior to 5:00 p.m., New York City time, on the Expiration Date. 6 Acceptance of Old Notes and Delivery of New Notes...... Subject to certain conditions, the Company will accept for exchange any and all Old Notes which are properly tendered in the Exchange Offer prior to 5:00 p.m., New York City time, on the Expiration Date. The New Notes issued pursuant to the Exchange Offer will be delivered promptly following the Expiration Date. See "The Exchange Offer--Terms of the Exchange Offer". Certain Tax Considerations.. The exchange of New Notes for Old Notes should not be a sale or exchange or otherwise a taxable event for Federal income tax purposes. See "Certain Federal Income Tax Considerations". Exchange Agent.............. BankAmerica National Trust Company is serving as exchange agent (the "Exchange Agent") in connection with the Exchange Offer. Use of Proceeds............. There will be no proceeds to the Company from the Exchange Offer. The net proceeds to the Company from the sale of the Old Notes were approximately $98 million. The Company used (or will use) such proceeds to repay outstanding indebtedness, including approximately $81 million of indebtedness under the Company's revolving credit facility (the "Revolving Credit Facility"). See "Use of Proceeds" and "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Sources of Capital". SUMMARY OF TERMS OF NEW NOTES The Exchange Offer relates to the exchange of up to $100,000,000 aggregate principal amount of Old Notes for up to an equal aggregate principal amount of New Notes. The New Notes will be obligations of the Company evidencing the same indebtedness as the Old Notes, and will be entitled to the benefits of the same Indenture. The form and terms of the New Notes are the same as the form and terms of the Old Notes, except that the New Notes have been registered under the Securities Act and therefore will not bear legends restricting the transfer thereof. See "Description of the New Notes". COMPARISON WITH OLD NOTES Freely Transferable.............. Generally, the New Notes will be freely transferable under the Securities Act by holders who are not affiliates of the Company. The New Notes otherwise will be substantially identical in all material respects (including interest rate and maturity) to the Old Notes. See "The Exchange Offer--Terms of the Exchange Offer". Registration Rights.............. The holders of Old Notes currently are entitled to certain registration rights pursuant to an Exchange Registration Rights Agreement (the "Registration Rights Agreement") dated as of May 10, 1995, between the Company and CS First Boston Corporation, as representative of the Initial Purchasers. However, upon consummation of the Exchange Offer, subject to certain 7 exceptions, holders of Old Notes who do not exchange their Old Notes for New Notes in the Exchange Offer will no longer be entitled to registration rights and will not be able to offer or sell their Old Notes, unless such Old Notes are subsequently registered under the Securities Act (which, subject to certain limited exceptions, the Company will have no obligation to do), except pursuant to an exemption from, or in a transaction not subject to, the Securities Act and applicable state securities laws. See "Risk Factors-- Consequences of Failure to Exchange". TERMS OF THE NEW NOTES Interest Payment Dates........... May 15 and November 15 of each year, commencing November 15, 1995. Interest Rate.................... 7 7/8% per annum. Maturity Date.................... May 15, 2000. Redemption....................... None. Sinking Fund..................... None. Ranking.......................... The New Notes will be unsecured obligations of the Company and will rank pari passu with other existing unsecured debt of the Company. At March 25, 1995, after giving effect to the sale of the Old Notes and the application of the proceeds thereof, the Company would have had outstanding approximately $299.4 million of senior indebtedness, including the Old Notes, and the Company would not have had any subordinated indebtedness outstanding. Except for approximately $3.9 million of indebtedness related to Industrial Development Revenue Bonds and $9.4 million of indebtedness assumed in connection with the acquisitions of Ferromatik and Widia, the Company had no debt secured by properties or equipment at March 25, 1995. Due to the limitations set forth in the terms of the Company's outstanding indebtedness, the Company currently has no intention to issue debt that will rank senior to the New Notes. Restrictive Covenants............ The indenture governing the New Notes will limit (i) the issuance of certain secured debt by the Company and (ii) the entrance into sale and leaseback transactions by the Company. Both of these restrictions, however, are subject to a number of qualifications. See "Description of the New Notes". RISK FACTORS Holders of Old Notes should carefully consider all of the information set forth in this Prospectus and, in particular, the information set forth under "Risk Factors" before tendering their Old Notes in the Exchange Offer. 8 SUMMARY SELECTED HISTORICAL FINANCIAL DATA
FISCAL YEAR(A) ------------------------------------------------ (DOLLARS IN MILLIONS) 1994 1993 1992 1991 1990 -------- -------- ------ ------ ------ SUMMARY OF OPERATIONS Sales.................... $1,197.1 $1,029.4 $789.2 $754.0 $805.2 Manufacturing margins(b). 292.3 238.1 176.6 150.8 172.4 Percent of sales......... 24.4% 23.1% 22.4% 20.0% 21.4% Operating earnings (loss)(c)............... $ 64.2 $ (23.8)(d) $ 43.2 $(58.3)(e) $ 6.8(f) Interest expense......... (17.9) (15.7) (19.1) (19.1) (19.7) Earnings (loss) from continuing operations before extraordinary items and cumulative effect of changes in methods of accounting... 37.7 (45.4)(d) 16.1 (83.1)(e) (13.6)(f) Net earnings (loss)...... 37.7 (101.9)(d) 21.5 (100.2)(e) (24.3)(f) BALANCE SHEET DATA (AT YEAR END) Working capital.......... $ 151.4 $ 114.3 $191.8 $188.0 $253.6 Total assets............. 787.6 729.6 578.9 598.4 693.0 Total debt............... 226.9 185.2 175.6 162.8 169.4 Shareholders' equity..... 157.8 124.1 134.4 129.0 247.7 OTHER DATA EBITDA(g)................ $ 92.4 $ 72.2 $ 64.1 $ 40.8 $ 57.1 Ratio of EBITDA to inter- est expense............. 5.2 4.6 3.4 2.1 2.9 Capital expenditures..... $ 43.0 $ 23.4 $ 17.6 $ 15.5 $ 34.1 Backlog of unfilled or- ders at year end........ 287.1 246.0 249.6 277.3 268.6
- -------- Note: See "--Recent Developments", "Selected Historical Financial Data", "Selected Historical Segment Information", "Selected Historical Geographic Information" and "Management's Discussion and Analysis of Financial Condition and Results of Operations". (a) 1992 includes 53 weeks as compared to 52 weeks included in 1994, 1993, 1991 and 1990. (b) Represents gross profit, which is sales less cost of products sold. (c) Represents earnings (loss) from continuing operations before extraordinary items and cumulative effect of changes in methods of accounting and before net interest expense and taxes. (d) Earnings (loss) from continuing operations before extraordinary items and cumulative effect of changes in methods of accounting for fiscal year 1993 includes a charge of $47.1 million (with no current tax effect) for the consolidation of domestic machine tool manufacturing operations and charges totaling $22.8 million (with no current tax effect) for the disposition of the Company's Sano business. Additional charges totaling $52.1 million related to the adoption of S.F.A.S. 109, "Accounting for Income Taxes" ("SFAS 109") and S.F.A.S. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions" ("SFAS 106"), as well as an extraordinary loss of $4.4 million related to the early extinguishment of debt, are included in the net loss for 1993. (e) Earnings (loss) from continuing operations before extraordinary items and cumulative effect of changes in methods of accounting for fiscal year 1991 includes a charge of $75.1 million (with no current tax effect) for plant closing and the relocation of certain machine tool manufacturing operations. An additional charge of $14.9 million (with no current tax effect) related to the revaluation for sale of LK Tool is included in net earnings for fiscal year 1991. (f) Earnings (loss) from continuing operations before extraordinary items and cumulative effect of changes in methods of accounting for fiscal year 1990 includes a charge of $26.6 million ($24.9 million after tax) for product discontinuance and the reorganization of grinding machine and certain other machine tool manufacturing operations. (g) Represents operating earnings (loss), excluding certain charges which are discussed below, before depreciation and amortization. EBITDA is presented because it is a widely accepted financial indicator of a company's ability to service and incur debt. EBITDA should not be considered by holders of Old Notes who tender their Old Notes in the Exchange Offer as an alternative to net income or as an indicator of the Company's operating performance. As presented above, EBITDA excludes the following: in 1993, a charge of $47.1 million (with no current tax effect) for the consolidation of domestic machine tool manufacturing operations and charges totaling $22.8 million (with no current tax effect) for the disposition of the Company's Sano business; in 1991, a charge of $75.1 million (with no current tax effect) for plant closing and the relocation of certain machine tool manufacturing operations; and in 1990, a charge of $26.6 million ($24.9 million after tax) for product discontinuance and the reorganization of grinding machine and certain other machine tool manufacturing operations. 9 RECENT DEVELOPMENTS On January 27, 1995, the Company sold its American Mine Tool business for $15 million, resulting in a pretax gain in the first quarter of 1995 of $5 million ($4 million after tax). On February 1, 1995, the Company completed its acquisition of Widia for approximately $80 million in cash. Widia, with 1994 sales of approximately $225 million, is one of the world's leading producers of industrial metalworking products. Widia's production and distribution networks in Europe and India are expected to complement Valenite's strength in North America, Japan and other Asian markets. The acquisition was financed principally with German marks available under the Revolving Credit Facility. In May 1995, the Company adopted a plan with a total cost of $17.1 million ($13.1 million in cash) to integrate certain operations of Valenite and Widia in order to improve future profitability. As a result, a $9.8 million pretax integration charge ($7.8 million after tax) was recorded in the second quarter of 1995 for that portion of the plan directly related to Valenite. The remaining $7.3 million that relates to Widia has been recorded as a purchase accounting adjustment. On July 20, 1995, the Company consummated the acquisition of Talbot. With annual sales of approximately $40 million, Talbot is a major supplier of round high-speed steel and carbide metalcutting tools. The total consideration for the acquisition, including assumed debt of approximately $5 million, was approximately $38 million. The transaction will be accounted for under the purchase method and was financed through available cash and existing credit lines. On July 18, 1995, the Company issued a press release in which it reported its operating results for the two quarters ended June 17, 1995. The Company reported sales and net earnings for the period of $744.9 million and $21.4 million, respectively. The latter amount includes a pretax gain recorded in the first quarter of $5.0 million ($4.0 million after tax) on the sale of the Company's American Mine Tool business and a pretax charge recorded in the second quarter of $9.8 million ($7.8 million after tax) to integrate certain operations of Valenite and Widia in order to improve future profitability. Both the gain and the charge relate to the Company's industrial products segment. During the two quarters ended June 17, 1995, cash and cash equivalents increased by $22.7 million to $44.2 million. New orders for the period of $768 million increased by $199 million, or 35%, over the equivalent period of 1994. Following is a comparison of certain summary financial data at, and for the two quarters ended, June 17, 1995 and June 18, 1994:
TWO QUARTERS ENDED ----------------------- (DOLLARS IN MILLIONS) JUNE 17, JUNE 18, 1995 1994 ---------- --------- SUMMARY OF OPERATIONS Sales.................................................. $ 744.9 $ 514.8 Manufacturing margins(a)............................... 184.7 124.3 Percent of sales....................................... 24.8% 24.1% Operating earnings(b).................................. $ 38.0(c) $ 23.7 Interest expense....................................... (11.9) (7.5) Net earnings........................................... 21.4(c) 12.9 BALANCE SHEET DATA (AT QUARTER END) Working capital........................................ $ 299.2 $ 160.2 Total assets........................................... 1,054.2 750.0 Total debt............................................. 326.3 192.9 Shareholders' equity................................... 192.6 136.3 OTHER DATA EBITDA(d).............................................. $ 60.3 $ 36.6 Ratio of EBITDA to interest expense.................... 5.1 4.9 Capital expenditures................................... $ 19.9 $ 11.9 Backlog of unfilled orders at quarter end.............. 384.9 299.3
- -------- (a) Represents gross profit, which is sales less cost of products sold. (b) Represents earnings before net interest expense and taxes. (c) Includes a pretax gain of $5.0 million ($4.0 million after tax) on the sale of the Company's American Mine Tool business and a charge of $9.8 million ($7.8 million after tax) to integrate certain operations of Valenite and Widia in order to improve future profitability. (d) Represents operating earnings before depreciation and amortization. In 1995, excludes the gain on the sale of the Company's American Mine Tool business and the charge to integrate certain operations of Valenite and Widia. 10 RISK FACTORS Holders of Old Notes should carefully consider the following risk factors, as well as other information set forth in this Prospectus, before tendering their Old Notes in the Exchange Offer. The risk factors set forth below (other than "Consequences of Failure to Exchange") are generally applicable to the Old Notes as well as the New Notes. CONSEQUENCES OF FAILURE TO EXCHANGE Holders of Old Notes who do not exchange their Old Notes for New Notes pursuant to the Exchange Offer will continue to be subject to the restrictions on transfer of such Old Notes as set forth in the legend thereon as a consequence of the issuance of the Old Notes pursuant to exemptions from, or in transactions not subject to, the registration requirements of the Securities Act and applicable state securities laws. In general, the Old Notes may not be offered or sold, unless registered under the Securities Act, except pursuant to an exemption from, or in a transaction not subject to, the Securities Act and applicable state securities laws. The Company does not currently anticipate that it will register the Old Notes under the Securities Act. Based on interpretations by the staff of the SEC, New Notes issued pursuant to the Exchange Offer in exchange for Old Notes may be offered for resale, resold or otherwise transferred by holders thereof (other than any such holder which is an "affiliate" of the issuer within the meaning of Rule 405 under the Securities Act) without compliance with the registration and prospectus delivery provisions of the Securities Act provided that such New Notes are acquired in the ordinary course of such holders' business and such holders have no arrangement with any person to participate in the distribution of such New Notes. Each broker-dealer that receives New Notes for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such New Notes. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of New Notes received in exchange for Old Notes where such Old Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities. The Company has agreed that, for a period of 180 days after the Expiration Date, it will make this Prospectus available to any broker-dealer for use in connection with any such resale. See "Plan of Distribution". However, to comply with the securities laws of certain jurisdictions, if applicable, the New Notes may not be offered or sold unless they have been registered or qualified for sale in such jurisdictions or an exemption from registration or qualification is available and is complied with. To the extent that Old Notes are tendered and accepted in the Exchange Offer, the trading market for untendered and tendered but unaccepted Old Notes could be adversely affected. LACK OF PUBLIC MARKET FOR THE NEW NOTES The New Notes are being offered to the holders of the Old Notes. The Old Notes were issued in May 1995 to a small number of institutional investors and are eligible for trading in the Private Offerings, Resales and Trading through Automatic Linkages (PORTAL) Market, the National Association of Securities Dealers' screen-based, automated market for trading of securities eligible for resale under Rule 144A of the Securities Act. There is no existing trading market for the New Notes, and there can be no assurance regarding the future development of such a market for the New Notes or the ability of holders of the New Notes to sell their New Notes or the price at which such holders may be able to sell their New Notes. If such a market were to develop, the New Notes could trade at prices that may be higher or lower than their principal amount depending on many factors, including prevailing interest rates, the Company's operating results and the market for similar securities. The Initial Purchasers have agreed that one or more of them will act as market-makers for the New Notes. However, the Initial Purchasers are not obligated to so act and they may discontinue any such market-making at any time without notice. There can be no assurance as to the liquidity of any trading market for the New Notes or that an active public market for the New Notes will develop. The Company does not intend to apply for listing or quotation of the New Notes on any securities exchange or stock market. 11 Historically, the market for noninvestment grade debt has been subject to disruptions that have caused substantial volatility in the prices of such securities. There can be no assurance that the market for the New Notes will not be subject to similar disruptions. Any such disruptions may have an adverse effect on holders of the New Notes. LEVERAGE After giving effect to the sale of the Old Notes and the application of the proceeds thereof, the Company's total indebtedness would have been approximately $299.4 million at March 25, 1995, and the Company's ratio of total long-term debt to total capitalization at such date would have been .61 to 1.0. This degree of leverage will have important consequences to holders of the New Notes, including the following: (i) the ability of the Company to obtain additional financing for working capital, capital expenditures, debt service requirements or other purposes may be impaired; (ii) a substantial portion of the Company's cash flow from operations will be required to be dedicated to the payment of the Company's interest expense; (iii) the Company may be more highly leveraged than companies with which it competes, which may place it at a competitive disadvantage; (iv) indebtedness under the Revolving Credit Facility bears interest at floating rates, which will cause the Company to be vulnerable to increases in interest rates; and (v) the Company may be more vulnerable in the event of a downturn in its businesses. Also, the Company has sold interests in certain accounts receivable to third parties. At March 25, 1995, the amount of the accounts receivable sold was $75 million. See "Capitalization", "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Description of the New Notes". The Company entered into an agreement dated as of May 31, 1995, with the lenders under the Revolving Credit Facility to extend the term of the Revolving Credit Facility from July 20, 1996 to June 1, 1998. In connection with such extension, beginning in January 1996, certain required financial ratio levels imposed on the Company gradually will become more stringent. The Company believes that it will be able to continue throughout the extended term of the Revolving Credit Facility to comply with the covenants of the Revolving Credit Facility, including all required ratio levels. In addition, at the Company's request, the amount of credit available under the Revolving Credit Facility was reduced to $150 million in order to reduce commitment fees payable by the Company thereunder. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Sources of Capital". RESTRICTIONS IMPOSED BY TERMS OF THE COMPANY'S INDEBTEDNESS The terms and conditions of the existing indebtedness of the Company and the Indenture impose restrictions that affect, among other things, the ability of the Company and its subsidiaries to (i) incur certain secured indebtedness; (ii) create liens on assets; (iii) sell or otherwise transfer certain assets; (iv) engage in mergers or consolidations; and (v) pay dividends. The Company is also required by the terms of the Revolving Credit Facility to comply with certain specified financial ratios and tests, including a minimum ratio of EBITDA to the sum of interest expense plus dividends. The Company's ability to comply with the foregoing provisions may be affected by events beyond its control. The Company's failure to comply with any of these covenants and restrictions could result in a default under its existing indebtedness. In the event of any default, depending on the actions taken by the holders of such indebtedness, the Company could be prohibited from making any payments of principal or interest on the New Notes for a period of time. In addition, in certain cases, such holders could elect to declare all amounts borrowed under their respective debt instruments, together with accrued interest, to be due and payable. If the Company were unable to repay such amounts, the holders of the New Notes may not be entitled to receive any payment until such declaration was rescinded or such debt was discharged or paid in full. If the indebtedness were to be accelerated, there could be no assurance that the assets of the Company would be sufficient to repay borrowings, including the New Notes, in full. 12 RECENT LOSSES The Company had losses before income taxes, extraordinary items and cumulative effect of changes in methods of accounting and before net interest expense of $58.3 million and $23.8 million in fiscal years 1991 and 1993, respectively, and net losses of $24.3 million, $100.2 million and $101.9 million in fiscal years 1990, 1991 and 1993, respectively. While the Company in fiscal year 1994 and in the first two quarters of 1995 had earnings before income taxes, extraordinary items and cumulative effect of changes in methods of accounting and before net interest expense of $64.2 million and $38.0 million, respectively, and net earnings of $37.7 million and $21.4 million, respectively, there can be no assurance that the Company will continue to operate profitably in the future. See "Management's Discussion and Analysis of Financial Condition and Results of Operations". USE OF PROCEEDS There will be no proceeds to the Company from the Exchange Offer. The net proceeds to the Company from the sale of the Old Notes were approximately $98 million. The Company used (or will use) such proceeds to repay outstanding indebtedness (which matures at various times, not later than July 20, 1996), including approximately $81 million of indebtedness under the Revolving Credit Facility. The Company will be able to reborrow amounts repaid under the Revolving Credit Facility for general corporate purposes, including to finance any future acquisitions. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Sources of Capital". The indebtedness repaid with the net proceeds from the sale of the Old Notes bore interest at an average annual interest rate of approximately 6.9%, as calculated at April 28, 1995. Pending its application, approximately $22 million of the net proceeds from the sale of the Old Notes has been invested in short-term investments. 13 CAPITALIZATION The following table sets forth the capitalization of the Company at March 25, 1995, and as adjusted to give effect to the sale of the Old Notes and the application of the proceeds thereof as described under "Use of Proceeds".
AS ADJUSTED FOR THE SALE OF THE ACTUAL OLD NOTES ------ --------------- (DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS) Amounts payable to banks............................. $ 47.8(a) $ 3.9 Long-term debt and lease obligations: 7 7/8% Notes due 2000.............................. -- 100.0 8 3/8% Notes due 2004.............................. 115.0 115.0 12% Sinking Fund Debentures due 2010............... 10.8 10.8 Industrial Development Revenue Bonds due 2008...... 10.0 10.0(b) Revolving Credit Facility.......................... 99.1 45.0(b) Other long-term debt and capital lease obligations. 14.7 14.7 ------ ------ Total long-term debt and capital lease obliga- tions........................................... 249.6 295.5 Shareholders' equity: 4% Cumulative Preferred Shares--60,000 shares authorized, issued and outstanding, $100 par value per share, redeemable at $105 a share............. 6.0 6.0 Common Shares--50,000,000 shares authorized, 33,796,447 shares outstanding, $1.00 par value per share(c).......................................... 33.8 33.8 Capital in excess of par value..................... 256.1 256.1 Accumulated deficit................................ (115.9) (115.9) Cumulative foreign currency translation adjust- ments............................................. 2.4 2.4 ------ ------ Total shareholders' equity....................... 182.4 182.4 ------ ------ Total capitalization............................. $479.8 $481.8 ====== ======
- -------- Note: The information set forth in this table should be read in conjunction with the audited consolidated financial statements of the Company and related notes and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this Prospectus and the audited consolidated financial statements of Widia and related notes thereto incorporated into this Prospectus by reference to the Company's 1995 Form 8-Ks. The table does not reflect the Company's sales of interests in certain accounts receivable to third parties. At March 25, 1995, the amount of the accounts receivable sold was $75 million. (a) Amounts payable to banks includes $25 million of indebtedness under the Revolving Credit Facility classified as short-term. (b) On April 13, 1995, the Company repaid in full its Industrial Development Revenue Bonds due 2008 with the proceeds of borrowings under the Revolving Credit Facility. At May 26, 1995, borrowings outstanding under the Revolving Credit Facility totaled $89 million. (c) At March 25, 1995, stock options for 2,507,832 shares were outstanding. The Company's 1994 Long-Term Incentive Plan provides for the granting of up to 2,000,000 additional shares in the form of stock options, restricted stock and performance awards, of which 866,950 remained available for granting at March 25, 1995. 14 RATIO OF EARNINGS TO FIXED CHARGES The ratio of earnings to fixed charges for the Company is set forth below for the periods indicated.
FISCAL YEAR ----------------------------------------------------------------------------------------- 1994 1993 1992 1991 1990 ---- ---- ---- ---- ---- 3.0 --(a) 2.2 --(b) --(c)
- -------- (a) A deficiency of $37.2 million in fiscal year 1993 resulted from a charge of $47.1 million for the consolidation of domestic machine tool manufacturing operations and charges totaling $22.8 million for the disposition of the Company's Sano business. (b) A deficiency of $73.8 million in fiscal year 1991 resulted from a charge of $75.1 million for plant closing and the relocation of certain machine tool manufacturing operations. (c) A deficiency of $9.0 million in fiscal year 1990 resulted from a charge of $26.6 million for product discontinuance and the reorganization of grinding machine and certain other machine tool manufacturing operations. The ratio of earnings to fixed charges for the two quarters ended June 17, 1995 was 2.8, as compared to 2.6 for the two quarters ended June 18, 1994. For purposes of computing the ratio of earnings to fixed charges, earnings were calculated by adding earnings (loss) from continuing operations before income taxes, extraordinary items and cumulative effect of changes in methods of accounting, interest expense, interest capitalized, amortization of debt discount and the portion of rents representative of an interest factor. Fixed charges consist of interest expense, interest capitalized and the portion of the rents representative of an interest factor. For periods in which earnings before fixed charges were insufficient to cover fixed charges, the amount of coverage deficiency (in millions), instead of the ratio, is disclosed in the footnotes to the table. Earnings, as defined, includes significant non-cash charges for depreciation and amortization. 15 SELECTED HISTORICAL FINANCIAL DATA
FISCAL YEAR(A) ------------------------------------------------- (DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS) 1994 1993 1992 1991 1990 -------- -------- ------ ------- ------ STATEMENT OF EARNINGS Sales.................... $1,197.1 $1,029.4 $789.2 $ 754.0 $805.2 Cost of products sold.... 904.8 791.3 612.6 603.2 632.8 -------- -------- ------ ------- ------ Manufacturing margins.. 292.3 238.1 176.6 150.8 172.4 Other costs and expenses Selling and administra- tive.................. 222.2 191.3 133.6 132.2 136.0 Consolidation charge... -- 47.1(b) -- -- -- Disposition of subsidi- ary................... -- 22.8(b) -- -- -- Closing and relocation charge................ -- -- -- 75.1(c) -- Special charge......... -- -- -- -- 26.6(d) Other--net............. 5.9 .7 (.2) 1.8 3.0 -------- -------- ------ ------- ------ Total other costs and expenses............ 228.1 261.9 133.4 209.1 165.6 -------- -------- ------ ------- ------ Operating earnings (loss).................. 64.2 (23.8) 43.2 (58.3) 6.8 Interest Interest income ....... 2.6 2.3 2.9 4.0 5.1 Interest expense....... (17.9) (15.7) (19.1) (19.1) (19.7) -------- -------- ------ ------- ------ Interest--net........ (15.3) (13.4) (16.2) (15.1) (14.6) -------- -------- ------ ------- ------ Earnings (loss) from continuing operations before income taxes, extraordinary items and cumulative effect of changes in methods of accounting.............. 48.9 (37.2) 27.0 (73.4) (7.8) Provision for income tax- es...................... 11.2 8.2 10.9 9.7 5.8 -------- -------- ------ ------- ------ Earnings (loss) from continuing operations before extraordinary items and cumulative effect of changes in methods of accounting... 37.7 (45.4)(b) 16.1 (83.1)(c) (13.6)(d) Discontinued operations net of income taxes..... -- -- -- (17.1)(e) (10.7)(f) Extraordinary items Tax benefit from loss carryforward.......... -- -- 5.4 -- -- Loss from early extin- guishment of debt..... -- (4.4)(b) -- -- -- Cumulative effect of changes in methods of accounting.............. -- (52.1)(b) -- -- -- -------- -------- ------ ------- ------ Net earnings (loss)...... $ 37.7 $ (101.9) $ 21.5 $(100.2) $(24.3) ======== ======== ====== ======= ====== Earnings (loss) per com- mon share Earnings (loss) from continuing operations before extraordinary items and cumulative effect of changes in methods of accounting. $ 1.10 $ (1.41) $ .58 $ (3.04) $ (.54) Discontinued operations net of income taxes... -- -- -- (.63) (.41) Extraordinary items Tax benefit from loss carryforward........ -- -- .19 -- -- Loss from early extinguishment of debt................ -- (.14) -- -- -- Cumulative effect of changes in methods of accounting............ -- (1.61) -- -- -- -------- -------- ------ ------- ------ Net earnings (loss).... $ 1.10 $ (3.16) $ .77 $ (3.67) $ (.95) ======== ======== ====== ======= ======
- -------- (continued on next page) 16 SELECTED HISTORICAL FINANCIAL DATA--(CONTINUED)
FISCAL YEAR(A) -------------------------------------- (DOLLARS IN MILLIONS) 1994 1993 1992 1991 1990 ------ ------ ------ ------ ------ BALANCE SHEET DATA (AT YEAR END) Working capital......... $151.4 $114.3 $191.8 $188.0 $253.6 Property, plant and equipment--net......... 198.8 184.0 121.1 129.7 159.2 Total assets............ 787.6 729.6 578.9 598.4 693.0 Long-term debt and lease obligations............ 143.0 107.6 154.4 155.9 157.3 Total debt.............. 226.9 185.2 175.6 162.8 169.4 Shareholders' equity.... 157.8 124.1 134.4 129.0 247.7 OTHER DATA Total debt to total cap- ital ratio............. 59% 60% 57% 56% 41% EBITDA(g)............... $ 92.4 $ 72.2 $ 64.1 $ 40.8 $ 57.1 Ratio of EBITDA to in- terest expense......... 5.2 4.6 3.4 2.1 2.9 Dividends paid to common shareholders........... $ 12.2 $ 11.6 $ 10.0 $ 17.3 $ 18.6 Capital expenditures.... 43.0 23.4 17.6 15.5 34.1 Backlog of unfilled or- ders at year end....... 287.1 246.0 249.6 277.3 268.6
- -------- Note: See "Prospectus Summary--Recent Developments", "Selected Historical Segment Information", "Selected Historical Geographic Information" and "Management's Discussion and Analysis of Financial Condition and Results of Operations". (a) 1992 includes 53 weeks as compared to 52 weeks included in 1994, 1993, 1991 and 1990. (b) Earnings (loss) from continuing operations before extraordinary items and cumulative effect of changes in methods of accounting for fiscal year 1993 includes a charge of $47.1 million (with no current tax effect) for the consolidation of domestic machine tool manufacturing operations and charges totaling $22.8 million (with no current tax effect) for the disposition of the Company's Sano business. Additional charges totaling $52.1 million related to the adoption of SFAS 109 and SFAS 106, as well as an extraordinary loss of $4.4 million related to the early extinguishment of debt, are included in the net loss for 1993. (c) Earnings (loss) from continuing operations before extraordinary items and cumulative effect of changes in methods of accounting for fiscal year 1991 includes a charge of $75.1 million (with no current tax effect) for plant closing and the relocation of certain machine tool manufacturing operations. (d) Earnings (loss) from continuing operations before extraordinary items and cumulative effect of changes in methods of accounting for fiscal year 1990 includes a charge of $26.6 million ($24.9 million after tax) for product discontinuance and the reorganization of grinding machine and certain other machine tool manufacturing operations. (e) Includes a charge of $14.9 million (with no current tax effect) related to the revaluation for sale of LK Tool. (f) Includes a provision for loss on the sale of the discontinued industrial robot business of $1.7 million (with no current tax effect) as well as a charge related to LK Tool of $6.2 million (with no current tax effect). (g) Represents operating earnings (loss), excluding certain charges which are discussed below, before depreciation and amortization. EBITDA is presented because it is a widely accepted financial indicator of a company's ability to service and incur debt. EBITDA should not be considered by holders of Old Notes who tender their Old Notes in the Exchange Offer as an alternative to net income or as an indicator of the Company's operating performance. As presented above, EBITDA excludes the following: in 1993, a charge of $47.1 million (with no current tax effect) for the consolidation of domestic machine tool manufacturing operations and charges totaling $22.8 million (with no current tax effect) for the disposition of the Company's Sano business; in 1991, a charge of $75.1 million (with no current tax effect) for plant closing and the relocation of certain machine tool manufacturing operations; and in 1990, a charge of $26.6 million ($24.9 million after tax) for product discontinuance and the reorganization of grinding machine and certain other machine tool manufacturing operations. 17 SELECTED HISTORICAL SEGMENT INFORMATION
FISCAL YEAR(A) ------------------------------------------ (DOLLARS IN MILLIONS) 1994 1993 1992 1991 1990 -------- -------- ------ ------ ------ Sales Plastics machinery(b)............. $ 503.8 $ 357.2 $301.4 $267.6 $272.8 Machine tools..................... 338.5 355.0 379.7 383.7 433.7 Industrial products(c)............ 354.8 317.2 108.1 102.7 98.7 -------- -------- ------ ------ ------ Total sales..................... $1,197.1 $1,029.4 $789.2 $754.0 $805.2 ======== ======== ====== ====== ====== Backlog of unfilled orders at year end Plastics machinery(b)............. $ 122.3 $ 85.5 $ 56.1 $ 53.3 $ 48.7 Machine tools..................... 117.4 123.9 188.8 219.7 216.1 Industrial products(c)............ 47.4 36.6 4.7 4.3 3.8 -------- -------- ------ ------ ------ Total backlog................... $ 287.1 $ 246.0 $249.6 $277.3 $268.6 ======== ======== ====== ====== ====== Operating earnings (loss)(d) Plastics machinery(b)(e).......... $ 45.9 $ 29.2 $ 25.7 $ 16.6 $ 20.4 Machine tools..................... 6.8 7.9 14.3 (3.1) 13.7 Industrial products(c)............ 36.3 29.0 18.7 19.0 19.8 Consolidation charge, closing and relocation charge and special charge(f)........................ -- (47.1) -- (75.1) (26.6) Disposition of subsidiary(g)...... -- (22.8) -- -- -- Unallocated corporate expenses(h)...................... (24.8) (20.0) (15.5) (15.7) (20.5) -------- -------- ------ ------ ------ Operating earnings (loss)......... 64.2 (23.8) 43.2 (58.3) 6.8 Interest--net..................... (15.3) (13.4) (16.2) (15.1) (14.6) -------- -------- ------ ------ ------ Earnings (loss) from continuing operations before income taxes, extraordinary items and cumulative effect of changes in methods of accounting............ $ 48.9 $ (37.2) $ 27.0 $(73.4) $ (7.8) ======== ======== ====== ====== ====== Capital expenditures Plastics machinery(b)............. $ 13.8 $ 4.2 $ 6.2 $ 6.5 $ 14.4 Machine tools..................... 11.6 8.8 7.1 7.5 15.3 Industrial products(c)............ 17.6 10.4 4.3 1.5 4.4 -------- -------- ------ ------ ------ Total capital expenditures...... $ 43.0 $ 23.4 $ 17.6 $ 15.5 $ 34.1 ======== ======== ====== ====== ====== Identifiable assets Plastics machinery(b)............. $ 295.0 $ 289.0 $219.9 $202.9 $202.1 Machine tools..................... 270.8 243.1 282.8 310.9 360.1 Industrial products(c)............ 195.0 174.4 56.8 63.7 82.1 Unallocated corporate assets(i)... 26.8 23.1 19.4 20.9 48.7 -------- -------- ------ ------ ------ Total assets.................... $ 787.6 $ 729.6 $578.9 $598.4 $693.0 ======== ======== ====== ====== ======
- -------- (a) 1992 includes 53 weeks as compared to 52 weeks included in 1994, 1993, 1991 and 1990. (b) The increases in the plastics machinery segment are partially attributable to the inclusion of Ferromatik as of November 8, 1993. (c) The increases in the industrial products segment are largely attributable to the inclusion of Valenite as of February 1, 1993. (d) In 1995, the Company's method of allocating corporate costs to its business segments was refined to exclude costs for certain services not directly assignable to the operations of the segments. This change results in additional costs being retained as unallocated corporate expenses. Amounts for 1994, 1993, 1992, 1991 and 1990 have been restated to conform to the Company's 1995 presentation. See the Company's 1995 Form 10-Q, which is incorporated herein by reference. (e) 1993 includes a $2.5 million gain on the sale of surplus land. (f) These charges relate to the machine tool segment. (g) This charge relates to the plastics machinery segment. (h) Includes financing costs related to the sale of accounts receivable and corporate expenses. (i) Includes cash and cash equivalents and the assets of the Company's insurance and utility subsidiaries. 18 SELECTED HISTORICAL GEOGRAPHIC INFORMATION
FISCAL YEAR(A) -------------------------------------------------- (DOLLARS IN MILLIONS) 1994 1993 1992 1991 1990 -------- -------- ------ ------ ------ Sales U.S. operations........ $ 873.9 $ 831.9 $654.1 $613.0 $638.3 Foreign operations..... 323.2 197.5 135.1 141.0 166.9 -------- -------- ------ ------ ------ Total sales.......... $1,197.1 $1,029.4 $789.2 $754.0 $805.2 ======== ======== ====== ====== ====== Operating earnings (loss)(b) U.S. operations........ $ 67.9(c) $ 58.1 $ 57.2 $ 29.5 $ 42.4 Foreign operations..... 21.1(c) 8.0 1.5 3.0 11.5 Consolidation charge, closing and relocation charge and special charge........ -- (47.1)(d) -- (75.1)(d) (26.6)(e) Disposition of subsidiary............ -- (22.8)(d) -- -- -- Unallocated corporate expenses.............. (24.8) (20.0) (15.5) (15.7) (20.5) -------- -------- ------ ------ ------ Operating earnings (loss).............. $ 64.2 $ (23.8) $ 43.2 $(58.3) $ 6.8 ======== ======== ====== ====== ======
- -------- Note: Sales of U.S. operations include export sales of $142.0 million in 1994, $118.7 million in 1993, $111.7 million in 1992, $98.6 million in 1991 and $82.4 million in 1990. Total sales of the Company's U.S. and foreign operations to unaffiliated customers outside the U.S. were $417.6 million, $298.4 million, $242.6 million, $236.0 million and $232.0 million in 1994, 1993, 1992, 1991 and 1990, respectively. (a) 1992 includes 53 weeks as compared to 52 weeks in 1994, 1993, 1991 and 1990. (b) In 1995, the Company's method of allocating corporate costs to its U.S. operations was refined to exclude costs for certain services not directly assignable to U.S. operations. This change results in additional costs being retained as unallocated corporate expenses. Amounts for 1994, 1993, 1992, 1991 and 1990 have been restated to conform to the Company's 1995 presentation. (c) These amounts have been restated to exclude the effects of the forgiveness of certain intercompany obligations. (d) These charges relate to U.S. operations. (e) The 1990 special charge includes $12.2 million for U.S. operations and $14.4 million for foreign operations. 19 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS The Company operates in three principal business segments: plastics machinery, machine tools and industrial products. See "Selected Historical Segment Data" for financial information for each of these segments. 1994 Compared to 1993 Sales Sales in 1994 were $1,197 million, which represented a $168 million, or 16%, increase over 1993. The sales increase was primarily attributable to: (i) a $147 million, or 41%, increase in plastics machinery sales, which included an approximately $80 million increase in sales resulting from the acquisition of Ferromatik in late 1993, with the rest of the plastics machinery increase coming from injection molding machines, and (ii) a $38 million increase in industrial products sales, of which about half resulted from the inclusion of Valenite's sales for twelve months in 1994 versus eleven months in 1993. Machine tool sales declined by $17 million, or 5%, primarily due to a decline in demand from the aerospace market. Sales of all segments to non-U.S. markets increased in 1994 by $119 million, or 40%, primarily due to the effect of the Ferromatik acquisition. Export shipments increased by $23 million, or 20%, primarily due to increases in exports of injection molding machines. New Orders and Backlog New orders for 1994 were $1,238 million, which represented a $268 million, or 28%, increase over 1993. Orders for plastics machinery increased $174 million, or 48%. Approximately $100 million of the increase resulted from the acquisition of Ferromatik late in 1993. Other contributing factors included higher demand for U.S.-built injection molding machines and a single $17 million European order. Machine tool new orders increased $47 million, or 16%, due to a greater demand for Wolfpack-designed products, primarily vertical machining centers. Orders for industrial products increased $48 million, or 15%, due primarily to both the timing of the Valenite acquisition and strengthening demand in the U.S. Export orders approximated $124 million in 1994 compared to $100 million in 1993. The increase in export orders was primarily attributable to the plastics machinery segment. At December 31, 1994, the backlog of unfilled orders was $287 million compared with $246 million at year end 1993. The increase in backlog was primarily attributable to greater demand for Ferromatik plastics machinery and vertical machining centers. Margins, Costs and Expenses Manufacturing margins increased to 24.4% in 1994 from 23.1% in 1993. Margins for all three segments improved. Plastics machinery benefited from increased volume and more stable pricing; machine tools reduced its costs due to the consolidation (see "--Consolidation Charge"); and industrial products achieved benefits from increased U.S. sales of grinding wheels, metalworking fluids and cutting tools. Selling and administrative expense as a percent of sales was 19% in both 1994 and 1993. Administrative expense was unchanged, but selling costs as a percent of sales increased due to the mix of products sold and costs related to two international trade shows in 1994. Other costs and expenses--net increased by $5.2 million due to: (i) a $2.8 million increase in financing fees, principally attributed to the sale of receivables, and (ii) the inclusion in 1993 of a $2.5 million gain on the sale of surplus land. 20 Interest expense, net of interest income, was $15.3 million in 1994 compared to $13.4 million in 1993. The increase was due to higher borrowing levels as well as higher interest rates. Income Taxes The consolidated effective tax rate in 1994 is less than the U.S. Federal rate due primarily to (i) an operating loss in the U.S. for tax reporting purposes related principally to the machine tool consolidation and (ii) utilization of net operating loss carryforwards in certain non-U.S. jurisdictions. At the end of 1994, for U.S. Federal tax reporting purposes, the Company had net operating loss carryforwards of approximately $41 million, which expire in 2008 and 2009. Current tax benefits were not offset against the U.S. loss in 1993 in accordance with the income tax accounting rules that became effective January 3, 1993. In addition, current tax benefits could not be recognized for losses in certain non-U.S. jurisdictions. Consolidation Charge In December 1993, management adopted a plan to reduce machine tool manufacturing capacity by consolidating U.S. machine tool manufacturing into facilities in Cincinnati and accordingly recorded a charge of $47.1 million in the fourth quarter of 1993. Production at the Company's two machine tool facilities in Fountain Inn and Greenwood, South Carolina, was phased out during 1994, and the facilities were closed in the fourth quarter of 1994. The consolidation plan included a provision for the phase-out of production in South Carolina offset by a simultaneous ramp-up of production in Cincinnati to minimize the effect of the consolidation on 1994 sales. However, two important factors necessitated adjustments to the original plan. First, the favorable job market in South Carolina resulted in an unexpectedly high early attrition rate affecting both production employees and certain other employees who were key to the execution of the production phase-out plan. The early attrition was particularly acute in parts manufacturing and resulted in an earlier than expected loss of capability in this area, slowing the phase-out of production in South Carolina and hampering the ramp-up of production in Cincinnati. To offset some of the lost capability, the Company had to temporarily utilize more costly subcontract sources. Second, market demand for machine tool products, including products previously manufactured in South Carolina, was strong in 1994. This temporarily strained key suppliers, causing part shortages and further slowing the ramp-up of production in Cincinnati. These production delays and inefficiencies during the consolidation process contributed to lower than expected operating earnings in the machine tools segment and resulted in an estimated $20 million to $30 million reduction in 1994 sales of products previously manufactured in South Carolina. Completion of the consolidation was originally expected to result in a net employee reduction of 235 in U.S. machine tool operations. However, increased customer demand for machine tool products, including the products being transferred from South Carolina, has caused this target to be reduced to 150. As a result of the larger than expected number of voluntary terminations and transfers to Cincinnati, the cost for severance and other fringe benefits was approximately $6 million less than originally anticipated. Simultaneously, the delay in the phase-out of production in South Carolina resulted in additional operating losses of approximately $2 million through the closure date of the two plants. The net $4 million reduction in the cost of the consolidation was utilized to absorb incremental costs arising from the Company"s 1990 and 1991 machine tool restructurings, including lower estimated net proceeds from the sale of the Heald facility, the closure of certain overseas sales offices and the restructuring of domestic machine tool operations. The consolidation, once fully implemented, was originally expected to result in annual cost savings of approximately $16 million. Approximately $12 million of the $16 million in anticipated savings related to the planned net employee reduction of 235 people. As a result of the lower than expected reduction, the actual annual cost savings are now expected to be $4 million less than originally anticipated. However, higher margins associated with increased sales should offset this reduction. 21 Earnings Earnings before extraordinary items and cumulative effect of changes in methods of accounting improved to $37.7 million, or $1.10 per share, in 1994 compared to a loss of $45.4 million, or $1.41 per share, in 1993. The 1993 loss was caused by the $47.1 million consolidation charge described above and a $22.8 million charge for the disposition of the Company's Sano subsidiary, as described below. The net loss for 1993 included the effect of an extraordinary charge of $4.4 million, or $.14 per share, related to the early extinguishment of $60 million of the Company's 12% Sinking Fund Debentures due 2010. The net loss for 1993 also included the effect of adopting SFAS 109 and SFAS 106, effective January 3, 1993, resulting in charges to earnings totaling $52.1 million, or $1.61 per share. Except for the cumulative effect, the new rules regarding postretirement medical benefits did not significantly affect the Company's earnings in 1994 or 1993, while the new rules regarding income taxes had the effect of reducing the Company's effective tax rate in 1994 and 1993. Net earnings were $37.7 million, or $1.10 per share, in 1994, compared to a net loss of $101.9 million, or $3.16 per share, in 1993. The 1993 net loss was caused by the aforementioned charges, the extraordinary item and the cumulative effect of changes in methods of accounting that totaled $126.4 million. 1993 Compared to 1992 Sales Sales in 1993 were $1,029 million, which represented a $240 million increase over 1992. This increase was primarily attributable to the $209 million increase in sales of industrial products which resulted from the acquisition of Valenite in February 1993. The plastics machinery sales increase totaled $56 million, or 19%; $15 million of the increase resulted from the Ferromatik acquisition, but the largest factor in the increase resulted from higher domestic sales of injection molding machines. Machine tool sales declined by $25 million, or 7%, due to the decline in sales of advanced machine tools for the aerospace market. Sales of all segments to foreign markets increased in 1993 by $55 million to $298 million due to the effect of the acquisitions. Export shipments increased by $7 million due to the acquisition of Valenite, which more than offset reductions in exports of injection molding machines and advanced machine tools to Europe. New Orders and Backlog New orders for 1993 were $970 million, which represented a $208 million increase over 1992. The increase was caused by a $60 million, or 20%, improvement in plastics machinery orders and by orders totaling $209 million for Valenite. Machine tool orders declined by $61 million, or 17%. This decline was caused principally by (i) a large order (over $25 million) received in the third quarter of 1992 and not repeated in 1993, (ii) reduced demand from customers in the aerospace industry resulting in a sales decline of about $18 million and (iii) the discontinuation of certain less profitable product lines resulting in a sales decline of about $12 million. Export orders approximated $100 million in 1993 and 1992; in 1993, export orders for industrial products increased due to the Valenite acquisition while export orders for plastics machinery and machine tools declined. At January 1, 1994, the backlog of unfilled orders was $246 million, down from $250 million a year ago, reflecting reduced orders for aerospace equipment which was partially offset by the acquisitions of Valenite and Ferromatik and the increased backlog of orders for other plastics machinery products. Margins, Costs and Expenses Manufacturing margins increased from 22.4% in 1992 to 23.1% in 1993. Margins for plastics machinery continued to be held back due to competitive pricing pressures in the U.S. and Europe. Margins for machine 22 tools declined primarily due to the severe reduction in shipments of advanced machine tools to aerospace customers that resulted in significant excess capacity costs late in 1993. Margins for industrial products, excluding Valenite, declined in 1993 due in part to reduced volume of European cutting fluids. The Valenite acquisition contributed 1.8 percentage points to the overall increase in manufacturing margins in 1993. Selling and administrative expense for 1993 increased over 1992 due to higher sales. Excluding the effects of the Valenite acquisition, selling expense remained constant at approximately 14% of sales. Administrative expense increased primarily due to the Valenite acquisition. Other costs and expenses--net included a $2.5 million gain on the sale of land in Austria. Interest expense, net of interest income, for 1993 decreased by $2.8 million compared with 1992. This reduction resulted primarily from the redemption of $60 million of the Company's 12% Sinking Fund Debentures due 2010. Disposition of Subsidiary The Company's Sano subsidiary incurred an operating loss of approximately $26.3 million in 1993, which included charges totaling $22.8 million for the disposition of the subsidiary. The decision to sell Sano was due in part to continuing operating losses. In addition, the Sano business did not serve a major global market with good long-term growth and profit potential and, as a result, did not meet the Company's criteria for a core business. The business was sold in February 1994. Income Taxes and Extraordinary Tax Benefit The provision for income taxes in 1993 consists of domestic state and local taxes and certain foreign taxes. Current tax benefits were not offset against the domestic loss that was caused by the charges described above, in accordance with new income tax accounting rules adopted in 1993. In addition, current tax benefits could not be recognized for losses in certain foreign jurisdictions. The provision for income taxes in 1992 of approximately 40% includes the Federal statutory rate as well as the effect of state and local and foreign income taxes. The extraordinary tax benefit in 1992 resulted from the utilization of a portion of the Company's net operating loss carryforward. Earnings For 1993, before extraordinary items and cumulative effect of changes in methods of accounting, the Company reported a loss of $45.4 million, or $1.41 per share, compared with a profit of $16.1 million, or $.58 per share, for 1992. The reduction in earnings from 1992 to 1993 was caused by the charges described above that totaled $69.9 million. The net loss for 1993 includes the effect of an extraordinary charge of $4.4 million, or $.14 per share, related to the early extinguishment of $60 million of the Company's 12% Sinking Fund Debentures due 2010. The net loss for 1993 also includes the effect of adopting two new accounting standards resulting in charges to earnings totaling $52.1 million, or $1.61 per share. The first new standard, SFAS 109, significantly changes existing methods of accounting for income taxes and resulted in a charge of $4.2 million, or $.13 per share. The second standard, SFAS 106, requires that certain postretirement benefits, such as health care, be accounted for on the accrual method. The adoption of this standard resulted in a charge of $47.9 million, or $1.48 per share, to record the accrued liability for retiree health care benefits. Because of limitations on the recognition of deferred tax assets under SFAS 109, no income tax benefit could be recorded in connection with the adoption of SFAS 106. Except for the cumulative effect, the new rules regarding postretirement 23 medical benefits did not significantly affect the Company's earnings for 1993, while the new rules regarding income taxes precluded the recognition of tax benefits with respect to domestic and certain foreign operating losses. As discussed above, the Company recorded an extraordinary tax benefit from the utilization of loss carryforwards of $5.4 million, or $.19 per share, for 1992. After the charges described above, extraordinary items and cumulative effect of changes in methods of accounting, the Company had a net loss of $101.9 million, or $3.16 per share, for 1993, compared with net earnings of $21.5 million, or $.77 per share, for 1992. The reduction in net earnings from 1992 to 1993 was caused by the aforementioned charges, the extraordinary item and the cumulative effect of changes in methods of accounting that totaled $126.4 million. LIQUIDITY AND SOURCES OF CAPITAL At December 31, 1994, the Company had cash and cash equivalents of $22 million, an increase of $3 million during the year. At June 17, 1995, the Company had cash and cash equivalents of $44 million, an increase of $22 million during the two quarters then ended. Operating activities provided $8 million of cash in 1994 after deducting incremental cash costs of the consolidation of $14 million, and $28 million of cash in the first two quarters of 1995 after including the net proceeds from additional sales of accounts receivable of $10 million. Operating activities provided $22 million in 1993 and $1 million in the first two quarters of 1994. Total debt was $326 million at June 17, 1995, an increase of $99 million over December 31, 1994, caused primarily by the Widia acquisition which was financed principally with German marks available under the Revolving Credit Facility. The ratio of total debt to total capital (debt plus equity) was 63% at June 17, 1995, and 59% at year end 1994. Working capital increased by $148 million in the first two quarters of 1995 (including $57 million related to the acquisition of Widia), and the current ratio improved to 1.8. Expenditures for new property, plant and equipment in 1994 were $43 million, including approximately $8 million for the implementation of advanced manufacturing technologies at Ferromatik and plant modernization at Valenite, compared to $23 million in 1993. Expenditures for new property, plant and equipment in the first two quarters of 1995 were $20 million, compared to $12 million in the first two quarters of 1994. Proceeds from the disposal of property, plant and equipment for 1994 were $4 million compared to $22 million in 1993. Proceeds during 1993 included amounts related to the sale of surplus assets and the sale and operating leaseback of certain manufacturing equipment. The Company's 1995 capital spending budget is $52 million. In addition, factory equipment valued at approximately $10 million will be financed through operating leases. In 1994, the Company completed an offering involving the issuance of $115 million of the Company's 8 3/8% Notes due 2004. The proceeds were used to redeem at par the Company's outstanding 8 3/8% Senior Notes due 1997 and to repay short-term debt. The Company had a number of short-term intercompany loans and advances denominated in various currencies totaling approximately $40 million and $46 million at December 31, 1994 and June 17, 1995, respectively, that were subject to foreign 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 intercompany loans and advances and the purchase and sale of goods under firm commitments by entering into foreign exchange contracts to minimize the effect of foreign currency exchange rate fluctuations related to significant transactions. At June 17, 1995, the Company had lines of credit with various U.S. and non- U.S. banks of approximately $346 million, including the $150 million committed Revolving Credit Facility. These credit facilities support letters of credit and leases in addition to providing borrowings under varying terms. The 24 Revolving Credit Facility imposes restrictions on total indebtedness in relation to total capital. Under the provisions of the Revolving Credit Facility, the Company's additional borrowing capacity totaled approximately $45 million at June 17, 1995. The Company entered into an agreement dated as of May 31, 1995, with the lenders under the Revolving Credit Facility to extend the term of the Revolving Credit Facility from July 20, 1996 to June 1, 1998. In connection with such extension, beginning in January 1996, certain required financial ratio levels imposed on the Company gradually will become more stringent. The Company believes that it will be able to continue throughout the extended term of the Revolving Credit Facility to comply with the covenants of the Revolving Credit Facility, including all required ratio levels. In addition, at the Company's request, the amount of credit available under the Revolving Credit Facility was reduced from $200 million to $150 million in order to reduce commitment fees payable by the Company thereunder. On January 27, 1995, the Company sold its American Mine Tool business for $15 million, resulting in a pretax gain of $5 million ($4 million after tax). On February 1, 1995, the Company completed the acquisition of Widia for approximately $80 million in cash, financed principally with German marks available under the Revolving Credit Facility. Widia, with 1994 sales of approximately $225 million, is one of the world's leading producers of industrial metalcutting products. In May 1995, the Company adopted a plan with a total cost of $17.1 million ($13.1 million in cash) to integrate certain operations of Valenite and Widia in order to improve future profitability. As a result, a $9.8 million pretax integration charge ($7.8 million after tax) was recorded in the second quarter of 1995 for that portion of the plan directly related to Valenite. The remaining $7.3 million that relates to Widia has been recorded as a purchase accounting adjustment. On May 17, 1995, the Company completed the offering of $100,000,000 aggregate principal amount of the Old Notes. On July 20, 1995, the Company consummated the acquisition of Talbot. With annual sales of approximately $40 million, Talbot is a major supplier of round high-speed steel and carbide metalcutting tools. The total consideration for the acquisition, including assumed debt of approximately $5 million, was approximately $38 million. The transaction will be accounted for under the purchase method and was financed through available cash and existing credit lines. The Company believes that its cash flow from operations and available credit lines will be sufficient to meet its debt service, capital expenditure and other operating requirements, including those associated with the acquisitions of Widia and Talbot. 25 THE EXCHANGE OFFER TERMS OF THE EXCHANGE OFFER General In connection with the sale of the Old Notes pursuant to a Purchase Agreement dated as of May 10, 1995, between the Company and CS First Boston Corporation, as representative of the Initial Purchasers, the Initial Purchasers and their assignees became entitled to the benefits of the Registration Rights Agreement. Under the Registration Rights Agreement, the Company is obligated to (i) file the Registration Statement of which this Prospectus is a part for a registered exchange offer with respect to an issue of new notes identical in all material respects to the Old Notes within 30 days after May 17, 1995, the date the Old Notes were issued (the "Issue Date"), and (ii) use its best efforts to cause the Registration Statement to become effective within 120 days after the Issue Date. The Exchange Offer being made hereby if commenced and consummated within such applicable time periods will satisfy those requirements under the Registration Rights Agreement. See "Description of the New Notes--Exchange Offer; Registration Rights". Upon the terms and subject to the conditions set forth in this Prospectus and in the Letter of Transmittal (which together constitute the Exchange Offer), the Company will accept for exchange all Old Notes properly tendered and not withdrawn prior to 5:00 p.m., New York City time, on the Expiration Date. The Company will issue New Notes in exchange for an equal principal amount of outstanding Old Notes accepted in the Exchange Offer. As of the date of this Prospectus, $100,000,000 aggregate principal amount of Old Notes was outstanding. This Prospectus, together with the Letter of Transmittal, is being sent to all registered holders as of July 24, 1995. The Company's obligation to accept Old Notes for exchange pursuant to the Exchange Offer is subject to certain conditions as set forth herein under "-- Conditions". The Company shall be deemed to have accepted validly tendered Old Notes when, as and if the Company has given oral or written notice thereof to the Exchange Agent. The Exchange Agent will act as agent for the tendering holders of Old Notes for the purposes of receiving the New Notes from the Company and delivering New Notes to such holders. In the event the Exchange Offer is consummated, subject to certain limited exceptions, the Company will not be required to register the Old Notes. In such event, holders of Old Notes seeking liquidity in their investment would have to rely on exemptions to registration requirements under the United States securities laws. See "Risk Factors--Consequences of Failure to Exchange". Expiration Date; Extensions; Amendments The term "Expiration Date" shall mean August 22, 1995, unless the Company, in its sole discretion, extends the Exchange Offer, in which case the term "Expiration Date" shall mean the latest date to which the Exchange Offer is extended. In order to extend the Expiration Date, the Company will notify the Exchange Agent of any extension by oral or written notice and will mail to the record holders of Old Notes an announcement thereof, each prior to 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date. Such announcement may state that the Company is extending the Exchange Offer for a specified period of time. The Company reserves the right (i) to delay accepting any Old Notes, to extend the Exchange Offer or to terminate the Exchange Offer and not accept Old Notes not previously accepted if any of the conditions set forth herein under "--Conditions" shall have occurred and shall not have been waived by the Company, by giving oral or written notice of such delay, extension or termination to the Exchange Agent, or (ii) to amend the terms of the Exchange Offer in any manner deemed by it to be advantageous to the holders of the Old Notes. Any such delay in acceptance, extension, termination or amendment will be followed as promptly as practicable by oral or written notice thereof. If the Exchange Offer is amended in a manner determined by 26 the Company to constitute a material change, the Company will promptly disclose such amendment in a manner reasonably calculated to inform the holders of the Old Notes of such amendment and the Company will extend the Exchange Offer for a period of five to 10 business days, depending upon the significance of the amendment and the manner of disclosure to holders of the Old Notes, if the Exchange Offer would otherwise expire during such five to 10 business day period. Without limiting the manner in which the Company may choose to make public announcement of any delay, extension, amendment or termination of the Exchange Offer, the Company shall have no obligation to publish, advertise, or otherwise communicate any such public announcement, other than by making a timely release to the Dow Jones News Service. NO VOTE OF THE COMPANY'S SECURITY HOLDERS IS REQUIRED UNDER APPLICABLE LAW TO EFFECT THE EXCHANGE OFFER AND NO SUCH VOTE (OR PROXY THEREFOR) IS BEING SOUGHT HEREBY. Holders of Old Notes do not have any appraisal or dissenters' rights in connection with the Exchange Offer under the Delaware General Corporation Law, the state in which the Company is incorporated. INTEREST ON THE NEW NOTES The New Notes will bear interest at the rate of 7 7/8% per annum from the most recent date to which interest has been paid on the Old Notes or, if no interest has been paid on the Old Notes, from May 17, 1995. In addition, holders of the New Notes will receive, on the next interest payment date following the Expiration Date, a payment equal to the amount of accrued and unpaid Additional Interest, if any, on the Old Notes exchanged for such New Notes. Holders of Old Notes whose Old Notes are accepted for exchange will not receive any payment in respect of accrued and unpaid interest (including Additional Interest, if any) on such Old Notes. Interest on the New Notes is payable semi-annually on May 15 and November 15 of each year, commencing November 15, 1995. PROCEDURES FOR TENDERING To tender in the Exchange Offer, a holder must complete, sign and date the Letter of Transmittal, or a facsimile thereof, have the signatures thereon guaranteed if required by the Letter of Transmittal and mail or otherwise deliver such Letter of Transmittal or such facsimile, together with any other required documents, to the Exchange Agent prior to 5:00 p.m., New York City time, on the Expiration Date. In addition, either (i) certificates for such Old Notes must be received by the Exchange Agent along with the Letter of Transmittal, (ii) a timely confirmation of a book-entry transfer (a "Book-Entry Confirmation") of such Old Notes, if such procedure is available, into the Exchange Agent's account at The Depository Trust Company (the "Book-Entry Transfer Facility") pursuant to the procedure for book-entry transfer described below, must be received by the Exchange Agent prior to the Expiration Date or (iii) the holder must comply with the guaranteed delivery procedures described below. THE METHOD OF DELIVERY OF OLD NOTES, LETTERS OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDERS. IF SUCH DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL, PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED, BE USED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY. NO LETTERS OF TRANSMITTAL OR OLD NOTES SHOULD BE SENT TO THE COMPANY. To be tendered effectively, the Old Notes, Letter of Transmittal and all other required documents must be received by the Exchange Agent prior to 5:00 p.m., New York City time, on the Expiration Date. Delivery of all documents must be made to the Exchange Agent at its address set forth below. Holders may also request their respective brokers, dealers, commercial banks, trust companies or nominees to effect such tender for such holders. The tender by a holder of Old Notes will constitute an agreement between such holder and the Company in accordance with the terms and subject to the conditions set forth herein and in the Letter of Transmittal. Only a holder of Old Notes may tender such Old Notes in the Exchange Offer. The term "holder" with respect to the Exchange Offer means any person in whose name Old Notes are registered on the books of the Company or any other person who has obtained a properly completed bond power from the registered holder. 27 Any beneficial owner whose Old Notes are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and who wishes to tender should contact such registered holder promptly and instruct such registered holder to tender on his behalf. If such beneficial owner wishes to tender on his own behalf, such beneficial owner must, prior to completing and executing the Letter of Transmittal and delivering his Old Notes, either make appropriate arrangements to register ownership of the Old Notes in such owner's name or obtain a properly completed bond power from the registered holder. The transfer of registered ownership may take considerable time. Signatures on a Letter of Transmittal or a notice of withdrawal, as the case may be, must be guaranteed by any member firm of a registered national securities exchange or of the National Association of Securities Dealers, Inc. or a commercial bank or trust company having an office or correspondent in the United States (an "Eligible Institution") unless the Old Notes tendered pursuant thereto are tendered (i) by a registered holder who has not completed the box entitled "Special Issuance Instructions" or "Special Delivery Instructions" on the Letter of Transmittal or (ii) for the account of an Eligible Institution. In the event that signatures on a Letter of Transmittal or a notice of withdrawal, as the case may be, are required to be guaranteed, such guarantee must be by an Eligible Institution. If the Letter of Transmittal is signed by a person other than the registered holder of any Old Notes listed therein, such Old Notes must be endorsed or accompanied by bond powers and a proxy which authorizes such person to tender the Old Notes on behalf of the registered holder, in each case as the name of the registered holder or holders appears on the Old Notes. If the Letter of Transmittal or any Old Notes bond powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such person should so indicate when signing, and unless waived by the Company, evidence satisfactory to the Company of their authority to so act must be submitted with the Letter of Transmittal. All questions as to the validity, form, eligibility (including time of receipt) and withdrawal of the tendered Old Notes will be determined by the Company in its sole discretion, which determination will be final and binding. The Company reserves the absolute right to reject any and all Old Notes not properly tendered or any Old Notes which, if accepted by the Company, would, in the opinion of counsel for the Company, be unlawful. The Company also reserves the right to waive any irregularities or conditions of tender as to particular Old Notes. The Company's interpretation of the terms and conditions of the Exchange Offer (including the instructions in the Letter of Transmittal) will be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of Old Notes must be cured within such time as the Company shall determine. None of the Company, the Exchange Agent or any other person shall be under any duty to give notification of defects or irregularities with respect to tenders of Old Notes, nor shall any of them incur any liability for failure to give such notification. Tenders of Old Notes will not be deemed to have been made until such irregularities have been cured or waived. Any Old Notes received by the Exchange Agent that are not properly tendered and as to which the defects or irregularities have not been cured or waived will be returned without cost to such holder by the Exchange Agent to the tendering holders of Old Notes, unless otherwise provided in the Letter of Transmittal, as soon as practicable following the Expiration Date. In addition, the Company reserves the right in its sole discretion to (i) purchase or make offers for any Old Notes that remain outstanding subsequent to the Expiration Date or, as set forth under "--Conditions", to terminate the Exchange Offer in accordance with the terms of the Registration Rights Agreement and (ii) to the extent permitted by applicable law, purchase Old Notes in the open market, in privately negotiated transactions or otherwise. The terms of any such purchases or offers could differ from the terms of the Exchange Offer. By tendering, each holder will represent to the Company that, among other things, the New Notes acquired pursuant to the Exchange Offer are being obtained in the ordinary course of such holder's business, that such holder has no arrangement or understanding with any person to participate in the distribution of 28 such New Notes and that such holder is not an "affiliate," as defined under Rule 405 of the Securities Act, of the Company or, if such holder is an affiliate of the Company, that such holder will comply with the prospectus delivery requirements of the Securities Act. Each broker or dealer that receives New Notes for its own account in exchange for Old Notes, where such Old Notes were acquired by such broker or dealer as a result of market-making activities, or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such New Notes. See "Plan of Distribution". ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES Upon satisfaction or waiver of all of the conditions to the Exchange Offer, the Company will accept, promptly after the Expiration Date, all Old Notes properly tendered and will issue the New Notes promptly after acceptance of the Old Notes. See "--Conditions" below. For purposes of the Exchange Offer, the Company shall be deemed to have accepted properly tendered Old Notes for exchange when, as and if the Company has given oral or written notice thereof to the Exchange Agent. For each Old Note accepted for exchange, the holder of such Old Note will receive a New Note having a principal amount equal to that of the surrendered Old Note. If by September 14, 1995, neither the Exchange Offer is consummated nor a shelf registration statement (the "Shelf Registration Statement") is declared effective, interest will accrue on the Old Notes from and including September 15, 1995, until but excluding the earlier of the date of the consummation of the Exchange Offer and the effective date of the Shelf Registration Statement, at a rate of 8 3/8% per annum, representing an additional 1/2% per annum over the interest rate stated on the face of the Old Notes (such additional 1/2% per annum being herein called "Additional Interest"). Holders of Old Notes accepted for exchange will not receive any payment in respect of accrued and unpaid interest (including Additional Interest, if any) on such Old Notes. However, holders of New Notes will receive, on the next interest payment date following the Expiration Date, a payment equal to the amount of accrued and unpaid Additional Interest, if any, on the Old Notes exchanged for such New Notes. In all cases, issuance of New Notes for Old Notes that are accepted for exchange pursuant to the Exchange Offer will be made only after timely receipt by the Exchange Agent of certificates for such Old Notes or a timely Book-Entry Confirmation of such Old Notes into the Exchange Agent's account at the Book- Entry Transfer Facility, a properly completed and duly executed Letter of Transmittal and all other required documents. If any tendered Old Notes are not accepted for any reason set forth in the terms and conditions of the Exchange Offer or if Old Notes are submitted for a greater principal amount than the holder desires to exchange, such unaccepted or nonexchanged Old Notes will be returned without expense to the tendering holder thereof (or, in the case of Old Notes tendered by book-entry transfer procedures described below, such nonexchanged Old Notes will be credited to an account maintained with such Book-Entry Transfer Facility) as promptly as practicable after the expiration or termination of the Exchange Offer. BOOK-ENTRY TRANSFER The Exchange Agent will make a request to establish an account with respect to the Old Notes at the Book-Entry Transfer Facility for purposes of the Exchange Offer within two business days after the date of this Prospectus. Any financial institution that is a participant in the Book-Entry Transfer Facility's systems may book-entry deliver Old Notes by causing the Book-Entry Transfer Facility to transfer such Old Notes into the Exchange Agent's account at the Book-Entry Transfer Facility in accordance with such Book-Entry Transfer Facility's procedures for transfer. However, although delivery of Old Notes may be effected through book-entry transfer at the Book-Entry Transfer Facility, the Letter of Transmittal or facsimile thereof with any required signature guarantees and any other required documents must, in any case, be transmitted to and received by the Exchange Agent at one of the addresses set forth below under "--Exchange Agent" on or prior to the Expiration Date or the guaranteed delivery procedures described below must be complied with. GUARANTEED DELIVERY PROCEDURES If a registered holder of the Old Notes desires to tender such Old Notes, and the Old Notes are not immediately available, or time will not permit such holder's Old Notes or other required documents to reach the Exchange Agent before the Expiration Date, or the procedure for book-entry transfer cannot be 29 completed on a timely basis, a tender may be effected if (i) the tender is made through an Eligible Institution, (ii) prior to the Expiration Date, the Exchange Agent received from such Eligible Institution a properly completed and duly executed Letter of Transmittal (or a facsimile thereof) and Notice of Guaranteed Delivery, substantially in the form provided by the Company (by facsimile transmission, mail or hand delivery), setting forth the name and address of the holder of Old Notes and the amount of Old Notes tendered, stating that the tender is being made thereby and guaranteeing that within five New York Stock Exchange ("NYSE") trading days after the date of execution of the Notice of Guaranteed Delivery, the certificates for all physically tendered Old Notes, in proper form for transfer, or a Book-Entry Confirmation, as the case may be, and any other documents required by the Letter of Transmittal will be deposited by the Eligible Institution with the Exchange Agent and (iii) the certificates for all physically tendered Old Notes, in proper form for transfer, or a Book-Entry Confirmation, as the case may be, and all other documents required by the Letter of Transmittal are received by the Exchange Agent within five NYSE trading days after the date of execution of the Notice of Guaranteed Delivery. WITHDRAWAL OF TENDERS Tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m, New York City time, on the Expiration Date. For a withdrawal to be effective, a written notice of withdrawal must be received by the Exchange Agent at one of the addresses set forth below under "Exchange Agent". Any such notice of withdrawal must specify the name of the person having tendered the Old Notes to be withdrawn, identify the Old Notes to be withdrawn (including the principal amount of such Old Notes) and (where certificates for Old Notes have been transmitted) specify the name in which such Old Notes are registered, if different from that of the withdrawing holder. If certificates for Old Notes have been delivered or otherwise identified to the Exchange Agent, then, prior to the release of such certificates, the withdrawing holder must also submit the serial numbers of the particular certificates to be withdrawn and a signed notice of withdrawal with signatures guaranteed by an Eligible Institution unless such holder is an Eligible Institution. If Old Notes have been tendered pursuant to the procedure for book-entry transfer described above, any notice of withdrawal must specify the name and number of the account at the Book-Entry Transfer Facility to be credited with the withdrawn Old Notes and otherwise comply with the procedures of such facility. All questions as to the validity, form and eligibility (including time of receipt) of such notices will be determined by the Company, whose determination shall be final and binding on all parties. Any Old Notes so withdrawn will be deemed not to have been validly tendered for exchange for purposes of the Exchange Offer. Any Old Notes which have been tendered for exchange but which are not exchanged for any reason will be returned to the holder thereof without cost to such holder (or, in the case of Old Notes tendered by book-entry transfer into the Exchange Agent's account at the Book- Entry Transfer Facility pursuant to the book-entry transfer procedures described above, such Old Notes will be credited to an account maintained with such Book-Entry Transfer Facility for the Old Notes) as soon as practicable after withdrawal, rejection of tender or termination of the Exchange Offer. Properly withdrawn Old Notes may be retendered by following one of the procedures described under "--Procedures for Tendering" above at any time on or prior to the Expiration Date. CONDITIONS Notwithstanding any other term of the Exchange Offer, the Company will not be required to accept for exchange, or to issue New Notes in exchange for, any Old Notes and may terminate or amend the Exchange Offer as provided herein before the acceptance of such Old Notes, if because of any change in law, or applicable interpretations thereof by the SEC, the Company determines that it is not permitted to effect the Exchange Offer, and the Company has no obligation to, and will not knowingly, accept tenders of Old Notes from affiliates of the Company (within the meaning of Rule 405 under the Securities Act) or from any other holder or holders who are not eligible to participate in the Exchange Offer under applicable law or interpretations thereof by the SEC, or if the New Notes to be received by such holder or holders of Old Notes in the Exchange Offer, upon receipt, will not be tradeable by such holder without restriction under the Securities Act and the Exchange Act and without material restrictions under the "blue sky" or securities laws of substantially all of the states. 30 EXCHANGE AGENT BankAmerica National Trust Company has been appointed as Exchange Agent for the Exchange Offer. Questions and requests for assistance and requests for additional copies of this Prospectus or of the Letter of Transmittal should be directed to the Exchange Agent addressed as follows: By Mail: By Hand/Overnight Delivery: BankAmerica National Trust Company BankAmerica National Trust Company Corporate Trust Operations Corporate Trust Operations P.O. Box 464, Bowling Green Station One World Trade Center New York, New York 10274-0464 18th Floor New York, New York 10048 Facsimile Transmission: (212) 390-3116 Confirm by Telephone: (212) 390-3039 FEES AND EXPENSES The expenses of soliciting tenders pursuant to the Exchange Offer will be borne by the Company. The principal solicitation for tenders pursuant to the Exchange Offer is being made by mail; however, additional solicitations may be made by telegraph, telephone, telecopy or in person by officers and regular employees of the Company. The Company will not make any payments to brokers, dealers or other persons soliciting acceptances of the Exchange Offer. The Company, however, will pay the Exchange Agent reasonable and customary fees for its services and will reimburse the Exchange Agent for its reasonable out-of-pocket expenses in connection therewith. The Company may also pay brokerage houses and other custodians, nominees and fiduciaries the reasonable out-of-pocket expenses incurred by them in forwarding copies of the Prospectus and related documents to the beneficial owners of the Old Notes, and in handling or forwarding tenders for exchange. The expenses to be incurred in connection with the Exchange Offer will be paid by the Company, and are estimated in the aggregate to be $150,000, including fees and expenses of the Exchange Agent and Trustee (as defined) and accounting, legal, printing and related fees and expenses. The Company will pay all transfer taxes, if any, applicable to the exchange of Old Notes pursuant to the Exchange Offer. If, however, certificates representing New Notes or Old Notes for principal amounts not tendered or accepted for exchange are to be delivered to, or are to be registered or issued in the name of, any person other than the registered holder of the Old Notes tendered, or if tendered Old Notes are registered in the name of any person other than the person signing the Letter of Transmittal, or if a transfer tax is imposed for any reason other than the exchange of Old Notes pursuant to the Exchange Offer, then the amount of any such transfer taxes (whether imposed on the registered holder or any other persons) will be payable by the tendering holder. If satisfactory evidence of payment of such taxes or exemption therefrom is not submitted with the Letter of Transmittal, the amount of such transfer taxes will be billed directly to such tendering holder. ACCOUNTING TREATMENT The New Notes will be recorded in the Company's accounting records at the same carrying value as the Old Notes as reflected in the Company's accounting records on the date of the exchange. Accordingly, no gain or loss for accounting purposes will be recognized upon the consummation of the Exchange Offer. The expenses of the Exchange Offer will be amortized by the Company over the term of the New Notes in accordance with generally accepted accounting principles. 31 BUSINESS GENERAL Cincinnati Milacron is one of the world's leading manufacturers of plastics machinery, machine tools and industrial consumable products for metalworking, as well as related computer controls and software for factory automation. Incorporated in Delaware in 1983, the Company is a successor to a business established in 1884. The Company sells products and provides services to industrial customers throughout the world. The Company has a long-standing reputation for quality and technological leadership. Virtually all of the Company's plastics machinery products and machine tools are computer-controlled and many include advanced applications software. Through strategic acquisitions, accelerated new product development and consolidation of its U.S. machine tool operations, the Company has made significant progress since the beginning of 1993 toward achieving a better balance between its businesses in terms of product, customer and geographic mix. The Company currently expects 1995 sales to approach $1.6 billion, approximately 40% of which is expected to come from the Company's industrial products segment, making this the Company's largest business segment. The plastics machinery segment is expected to be the Company's second largest business segment in 1995. The Company expects the growth in industrial consumable products and plastics machinery sales to make the Company less susceptible to the business cycles and historically low margins characteristic of the machine tool business. In addition, the Company expects that almost half of its sales for 1995 will come from sales outside the United States. The Company also expects that its growing foreign sales, over time, will decrease the Company's dependence upon the U.S. economy. Early in 1993, the Company acquired Valenite, expanding the Company's industrial products segment. See "--Industrial Products Business". In 1993, the Company also acquired Ferromatik, one of Europe's leading manufacturers of plastics injection molding machines, expanding the Company's plastics processing technology base and product line. See "--Plastics Machinery Business". The Company's acquisition of Widia, which was completed in February 1995, complemented Valenite's geographic balance, enhanced the Company's technological base, diversified its product line and expanded its worldwide sales and distribution network. Furthermore, by achieving a better balance and mix between capital goods and industrial products, the Company believes that it is in a better position to take advantage of opportunities in each market even while demand in a single segment may be weak. In recent years, the Company also has undertaken a major program for product development, process improvement and modernization. This program is named "Wolfpack" because of its emphasis on teamwork and fierce competitiveness. The objectives of Wolfpack are to design and produce new products at world- competitive levels of quality, performance, efficiency and cost. Wolfpack teams consist of members not only from design engineering but also from sales, marketing, manufacturing, engineering, quality control, purchasing and assembly, and often include suppliers and customers. In addition to teamwork, other key principles of the Wolfpack philosophy are: a market-driven approach, "simultaneous engineering", reduction and standardization of parts, design for manufacturability and integrated, just-in- time manufacturing. Wolfpack teams develop marketable products faster than conventional teams with improved quality, features and cost and quality performance ratios. Compared to the products they replace, Wolfpack-developed products typically have achieved a 30 to 50 percent reduction in each of the following areas: product development cycles, number of total parts, manufacturing lead time, 32 installation time and overall cost. This approach is designed to minimize inventory obsolescence while providing an opportunity for increased revenue as the new products achieve market acceptance. In 1985, the Company began applying Wolfpack principles to the development of its Vista line of plastics injection molding machines, and the line has since become the market leader in the United States. Today, most of the Company's plastics processing machinery lines have been developed through the Wolfpack approach, and about 90% of the Company's machine tool sales consist of Wolfpack designs. The Company also conducts an ongoing research and product development effort for all product lines, designed to create new products to maintain or enhance its competitive market positions. During the last three years, the Company has maintained its expenditures for research and development at an average of approximately 4% of sales. In 1994, the Company continued Total Quality Leadership ("TQL"), a Company- wide commitment to promote higher levels of teamwork, innovation and employee empowerment. TQL is a people-oriented philosophy that seeks commitment from all employees, representatives and suppliers to focus on total customer satisfaction. TQL is a long-term strategy intended to promote continuous process and quality improvement. The Company continually explores acquisition, divestiture and consolidation opportunities when it believes such actions could expand markets, enhance product synergies or improve earnings potential for the long-term. In addition to the Valenite, Ferromatik and Widia acquisitions, in the past four years the Company has sold certain businesses and consolidated certain manufacturing operations. In 1994, the Company completed a major consolidation of its U.S. machine tool operations, closing two plants in South Carolina and moving all of its U.S. production to its main machine tool facilities in Cincinnati. For purposes of financial reporting, the Company divides its business into three segments: plastics machinery, machine tools and industrial products. PLASTICS MACHINERY BUSINESS The Company believes it is the largest U.S. producer of plastics machinery. In 1994, the Company's plastics machinery segment sales were $504 million. The Company believes it offers more varieties of machinery to process plastic than any other U.S. company and that its electronic controls and software enhancements are key selling features. The Company produces equipment for three major plastics processing technologies, including a full range of injection molding machines and systems for extrusion and blow molding. The Company also sells a line of imported electric injection molding machines and a number of types of auxiliary equipment, all of which are manufactured by others to the Company's specifications. The Company designs and builds its own electronic controls and develops the necessary software for virtually all of its plastics machinery lines. The Company believes that its advanced controls and software for plastics manufacturing equipment are key selling features that have helped increase its market share. Plastics Machinery Industry The market for plastics machinery has grown steadily over the past four decades, as plastics have continued to replace traditional materials such as metal, wood, glass and paper in an increasing number of manufactured products, particularly in the transportation, construction, packaging and medical industries. Advancements in both the development of materials, which make plastic products more functional, and the capabilities of plastics processing equipment have been major contributors to the steady growth in the plastics machinery market. In addition, consumer demand for safer, more convenient and recyclable products has 33 increased the general demand for plastic products. Like other capital goods markets, the plastics machinery market is subject to economic cycles, but to a lesser degree than the machine tool market. In particular, the market for injection molding machines is driven by the consumer economy and the automotive industry. Beginning in 1989, the plastics machinery industry began to experience a slowdown in orders from these sectors and the slowdown continued through 1991 and into the first half of 1992. Plastics machinery orders have been strong and rising since the second half of 1992. Custom molders, which produce a wide variety of components for many industries, are the single largest group of plastics machinery buyers. Other customer categories include the automotive industry, the packaging industry, the construction industry, manufacturers of housewares and appliances and producers of medical supplies. Among the factors that affect the plastics machinery market are the health of the consumer economy, residential and commercial construction and automotive production. Because of intense competition from international plastics machinery producers, currency exchange rates also have a significant impact. Fluctuations in oil and natural gas supplies and prices may affect the businesses of the customers for plastics machinery and, in turn, the market for this equipment. Environmental concerns about plastics may have the potential to slow the growth of the plastics machinery market. However, some plastics raw materials suppliers, machinery makers and processors are developing biodegradable products and methods of recycling to address environmental issues. The Company believes that environmental concerns have not had any discernible negative effect on the market to date. Nevertheless, the Company, through its membership in The Society of Plastics Industry (an industry trade association), is participating in a joint initiative with "The Partnership for Plastics Progress", which has brought together leading companies within the plastics industry to address the role of plastics in the environment. The Company's Plastics Machinery Business The Company's plastics machinery segment consists of three major businesses: injection molding machines, extrusion systems and blow molding systems. In 1994, sales of injection molding machines constituted over two-thirds of the sales of the Company's plastics machinery segment. Injection Molding. The Company believes it is the largest U.S. producer of injection molding machines. Injection molding is the most common and versatile method of processing plastic, and it is used to make a wide variety of parts and products ranging from housewares and consumer goods to medical supplies and industrial components. The Company manufactures many types of injection molding machines, all of which were developed using Wolfpack principles. Product standardization (which facilitates part commonality) and the modernization of the Company's manufacturing facilities and methods, as well as increased volumes, have enabled the Company to achieve significant economies of scale for the production of injection molding machines. The Company believes these factors have enabled it to become the lowest cost U.S. producer of these machines. Additionally, the Company believes its success in injection molding machines has been due in large part to the development and marketing of its Vista line, which the Company has expanded. Sales of injection molding machines have been at record levels for each of the last three years, in part due to the acquisition of Ferromatik. On November 8, 1993, the Company acquired Ferromatik, one of Europe's leading producers of injection molding machines. Ferromatik is recognized for its high- end technology including multi-color machines, multi-component systems and other specialty applications. The acquisition included the Ferromatik lines of hydraulic and electric injection molding machines and a modern manufacturing facility in Malterdingen, Germany, as well as Ferromatik's worldwide marketing, sales and service network. The Ferromatik acquisition expanded the Company's plastics processing technology base and product line and enabled the Company to achieve its objective of establishing a plastics machinery manufacturing and distribution base in Germany to serve Europe and other markets. The Company believes Ferromatik provides a complementary fit with its previously existing injection molding machine business. 34 The Company has substantially completed a restructuring of Ferromatik intended to (1) derive benefits of synergies between Ferromatik and other Company operations and (2) improve Ferromatik operations through implementation of manufacturing techniques and methods currently being used in the Company's U.S. plastics machinery operations. The Company believes that this restructuring has helped and will continue to help it to achieve its cost reduction goals in both marketing and manufacturing. The Company conducts its plastics machinery European marketing activities through Ferromatik's existing network and thus has eliminated expenses previously incurred by the Company's European marketing operation in Offenbach, Germany. The Company sells several of its successful plastics machinery lines to European customers through Ferromatik's sales and distribution network. Extrusion Systems. Extrusion systems business consists of individual machines and systems comprised of multiple units which are tooled to make a specific product in quantity. Such systems take longer to manufacture than do injection molding machines. Extrusion systems include twin-screw extruders and single- screw extruders. The Company believes it has a strong competitive position in each of these lines. Twin-screw extruders are used to produce continuous-flow products such as pipe, residential siding, sheet lines and window frames, hence the business is closely tied to housing market cycles. Single-screw extruders are used in a variety of applications and systems such as blow molding, blown- film and cast-film systems, pipe and profiles and wire and cable applications. Blow Molding Systems. The Company's blow molding systems business consists of extrusion blow molding systems, which are used to make a wide variety of products ranging from bottles, jars, vials and other containers, to industrial parts and toys. Specialty Equipment. The Company sells a variety of specialty equipment used in the processing of plastics products, including peripheral auxiliary equipment such as material management systems, heat exchangers and product handling systems, all of which are manufactured by third parties to the Company's specifications. The Company also rebuilds and retrofits many types of plastics processing equipment sold by the Company or others, refitting them with new Company-produced controls and software. Production Facilities For the plastics machinery segment, the Company maintains the following production facilities:
FACILITY PRODUCTS - -------- -------- Batavia, Ohio Injection and blow molding machines. Cincinnati, Ohio Extrusion systems. Malterdingen, Germany Injection molding machines. Mt. Orab, Ohio Plastics machinery parts. Vienna, Austria Extrusion systems.
Sales, Marketing and Customer Service The Company maintains a large direct sales force in the United States for its plastics machinery segment, which it supplements with independent agents. Internationally, the Company uses both a direct sales force and independent agents. In the U.S., the plastics machinery business uses the Company's Cincinnati, Ohio, headquarters, as well as regional offices in Allentown, Pennsylvania; Charlotte, North Carolina; Chicago, Illinois; Detroit, Michigan; and Los Angeles, California to market its products and provide customer support and training. Through its Austrian and Ferromatik subsidiaries, the Company has an extensive sales, marketing, service and distribution system throughout Europe. 35 Competition The markets for plastics machinery in the United States and worldwide are highly competitive and are made up of a number of U.S., European and Asian competitors. The Company believes it has a significant share of the U.S. market for the type of products it produces. The Company's competitors vary in size and resources; some are larger than the Company, many are smaller, and only a few compete in more than one product category. Principal competitive factors in the plastics machinery industry are: product features, technology, quality, performance, reliability, speed of delivery, price and customer service. The Wolfpack program is designed to enhance the Company's competitive position with respect to each of these competitive factors. MACHINE TOOL BUSINESS The Company is a leading U.S. producer of machine tools. A machine tool is a power-driven machine, not hand-held, that is used to cut, form or shape metal. Machine tools are typically installed as capital equipment in metalworking industries. In 1994, the Company's machine tool segment sales were $339 million. Machine Tool Industry The primary customers for machine tools are the automotive industry; machine shops; producers of farm, construction, off-road and power generation equipment; manufacturers of bearings; the aerospace industry; the die and mold industry; and a variety of other metalworking manufacturers. The machine tool industry has historically been cyclical with relatively long lead times between orders and shipments. Machine tool sales are affected by capital spending levels, interest rates, tax and depreciation policies, international competition, currency exchange rates and general economic conditions. The Company's Machine Tool Business The Company's machine tool segment is comprised of three focused businesses: standard machine tools, applied machine tool systems and electronic systems. The Company's standard machine tool business manufactures horizontal machining centers, vertical machining centers and turning centers for a variety of industries engaged in basic metalworking operations, including machine shops. The products of the Company's applied machine tool systems business include large, multi-axis metalcutting and composites processing systems for the aerospace industry; large, multi-axis machines for manufacturers of farm, construction, off-road and power generation equipment and for the die and mold industry; applied production turning centers and centerless grinding machines for the automotive industry and for bearings manufacturers; and automated flexible manufacturing cells for the metalworking industry. The Company's electronic systems business designs and manufactures computer controls and develops proprietary software for the Company's machine tools, plastics machinery and automated flexible manufacturing cells. Standard Machine Tool Products Horizontal and Vertical Machining Centers. The Company designs, builds and sells general-purpose computer numerically controlled ("CNC") horizontal and vertical machining centers for basic metalworking operations to a number of industries. These machines produce prismatic or box-like parts and are capable of performing a variety of operations such as milling, drilling, boring, tapping, reaming and routing. Turning Centers. Standard turning centers are designed for ease of use by a broad variety of customers that do not require custom-designed features. Applied Machine Tools Metalcutting and Composites Processing Systems for Aerospace. The Company believes it is one of the world's leading producers of large five-axis machining centers and profilers used to machine intricately 36 contoured surfaces, often out of aluminum and high-strength alloys such as titanium, for the aerospace industry. The Company is also a world leader in the development of new machines and systems to automate the manufacture of components made of advanced composite materials, such as carbon or graphite fibers in combination with epoxy. These systems are used by the aerospace industry to manufacture jet engine parts and structural components, primarily for commercial aircraft. Large Machine Tools. The Company makes large, often highly customized, metalcutting machines and systems for the manufacturers of heavy machinery such as farm and construction implements and machinery, off-road vehicles and power generation equipment. Applied Production Turning Centers and Centerless Grinding Machines. The Company also specializes in manufacturing applied production turning centers and centerless grinding machines designed to meet exacting specifications for the automotive industry. Turning centers, also called CNC lathes, shape cylindrical parts, which are rotated at high speed against a stationary tool. The Company's applied production turning centers are used by the automotive industry in a number of applications. Grinding machines are used to bring a part surface to a more precise dimension or finish. There are many different kinds of grinding processes. In 1991, the Company announced its intention to focus on centerless grinding machines, which grind external diameters of cylindrical parts primarily for the automotive industry and for bearings manufacturers. The Company has a long-standing leadership position in the domestic centerless grinding machine business. In 1994, this business experienced very high levels of new orders from the automotive industry. Automated Flexible Manufacturing Cells. Automated flexible manufacturing cells consist of one or more processing machines (usually standard machine tools), ancillary equipment for parts and tools handling and computer hardware and software to automate and integrate all necessary functions, allowing for lightly-manned or unattended operation. These systems are used widely throughout the metalworking industry and generally feature a number of computer-driven functions, such as work and tool scheduling and quality control. Automated flexible manufacturing cells are a major focus of a number of U.S. companies seeking to update plant and equipment to enhance their productivity and international competitiveness. The Company believes that its Wolfpack-developed cell control hardware and software have enabled it to obtain a leadership position in the U.S. automated flexible manufacturing cells market. Electronic Systems The Company designs and manufactures computer controls and develops proprietary software for its machine tools and plastics machinery. Computer controls and software are often important selling features for individual machines, and the controls and software enable machines to be linked together to form automated cells and manufacturing systems. Most of the controls for the Company's machine tools and plastics machinery are manufactured by the Company, providing significant product differentiation from competing products. The Company's electronic systems business also offers a variety of retrofitting services to automate or upgrade existing machine tools, including those manufactured by other companies. During 1994, the Company introduced two major new families of computer controls, the new CAMAC for plastics machinery and the Acramatic 2100 for machine tools. Both controls are PC-based and feature an open architecture platform. Production Facilities For the machine tool segment, the Company maintains the following principal production facilities:
FACILITY PRODUCTS - -------- -------- Birmingham, England Standard vertical machining centers. Cincinnati, Ohio Standard machine tool products and applied machine tool systems. Electronic controls and industrial South Lebanon, Ohio software.
37 Sales, Marketing and Customer Service The Company markets machine tools in North America through a comprehensive network of independent distributors assisted by the Company's direct sales force. The expanded use of distributors is a significant aspect of the Company's strategy aimed at placing more sales representatives in the field to reach additional markets. Through these distributors, the Company currently has approximately 275 salespeople representing its machine tools in North America, which is approximately three times more salespeople than it had four years ago. The Company continues to emphasize distribution in Europe by upgrading its distributor network. A strong distribution network is one of the cornerstones in the Company's plan to improve its position in the global market for standard machine tools. The Company believes that applications work, field service engineering and customer support are important for all its products, especially for grinding machines, aerospace and special machines and automated flexible manufacturing cells. In addition to its marketing and service headquarters in Cincinnati, the Company maintains regional offices in Allentown, Pennsylvania; Chicago, Illinois; Detroit, Michigan; and Toronto, Ontario; as well as in Birmingham, England; and Offenbach, Germany. Competition The worldwide machine tool industry is made up of a number of competitors, none of which has a dominant market share despite the considerable consolidation that has occurred in the industry over the past decade. The markets for the Company's machine tool segment products are highly competitive in the United States and internationally, with strong competition from U.S., European and Asian companies in all markets. The Company's competitors vary in size and resources; some are larger than the Company, many are smaller, and only a few compete in more than one product category. Principal competitive factors for products in the machine tool business are product features (including controls and software), quality, performance, reliability, technology, speed of delivery, price and customer service. The Wolfpack program is designed to enhance the Company's competitive position with respect to each of these competitive factors. In certain aerospace and grinding machine lines, the Company has significant market positions and relatively few competitors. However, in the case of standard machine tool products and automated flexible manufacturing cells, there are many competitors and no one company has market dominance. INDUSTRIAL PRODUCTS BUSINESS The Company's Industrial Products Business The Company is a leading producer of three basic types of industrial products: metalcutting tools, metalworking fluids and precision grinding wheels. In 1994, sales of the Company's industrial products segment were $355 million. Most of the Company's industrial products are consumable, which means they are depleted during the process for which they are used, offering the Company a continuous opportunity to sell replacement products to its customers. The Company believes that its industrial products business complements its plastics machinery and machine tool businesses, as the industrial products business requires relatively small investment in equipment and working capital and is exposed to less pronounced business cycles. Metalcutting Tools Metalcutting tools are used in a wide variety of metalcutting operations. The Company believes that, through its subsidiaries, Valenite and Widia, it is the second largest producer of carbide metalcutting tool systems in the U.S. and the third largest worldwide. Valenite manufactures over 33,000 products, including an extensive line of cutting tool inserts in a wide variety of materials and geometries for turning, boring, milling and drilling, and standard and special steel insert holders. Valenite has strong market positions in 38 carbide die and wear products for metalforming and in products requiring the wear and corrosion resistant properties of tungsten carbide. In February 1995, the Company completed the acquisition of Widia, a major European cutting tool maker with key production facilities in Germany and other Western European countries. Widia also owns a 51% interest in Widia (India) Ltd., an Indian public company. Widia's product lines include tungsten carbide cutting tool inserts and steel insert holders needed for metalcutting operations, carbide die and wear products used in forming and stamping metal, and both soft and permanent industrial magnets, used in automotive and other applications. Metalworking Fluids Metalworking fluids are used as lubricants and coolants in a wide variety of metalcutting and metalforming operations. Major customers are producers of precision metal components for many industries, including manufacturers of automotive power trains, aerospace engines and bearings as well as general metalworking shops. The Company is a full-line supplier, offering water-based fluids (synthetics), water-based oil-bearing fluids (semi-synthetics) and oil- based fluids. Over the last four years, the Company expanded its lines of soluble oils, base oils and synthetic fluids. In 1993, the Company developed a brand of fluid called Valcool designed specifically to work with Valenite metalcutting tools that is being marketed through Valenite's distribution channels. Grinding Wheels Grinding wheels are used by manufacturers in the metalworking industry. Major customers are producers of precision metal components for many industries, including manufacturers of automotive power trains, aerospace engines and bearings as well as general metalworking machine shops. The Company designs and manufactures a wide variety of precision abrasive grinding wheels, including resin-bonded, vitrified, cubic boron nitride (CBN), diamond and synthetic ceramic abrasive types. The Company believes, based on tests in its own laboratories and in customer plants, that the Company's proprietary formulae and modern production equipment and techniques for the manufacture of precision grinding wheels give it advantages in terms of product quality, lower production costs and faster deliveries. The Company achieves lower production costs, in part, by finishing its wheels on computer numerically controlled machines designed and built by the Company's machine tool business. 39 Production Facilities For its industrial products segment, the Company maintains the following principal production facilities:
FACILITY PRODUCTS - -------- -------- Andrezieux, France Carbide inserts. Bangalore, India* Carbide inserts, steel insert holders, carbide die and wear products and special machine tools. Carlisle, Pennsylvania Precision grinding wheels. Cincinnati, Ohio Metalworking fluids and precision grinding wheels. Detroit, Michigan (metro area) Carbide inserts, special steel products and gauging systems, ceramic inserts and cermet inserts. Dreux, France* Carbide inserts. Essen, Germany* Carbide inserts, magnets and carbide rods. Gainesville, Texas Turning tools, milling cutters and boring bars. Hardenberg, The Netherlands* Carbide die and wear products. Lichtenau, Germany* Steel insert holders. Nogales, Mexico Precision grinding wheels. Patancheru, India* Rock tools. Sinsheim, Germany Special steel tooling products. Tokyo, Japan Carbide inserts and steel tools. Vitoria, Spain* Special braised tools. Vlaardingen, The Netherlands Metalworking fluids. West Branch, Michigan Power production, die and wear. Westminster and Seneca, South Car- Carbide and diamond inserts. olina
- -------- * Widia facilities acquired February 1, 1995. Sales, Marketing and Customer Service The Company sells its fluids and wheels primarily through a growing network of independent industrial distributors, as well as through a direct sales force. The Company's metalworking fluids and grinding wheels businesses offer customer service, training, and applications engineering at most of the Company's regional offices in the U.S. and Europe. See "Machine Tool Business-- Sales, Marketing and Customer Service" for a description of the regional offices. Valenite maintains its own worldwide, direct sales and service force of some 350 technically trained engineers, of whom 200 are located in the United States. The direct sales and service force is complemented by selected independent industrial distributors. Widia maintains a market channel in Europe and India similar to that of Valenite in the U.S. Competition The Company's main global competitors in its metalworking fluids business are large petrochemical companies and smaller companies specializing in similar fluids. There are a small number of large competitors in the U.S. grinding wheel market, one of which is significantly larger than the Company. The Company has limited sales of grinding wheels outside the U.S. The Company believes that, through its subsidiaries, Valenite and Widia, it is the second largest producer of metalcutting tool systems in the U.S. and the third largest worldwide. The Company also believes that Widia is the second largest tooling company in Europe and that Widia (India) Ltd. is the largest carbide insert producer in India. 40 DESCRIPTION OF THE NEW NOTES The Old Notes were issued and the New Notes are to be issued under an Indenture dated as of July 1, 1985, between the Company and BankAmerica National Trust Company (formerly BankAmerica Trust Company of New York), as Trustee (the "Trustee"), as supplemented and amended from time to time (the "Indenture"). Upon the issuance of the New Notes, or the effectiveness of a registration statement with respect to the Old Notes, the Indenture governing the Notes will be subject to and governed by the Trust Indenture Act of 1939, as amended. The following summaries of certain provisions of the Indenture do not purport to be complete and are subject to, and are qualified in their entirety by reference to, all of the provisions of the Indenture, including the definitions therein of certain terms, a copy of which is filed (or incorporated by reference) as an exhibit to the Registration Statement of which this Prospectus is a part. Whenever particular provisions of or terms defined in the Indenture are referred to, such provisions and defined terms are incorporated by reference as part of the statement made. GENERAL The New Notes will be issued solely in exchange for an equal principal amount of outstanding Old Notes pursuant to the Exchange Offer. The terms of the New Notes will be substantially identical to the Old Notes, except that the New Notes have been registered under the Securities Act and therefore will not bear legends restricting their transfer. ALL REFERENCES HEREIN TO THE NOTES SHALL BE DEEMED TO BE REFERENCES TO THE OLD NOTES AND/OR THE NEW NOTES, WHICHEVER ARE OUTSTANDING. The Notes, which mature on May 15, 2000, will be limited to $100,000,000 in aggregate principal amount and will constitute a separate series for purposes of the Indenture. The Notes are not redeemable prior to maturity and will not be subject to redemption pursuant to a sinking fund or otherwise. The Notes will bear interest from the most recent date to which interest has been paid or, if no interest has been paid on the Old Notes, from May 17, 1995, at the rate per annum set forth on the cover page hereof, payable semiannually on May 15 and November 15 of each year to the holders of record at the close of business on the next preceding May 1 or November 1, respectively. Interest will be computed on the basis of a 360-day year of twelve 30-day months. If by September 14, 1995, neither the Exchange Offer is consummated nor the Shelf Registration Statement is declared effective, interest will accrue on the Old Notes from and including September 15, 1995, until but excluding the earlier of the date of the consummation of the Exchange Offer and the effective date of the Shelf Registration Statement, at a rate of 8 3/8% per annum, representing Additional Interest of 1/2% per annum. Holders of New Notes will receive, on the next interest payment date following the Expiration Date, a payment equal to the amount of accrued and unpaid Additional Interest, if any, on the Old Notes exchanged for such New Notes. Holders of Old Notes whose Old Notes are accepted for exchange will not receive any payment in respect of accrued and unpaid interest (including Additional Interest, if any) on such Old Notes. The Indenture provides for the issuance from time to time of additional series of indebtedness without limit. ((S)(S) 2.01 and 4.03 of the Indenture) In addition to the Old Notes, as of the date of this Prospectus, $10.8 million of 12% Sinking Fund Debentures due 2010 and $115.0 million of 8 3/8% Notes due 2004 are outstanding under the Indenture. The aggregate of the securities outstanding under the Indenture at any time is herein referred to as the "Outstanding Debt Securities". There are no covenants or provisions contained in the Indenture that may afford the holders of the Notes protection in the event of a highly leveraged transaction involving the Company. RANKING The New Notes will be unsecured obligations of the Company and will rank pari passu with other existing unsecured debt of the Company. At March 25, 1995, after giving effect to the sale of the Old Notes 41 and the application of the proceeds thereof, the Company would have had outstanding approximately $299.4 million of senior indebtedness, including the Old Notes, and the Company would not have had any subordinated indebtedness outstanding. Except for approximately $3.9 million of indebtedness related to Industrial Development Revenue Bonds and $9.4 million of indebtedness assumed in connection with the acquisitions of Ferromatik and Widia, the Company had no debt secured by properties or equipment at March 25, 1995. BOOK-ENTRY, DELIVERY AND FORM Except as set forth in the next paragraph, the New Notes will be issued in the form of a global note (the "Global Note") and will be deposited with, or on behalf of, The Depository Trust Company (the "Depository") in New York, New York and registered in the name of the Depository or its nominee. Except as set forth below, the Global Note may be transferred, in whole and not in part, only to the Depository or another nominee of the Depository. Investors may hold their beneficial interests in the Global Note directly through the Depository if they are participants in such system or indirectly through organizations which are participants in such system. Notes that were (i) transferred to institutional "accredited investors" who are not "qualified institutional buyers" (as such terms are defined under the Securities Act (the "Non-Global Purchasers")) or (ii) issued as described below under "--Certificated Notes", may be issued in the form of registered definitive certificates (the "Certificated Notes"). Upon the transfer to a qualified institutional buyer of Certificated Notes initially issued to a Non- Global Purchaser, such Certificated Notes may, unless the Global Note has previously been exchanged for Certificated Notes, be exchanged for an interest in the Global Note. The Depository has advised the Company as follows: The Depository is a limited-purpose trust company organized under the laws of the State of New York, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and "a clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934 (the " Exchange Act"). The Depository was created to hold securities of institutions that have accounts with the Depository ("participants") and to facilitate the clearance and settlement of securities transactions among its participants in such securities through electronic book- entry changes in accounts of the participants, thereby eliminating the need for physical movement of securities certificates. The Depository's participants include securities brokers and dealers (which may include the Initial Purchasers), banks, trust companies, clearing corporations and certain other organizations, some of whom (and/or their representatives) own the Depository. Access to the Depository's book-entry system is also available to others such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a participant, either directly or indirectly. The Depository agrees with and represents to its participants that it will administer its book-entry system in accordance with its rules and by-laws and requirements of law. The Depository will credit, on its book-entry registration and transfer system, the respective principal amounts of the Notes represented by the Global Note to the accounts of participants. Ownership of beneficial interests in the Global Note will be shown on, and the transfer of those ownership interests will be effected only through, records maintained by the Depository (with respect to participants' interests) and such participants (with respect to the owners of beneficial interests in the Global Note other than participants). The laws of some jurisdictions may require that certain purchasers of securities take physical delivery of such securities in definitive form. Such limits and laws may impair the ability to transfer or pledge beneficial interests in the Global Note. So long as the Depository, or its nominee, is the registered holder and owner of the Global Note, the Depository or such nominee, as the case may be, will be considered the sole owner and holder of the related Notes for all purposes of such Notes. Owners of beneficial interests in the Global Note will not be entitled to have the Notes represented by such Global Note registered in their names and will not be considered to be the owners or holders of any Notes under the Global Note. Accordingly, each person owning a beneficial interest in the Global Note must rely on the procedures of the Depository and, if such person is not a 42 participant, on the procedures of the participant through which such person owns its interests, to exercise any right of a holder of Notes under the Global Note. The Company understands that under existing industry practice, in the event an owner of a beneficial interest in the Global Note desires to take any action that the Depository, as the holder of the Global Note, is entitled to take, the Depository would authorize the participants to take such action, and that the participants would authorize beneficial owners owning through such participants to take such action or would otherwise act upon the instructions of beneficial owners owning through them. Payment of principal of and interest on Notes represented by the Global Note registered in the name of and held by the Depository or its nominee will be made to the Depository or its nominee, as the case may be, as the registered owner and holder of the Global Note. The Company expects that the Depository or its nominee, upon receipt of any payment of principal or interest in respect of the Global Note, will credit participants' accounts with payments in amounts proportionate to their respective beneficial interests in the principal amount of the Global Note as shown on the records of the Depository or its nominee. The Company also expects that payments by participants to owners of beneficial interests in the Global Note held through such participants will be governed by standing instructions and customary practices, as is now the case with securities held for the accounts of customers in bearer form or registered in "street name", and will be the responsibility of such participants. The Company will not have any responsibility or liability for any aspect of the records relating to, or payments made on account of, beneficial ownership interests in the Global Note for any Note or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests or for any other aspect of the relationship between the Depository and its participants or the relationship between such participants and the owners of beneficial interests in the Global Note owning through such participants. Unless and until it is exchanged in whole or in part for Certificated Notes in definitive form, the Global Note may not be transferred except as a whole by the Depository to a nominee of such Depository or by a nominee of such Depository to such Depository or another nominee of such Depository. CERTIFICATED NOTES In addition to transfers to Non-Global Purchasers as described above, the Notes represented by the Global Note are exchangeable for Certificated Notes in definitive form of like tenor as such Notes in denominations of U.S. $1,000 and integral multiples thereof if (i) the Depository notifies the Company that it is unwilling or unable to continue as Depository for the Global Note or if at any time the Depository ceases to be a clearing agency registered under the Exchange Act, (ii) the Company in its discretion at any time determines not to have all of the Notes represented by the Global Note or (iii) a default entitling the holders of the Notes to accelerate the maturity thereof has occurred and is continuing. Any Note that is exchangeable pursuant to the preceding sentence is exchangeable for Certificated Notes issuable in authorized denominations and registered in such names as the Depository shall direct. Although the Depository has agreed to the foregoing procedures in order to facilitate transfers of interests in the Global Note among participants of the Depository, it is under no obligation to perform or continue to perform such procedures, and such procedures may be discontinued at any time. Neither the Trustee nor the Company will have any responsibility for the performance by the Depository or its participants of their respective obligations under the rules and procedures governing their operations. EXCHANGE OFFER; REGISTRATION RIGHTS In connection with the initial issuance and sale of the Old Notes, the Initial Purchasers and their assignees became entitled to the benefits of the Registration Rights Agreement. The Company is obligated pursuant to the terms of the Registration Rights Agreement, for the benefit of the holders of the Old Notes, at its cost, (i) to file the Registration Statement of which this Prospectus is a part with the SEC with respect to a registered offer to exchange the Old Notes for the New Notes, which will have terms substantially 43 identical in all material respects to the Old Notes (except that the New Notes will not contain terms with respect to transfer restrictions), on or before June 16, 1995, and (ii) to use its best efforts to cause the Registration Statement to be declared effective under the Securities Act on or before September 14, 1995. The Company has agreed to keep the Exchange Offer open for not less than 30 days (or longer if required by applicable law) after the date notice of the Exchange Offer is mailed to the holders of the Old Notes. The Company is entitled to close the Exchange Offer 30 days after the commencement thereof, provided that it has accepted all Old Notes theretofore validly tendered in accordance with the terms of the Exchange Offer. For each Old Note surrendered to the Company pursuant to the Exchange Offer, the holder of such Old Note will receive a New Note having a principal amount equal to that of the surrendered Old Note. Interest on each New Note will accrue at the rate of 7 7/8% per annum from the most recent date to which interest has been paid on the Old Note or, if no interest has been paid on the Old Note, from May 17, 1995. In addition, holders of New Notes will receive, on the next interest payment date following the Expiration Date, a payment equal to the amount of accrued and unpaid Additional Interest, if any, on the Old Notes exchanged for such New Notes. Under existing SEC interpretations, the New Notes would be freely transferable by holders other than affiliates of the Company after the Exchange Offer without further registration under the Securities Act if the holder of the New Notes represents that it is acquiring the New Notes in the ordinary course of its business, that it has no arrangement or understanding with any person to participate in the distribution of the New Notes and that it is not an affiliate of the Company, as such terms are interpreted by the SEC; provided that broker-dealers ("Participating Broker-Dealers") receiving New Notes in the Exchange Offer will have a prospectus delivery requirement with respect to resales of such New Notes. The SEC has taken the position that Participating Broker-Dealers may fulfill their prospectus delivery requirements with respect to New Notes (other than a resale of an unsold allotment from the original sale of the Old Notes) with the prospectus contained in the Registration Statement. Under the Registration Rights Agreement, the Company is required to allow Participating Broker-Dealers and other persons, if any, with similar prospectus delivery requirements to use the prospectus contained in the Registration Statement in connection with the resale of such New Notes. Holders of Old Notes (other than certain specified holders) who wish to exchange such Old Notes for New Notes in the Exchange Offer will be required to represent that any New Notes to be received by it will be acquired in the ordinary course of its business and that at the time of the commencement of the Exchange Offer it has no arrangement or understanding with any person to participate in the distribution (within the meaning of the Securities Act) of the New Notes and that it is not an affiliate of the Company. In the event that applicable interpretations of the staff of the SEC do not permit the Company to effect the Exchange Offer, or if for any other reason the Exchange Offer is not consummated within 180 days of the date of the Registration Rights Agreement, or if the Initial Purchasers so request with respect to Old Notes not eligible to be exchanged for New Notes in the Exchange Offer, or if any holder of Old Notes is not eligible to participate in the Exchange Offer or does not receive freely tradeable New Notes in the Exchange Offer, the Company will, at its cost, (a) as promptly as practicable, file a Shelf Registration Statement covering resales of the Old Notes or the New Notes, as the case may be, (b) use its best efforts to cause the Shelf Registration Statement to be declared effective under the Securities Act and (c) keep the Shelf Registration Statement effective until three years after its effective date. The Company will, in the event a Shelf Registration Statement is filed, among other things, provide to each holder for whom such Shelf Registration Statement was filed copies of the prospectus which is a part of the Shelf Registration Statement, notify each such holder when the Shelf Registration Statement has become effective and take certain other actions as are required to permit unrestricted resales of the Old Notes or the New Notes, as the case may be. A holder selling such Old Notes or New Notes pursuant to the Shelf Registration Statement generally will be required to be named as a selling security holder in the related prospectus and to deliver a prospectus to purchasers, will be subject to certain of the civil liability provisions under the Securities Act in connection with such sales and will be bound by the provisions of the Registration Rights Agreement which are applicable to such a holder (including certain indemnification obligations). 44 The Registration Rights Agreement provides that if by June 16, 1995, neither the Registration Statement nor the Shelf Registration Statement has been filed with the SEC, interest will accrue on the Old Notes from and including June 17, 1995, until but excluding the earlier of the date the Registration Statement or the Shelf Registration Statement is filed and September 15, 1995, at a rate of 8 3/8% per annum, representing Additional Interest of 1/2% per annum. If by September 14, 1995, neither the Exchange Offer is consummated nor the Shelf Registration Statement is declared effective, interest will accrue on the Old Notes from and including September 15, 1995, until but excluding the earlier of the date of the consummation of the Exchange Offer and the effective date of the Shelf Registration Statement, at a rate of 8 3/8% per annum, representing Additional Interest of 1/2% per annum. At all other times, the Old Notes will bear interest at the rate of 7 7/8% per annum. The summary herein of certain provisions of the Registration Rights Agreement does not purport to be complete and is subject to, and is qualified in its entirety by reference to, all the provisions of the Registration Rights Agreement, a copy of which is filed as an exhibit to the Registration Statement of which this Prospectus is a part. COVENANTS Limitations on Secured Funded Debt. The Company will not, nor will it permit any Restricted Subsidiary to, incur, issue, assume, guarantee or create any Secured Funded Debt, without effectively providing that the Outstanding Debt Securities shall be secured equally and ratably with (or prior to) such Secured Funded Debt, unless, after giving effect thereto, the sum of the aggregate amount of all outstanding Secured Funded Debt of the Company and its Restricted Subsidiaries together with all Attributable Debt in respect of sale and leaseback transactions relating to a Principal Property (with the exception of Attributable Debt which is excluded pursuant to clauses (1) to (6) inclusive described under "Restrictions Upon Sales with Leasebacks" below), would not exceed 10% of Consolidated Net Tangible Assets of the Company and its Restricted Subsidiaries; provided, however, that this restriction will not apply to, and there shall be excluded from Secured Funded Debt in any computation under such restriction, Funded Debt secured by: (1) Liens on property of any corporation existing at the time such corporation becomes a Subsidiary; (2) Liens on property existing at or incurred within 180 days of the time of acquisition thereof (including, without limitation, acquisition through merger or consolidation); (3) Liens on property subsequently acquired (or constructed) by the Company or any Restricted Subsidiary and created prior to, at the time of, or within 270 days after such acquisition (or the completion of such construction or commencement of commercial operation of such property, whichever is later) to secure or provide for the payment of all or any part of the purchase price (or the construction price) thereof; (4) Liens in favor of the Company or any Restricted Subsidiary; (5) Liens in favor of the United States of America, State thereof or the District of Columbia, or any agency, department or other instrumentality thereof, to secure partial, progress, advance or other payments pursuant to any contract or provisions of any statute; (6) Liens securing the performance of any contract or undertaking not directly or indirectly in connection with the borrowing of money, the obtaining of advances or credit or the securing of Funded Debt, if made and continuing in the ordinary course of business; (7) Liens incurred (no matter when created) in connection with the Company's or a Restricted Subsidiary's engaging in leveraged or single-investor lease transactions, provided that the instrument creating or evidencing any borrowings secured by such Lien shall provide that such borrowings are payable solely out of the income and proceeds of the property subject to such Lien and are not a general obligation of the Company or such Restricted Subsidiary; (8) Liens incurred to finance construction, alteration or repair of any Principal Property and improvements thereto prior to or within 270 days after completion of such construction, alteration or repair; (9) Liens (A) held by banks to secure amounts due to such banks in the ordinary course of business, (B) under workers' compensation, unemployment insurance or similar laws, (C) on deposits to secure public or statutory obligations of the Company or a Restricted Subsidiary or deposits of cash or obligations of the United States of America to secure surety and appeal bonds to which the Company or a Restricted Subsidiary is a party, or pledges or deposits for similar purposes, (D) arising by operation of law such as mechanics' liens, materialmen's liens or other similar liens, or out of judgments or awards against the Company or a Restricted Subsidiary during a stay of execution pending an appeal, (E) for taxes not yet due or being contested in good faith by the Company or a Restricted Subsidiary, and (F) on the 45 use of real properties which are not material and minor encumbrances and easements; (10) Liens incurred or assumed in connection with the issuance of revenue bonds the interest on which is exempt from Federal income taxation pursuant to Section 103(b) of the Internal Revenue Code of 1954, as amended; or (11) any extension, renewal, refunding or replacement of the foregoing. ((S) 7.05 of the Indenture) "Attributable Debt" means as to any particular lease under which either the Company or any Restricted Subsidiary is at any time liable as lessee and at any date as of which the amount thereof is to be determined, the total net obligations of the lessee for rental payments during the remaining term of the lease (including any period for which such lease has been extended or may, at the option of the lessor, be extended) discounted from the respective due dates thereof to such date at a rate per annum equivalent to the greater of (a) the weighted average Yield to Maturity (as defined in the Indenture) of the Outstanding Debt Securities, such average being weighted by the principal amount of the Outstanding Debt Securities of each series or, in the case of Original Issue Discount Securities (as defined in the Indenture), such amount to be the principal amount of such outstanding Original Issue Discount Securities that would be due and payable as of the date of such determination upon a declaration of acceleration of the maturity thereof pursuant to the Indenture and (b) the interest rate inherent in such lease (as determined in good faith by the Company), both to be compounded semi-annually. ((S) 1.01 of the Indenture) "Consolidated Net Tangible Assets" means, at any date, the total assets appearing on the most recent consolidated balance sheet of the Company and its Restricted Subsidiaries as at the end of a fiscal quarter of the Company, prepared in accordance with generally accepted accounting principles, less (a) all current liabilities (due within one year) as shown on such balance sheet, (b) applicable reserves, (c) investments in and advances to Unrestricted Subsidiaries or to entities while they were Unrestricted Subsidiaries but which are not Subsidiaries at the time of such balance sheet or other entities accounted for on the equity method of accounting, and (d) Intangible Assets and liabilities relating thereto. "Intangible Assets" means the value (net of any applicable reserves), as shown on or reflected in such balance sheet, of: (i) all trade names, trademarks, licenses, patents, copyrights, service marks, goodwill and other like intangibles; (ii) organizational and development costs; (iii) deferred charges (other than prepaid items such as insurance, taxes, interest, commissions, rents and similar items and tangible assets being amortized); and (iv) unamortized debt discount and expense, less unamortized premium. ((S) 1.01 of the Indenture) "Funded Debt" means any indebtedness maturing more than 12 months after the time of computation thereof, guarantees of Funded Debt or of dividends of others (except guarantees in connection with the sale or discount of accounts receivable, trade acceptances and other paper arising in the ordinary course of business), and in the case of any Restricted Subsidiary all preferred stock of such Restricted Subsidiary, and all Capital Lease Obligations (as defined in the Indenture). ((S) 1.01 of the Indenture) "Principal Property" means any manufacturing plant located in the United States of America and owned and operated by the Company or any Restricted Subsidiary, and any manufacturing equipment (as defined in the Indenture) owned by the Company or any Restricted Subsidiary in such manufacturing plant. ((S) 1.01 of the Indenture) "Restricted Subsidiary" means each Subsidiary other than Unrestricted Subsidiaries. ((S) 1.01 of the Indenture) "Secured Funded Debt" means Funded Debt which is secured by any pledge of, or mortgage, security interest or other lien on any Principal Property of the Company or a Restricted Subsidiary. "Liens" means such pledges, mortgages, security interests and other liens. ((S) 1.01 of the Indenture) "Subsidiary" means any corporation at least a majority of the outstanding voting stock of which is owned directly or indirectly by the Company or by one or more Subsidiaries of the Company, or by the Company and one or more Subsidiaries. ((S) 1.01 of the Indenture) "Unrestricted Subsidiary" means Cincinnati Milacron Commercial Corp., Amertool Services, Inc., Cincinnati Milacron Assurance Ltd., The Factory Power Company, Subsidiaries of the foregoing, and other Subsidiaries designated as Unrestricted Subsidiaries from time to time by the Board of Directors of the Company. ((S) 1.01 of the Indenture) 46 Restrictions Upon Sales with Leasebacks. The Company is not permitted, and may not permit a Restricted Subsidiary, to sell any Principal Property owned by the Company or a Restricted Subsidiary with the intention that the Company or any Restricted Subsidiary leaseback such Principal Property, unless, after giving effect thereto, the aggregate amount of all Attributable Debt with respect to all such sale and leaseback transactions plus all Secured Funded Debt (with the exception of Funded Debt which is excluded pursuant to clauses (1) to (11) inclusive described under "Limitations on Secured Funded Debt" above) would not exceed 10% of Consolidated Net Tangible Assets. This covenant shall not apply to, and there shall be excluded from Attributable Debt in any computation under such restriction or under "Limitations on Secured Funded Debt" above, Attributable Debt with respect to, any sale and leaseback transaction if: (1) the lease in such sale and leaseback transaction is for a period, including renewals, of not more than three years, (2) the Company or a Restricted Subsidiary is permitted to create Funded Debt secured by a Lien pursuant to clauses (1) to (11) inclusive described under "Limitations on Secured Funded Debt" above on the Principal Property to be leased, in an amount equal to the Attributable Debt with respect to such sale and leaseback transaction, without equally and ratably securing the Outstanding Debt Securities, (3) the sale and leaseback transaction is entered into in respect of a Principal Property within 270 days of the acquisition thereof or the completion of construction and commencement of operation thereof, whichever is later, (4) the Company or a Restricted Subsidiary within 270 days after such sale applies to the retirement of its Secured Funded Debt an amount equal to the greater of (a) the net proceeds of the sale of the Principal Property leased pursuant to such sale and leaseback transaction or (b) the fair market value of the Principal Property so leased; provided, that the amount to be applied to such retirement shall be reduced by the aggregate principal amount of other Secured Funded Debt voluntarily retired within 270 days after such sale; (5) the Company or a Restricted Subsidiary applies the net proceeds of the sale to investment in another Principal Property within 270 days prior or subsequent to such sale; provided, that this exception shall apply only if such proceeds invested in such other Principal Property shall not exceed the total acquisition, alteration, repair and construction cost of the Company or any Restricted Subsidiary in such other Principal Property less amounts secured by any purchase money or construction mortgage on such other Principal Property; and (6) the sale and leaseback transaction is entered into between the Company and a Restricted Subsidiary or between Restricted Subsidiaries. ((S) 7.06 of the Indenture) EVENTS OF DEFAULT, NOTICE AND WAIVER The Indenture provides that if an Event of Default with respect to any series of Outstanding Debt Securities shall have happened and be continuing, either the Trustee or the holders of not less than 25% in aggregate principal amount of the Applicable Debt Securities then outstanding under the Indenture may declare the principal of all the Applicable Debt Securities and the accrued interest thereon, if any, to be due and payable immediately (an "Acceleration"). The term "Applicable Debt Securities" shall mean a series of Outstanding Debt Securities with respect to which an Event of Default shall have occurred and be continuing; provided, however, that in no event shall the term "Applicable Debt Securities" include more than one series of Outstanding Debt Securities except with respect to an Event of Default described under clause (4) or (5) below; provided further, however, that for purposes of clause (3) below, any covenant or agreement on the part of the Company contained in the Indenture which is not limited to a series of Outstanding Debt Securities shall be in respect of all series of Outstanding Debt Securities, unless otherwise specifically provided with respect to a particular series of Outstanding Debt Securities in the supplement indenture under which such series of Outstanding Debt Securities is issued. ((S) 9.01 of the Indenture) Events of Default in respect of the Notes are defined in the Indenture as being: (1) default for 30 days in payment of any interest installment on the Notes when due; (2) default in payment of principal of or premium, if any, on the Notes when due either at their stated maturity, upon any redemption, by an Acceleration or otherwise; (3) default for 60 days after notice to the Company by the Trustee or to the Company and the Trustee by holders of not less then 25% in aggregate principal amount of the Notes at the time outstanding in the performance of any covenant or agreement in the Indenture with respect to the Notes; (4) failure to make any mandatory sinking, purchase or analogous fund payment as and when due and payable with respect 47 to the Notes; (5) certain events of bankruptcy, insolvency and reorganization with respect to the Company; and (6) acceleration of any Indebtedness (as defined in the Indenture) in an aggregate principal amount exceeding $2,000,000 of the Company or a Restricted Subsidiary under the terms of the instrument under which such Indebtedness is issued or secured, if such acceleration is not annulled, or such Indebtedness is not discharged, or a sum sufficient to discharge in full such Indebtedness is not deposited in trust, within 30 days after written notice specifying the related default to the Company by the Trustee or to the Company and the Trustee by holders of not less than 25% in aggregate principal amount of the outstanding Notes. ((S) 9.01 of the Indenture) The Indenture provides that the Trustee will, within 90 days after the occurrence of a default with respect to the Notes, give to the holders of the Notes notice of all uncured and unwaived defaults known to it; provided that, except in the case of default in the payment of principal of, premium, if any, or interest on any of the Notes, the Trustee will be protected in withholding such notice if it in good faith determines that the withholding of such notice is in the interest of the holders of the Notes. The term "default" for the purpose of this provision only means the happening of any of the Events of Default with respect to the Notes, except that any grace period and/or notice requirement of such Event of Default is eliminated. ((S) 9.08 of the Indenture) Before proceeding to exercise any right or power under the Indenture at the request, order or direction of any holders of the Notes, the Trustee is entitled to be indemnified by such holders subject to the duty of the Trustee during an Event of Default to act with the required standard of care. ((S) 10.02 of the Indenture) The Indenture provides that the holders of not less than 50% in aggregate principal amount of the Notes at the time outstanding may direct the time, method and place of conducting proceedings for remedies available to the Trustee, or exercising any trust or power conferred on the Trustee in respect of the Notes, subject to provisions for indemnification and certain other rights of the Trustee. ((S)(S) 9.07 and 10.02 of the Indenture) The Indenture includes a covenant that the Company will file annually with the Trustee a certificate of no default, or specifying any default that exists. ((S) 7.07 of the Indenture) In certain cases, the holders of not less than 50% in aggregate principal amount of the Applicable Debt Securities then outstanding may on behalf of the holders of all such Applicable Debt Securities annul an Acceleration and its consequences. Prior to an Acceleration with respect to any series of Outstanding Debt Securities, the holders of not less then 50% in aggregate principal amount of such Outstanding Debt Securities may on behalf of the holders of all such Outstanding Debt Securities waive any past default or Event of Default with respect to such series of Outstanding Debt Securities and its consequences, except, among other things, a default in the payment of the principal of, premium, if any, or interest on such Outstanding Debt Securities. ((S)(S) 9.01 and 9.07 of the Indenture) MODIFICATION OF THE INDENTURE The Indenture contains provisions permitting the Company and Trustee, with the consent of the holders of not less than 66 2/3% in aggregate principal amount of each series of Outstanding Debt Securities to be affected, to execute supplemental indentures adding any provisions to or changing or eliminating any of the provisions of the Indenture or any supplemental indenture or modifying the rights of the holders of such series of Outstanding Debt Securities to be affected, except that no such supplemental indenture may (i) among other things, extend the fixed maturity of any Outstanding Debt Securities, or reduce the principal amount thereof, or reduce the rate or extend the time of payment of interest thereon, or reduce any premium payable upon the redemption thereof, or change the place or medium of payment of the principal amount thereof, or any premium or interest thereon, or impair certain rights of holders of the Outstanding Debt Securities to institute suit for payment, without the consent of all the holders of the Outstanding Debt Securities so affected, or (ii) reduce the aforesaid percentage of any series of Outstanding Debt Securities, the consent of the holders of which is required for any such supplemental indenture, without the consent of all the holders of such series of Outstanding Debt Securities. ((S) 13.02 of the Indenture) 48 CONSOLIDATION, MERGER OR SALE OF ASSETS OF THE COMPANY The Company shall not consolidate with or merge into any other corporation or sell its assets substantially as an entirety, unless (1) either the Company will be the continuing corporation or the successor corporation, as a result of such consolidation, merger or sale of the Company's assets, is organized in the United States of America and expressly assumes the due and punctual payment of the principal of, premium, if any, and interest on all the Outstanding Debt Securities and the performance of every covenant of the Indenture on the part of the Company to be performed and (2) immediately after giving effect to such transaction, no Event of Default, and no event which, after notice or lapse of time, or both, would become an Event of Default, shall have happened and be continuing. Upon any such consolidation, merger or sale, the successor corporation formed by such consolidation or into which the Company is merged or to which such sale is made shall succeed to, and be substituted for, the Company under the Indenture. ((S)(S) 14.01 and 14.02 of the Indenture) DEFEASANCE If at any time the Company shall deposit with the Trustee (1) funds sufficient to pay, or (2) such amount of direct obligations of the United States of America as will or will together with the income thereon without consideration of any reinvestment thereof be sufficient to pay, all sums due for principal of, premium, if any, and interest on the Notes, as they shall become due from time to time, and provided that certain Events of Default shall not have occurred and be continuing, the Indenture shall cease to be of further effect with respect to the Notes, except as to (i) rights of registration of transfer, substitution and exchange of the Notes, (ii) rights of holders to receive payments from the Company of principal of, premium, if any, and interest on the Notes as they shall become due from time to time and other rights, duties and obligations of holders as beneficiaries with respect to the funds or obligations so deposited with Trustee and (iii) the rights, obligations and immunities of the Trustee under the Indenture; provided, that the Company shall have furnished to the Trustee an opinion of counsel to the effect that the holders of the Notes will not recognize income, gain or loss for United States Federal income tax purposes as a result of such deposit and defeasance and will be subject to United States Federal income tax on the same amount, and in the same manner and at the same times, as would have been the case if such deposit and defeasance had not occurred. ((S)(S) 18.01 and 18.02 of the Indenture) CONCERNING THE TRUSTEE The Company may from time to time maintain lines of credit, and have other customary banking relationships, with affiliates of BankAmerica National Trust Company, the Trustee under the Indenture. 49 PLAN OF DISTRIBUTION Each broker-dealer that receives New Notes for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such New Notes. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of New Notes received in exchange for Old Notes where such Old Notes were acquired as a result of market-making activities or other trading activities. The Company has agreed that, for a period of 180 days after the Expiration Date, it will make this Prospectus, as amended or supplemented, available to any broker-dealer for use in connection with any such resale. The Company will not receive any proceeds from any sale of New Notes by broker-dealers. New Notes received by broker-dealers for their own account pursuant to the Exchange Offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the New Notes or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such broker-dealer and/or the purchasers of any such New Notes. Any broker-dealer that resells New Notes that were received by it for its own account pursuant to the Exchange Offer and any broker or dealer that participates in a distribution of such New Notes may be deemed to be an "underwriter" within the meaning of the Securities Act and any profit on any such resale of New Notes and any commissions or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. The Letter of Transmittal states that by acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. For a period of 180 days after the Expiration Date, the Company will promptly send additional copies of this Prospectus and any amendment or supplement to this Prospectus to any broker-dealer that requests such documents in the Letter of Transmittal. The Company has agreed to pay all expenses incident to the Exchange Offer other than commissions or concessions of any brokers or dealers and will indemnify the Initial Purchasers and any broker-dealer who delivered a Prospectus in connection with any resale of the New Notes against certain liabilities, including liabilities under the Securities Act. CERTAIN FEDERAL INCOME TAX CONSIDERATIONS The following discussion is a summary of the material United States Federal income tax consequences expected to apply to the exchange of Old Notes for New Notes under currently applicable law. The summary is based on laws, regulations, rulings and decisions now in effect, all of which are subject to change. The discussion does not cover all aspects of Federal taxation that may be relevant to, or the actual tax effect that any of the matters described herein will have on, particular holders, and does not address state, local, foreign or other tax laws. Certain holders (including insurance companies, tax- exempt organizations, financial institutions, broker-dealers, taxpayers subject to the alternative minimum tax and foreign persons) may be subject to special rules not discussed below. EACH HOLDER OF THE OLD NOTES SHOULD CONSULT WITH ITS OWN TAX ADVISOR IN DETERMINING THE FEDERAL, STATE, LOCAL AND ANY OTHER TAX CONSEQUENCES TO THE PARTICULAR HOLDER OF THE EXCHANGE OF OLD NOTES FOR NEW NOTES. The exchange of New Notes for Old Notes should not be a sale or exchange or otherwise a taxable event for Federal income tax purposes. Accordingly, the New Notes should have the same issue price as the Old Notes, and a holder should have the same adjusted basis and holding period in the New Notes as it had in the Old Notes immediately before the exchange. 50 HOLDERS OF THE OLD NOTES ARE URGED TO CONSULT THEIR TAX ADVISORS REGARDING THE PARTICULAR TAX CONSEQUENCES TO THEM OF ACQUIRING, OWNING AND DISPOSING OF THE OLD NOTES AND THE NEW NOTES, INCLUDING THE APPLICATION OF FEDERAL, STATE, LOCAL AND FOREIGN TAX LAWS AND POSSIBLE FUTURE CHANGES IN SUCH FEDERAL TAX LAWS. LEGAL MATTERS Certain legal matters regarding the New Notes will be passed on for the Company by Cravath, Swaine & Moore, New York, New York. EXPERTS The consolidated financial statements of the Company at December 31, 1994, and January 1, 1994, and for each of the three years in the period ended December 31, 1994, appearing in this Prospectus and Registration Statement have been audited by Ernst & Young LLP, independent auditors, as set forth in their report thereon appearing elsewhere herein and in the Registration Statement, and are included in reliance upon such report given upon the authority of such firm as experts in accounting and auditing. The combined financial statements of Widia incorporated by reference in this Prospectus and Registration Statement have been audited by Coopers & Lybrand GmbH, independent auditors, for the periods indicated in their report thereon which is included in the Company's Current Report on Form 8-K dated February 1, 1995 (as amended by the Company's Form 8-K/A relating thereto filed April 14, 1995). The financial statements audited by Coopers & Lybrand GmbH have been incorporated herein by reference in reliance on such firm's report given upon the authority of such firm as experts in accounting and auditing. 51 CINCINNATI MILACRON INC. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS ----------------
PAGE NUMBER ------ Consolidated Statement of Earnings for the fiscal years ended the Sat- urday closest to December 31 in fiscal years 1994, 1993 and 1992...... F-2 Consolidated Balance Sheet as of the Saturday closest to December 31 in fiscal years 1994 and 1993.................................................................. F-3 Consolidated Statement of Changes in Shareholders' Equity for the fis- cal years ended the Saturday closest to December 31 in fiscal years 1994, 1993 and 1992................................................... F-4 Consolidated Statement of Cash Flows for the fiscal years ended the Saturday closest to December 31 in fiscal years 1994, 1993 and 1992....................... F-5 Notes to Consolidated Financial Statements............................. F-6 Report of Independent Auditors......................................... F-16
F-1 CONSOLIDATED STATEMENT OF EARNINGS CINCINNATI MILACRON INC. AND SUBSIDIARIES Fiscal year ends on Saturday closest to December 31.
(In millions, except per-share amounts) 1994 1993 1992 -------- -------- -------- Sales................................................ $1,197.1 $1,029.4 $ 789.2 Cost of products sold................................ 904.8 791.3 612.6 -------- -------- ------- Manufacturing margins.............................. 292.3 238.1 176.6 Other costs and expenses Selling and administrative......................... 222.2 191.3 133.6 Consolidation charge............................... - 47.1 - Disposition of subsidiary.......................... - 22.8 - Other - net........................................ 5.9 .7 (.2) -------- -------- ------- Total other costs and expenses................... 228.1 261.9 133.4 -------- -------- ------- Operating earnings (loss)............................ 64.2 (23.8) 43.2 Interest Income............................................. 2.6 2.3 2.9 Expense............................................ (17.9) (15.7) (19.1) -------- -------- ------- Interest - net................................... (15.3) (13.4) (16.2) -------- -------- ------- EARNINGS (LOSS) BEFORE INCOME TAXES, EXTRAORDINARY ITEMS AND CUMULATIVE EFFECT OF CHANGES IN METHODS OF ACCOUNTING.............................. 48.9 (37.2) 27.0 Provision for income taxes........................... 11.2 8.2 10.9 -------- -------- ------- EARNINGS (LOSS) BEFORE EXTRAORDINARY ITEMS AND CUMULATIVE EFFECT OF CHANGES IN METHODS OF ACCOUNTING................... 37.7 (45.4) 16.1 Extraordinary items Loss on early extinguishment of debt............... - (4.4) - Tax benefit from loss carryforward................. - - 5.4 Cumulative effect of changes in methods of accounting...................................... - (52.1) - -------- -------- ------- NET EARNINGS (LOSS).................................. $ 37.7 $ (101.9) $ 21.5 ======== ======== ======= EARNINGS (LOSS) PER COMMON SHARE Earnings (loss) from continuing operations before extraordinary items and cumulative effect of changes in methods of accounting............................ $ 1.10 $ (1.41) $ .58 Extraordinary items Loss on early extinguishment of debt............. - (.14) - Tax benefit from loss carryforward............... - - .19 Cumulative effect of changes in methods of accounting.................................... - (1.61) - -------- -------- ------- NET EARNINGS (LOSS)................................ $ 1.10 $ (3.16) $ .77 ======== ======== =======
See notes to consolidated financial statements. F-2 CONSOLIDATED BALANCE SHEET CINCINNATI MILCRON INC. AND SUBSIDIARIES Fiscal year ends on Saturday closest to December 31.
(In millions) 1994 1993 -------- ------- ASSETS Current assets Cash and cash equivalents.................................. $ 21.5 $ 18.8 Notes and accounts receivable less allowances.......................................... 188.0 188.3 Inventories Raw materials............................................ 25.4 21.5 Work-in-process and finished parts....................... 162.8 155.7 Finished products........................................ 79.0 70.0 -------- ------- Total inventories...................................... 267.2 247.2 Other current assets....................................... 38.0 29.3 -------- ------- Total current assets..................................... 514.7 483.6 Property, plant and equipment - net.......................... 198.8 184.0 Other noncurrent assets...................................... 74.1 62.0 -------- ------- TOTAL ASSETS................................................. $ 787.6 $ 729.6 ======== ======= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Amounts payable to banks................................... $ 62.8 $ 74.2 Long-term debt and lease obligations due within one year...................................... 21.1 3.4 Trade accounts payable..................................... 99.2 84.6 Advance billings and deposits.............................. 39.6 36.9 Accrued and other current liabilities...................... 140.6 170.2 -------- ------- Total current liabilities................................ 363.3 369.3 Long-term accrued liabilities................................ 123.5 128.6 Long-term debt and lease obligations......................... 143.0 107.6 -------- ------- TOTAL LIABILITIES.......................................... 629.8 605.5 -------- ------- Commitments and contingencies................................ - - Shareholders' equity 4% Cumulative Preferred shares............................. 6.0 6.0 Common shares, $1 par value (outstanding: 33.7 in 1994 and 33.5 in 1993)........................... 33.7 33.5 Capital in excess of par value............................. 255.5 251.3 Accumulated deficit........................................ (125.9) (151.2) Cumulative foreign currency translation adjustments.............................................. (11.5) (15.5) -------- ------- TOTAL SHAREHOLDERS' EQUITY............................. 157.8 124.1 -------- ------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY................... $ 787.6 $ 729.6 ======== =======
See notes to consolidated financial statements. F-3 CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY CINCINNATI MILACRON INC. AND SUBSIDIARIES Fiscal year ends on Saturday closest to December 31.
Cumulative 4% Foreign Cumulative Common Capital in Currency Total Preferred Shares, Excess of Accumulated Translation Shareholders' (In millions, except share amounts) Shares $1 Par Value Par Value Deficit Adjustments Equity ---------- ------------ ---------- ----------- ----------- ------------- BALANCE AT YEAR-END 1991....................... $6.0 $27.4 $140.3 $ (48.8) $ 4.1 $129.0 Stock options exercised and restricted stock awarded for 91,628 common shares....... .1 2.4 2.5 Sale of 42,640 treasury shares................. .6 .6 Net earnings for the year...................... 21.5 21.5 Cash dividends Preferred shares ($4.00 per share)........... (.2) (.2) Common shares ($.36 per share)............... (10.0) (10.0) Foreign currency translation adjustments....... (9.0) (9.0) ---- ----- ------ ------- ------ ------ BALANCE AT YEAR-END 1992....................... 6.0 27.5 143.3 (37.5) (4.9) 134.4 Issuance of 5,175,000 common shares in public offering.............................. 5.2 95.4 100.6 Stock options exercised and restricted stock awarded for 854,918 common shares............ .8 12.8 13.6 Net purchase of 3,967 treasury shares.......... (.2) (.2) Net loss for the year.......................... (101.9) (101.9) Cash dividends Preferred shares ($4.00 per share)........... (.2) (.2) Common shares ($.36 per share)............... (11.6) (11.6) Foreign currency translation adjustments....... (10.6) (10.6) ---- ----- ------ ------- ------ ------ BALANCE AT YEAR-END 1993....................... 6.0 33.5 251.3 (151.2) (15.5) 124.1 Stock options exercised and restricted stock awarded for 203,404 common shares............ .2 4.1 4.3 Sale of 6,998 treasury shares.................. .1 .1 Net earnings for the year...................... 37.7 37.7 Cash dividends Preferred shares ($4.00 per share)........... (.2) (.2) Common shares ($.36 per share)............... (12.2) (12.2) Foreign currency translation adjustments....... 4.0 4.0 ---- ----- ------ ------- ------ ------ BALANCE AT YEAR-END 1994....................... $6.0 $33.7 $255.5 $(125.9) $(11.5) $157.8 ==== ===== ====== ======= ====== ======
See notes to consolidated financial statements. F-4 CONSOLIDATED STATEMENT OF CASH FLOWS CINCINNATI MILACRON INC. AND SUBSIDIARIES Fiscal year ends on Saturday closest to December 31.
(In millions) 1994 1993 1992 ------- -------- ------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS OPERATING ACTIVITIES CASH FLOWS Net earnings (loss)........................... $ 37.7 $(101.9) $ 21.5 Extraordinary loss on early extinguishment of debt...................... - 4.4 - Cumulative effect of changes in methods of accounting....................... - 52.1 - Other operating activities providing (using) cash Depreciation.............................. 28.2 26.1 20.9 Consolidation charge...................... - 47.1 - Disposition of subsidiary................. - 22.8 - Deferred income taxes..................... .5 1.5 1.5 Working capital changes Notes and accounts receivable........... 4.8 31.6 13.0 Inventories............................. (19.8) 24.2 (16.5) Other current assets.................... (.4) 5.1 1.3 Trade accounts payable.................. 13.3 (8.3) 9.6 Other current liabilities............... (42.5) (61.5) (29.5) Increase in other noncurrent assets....... (3.2) (2.1) (3.3) Decrease in long-term accrued liabilities. (6.2) (10.1) (11.0) Other - net............................... (4.4) (8.8) (9.7) ------ ------- ------ Net cash provided (used) by operating activities............................ 8.0 22.2 (2.2) ------ ------- ------ INVESTING ACTIVITIES CASH FLOWS Capital expenditures.......................... (43.0) (23.4) (17.6) Net disposals of property, plant and equipment................................... 4.3 22.2 11.1 Acquisitions.................................. (1.9) (112.5) - Divestitures.................................. 3.2 5.0 - ------ ------- ------ Net cash used by investing activities....... (37.4) (108.7) (6.5) ------ ------- ------ FINANCING ACTIVITIES CASH FLOWS Dividends paid................................ (12.4) (11.8) (10.2) Issuance of long-term debt.................... 115.4 - - Repayments of long-term debt and lease obligations................................. (62.8) (61.9) (1.4) Increase (decrease) in amounts payable to banks.................................... (12.5) 54.8 15.9 Net issuance of common shares................. 4.4 114.0 3.1 Redemption premium on early extinguishment of debt..................................... - (4.7) - ------ ------- ------ Net cash provided by financing activities... 32.1 90.4 7.4 ------ ------- ------ INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS.. 2.7 3.9 (1.3) Cash and cash equivalents at beginning of year.... 18.8 14.9 16.2 ------ ------- ------ CASH AND CASH EQUIVALENTS AT END OF YEAR.......... $ 21.5 $ 18.8 $ 14.9 ====== ======= ======
See notes to consolidated financial statements. F-5 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES FISCAL YEAR END The company's year ends on the Saturday closest to December 31 of each year. Fiscal year ends are as follows: 1994: December 31, 1994 1993: January 1, 1994 1992: January 2, 1993 CONSOLIDATION The consolidated financial statements include the accounts of the company and its subsidiaries. All significant intercompany transactions are eliminated. FOREIGN CURRENCY TRANSLATION Assets and liabilities of the company's foreign operations are translated into U.S. dollars at period-end exchange rates, and income and expense accounts are translated at weighted-average exchange rates for the period. Net exchange gains or losses resulting from such translation are excluded from net earnings (loss) and accumulated in a separate component of shareholders' equity. Gains and losses from foreign currency transactions are included in other costs and expenses - net in the Consolidated Statement of Earnings. Gains and losses on foreign exchange forward contracts are recognized as part of the specific transaction hedged. CASH AND CASH EQUIVALENTS The company considers all highly liquid investments with a maturity of three months or less to be cash equivalents. INVENTORY VALUATION Inventories are stated at the lower of cost or market, including provisions for obsolescence commensurate with known or estimated exposures. The principal methods of determining costs are last-in, first-out (LIFO) for most U.S. inventories and average or standard cost, which approximates first-in, first-out (FIFO), for other inventories. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment, including capital leases, are stated at cost. Equipment leased to customers is accounted for under the operating lease method. For financial reporting purposes, depreciation is generally determined on the straight-line method using estimated useful lives of plant and equipment. Property, plant and equipment currently idle and held for sale or identified for sale in the future are valued at the lower of historical cost less accumulated depreciation, or estimated net realizable value. Carrying costs through the expected disposal dates of such assets are accrued at the time expected losses are recognized or, in the case of assets to be sold at a gain, charged to expense as incurred. INCOME TAXES The company provides deferred taxes for cumulative temporary differences between the financial reporting basis and income tax basis of its assets and liabilities. Provisions are made for any additional taxes on anticipated distributions from subsidiaries. EARNINGS PER SHARE Earnings per common share are based on the weighted-average number of common shares and common share equivalents outstanding. RETIREMENT BENEFIT PLANS The company maintains various pension plans covering substantially all employees. Pension benefits are based primarily on length of service and highest consecutive average five-year compensation. The company's policy is to fund the plans in accordance with applicable laws and regulations. CUMULATIVE EFFECT OF CHANGES IN METHODS OF ACCOUNTING Effective January 3, 1993, the company adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes." This standard requires the use of the liability method, under which deferred income tax assets and liabilities related to cumulative differences between an entity's financial reporting and tax basis balance sheets are recognized using expected future tax rates. Previously, the company had used the deferred method, under which deferred income tax assets and liabilities were based on historical differences between financial reporting income and taxable income and recognized using historical income tax rates. Financial results for fiscal year 1992 have not been restated in connection with the adoption of this standard. The company's domestic operations also adopted Statement of Financial Accounting Standards No. 106, "Employers Accounting for Postretirement Benefits Other Than Pensions," effective January 3, 1993. This standard requires that the expected cost of postretirement benefits other than pensions, such as health care benefits, that are provided to retirees be recognized on the accrual method during the years that employees render service. The company provides health care benefits to U.S. retirees and previously recognized the related cost as the benefits were paid. The standard does not permit the restatement of the financial results of prior years. The company has recorded the cumulative effect (to January 2, 1993) of adopting these standards as a charge to earnings in the first quarter of 1993, as follows:
Cumulative Effect of Changes in Methods of Accounting 1993 ---------------------- Charge to Per Common (In millions, except per share amounts) Earnings Share --------- ---------- Income taxes.............................. $ (4.2) $ (.13) Retiree health care benefits (with no current tax effect)............. (47.9) (1.48) ------ ------ $(52.1) $(1.61) ====== ======
F-6 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The new standard for accounting for income taxes imposes significant limitations on the recognition and valuation of deferred tax assets related to future tax deductions previously recognized for financial reporting purposes and to net operating loss carryforwards. Because of these limitations, and because the company entered 1993 with a U.S. net operating loss carryforward of approximately $36 million, no income tax benefit could be recognized on a net basis for the cumulative effect of adopting the new accounting rules for postretirement health care benefits. CONSOLIDATION CHARGE In December, 1993, management adopted a plan to reduce machine tool manufacturing capacity by consolidating U.S. machine tool manufacturing into facilities in Cincinnati and accordingly, recorded a charge of $47.1 million (with no current tax effect). Production at the company's two machine tool facilities in Fountain Inn and Greenwood, South Carolina was phased out during 1994 and the plants were closed by year-end. The consolidation addressed excess manufacturing capacity created by two factors: the company's successful Wolfpack program, which significantly reduced the hours and floorspace required to manufacture and assemble machine tool products, and the unusually steep recession in the aerospace industry, which has dramatically lowered demand for the company's advanced machine tool systems. The consolidation plan included a provision for the phase out of production in South Carolina offset by a simultaneous ramp up of production in Cincinnati in order to minimize the effect of the consolidation on 1994 sales. Major components of the charge are reflected in the following table.
Consolidation Charge (In millions) 1993 ----- Severance and other fringe benefits............... $ 9.1 Costs to relocate key employees and production................................... 10.0 Write-downs of inventory of discontinued products......................................... 6.1 Loss on disposal of plant and equipment........... 4.9 Accrual for operating losses through plant closing dates.................................... 13.6 Other............................................. 3.4 ----- $47.1 =====
Reserves related to additional cash costs to be incurred principally in the first quarter of 1995 totaled approximately $2.6 million at year-end 1994. Completion of the consolidation was originally expected to result in a net employee reduction of 235 in U.S. machine tool operations. However, increased customer demand for machine tool products, including the products being transferred from South Carolina, has caused this target to be reduced to 150. In addition, the favorable job market in South Carolina resulted in an unexpectedly high early attrition rate at the facilities to be closed. As a result of these factors, the cost for severance and other fringe benefits was approximately $6 million less than the original estimate reflected above. Simultaneously, a higher than expected number of voluntary terminations slowed the phase out of production in South Carolina and as a result, operating losses through the closure date of the two plants were approximately $2 million higher than originally expected. The net $4 million reduction in the cost of the consolidation was utilized to absorb incremental costs arising from the 1990 and 1991 machine tool restructurings, including lower estimated net proceeds from the sale of the Heald facility, the closure of certain overseas sales offices and the restructuring of domestic machine tool operations. DISPOSITION OF SUBSIDIARY In November, 1993, the company announced its decision to sell its Sano business. Accordingly, the company recorded charges in the third and fourth quarters of 1993 totaling $22.8 million (with no current tax effect) to adjust its investment in Sano to net realizable value. The decision to sell Sano was due in part to its continuing operating losses. In addition, the Sano business did not serve a major global market with good long-term growth and profit potential and as a result, did not meet the company's criteria for a core business. In February, 1994, the company completed the sale of Sano resulting in initial cash proceeds of $2.0 million. The remainder of the gross sales price of approximately $7 million is being received through the collection of trade receivables and in varying installments through 1999. ACQUISITIONS On February 1, 1993, the company completed the acquisition of GTE Valenite Corporation (Valenite) for $66 million in cash and $11 million of assumed debt. Valenite is a leading producer of consumable industrial metalcutting products. The acquisition, which was accounted for under the purchase method, was financed principally through the sale of $50 million of accounts receivable and borrowings under the company's committed revolving credit facility. On November 8, 1993, the company completed the acquisition of Ferromatik, the plastics injection molding machine business of Kloeckner-Werke AG, for DM 74.8 million (approximately $44 million) in cash and DM 10.6 million (approximately $6 million) in assumed debt. The acquisition, which was accounted for under the purchase method, was financed primarily through borrowings under the company's existing lines of credit, including its committed revolving credit facility. Ferromatik, which is headquartered in Germany, is one of the world's leading producers of injection molding machines and is recognized for high-end technology and specialty applications. The aggregate acquisition cost of the company's investments in Valenite and Ferromatik, including professional fees and other costs related thereto, was approximately $115.5 million. The following table presents the allocation of the aggregate acquisition cost to the assets acquired and liabilities assumed. Goodwill arising from the Valenite and Ferromatik acquisitions, which is included in other noncurrent assets in the following table, totaled $15.6 million. F-7 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Allocation of Acquisition Cost (In millions) 1993 ------ Cash and cash equivalents........................ $ 1.1 Accounts receivable.............................. 54.6 Inventories...................................... 74.2 Other current assets............................. 19.5 Property, plant and equipment.................... 91.1 Other noncurrent assets.......................... 28.6 ------ Total assets.................................... 269.1 ------ Amounts payable to banks and long-term debt due within one year.............. 13.1 Other current liabilities........................ 103.7 Long-term accrued liabilities.................... 31.6 Long-term debt and lease obligations............. 5.2 ------ Total liabilities............................... 153.6 ------ Total acquisition cost........................... $115.5 ======
As presented above, other current liabilities includes a reserve of $44.0 million for the restructuring of Valenite for future profitability. The restructuring plan included the consolidation of production through the closing of eleven production facilities, the downsizing of two production facilities and a net employee reduction in excess of 500. The total cost of the restructuring, to the extent reflected in the allocation of acquisition cost, was $53.7 million ($25.8 million in cash) and included amounts for severance, relocation and losses on the sale of surplus inventory, machinery and equipment and production facilities. Additional costs in 1993 and 1994 related to the overall restructuring plan that were not reserved for in the allocation of acquisition cost totaled $11.4 million, of which $7.9 million was recorded as capital expenditures with the remaining $3.5 million being charged to expense as incurred. The restructuring, which began March 2, 1993, was completed in 1994. Other current liabilities also includes a reserve of $6.5 million for the restructuring of Ferromatik during 1994. Capital expenditures related to the overall restructuring plan, which are not reserved in the allocation of acquisition cost, totaled $.3 million in 1994 but will be more significant in 1995. Due to general economic conditions in Europe, the operations of Ferromatik's manufacturing plant were restructured during 1993 and 1992 to improve efficiency and reduce personnel levels. The company and Ferromatik identified additional restructuring actions, including further personnel reductions, that are intended to improve Ferromatik's profitability in the future. These actions, which complement the actions already taken prior to the acquisition, were substantially completed during 1994 except for the capital expenditures to be made in 1995. Unaudited pro forma sales and earnings information for 1993 and 1992 prepared under the assumption that the acquisitions had been completed at the beginning of those years is as follows:
Pro Forma Information (In millions, except per-share amounts) 1993 1992 ------- -------- Sales....................................... 1,128.4 $1,187.5 ======= ======== Earnings (loss) before extraordinary items and cumulative effect of changes in methods of accounting.................. $ (48.2) $ 19.3 Extraordinary items Loss on early extinguishment of debt...... (4.4) - Tax benefit from loss carryforward........ - 4.0 Cumulative effect of changes in methods of accounting.................. (52.1) - ------- -------- Net earnings (loss)......................... $(104.7) $ 23.3 ======= ======== Earnings (loss) per common share Earnings (loss) before extraordinary items and cumulative effect of changes in methods of accounting................ $ (1.50) $ .69 Extraordinary items Loss on early extinguishment of debt.... (.14) - Tax benefit from loss carryforward...... - .15 Cumulative effect of changes in methods of accounting................ (1.61) - ------- -------- Net earnings (loss)....................... $ (3.25) $ .84 ======= ========
RESEARCH AND DEVELOPMENT Charges to operations for research and development activities are summarized below. The amounts include expenses related to the company's Wolfpack product development and process improvement program.
Research and Development (In millions) 1994 1993 1992 ----- ----- ----- Research and development.... $46.8 $41.9 $34.1 ===== ===== =====
RETIREMENT BENEFIT PLANS Summarized in the following tables are the company's pension cost (income) and funded status of its major pension plans.
Pension Cost (Income) (In millions) 1994 1993 1992 ------ ------ ------ Service cost (benefits earned during the period).......................... $ 7.6 $ 6.3 $ 6.3 Interest cost on projected benefit obligation.......................... 32.2 31.5 29.0 Actual loss (return) on plan assets.......... 4.8 (54.8) (24.0) Net amortization and deferral................ (47.0) 14.3 (18.7) ------ ------ ------ Pension cost (income)........................ $ (2.4) $ (2.7) $ (7.4) ====== ====== ======
F-8 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Funded Status of Pension Plans at Year-End (In millions) 1994 1993 ------- ------- Vested benefit obligation............................. $(316.6) $(340.2) ======= ======= Accumulated benefit obligation........................ $(331.9) $(353.7) ======= ======= Plan assets at fair value, primarily listed stocks and debt securities, including company stock of $14.9 in 1994 and $14.0 in 1993.................................... $ 366.1 $ 396.9 Projected benefit obligation.......................... (383.7) (416.9) ------- ------- Deficiency of plan assets in relation to projected benefit obligation...................... (17.6) (20.0) Unrecognized net (gain ) loss......................... 41.6 46.8 Unrecognized net transition asset..................... (24.8) (30.2) ------- ------- Accrued pension liability............................. $ (.8) $ (3.4) ======= =======
At December 31, 1994, the projected benefit obligation of the company's U.S. plan exceeded its assets by $28.9 million, while the assets of the plan for United Kingdom employees exceeded the projected benefit obligation by $11.3 million. A contribution of $.1 million was made to the U.S. plan in 1994. Because of the funded status of the two plans, no other contributions were required or made in the three year period ended December 31, 1994. For 1994 and 1993, the assumed discount rates used in determining the projected benefit obligation were 9% and 7 1/2%, respectively. The assumed rate of increase in remuneration was 5% for 1994 and 4 1/2% for 1993. The weighted- average expected long-term rate of return on plan assets used to determine pension income was 9 1/2% in all years presented. In addition to pension benefits, the company also provides varying levels of postretirement health care benefits to most U.S. employees who retire from active service after having attained age 55 and ten years of service. The plan is contributory in nature. Prior to 1993, retiree contributions were based on varying percentages of the average per-contract cost of benefits, with the company funding any excess over these amounts. However, the plan was amended in 1992 to freeze the dollar amount of the company's contributions in future years for employees retiring after 1980 based on specified percentages of the 1993 per-contract cost. Effective January 3, 1993, the company's domestic operations adopted Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions." The change did not significantly affect earnings before extraordinary items and cumulative effect of changes in methods of accounting for 1993. The following table presents the components of the company's liability for future retiree health care benefits.
Accrued Postretirement Health Care Benefits (In millions) 1994 1993 ------- ------- Accumulated postretirement benefit obligation Retirees...................................... $(35.2) $(42.6) Fully eligible active participants............ (5.4) (7.4) Other active participants..................... (7.5) (8.1) ------ ------ (48.1) (58.1) Unrecognized net loss.......................... 2.6 9.8 ------ ------ $(45.5) $(48.3) ====== ======
At year-end 1994, $1.5 million of the total liability for postretirement health care benefits is included in current liabilities in the Consolidated Balance Sheet. Retiree health care costs for 1994 were $4.8 million, consisting of service cost of $.5 million, interest of $4.0 million and amortization of $.3 million. In 1993, retiree health care costs were $4.5 million, including service cost and interest of $.3 million and $4.2 million, respectively. Prior to 1993, the company recognized the cost of health care benefits paid to U.S. retirees as incurred. Such costs totaled $5.8 million in 1992. The discount rates used in calculating the accumulated postretirement benefit obligation were 8 1/2% for 1994 and 7% for 1993. For 1995, the assumed rate of increase in health care costs used to calculate the accumulated postretirement benefit obligation is 10%. This rate is assumed to decrease to varying degrees annually to 6% for years 2005 and thereafter. Because of the effect of the 1992 plan changes that froze the dollar amount of the company's contributions for future years, a one percent change in each year in relation to the above assumptions would not significantly change the accumulated postretirement benefit obligation or the total cost of the plan. INCOME TAXES Effective January 3, 1993, the company adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes." The standard requires the use of the liability method to recognize deferred income tax assets and liabilities using expected future tax rates. The tax effects of temporary differences that give rise to the recorded deferred tax assets and deferred tax liabilities at year-end 1994 and 1993 are presented in the following table. F-9 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Components of Deferred Tax Assets and Liabilities (In millions) 1994 1993 ------- ------- Deferred tax assets Net operating loss and various tax credit carryforwards.......................... $ 56.8 $ 40.8 Accrued postretirement health care benefits..... 15.4 16.9 Inventories, principally due to obsolescence reserves and additional costs inventoried for tax purposes.............................. 7.1 5.6 Accrued employee benefits other than pensions and retiree health care benefits..... 5.2 3.2 Accrued pension costs........................... 4.6 5.3 Accrued warranty costs.......................... 3.2 2.2 Accounts receivable, principally due to allowances for doubtful accounts.............. 1.8 1.3 Consolidation, restructuring and other reserves................................ 2.0 34.8 Foreign investments............................. 1.4 9.2 Other........................................... 15.8 13.1 ------ ------ Total deferred tax assets..................... 113.3 132.4 Less valuation allowance...................... (85.7) (95.7) ------ ------ Net deferred tax assets..................... 27.6 36.7 ------ ------ Deferred tax liabilities Property, plant and equipment, principally due to differences in depreciation methods.... 18.5 26.1 Undistributed earnings of foreign subsidiaries.. - 3.9 Pension assets.................................. 3.5 2.9 Other........................................... 7.6 4.2 ------ ------ Total deferred tax liabilities................ 29.6 37.1 ------ ------ Net deferred tax liability........................ $ (2.0) $ (.4) ====== ======
Summarized in the following tables are the company's earnings (loss) before income taxes, extraordinary items and cumulative effect of changes in methods of accounting, its provision for income taxes, and a reconcilement of the U.S. statutory rate to the tax provision rate.
Earnings (Loss) Before Income Taxes, Extraordinary Items and Cumulative Effect of Changes in Methods of Accounting (In millions) 1994 1993 1992 ------- -------- -------- United States............... $32.7 $(41.5) $28.0 Foreign..................... 16.2 4.3 (1.0) ----- ------ ----- $48.9 $(37.2) $27.0 ===== ====== =====
Provision for Income Taxes Deferred Liability Method Method ---------------- -------- (In millions) 1994 1993 1992 ----- ------ ----- Current provision United States................ $ 4.1 $ - $ - State and local.............. 3.4 2.4 1.7 Foreign...................... 3.2 4.3 2.3 ----- ---- ----- 10.7 6.7 4.0 ----- ---- ----- Deferred provision United States................ - - .6 Foreign...................... .5 1.5 .9 ----- ---- ----- .5 1.5 1.5 ----- ---- ----- Provision recognized as extraordinary benefit........ - - 5.4 ----- ---- ----- $11.2 $8.2 $10.9 ===== ==== =====
Components of the Provision for Deferred Income Taxes Deferred Liability Method Method -------------------- -------- (In millions) 1994 1993 1992 --------- -------- -------- Tax effects of consolidation, restructuring and other reserves $ 32.8 $ (9.2) $ 1.2 Change in deferred revenue (.2) (16.3) - Depreciation (7.6) 1.3 - Change in valuation allowance (10.0) 25.5 - Change in deferred taxes related to operating loss carryforward (16.0) (1.3) - Other 1.5 1.5 .3 ----- ------ ----- $ .5 $ 1.5 $ 1.5 ===== ====== =====
Reconcilement of the U.S. Statutory Rate to the Tax Provision Rate Deferred Liability Method Method ---------------- -------- 1994 1993 1992 -------- ------ -------- U.S. statutory tax rate.................. 35.0% (35.0)% 34.0% Increase (decrease) resulting from Losses without current tax benefits.... 5.6 56.1 5.1 Tax benefits from net reversal of U.S. temporary differences............. (15.1) - - Effect of operations outside the U.S... (9.5) (5.5) (2.7) State and local taxes, net of federal benefit.............................. 7.0 6.5 4.2 Other.................................. (.1) (.1) (.2) ----- ----- ---- 22.9% 22.0% 40.4% ===== ===== ====
F-10 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS In 1992, in accordance with accounting rules then in effect, the company recognized an extraordinary tax benefit of $5.4 million, or $.19 per share, from the realization of its U.S. net operating loss carryforward that originated principally from a closing and relocation charge of $75.1 million recorded in 1991 and a special charge of $32.8 million for product discontinuance and the reorganization of grinding machine and certain other machine tool manufacturing operations recorded in 1990. For U.S. tax reporting purposes, at year-end 1994, the company had net operating loss carryforwards of approximately $41 million which expire in 2008 and 2009. Undistributed earnings of foreign subsidiaries which are intended to be indefinitely reinvested aggregated $42 million at the end of 1994. Income taxes of $10.4 million, $16.1 million and $5.0 million were paid in 1994, 1993 and 1992, respectively. RECEIVABLES The components of notes and accounts receivable less allowances are shown in the following table.
Notes and Accounts Receivable Less Allowances (In millions) 1994 1993 ------ ------ Notes receivable....................... $ 12.9 $ 6.0 Accounts receivable.................... 183.8 190.2 ------ ------ 196.7 196.2 Less allowances for doubtful accounts.. 8.7 7.9 ------ ------ $188.0 $188.3 ====== ======
The acquisition of Valenite was financed in part through the sale of $50.0 million of the company's U.S. accounts receivable. The sale transaction occurred under a three year receivables purchase agreement with an independent issuer of receivables-backed commercial paper, pursuant to which the company agreed to sell on an ongoing basis and without recourse, an undivided percentage ownership interest in designated pools of accounts receivable. In order to maintain the balance in the designated pools of accounts receivable sold, the company is obligated to sell undivided percentage interests in new receivables as existing receivables are collected. On March 18, 1994, the receivables purchase agreement was amended and restated to provide for the sale of up to $65.0 million of interests in accounts receivable through January, 1996, the termination date of the agreement. At December 31, 1994, and January 1, 1994, the undivided interest in the company's gross accounts receivable that had been sold to the purchaser aggregated $65.0 million and $50.0 million, respectively. The company also sold an additional $11.4 million of accounts receivable in the fourth quarter of 1993 under a separate receivables purchase agreement. Costs related to both sales are included in other costs and expenses - net in the Consolidated Statement of Earnings. The proceeds are reported as providing operating cash flow in the Consolidated Statement of Cash Flows. INVENTORIES Inventories amounting to $136.1 million for 1994 and $134.8 million for 1993 are stated at LIFO cost. Such inventories if stated at FIFO cost would be greater by approximately $59.5 million in 1994 and $57.4 million in 1993. As presented in the Consolidated Balance Sheet, inventories are net of reserves for obsolescence of $38.6 million and $33.8 million in 1994 and 1993, respectively. PROPERTY, PLANT AND EQUIPMENT The components of property, plant and equipment are shown in the following table.
Property, Plant and Equipment - Net (In millions) 1994 1993 ------ ------ Land.............................................. $ 8.1 $ 8.4 Buildings......................................... 139.4 138.3 Machinery and equipment........................... 301.8 284.6 ------ ------ 449.3 431.3 Less accumulated amortization and allowances for depreciation..................... 250.5 247.3 ------ ------ $198.8 $184.0 ====== ======
OTHER ASSETS At December 31, 1994, other current assets includes $10.3 million related to assets held for sale, including the net book value of Valenite's American Mine Tool business, which was sold in January, 1995, and certain idle production facilities which are expected to be sold in 1995. At December 31, 1994, the $5.9 million carrying value of the two South Carolina facilities that were closed in connection with the machine tool consolidation is included in other noncurrent assets. At January 1, 1994, property, plant and equipment - net included $7.2 million related to these facilities which were still in use at that time. LIABILITIES The components of accrued and other current liabilities and long-term accrued liabilities are shown in the following tables.
Accrued and Other Current Liabilities (In millions) 1994 1993 ------ ------ Accrued salaries, wages and other compensation............................... $ 29.9 $ 21.5 Consolidation reserve.............................. 2.6 38.7 Restructuring reserves............................. 3.1 17.1 Accrued and deferred income taxes.................. 21.5 23.6 Other accrued expenses............................. 83.5 69.3 ------ ------ $140.6 $170.2 ====== ======
F-11 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Long-Term Accrued Liabilities (In millions) 1994 1993 ------ ------ Accrued pension and other compensation........... $ 27.3 $ 24.1 Accrued postretirement health care benefits...... 44.0 46.9 Accrued and deferred income taxes................ 25.8 30.5 Other............................................ 26.4 27.1 ------ ------ $123.5 $128.6 ====== ======
LONG-TERM DEBT AND LEASE OBLIGATIONS Long-term debt and lease obligations are shown in the following table.
Long-Term Debt and Lease Obligations (In millions) 1994 1993 ------- ------- Long-term debt 8 3/8% Notes due 2004................. $115.0 $ - 8 3/8% Senior Notes due 1997.......... - 60.0 12% Sinking Fund Debentures due 2010.. 10.8 10.8 Industrial Development Revenue Bonds due 2008....................... 10.0 10.0 Revolving credit facility............. 10.0 10.0 Other................................. 8.1 8.8 ------ ------ 153.9 99.6 ------ ------ Capital lease obligations 6 3/4% Bonds due 2004................. 7.6 7.6 6 3/8% Bonds due 1995 - 1997.......... 2.6 3.4 6 1/2% Bonds due 1994................. - .4 ------ ------ 10.2 11.4 ------ ------ 164.1 111.0 Current maturities..................... (21.1) (3.4) ------ ------ $143.0 $107.6 ====== ======
Except for the 8 3/8% Notes due 2004, the carrying amount of the company's long- term debt approximates fair value, which is determined using discounted cash flow analysis based on the company's incremental borrowing rate for similar types of financing arrangements. The fair value of the 8 3/8% Notes due 2004 is $104.4 million, which is based on recent trade prices through registered securities brokers. In 1994, the company completed a public offering involving the issuance of $115.0 million of 8 3/8% Notes due 2004. The proceeds were used to redeem at par the company's outstanding 8 3/8% Senior Notes due 1997 and to repay short-term debt. The 12% Sinking Fund Debentures due 2010 have annual sinking fund installments commencing in 1996. The debentures are redeemable at any time at the company's option subject to possible premiums and other restrictions. The Industrial Development Revenue Bonds due 2008 are tax-exempt variable-rate bonds. The interest rate is established weekly and averaged 2.9% in 1994. The bonds are supported by a bank letter of credit, which requires a fee of 1 1/4% per annum on the amount outstanding. Certain of the above long-term debt obligations contain various restrictions and financial covenants relating principally to additional secured indebtedness. At December 31, 1994 and January 1, 1994, $10.0 million of borrowings under the company's revolving credit facility are included in long-term debt based on the expectation that such amount will remain outstanding for more than one year. At December 31, 1994, current maturities includes the Industrial Development Revenue Bonds due 2008 and the 6 3/4% Bonds due 2004, both of which are expected to become payable within one year due to the closure of the company's two machine tool facilities in South Carolina. Interest paid was $17.1 million in 1994, $19.0 million in 1993 and $18.9 million in 1992. Maturities of long-term debt for the five years after 1994 are: 1995: $12.7 million 1996: 6.3 million 1997: 7.2 million 1998: 1.3 million 1999: 1.5 million The capitalized lease assets are included in property, plant and equipment. Amortization of leased properties is included in depreciation and interest on lease obligations is included in interest expense. Future minimum payments for principal and interest on capitalized leases are: 1995: $8.9 million 1996: 1.0 million 1997: 1.0 million After 1997: - million The company also leases certain equipment under operating leases, some of which include varying renewal and purchase options. Future minimum rental payments applicable to noncancelable operating leases during the next five years and in the aggregate thereafter are: 1995: $15.9 million 1996: 12.2 million 1997: 9.1 million 1998: 4.4 million 1999: 3.1 million After 1999: 7.8 million Rent expense was $17.4 million, $14.7 million and $9.6 million in 1994, 1993 and 1992, respectively. LINES OF CREDIT At year-end 1994, the company had lines of credit with various U.S. and non-U.S. banks of approximately $366 million, including a $200 million committed revolving credit facility. These credit facilities support letters of credit and leases in addition to providing borrowings under varying terms. The revolving credit facility was amended in December, 1994, to increase the amount of borrowings available thereunder from $130 million to $200 million, including borrowings denominated in German marks up to an equivalent of $100 million. The facility, which allows borrowings through July, 1996, requires a facility fee of 1/2 % per annum on the total $200 million revolving loan commitment and imposes restrictions on total indebtedness in relation to total capital (debt plus tangible net worth, the latter being approximately equal to F-12 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS shareholders' equity). The company has remained in compliance with the restrictions imposed by the facility since its inception. Under the provisions of the amended facility, the company's additional borrowing capacity totaled approximately $113 million at year-end 1994. A portion of this capacity was utilized to finance the acquisition of Krupp Widia GmbH early in 1995 (see Subsequent Events). The weighted average interest rate on short-term borrowings outstanding as of year-end 1994 and 1993 was 7.3% and 5.5%, respectively. SHAREHOLDERS' EQUITY On April 15, 1993, the company completed the issuance of an additional 5.175 million common shares through a public offering, resulting in net proceeds (after deducting issuance costs) of $100.6 million. The proceeds of the offering were used to redeem $60.0 million of the company's 12% Sinking Fund Debentures due 2010 and to repay borrowings under revolving lines of credit and other bank debt. The redemption of the 12% Sinking Fund Debentures due 2010 effective May 17, 1993 resulted in an extraordinary loss on early extinguishment of debt of $5.2 million ($4.4 million after tax) in the second quarter. The extraordinary loss included a cash call premium of $4.7 million and the write-off of deferred financing fees of $.5 million.
Shareholders' Equity - Preferred and Common Shares (Dollars in millions, except per-share amounts) 1994 1993 ----- ----- 4% Cumulative Preferred shares authorized, issued and outstanding, 60,000 shares at $100 par value, redeemable at $105 a share... $ 6.0 $ 6.0 Common shares, $1 par value authorized 50,000,000 shares, issued and outstanding, 1994: 33,742,125 shares, 1993: 33,531,723.... 33.7 33.5 ===== =====
The company has authorized ten million serial preference shares with $1 par value. None of these shares has been issued. Holders of company common stock have one vote per share until they have held their shares for at least 36 consecutive months, after which they are entitled to ten votes per share. CONTINGENCIES Various lawsuits arising during the normal course of business are pending against the company and its consolidated subsidiaries. In the opinion of management, the ultimate liability, if any, resulting from these matters will have no significant effect on the company's consolidated financial position or results of operations. FOREIGN EXCHANGE CONTRACTS The company enters into foreign exchange contracts to hedge foreign currency transactions on a continuing basis for periods commensurate with its known or expected exposures. The purpose of this practice is to minimize the effect of foreign currency exchange rate fluctuations on the company's operating results. The company does not engage in speculation. At December 31, 1994, the company had outstanding foreign exchange contracts totaling $11.9 million, which generally mature in periods of six months or less. These contracts require the company and its subsidiaries to exchange currencies at the maturity dates at exchange rates agreed upon at inception. LONG-TERM INCENTIVE PLANS The 1994 Long-Term Incentive Plan (1994 Plan) permits the company to grant its common shares in the form of non-qualified stock options, incentive stock options, restricted stock and performance awards. A summary of amounts issued under the 1994 Plan and prior plans is presented in the following table.
Stock Options, Restricted Stock Awards and SARs Price Shares SARs Range --------- ------- ------ Outstanding at year-end 1991.......... 1,852,028 515,762 $ 9-29 Activity during 1992 - Granted...... 462,920 - 15-16 - Exercised.... (91,628) - 9-25 - Canceled..... (148,167) - 9-25 - SARs Canceled 515,762 (515,762) 9-28 --------- -------- ------ Outstanding at year-end 1992.......... 2,590,915 - 9-29 Activity during 1993- Granted....... 118,025 - 17-24 - Exercised..... (854,918) - 9-25 - Canceled...... (136,947) - 13-29 --------- -------- ------ Outstanding at year-end 1993.......... 1,717,075 - 9-28 Activity during 1994- Granted....... 481,547 - 23 - Exercised..... (203,404) - 9-25 - Canceled...... (25,782) - 16-25 --------- -------- ------ Outstanding at year-end 1994.......... 1,969,436 - $ 9-28 ========= ======== ======
Exercisable Stock Options at Year-End Stock Options --------- 1992....................... 1,748,565 1993....................... 1,474,262 1994....................... 1,437,636
The non-qualified stock options and incentive stock options are issued at market and, under the terms of a prior plan, could be granted in tandem with SARs. However, during 1992, all previously granted SARs were canceled with the consent of the holders. Stock options become exercisable under varying terms and expire F-13 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS in ten years. Shares of restricted stock are subject to three-year restrictions against selling, encumbering or otherwise disposing of these shares. Performance awards may be earned based on achievement of specified annual earnings objectives. The maximum number of shares that may be granted under the 1994 Plan is 2,000,000, all of which were available for grant at year-end 1993. At year-end 1994, 1,481,950 shares were available for grant. GEOGRAPHIC INFORMATION The following table summarizes the company's U.S. and foreign operations which are located principally in Western Europe. Sales of U.S. operations include export sales of $142.0 million in 1994, $118.7 million in 1993 and $111.7 million in 1992. Total sales of the company's U.S. and foreign operations to unaffiliated customers outside the U.S. were $417.6 million, $298.4 million and $242.6 million, in 1994, 1993 and 1992, respectively.
U.S. and Foreign Operations (In millions) 1994 1993 1992 ------ ------ ------ U.S. operations Sales....................... $873.9 $831.9 $654.1 Operating earnings.......... 50.6 49.6 47.9 Consolidation charge........ - (47.1) - Disposition of subsidiary... - (22.8) - Identifiable assets......... 471.4 420.6 410.8 Liabilities................. 506.3 469.9 403.3 Capital expenditures........ 33.2 21.3 13.9 Depreciation................ 18.8 19.1 16.3 Foreign operations Sales....................... 323.2 197.5 135.1 Operating earnings.......... 27.2 8.0 1.5 Identifiable assets......... 289.4 285.9 148.7 Liabilities................. 123.5 135.6 41.2 Capital expenditures........ 9.8 2.1 3.7 Depreciation................ 9.4 7.0 4.6
SEGMENT INFORMATION Cincinnati Milacron is one of the world's leading manufacturers of plastics machinery, machine tools, computer controls and software for factory automation. In addition, the company is a leading producer of precision grinding wheels, metalworking fluids and metalcutting tools. Financial data for the past three years for the company's business segments are shown in the following tables.
Sales by Segment (In millions) 1994 1993 1992 -------- -------- ------ Plastics machinery (a)... $ 503.8 $ 357.2 $301.4 Machine tools............ 338.5 355.0 379.7 Industrial products (b).. 354.8 317.2 108.1 -------- -------- ------ $1,197.1 $1,029.4 $789.2 ======== ======== ======
Operating Information by Segment (In millions) 1994 1993 1992 ------- -------- ------- Operating earnings (loss) Plastics machinery (a)(c).......... $ 42.5 $ 26.6 $ 22.8 Machine tools...................... 1.0 3.9 8.9 Industrial products (b)............ 34.3 27.1 17.7 Consolidation charge (d)........... - (47.1) - Disposition of subsidiary(e)....... - (22.8) - Unallocated corporate expenses(f).. (13.6) (11.5) (6.2) ------ ------ ------ Operating earnings(loss)......... 64.2 (23.8) 43.2 Interest expense-net............... (15.3) (13.4) (16.2) ------ ------ ------ Earnings (loss) before income taxes, extraordinary items and cumulative effect of changes in methods of accounting......... $ 48.9 $(37.2) $ 27.0 ====== ====== ====== Identifiable assets Plastics machinery (a)............. $295.0 $289.0 $219.9 Machine tools...................... 270.8 243.1 282.8 Industrial products (b)........... 195.0 174.4 56.8 Unallocated corporate assets (g)... 26.8 23.1 19.4 ------ ------ ------ Total assets................... $787.6 $729.6 $578.9 ====== ====== ====== Capital expenditures Plastics machinery (a)............. $ 13.8 $ 4.2 $ 6.2 Machine tools...................... 11.6 8.8 7.1 Industrial products (b)........... 17.6 10.4 4.3 ------ ------ ------ Total capital expenditures..... $ 43.0 $ 23.4 $ 17.6 ====== ====== ====== Depreciation Plastics machinery (a)............. $ 9.2 $ 6.2 $ 7.7 Machine tools...................... 7.2 9.4 10.6 Industrial products (b)........... 11.8 10.5 2.6 ------ ------ ------ Total depreciation............. $ 28.2 $ 26.1 $ 20.9 ====== ====== ======
(a) The increases in the plastics machinery segment are partially attributable to the inclusion of Ferromatik on November 8, 1993. (b) The increases in the industrial products segment are largely attributable to the inclusion of Valenite as of February 1, 1993. (c) The 1993 amount includes a $2.5 million gain on sale of surplus land. (d) This amount relates to the machine tools segment. (e) This amount relates to the plastics machinery segment. (f) Includes corporate research and development and certain administrative expenses. The 1994 and 1993 amounts include amortization of financing costs and costs related to the sale of receivables. (g) Includes cash and cash equivalents and the assets of the company's insurance and utility subsidiaries. F-14 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SUBSEQUENT EVENTS On January 27, 1995, the company completed the sale of its American Mine Tool business resulting in a pretax gain to be recognized in the first quarter of 1995 of approximately $5 million. The sale will not have a significant effect on reported sales or earnings from normal operations in the future. On February 1, 1995, the company completed the acquisition of Krupp Widia GmbH (Widia) for DM 121 million (approximately $78 million) in cash and DM 33 million (approximately $21 million) in assumed debt. Headquartered in Germany, Widia had sales of approximately $240 million in 1994 and is one of the world's leading producers of metalcutting products and industrial magnets. The acquisition, which will be accounted for under the purchase method, was financed principally through borrowings under the company's revolving credit agreement. The company is currently evaluating alternative actions to integrate Valenite and Widia to improve future profitability which could result in incremental costs and expenses in 1995. F-15 [LETTERHEAD OF ERNST & YOUNG LLP] Report of Independent Auditors Board of Directors Cincinnati Milacron Inc. We have audited the accompanying Consolidated Balance Sheet of Cincinnati Milacron Inc. and subsidiaries as of December 31, 1994 and January 1, 1994, and the related Consolidated Statements of Earnings, Changes in Shareholders' Equity, and Cash Flows for each of the three years in the period ended December 31, 1994. These financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Cincinnati Milacron Inc. and subsidiaries at December 31, 1994 and January 1, 1994, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1994, in conformity with generally accepted accounting principles. As discussed in the Note to Consolidated Financial Statements, Cumulative Effect of Changes in Methods of Accounting, in 1993 the company changed its method of accounting for postretirement benefits other than pensions and its method of accounting for income taxes. /s/ Ernst & Young LLP ERNST & YOUNG LLP February 24, 1995 F-16 - ------------------------------------------------------------------------------- NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF. ------------ TABLE OF CONTENTS
PAGE ---- Available Information..................................................... 2 Incorporation of Certain Documents by Reference........................... 2 Prospectus Summary........................................................ 3 Risk Factors.............................................................. 11 Use of Proceeds........................................................... 13 Capitalization............................................................ 14 Ratio of Earnings to Fixed Charges........................................ 15 Selected Historical Financial Data........................................ 16 Selected Historical Segment Information................................... 18 Selected Historical Geographic Information................................ 19 Management's Discussion and Analysis of Financial Condition and Results of Operations............................................................... 20 The Exchange Offer........................................................ 26 Business.................................................................. 32 Description of the New Notes.............................................. 41 Plan of Distribution...................................................... 50 Certain Federal Income Tax Considerations................................. 50 Legal Matters............................................................. 51 Experts................................................................... 51 Financial Statements...................................................... F-1
- ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- CINCINNATI MILACRON OFFER TO EXCHANGE ITS REGISTERED 7 7/8% NOTES DUE 2000 FOR ANY AND ALL OF ITS OUTSTANDING 7 7/8% NOTES DUE 2000 ----------------- PROSPECTUS ----------------- - ------------------------------------------------------------------------------- PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS. Subsection (a) of Section 145 of the General Corporation Law of Delaware empowers a corporation to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. Subsection (b) of Section 145 empowers a corporation to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that such person acted in any of the capacities set forth above against expenses (including attorneys' fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Delaware Court of Chancery or the court in which such action or suit was brought shall determine that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Delaware Court of Chancery or such other court shall deem proper. Section 145 further provides that to the extent a director, officer, employee or agent of a corporation has been successful on the merits or otherwise in the defense of any action, suit or proceeding referred to in subsections (a) and (b) of such Section 145 or in the defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith. It also provides that indemnification provided for by Section 145 shall not be deemed exclusive of any other rights to which the indemnified party may be entitled, and it empowers a corporation to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him or incurred by him in any such capacity or arising out of his status as such, whether or not the corporation would have the power to indemnify him against such liability under Section 145. Article Eleventh of the Restated Certificate of Incorporation, as amended, of the Company provides that, to the fullest extent that the General Corporation Law of Delaware permits the limitation or elimination of the liability of directors, no director of the Company shall be liable to the Company or its stockholders for monetary damages for breach of fiduciary duty as a director. Section 1 of Article XII of the By-Laws of the Company, as amended, provides that the Company shall to the fullest extent permitted by applicable law indemnify any person who is or was a director or officer of the Company and who is or was involved in any manner (including, without limitation, as a party or a witness) or is threatened to be made so involved in any threatened, pending or completed investigation, claim, II-1 action, suit or proceeding, whether civil, criminal, administrative or investigative (including without limitation, any action, suit or proceeding by or in the right of the Company to procure a judgment in its favor) (a "Proceeding") by reason of the fact that such person is or was a director, officer, employee or agent of the Company, or is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise (including, without limitation, any employee benefit plan) against all expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such Proceeding. Section 2 of Article XII of the By-Laws of the Company, as amended, provides that the Company may purchase and maintain insurance to protect itself and any person entitled to indemnification under such Article XII against any expenses, judgments, fines and amounts paid in settlement as specified in Article XII or incurred by any such person in connection with any Proceeding referred to in Article XII, to the fullest extent permitted by applicable law. The Company also may enter into contracts with any person entitled to indemnification under Article XII in furtherance of the provisions of such Article and may create a trust fund, grant a security interest or use other means (including, without limitation, a letter of credit) to ensure the payment of such amounts as may be necessary to effect indemnification as provided in Article XII. The Company has purchased directors' and officers' liability insurance covering certain liabilities incurred by its officers and directors in connection with the performance of their duties. ITEM 21. EXHIBITS. 4.1* Indenture dated as of July 1, 1985, between the Company and BankAmerica Trust Company of New York, as Trustee (incorporated by reference to the Company's Form S-3 Registration Statement filed June 9, 1986 (File No. 33-06147)). 4.2* Second Supplemental Indenture dated as of March 16, 1994, to the Indenture dated as of July 1, 1985, between the Company and BankAmerica National Trust Company (as successor to BankAmerica Trust Company of New York), as Trustee (incorporated by reference to the Company's Form S-4 Registration Statement filed April 7, 1994 (File No. 33-53009)). 4.3* Third Supplemental Indenture dated as of May 17, 1995, to the Indenture dated as of July 1, 1985, between the Company and BankAmerica National Trust Company (as successor to BankAmerica Trust Company of New York), as Trustee. 4.4* Form of Note. 4.5* Registration Rights Agreement relating to the Old Notes. 5* Opinion of Cravath, Swaine & Moore. 8* Tax Opinion of Cravath, Swaine & Moore (included in Exhibit 5). 12* Statement regarding computation of ratios. 23.1 Consent of Ernst & Young LLP. 23.2 Consent of Coopers & Lybrand GmbH. 23.3* Consent of Cravath, Swaine & Moore (included in Exhibit 5). 24* Powers of attorney. 25* Form T-1 Statement of Eligibility and Qualification under the Trust Indenture Act of 1939. 99.1 Form of Letter of Transmittal. 99.2 Form of Notice of Guaranteed Delivery. 99.3 Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees. 99.4 Form of Letter to Clients.
- -------- * Previously filed II-2 ITEM 22. UNDERTAKINGS. The undersigned Registrant hereby undertakes that, for purposes of determining any liability under the Securities Act each filing of the Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Exchange Act (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Exchange Act), that is incorporated by reference in the Registration Statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the provisions set forth in response to Item 20 above, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. The undersigned Registrant hereby undertakes to respond to requests for information that is incorporated by reference into the Prospectus pursuant to Items 4, 10(b), 11, or 13 of Form S-4 under the Securities Act, including information contained in documents filed subsequent to the effective date of this Registration Statement through the date of responding to the request, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. The undersigned Registrant hereby undertakes to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in this Registration Statement when it became effective. II-3 SIGNATURES PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT HAS DULY CAUSED THIS AMENDMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF CINCINNATI, STATE OF OHIO, ON THIS 21ST DAY OF JULY, 1995. CINCINNATI MILACRON INC., Registrant /s/ Ronald D. Brown By___________________________________ RONALD D. BROWN VICE PRESIDENT, FINANCE PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THIS AMENDMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED: SIGNATURE TITLE DATE * Chairman of the Board, - ------------------------------------ Chief Executive July 21, 1995 DANIEL J. MEYER Officer and Director (Principal Executive Officer) /s/ Ronald D. Brown Vice President, Finance - ------------------------------------ (Principal Financial July 21, 1995 RONALD D. BROWN Officer) * Controller (Principal - ------------------------------------ Accounting Officer) July 21, 1995 ROBERT P. LIENESCH * Director - ------------------------------------ July 21, 1995 DARRYL F. ALLEN * Director - ------------------------------------ July 21, 1995 NEIL A. ARMSTRONG * Director - ------------------------------------ July 21, 1995 LYLE EVERINGHAM II-4 SIGNATURE TITLE DATE * Director - ------------------------------------- July 21, 1995 JAMES A.D. GEIER * Director - ------------------------------------- July 21, 1995 HARRY A. HAMMERLY * Director - ------------------------------------- July 21, 1995 JAMES E. PERELLA * Director - ------------------------------------- July 21, 1995 RAYMOND E. ROSS * Director - ------------------------------------- July 21, 1995 JOSEPH A. STEGER * Director - ------------------------------------- July 21, 1995 HARRY C. STONECIPHER *THE UNDERSIGNED, BY SIGNING HIS NAME HERETO, DOES HEREBY SIGN THIS AMENDMENT ON BEHALF OF EACH OF THE ABOVE-INDICATED OFFICERS AND DIRECTORS OF CINCINNATI MILACRON INC. PURSUANT TO POWERS OF ATTORNEY EXECUTED ON BEHALF OF EACH SUCH OFFICER OR DIRECTOR. BY /s/ Ronald D. Brown ----------------------------------- RONALD D. BROWN ATTORNEY-IN-FACT II-5 EXHIBIT INDEX
PAGE NO. -------- 4.1* Indenture dated as of July 1, 1985, between the Company and BankAmerica Trust Company of New York, as Trustee (incorporated by reference to the Company's Form S-3 Registration Statement filed June 9, 1986 (File No. 33- 06147)). 4.2* Second Supplemental Indenture dated as of March 16, 1994, to the Indenture dated as of July 1, 1985, between the Company and BankAmerica National Trust Company (as successor to BankAmerica Trust Company of New York), as Trustee (incorporated by reference to the Company's Form S-4 Registration Statement filed April 7, 1994 (File No. 33- 53009)). 4.3* Third Supplemental Indenture dated as of May 17, 1995, to the Indenture dated as of July 1, 1985, between the Company and BankAmerica National Trust Company (as successor to BankAmerica Trust Company of New York), as Trustee. 4.4* Form of Note. 4.5* Registration Rights Agreement relating to the Old Notes. 5* Opinion of Cravath, Swaine & Moore. Tax Opinion of Cravath, Swaine & Moore (included in Exhibit 8* 5). 12* Statement regarding computation of ratios. 23.1 Consent of Ernst & Young LLP. 23.2 Consent of Coopers & Lybrand GmbH. 23.3* Consent of Cravath, Swaine & Moore (included in Exhibit 5). 24* Powers of attorney. 25* Form T-1 Statement of Eligibility and Qualification under the Trust Indenture Act of 1939. 99.1 Form of Letter of Transmittal. 99.2 Form of Notice of Guaranteed Delivery. 99.3 Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees. 99.4 Form of Letter to Clients.
- -------- * Previously filed EX-23.1 2 CONSENT OF ERNST & YOUNG EXHIBIT 23.1 CONSENT OF INDEPENDENT AUDITORS We consent to the reference to our firm under the caption "Experts" and to the use of our report dated February 24, 1995 in Amendment No. 1 to the Registration Statement on Form S-4 and related Prospectus of Cincinnati Milacron Inc. for the registration of $100,000,000 aggregate principal amount of 7 7/8% Notes due 2000. ERNST & YOUNG LLP Cincinnati, Ohio July 20, 1995 EX-23.2 3 CONSENT OF COOPERS & LYBRAND EXHIBIT 23.2 CONSENT OF INDEPENDENT AUDITORS As independent auditors, we hereby consent to the incorporation by reference, in the Registration Statement on Form S-4 and related Prospectus of Cincinnati Milacron Inc., for the registration of $100,000,000 aggregate principal amount of 7 7/8% Notes due 2000, of our report dated February 28, 1995. We also consent to the reference to our firm under the caption "Experts." COOPERS & LYBRAND GmbH Wirtschaftsprufungsgesellschaft Buiting Wiegand Wirtschaftsprufer Wirtschaftsprufer and Certified Public Accountant Dusseldorf, Germany July 18, 1995 EX-99.1 4 FORM OF LETTER OF TRANSMITTAL EXHIBIT 99.1 LETTER OF TRANSMITTAL CINCINNATI MILACRON INC. OFFER TO EXCHANGE ITS REGISTERED 7 7/8% NOTES DUE 2000 FOR ANY AND ALL OF ITS OUTSTANDING 7 7/8% NOTES DUE 2000 PURSUANT TO THE PROSPECTUS, DATED JULY 21, 1995. THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M. NEW YORK CITY TIME, ON AUGUST 22, 1995, UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERS MAY BE WITHDRAWN PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE. By Mail: Facsimile Transmission Number: By Hand/Overnight Delivery: BankAmerica National (212) 390-3116 Trust Company BankAmerica National Corporate Trust Trust Company Operations (For Eligible Institutions Only) Corporate Trust P.O. Box 464, Bowling Confirm by Telephone: Operations Green Station (212) 390-3039 One World Trade Center New York, New York 18th Floor 10274-0464 New York, New York 10048 For Information Call: (212) 390-2853 DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY. The undersigned acknowledges that he or she has received and reviewed the Prospectus, dated July 21, 1995 (the "Prospectus"), of Cincinnati Milacron Inc., a Delaware corporation (the "Company"), and this Letter of Transmittal (this "Letter"), which together constitute the Company's offer (the "Exchange Offer") to exchange an aggregate principal amount of up to $100,000,000 of 7 7/8% Notes Due 2000 (the "New Notes") of the Company for an equal principal amount of the Company's outstanding 7 7/8% Notes Due 2000 (the "Old Notes"). For each Old Note accepted for exchange, the holder of such Old Note will receive a New Note having a principal amount at maturity equal to that of the surrendered Old Note. The New Notes will bear interest at the rate of 7 7/8% per annum from the most recent date to which interest has been paid on the Old Notes or, if no interest has been paid on the Old Notes, from May 17, 1995. If by September 14, 1995, neither the Exchange Offer has been consummated nor a shelf registration statement with respect to the Old Notes has been declared effective, interest will accrue on each Old Note, from and including September 15, 1995, until but excluding the earlier of the date of consummation of the Exchange Offer and the effective date of a shelf registration statement at a rate of 8 3/8% per annum, representing an additional 1/2% per annum over the interest rate stated on the face of the Old Notes (such additional 1/2% per annum being herein called "Additional Interest"). Holders of Old Notes whose Old Notes are accepted for exchange will not receive any payment in respect of accrued and unpaid interest (including Additional Interest, if any) on such Old Notes. However, holders of New Notes will receive, on the next interest payment date following the Expiration Date, a payment equal to the amount of accrued and unpaid Additional Interest, if any, on the Old Notes exchanged for such New Notes. The Company reserves the right, at any time or from time to time, to extend the Exchange Offer at its discretion, in which event the term "Expiration Date" shall mean the latest time and date to which the Exchange Offer is extended. The Company shall notify the holders of the Old Notes of any extension by means of a press release or other public announcement prior to 9:00 A.M., New York City time, on the next business day after the previously scheduled Expiration Date. This Letter is to be completed by a holder of Old Notes either if certificates are to be forwarded herewith or if a tender of Old Notes, if available, is to be made by book-entry transfer to the account maintained by the Exchange Agent at The Depository Trust Company (the "Book-Entry Transfer Facility") pursuant to the procedures set forth in "The Exchange Offer" section of the Prospectus. Holders of Old Notes whose certificates are not immediately available, or who are unable to deliver their certificates or confirmation of the book-entry tender of their Old Notes into the Exchange Agent's account at the Book-Entry Transfer Facility (a "Book-Entry Confirmation") and all other documents required by this Letter to the Exchange Agent on or prior to the Expiration Date, must tender their Old Notes according to the guaranteed delivery procedures set forth in "The Exchange Offer--Guaranteed Delivery Procedures" section of the Prospectus. See Instruction 1. Delivery of documents to the Book-Entry Transfer Facility does not constitute delivery to the Exchange Agent. The undersigned has completed the appropriate boxes below and signed this Letter to indicate the action the undersigned desires to take with respect to the Exchange Offer. List below the Old Notes to which this Letter relates. If the space provided below is inadequate, the certificate numbers and principal amount of Old Notes should be listed on a separate signed schedule affixed hereto. - -------------------------------------------------------------------------------
DESCRIPTION OF OLD NOTES 1 2 3 - ----------------------------------------------- NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) AGGREGATE (PLEASE PRINCIPAL PRINCIPAL FILL IN, IF CERTIFICATE AMOUNT OF AMOUNT BLANK) NUMBER(S)* OLD NOTE(S) TENDERED** - ----------------------------------------------- TOTAL
- ------------------------------------------------------------------------------- *Need not be completed if Old Notes are being tendered by book-entry transfer. **Unless otherwise indicated in this column, a holder will be deemed to have tendered ALL of the Old Notes represented by the Old Notes indicated in column 2. See Instruction 2. Old Notes tendered hereby must be in denominations of principal amount of $1,000 and any integral multiple thereof. See Instruction 1. [_] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING: Name of Tendering Institution _______________________________________________ Account Number ___________ Transaction Code Number ____________ [_] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE FOLLOWING: Name(s) of Registered Holder(s) _____________________________________________ Window Ticket Number (if any) _______________________________________________ Date of Execution of Notice of Guaranteed Delivery __________________________ Name of Institution which guaranteed delivery _______________________________ IF DELIVERED BY BOOK-ENTRY TRANSFER, COMPLETE THE FOLLOWING: Account Number ___________ Transaction Code Number ___________ [_] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO. Name: _________________________________________________________________________ Address:_______________________________________________________________________ _______________________________________________________________________________ PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY Ladies and Gentlemen: Upon the terms and subject to the conditions of the Exchange Offer, the undersigned hereby tenders to the Company the aggregate principal amount of Old Notes indicated above. Subject to, and effective upon, the acceptance for exchange of the Old Notes tendered hereby, the undersigned hereby sells, assigns and transfers to, or upon the order of, the Company all right, title and interest in and to such Old Notes as are being tendered hereby. The undersigned hereby represents and warrants that the undersigned has full power and authority to tender, sell, assign and transfer the Old Notes tendered hereby and that the Company will acquire good and unencumbered title thereto, free and clear of all liens, restrictions, charges and encumbrances and not subject to any adverse claim when the same are accepted by the Company. The undersigned hereby further represents that any New Notes acquired in exchange for Old Notes tendered hereby will have been acquired in the ordinary course of business of the person receiving such New Notes, whether or not such person is the undersigned, that neither the holder of such Old Notes nor any such other person has an arrangement or understanding with any person to participate in the distribution of such New Notes and that neither the holder of such Old Notes nor any such other person is an "affiliate", as defined in Rule 405 under the Securities Act of 1933, as amended (the "Securities Act"), of the Company. The undersigned also acknowledges that this Exchange Offer is being made in reliance on an interpretation by the staff of the Securities and Exchange Commission (the "SEC") that the New Notes issued in exchange for the Old Notes pursuant to the Exchange Offer may be offered for resale, resold and otherwise transferred by holders thereof (other than any such holder that is an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act), without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that such New Notes are acquired in the ordinary course of such holders' business and such holders have no arrangement with any person to participate in the distribution of such New Notes. If the undersigned is not a broker-dealer, the undersigned represents that it is not engaged in, and does not intend to engage in, a distribution of New Notes. If the undersigned is a broker-dealer that will receive New Notes for its own account in exchange for Old Notes, it represents that the Old Notes to be exchanged for the New Notes were acquired by it as a result of market-making activities or other trading activities and acknowledges that it will deliver a prospectus in connection with any resale of such New Notes; however, by so acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. The undersigned will, upon request, execute and deliver any additional documents deemed by the Company to be necessary or desirable to complete the sale, assignment and transfer of the Old Notes tendered hereby. All authority conferred or agreed to be conferred in this Letter and every obligation of the undersigned hereunder shall be binding upon the successors, assigns, heirs, executors, administrators, trustees in bankruptcy and legal representatives of the undersigned and shall not be affected by, and shall survive, the death or incapacity of the undersigned. This tender may be withdrawn only in accordance with the procedures set forth in "The Exchange Offer--Withdrawal of Tenders" section of the Prospectus. Unless otherwise indicated herein in the box entitled "Special Issuance Instructions" below, please deliver the New Notes (and, if applicable, substitute certificates representing Old Notes for any Old Notes not exchanged) in the name of the undersigned or, in the case of a book-entry delivery of Old Notes, please credit the account indicated above maintained at the Book-Entry Transfer Facility. Similarly, unless otherwise indicated under the box entitled "Special Delivery Instructions" below, please send the New Notes (and, if applicable, substitute certificates representing Old Notes for any Old Notes not exchanged) to the undersigned at the address shown above in the box entitled "Description of Old Notes". THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF OLD NOTES" ABOVE AND SIGNING THIS LETTER, WILL BE DEEMED TO HAVE TENDERED THE OLD NOTES AS SET FORTH IN SUCH BOX ABOVE. SPECIAL ISSUANCE INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 3 AND 4) (SEE INSTRUCTIONS 3 AND 4) To be completed ONLY if cer- To be completed ONLY if cer- tificates for Old Notes not tificates for Old Notes not exchanged and/or New Notes exchanged and/or New Notes are to be issued in the name are to be sent to someone of and sent to someone other other than the person(s) than the person(s) whose sig- whose signature(s) appear(s) nature(s) appear(s) on this on this Letter above or to Letter above, or if Old Notes such person(s) at an address delivered by book-entry other than shown in the box transfer which are not ac- entitled "Description of Old cepted for exchange are to be Notes" on this Letter above. returned by credit to an ac- count maintained at the Book- Entry Transfer Facility other than the account indicated above. Mail New Notes and/or Old Notes to: Name(s):...................... (PLEASE TYPE OR PRINT) .............................. Issue New Notes and/or Old (PLEASE TYPE OR PRINT) Notes to: Address: ..................... .............................. Name(s): ..................... (INCLUDING ZIP CODE) (PLEASE TYPE OR PRINT) .............................. (PLEASE TYPE OR PRINT) Address: ..................... .............................. (INCLUDING ZIP CODE) (COMPLETE ACCOMPANYING SUBSTITUTE FORM W-9) [_Credit]unexchanged Old Notes delivered by book- entry transfer to the Book- Entry Transfer Facility account set forth below. ______________________________ (Book-Entry Transfer Facility Account Number, if applicable) IMPORTANT: THIS LETTER OR A FACSIMILE HEREOF (TOGETHER WITH THE CERTIFICATES FOR OLD NOTES OR A BOOK-ENTRY CONFIRMATION AND ALL OTHER REQUIRED DOCUMENTS OR THE NOTICE OF GUARANTEED DELIVERY) MUST BE RECEIVED BY THE EXCHANGE AGENT PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE. PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL CAREFULLY BEFORE COMPLETING ANY BOX ABOVE. PLEASE SIGN HERE (TO BE COMPLETED BY ALL TENDERING HOLDERS) (COMPLETE ACCOMPANYING SUBSTITUTE FORM W-9 ON REVERSE SIDE) Dated: .................................. , 1995 x ............................ ...... , 1995 x ............................ ...... , 1995 (SIGNATURE(S) OF OWNER) (DATE) Area Code and Telephone Number: ......... If a holder is tendering any Old Notes, this Letter must be signed by the registered holder(s) as the name(s) appear(s) on the certificate(s) for the Old Notes or by any person(s) authorized to become registered holder(s) by endorsements and documents transmitted herewith. If signature is by a trustee, executor, administrator, guardian, officer or other person acting in a fiduciary or representative capacity, please set forth full title. See Instruction 3. Name(s):................................... ........................................... (PLEASE TYPE OR PRINT) Capacity:.................................. Address:................................... ........................................... (INCLUDING ZIP CODE) SIGNATURE GUARANTEE (IF REQUIRED BY INSTRUCTION 3) Signature(s) Guaranteed by an Eligible Institution: .................. (AUTHORIZED SIGNATURE) ........................................... (TITLE) ........................................... (NAME AND FIRM) Dated: ............................. , 1995 INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER TO EXCHANGE REGISTERED 7 7/8% NOTES DUE 2000 FOR ANY AND ALL OUTSTANDING 7 7/8% NOTES DUE 2000 OF CINCINNATI MILACRON INC. 1. DELIVERY OF THIS LETTER AND OLD NOTES; GUARANTEED DELIVERY PROCEDURES. This Letter is to be completed by holders of Old Notes either if certificates are to be forwarded herewith or if tenders are to be made pursuant to the procedures for delivery by book-entry transfer set forth in "The Exchange Offer--Book-Entry Transfer" section of the Prospectus. Certificates for all physically tendered Old Notes, or Book-Entry Confirmation, as the case may be, as well as a properly completed and duly executed Letter of Transmittal (or facsimile thereof) and any other documents required by this Letter, must be received by the Exchange Agent at the address set forth herein on or prior to the Expiration Date, or the tendering holder must comply with the guaranteed delivery procedures set forth below. Old Notes tendered hereby must be in denominations of principal amount of maturity of $1,000 and any integral multiple thereof. Holders of Old Notes whose certificates for Old Notes are not immediately available or who cannot deliver their certificates and all other required documents to the Exchange Agent on or prior to the Expiration Date, or who cannot complete the procedure for book-entry transfer on a timely basis, may tender their Old Notes pursuant to the guaranteed delivery procedures set forth in "The Exchange Offer--Guaranteed Delivery Procedures" section of the Prospectus. Pursuant to such procedures, (i) such tender must be made through an Eligible Institution (as defined below), (ii) prior to the Expiration Date, the Exchange Agent must receive from such Eligible Institution a properly completed and duly executed Letter of Transmittal (or facsimile thereof) and Notice of Guaranteed Delivery, substantially in the form provided by the Company (by facsimile transmission, mail or hand delivery), setting forth the name and address of the holder of Old Notes and the amount of Old Notes tendered, stating that the tender is being made thereby and guaranteeing that within five New York Stock Exchange ("NYSE") trading days after the date of execution of the Notice of Guaranteed Delivery, the certificates for all physically tendered Old Notes, or a Book-Entry Confirmation, as the case may be, and any other documents required by this Letter will be deposited by the Eligible Institution with the Exchange Agent, and (iii) the certificates for all physically tendered Old Notes, in proper form for transfer, or Book-Entry Confirmation, as the case may be, and all other documents required by this Letter, are received by the Exchange Agent within five NYSE trading days after the date of execution of the Notice of Guaranteed Delivery. The method of delivery of this Letter, the Old Notes and all other required documents is at the election and risk of the tendering holders, but the delivery will be deemed made only when actually received or confirmed by the Exchange Agent. If Old Notes are sent by mail, it is suggested that the mailing be made sufficiently in advance of the Expiration Date to permit delivery to the Exchange Agent prior to 5:00 p.m., New York City time, on the Expiration Date. See "The Exchange Offer" section of the Prospectus. 2. PARTIAL TENDERS (NOT APPLICABLE TO HOLDERS OF OLD NOTES WHO TENDER BY BOOK- ENTRY TRANSFER). If less than all of the Old Notes evidenced by a submitted certificate are to be tendered, the tendering holder(s) should fill in the aggregate principal amount of Old Notes to be tendered in the box above entitled "Description of Old Notes--Principal Amount Tendered". A reissued certificate representing the balance of nontendered Old Notes will be sent to such tendering holder, unless otherwise provided in the appropriate box on this Letter, promptly after the Expiration Date. ALL OF THE OLD NOTES DELIVERED TO THE EXCHANGE AGENT WILL BE DEEMED TO HAVE BEEN TENDERED UNLESS OTHERWISE INDICATED. 3. SIGNATURES ON THIS LETTER; BOND POWERS AND ENDORSEMENTS; GUARANTEE OF SIGNATURES. If this Letter is signed by the registered holder of the Old Notes tendered hereby, the signature must correspond exactly with the name as written on the face of the certificates without any change whatsoever. If any tendered Old Notes are owned of record by two or more joint owners, all such owners must sign this Letter. If any tendered Old Notes are registered in different names on several certificates, it will be necessary to complete, sign and submit as many separate copies of this Letter as there are different registrations of certificates. When this Letter is signed by the registered holder of the Old Notes specified herein and tendered hereby, no endorsements of certificates or separate bond powers are required. If, however, the New Notes are to be issued, or any untendered Old Notes are to be reissued, to a person other than the registered holder, then endorsements of any certificates transmitted hereby or separate bond powers are required. Signatures on such certificates must be guaranteed by an Eligible Institution. If this Letter is signed by a person other than the registered holder of any certificates specified herein, such certificates must be endorsed or accompanied by appropriate bond powers, in either case signed exactly as the name of the registered holder appears on the certificates and the signatures on such certificates must be guaranteed by an Eligible Institution. If this Letter or any certificates or bond powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and, unless waived by the Company, proper evidence satisfactory to the Company of their authority to so act must be submitted. ENDORSEMENTS ON CERTIFICATES FOR OLD NOTES OR SIGNATURES ON BOND POWERS REQUIRED BY THIS INSTRUCTION 3 MUST BE GUARANTEED BY A FIRM WHICH IS A MEMBER OF A REGISTERED NATIONAL SECURITIES EXCHANGE OR A MEMBER OF THE NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC. OR BY A COMMERCIAL BANK OR TRUST COMPANY HAVING AN OFFICE OR CORRESPONDENT IN THE UNITED STATES (AN "ELIGIBLE INSTITUTION"). SIGNATURES ON THIS LETTER NEED NOT BE GUARANTEED BY AN ELIGIBLE INSTITUTION, PROVIDED THE OLD NOTES ARE TENDERED: (I) BY A REGISTERED HOLDER OF OLD NOTES (WHICH TERM, FOR PURPOSES OF THE EXCHANGE OFFER, INCLUDES ANY PARTICIPANT IN THE BOOK-ENTRY TRANSFER FACILITY SYSTEM WHOSE NAME APPEARS ON A SECURITY POSITION LISTING AS THE HOLDER OF SUCH OLD NOTES) TENDERED WHO HAS NOT COMPLETED THE BOX ENTITLED "SPECIAL ISSUANCE INSTRUCTIONS" OR "SPECIAL DELIVERY INSTRUCTIONS" ON THIS LETTER, OR (II) FOR THE ACCOUNT OF AN ELIGIBLE INSTITUTION. 4. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. Tendering holders of Old Notes should indicate in the applicable box the name and address to which New Notes issued pursuant to the Exchange Offer and/or substitute certificates evidencing Old Notes not exchanged are to be issued or sent, if different from the name or address of the person signing this Letter. In the case of issuance in a different name, the employer identification or social security number of the person named must also be indicated. A holder of Old Notes tendering Old Notes by book-entry transfer may request that Old Notes not exchanged be credited to such account maintained at the Book-Entry Transfer Facility as such holder of Old Notes may designate hereon. If no such instructions are given, such Old Notes not exchanged will be returned to the name or address of the person signing this Letter. 5. TAX IDENTIFICATION NUMBER. Federal income tax law generally requires that a tendering holder whose Old Notes are accepted for exchange must provide the Company (as payor) with such holder's correct Taxpayer Identification Number ("TIN") on Substitute Form W-9 below, which, in the case of a tendering holder who is an individual, is his or her social security number. If the Company is not provided with the current TIN or an adequate basis for an exemption, such tendering holder may be subject to a $50 penalty imposed by the Internal Revenue Service. In addition, delivery of New Notes to such tendering holder may be subject to backup withholding in an amount equal to 31% of all reportable payments made after the exchange. If withholding results in an overpayment of taxes, a refund may be obtained. Exempt holders of Old Notes (including, among others, all corporations and certain foreign individuals) are not subject to these backup withholding and reporting requirements. See the enclosed Guidelines of Certification of Taxpayer Identification Number on Substitute Form W-9 (the "W-9 Guidelines") for additional instructions. To prevent backup withholding, each tendering holder of Old Notes must provide its correct TIN by completing the "Substitute Form W-9" set forth below, certifying that the TIN provided is correct (or that such holder is awaiting a TIN) and that (i) the holder is exempt from backup withholding, (ii) the holder has not been notified by the Internal Revenue Service that such holder is subject to a backup withholding as a result of a failure to report all interest or dividends or (iii) the Internal Revenue Service has notified the holder that such holder is no longer subject to backup withholding. If the tendering holder of Old Notes is a nonresident alien or foreign entity not subject to backup withholding, such holder must give the Company a completed Form W-8, Certificate of Foreign Status. These forms may be obtained from the Exchange Agent. If the Old Notes are in more than one name or are not in the name of the actual owner, such holder should consult the W-9 Guidelines for information on which TIN to report. If such holder does not have a TIN, such holder should consult the W-9 Guidelines for instructions on applying for a TIN, check the box in Part 2 of the Substitute Form W-9 and write "applied for" in lieu of its TIN. Note: checking this box and writing "applied for" on the form means that such holder has already applied for a TIN or that such holder intends to apply for one in the near future. If such holder does not provide its TIN to the Company within 60 days, backup withholding will begin and continue until such holder furnishes its TIN to the Company. 6. TRANSFER TAXES. The Company will pay all transfer taxes, if any, applicable to the transfer of Old Notes to it or its order pursuant to the Exchange Offer. If, however, New Notes and/or substitute Old Notes not exchanged are to be delivered to, or are to be registered or issued in the name of, any person other than the registered holder of the Old Notes tendered hereby, or if tendered Old Notes are registered in the name of any person other than the person signing this Letter, or if a transfer tax is imposed for any reason other than the transfer of Old Notes to the Company or its order pursuant to the Exchange Offer, the amount of any such transfer taxes (whether imposed on the registered holder or any other persons) will be payable by the tendering holder. If satisfactory evidence of payment of such taxes or exemption therefrom is not submitted herewith, the amount of such transfer taxes will be billed directly to such tendering holder. EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR TRANSFER TAX STAMPS TO BE AFFIXED TO THE OLD NOTES SPECIFIED IN THIS LETTER. 7. WAIVER OF CONDITIONS. The Company reserves the absolute right to waive satisfaction of any or all conditions enumerated in the Prospectus. 8. NO CONDITIONAL TENDERS. No alternative, conditional, irregular or contingent tenders will be accepted. All tendering holders of Old Notes, by execution of this Letter, shall waive any right to receive notice of the acceptance of their Old Notes for exchange. Neither the Company, the Exchange Agent nor any other person is obligated to give notice of any defect or irregularity with respect to any tender of Old Notes nor shall any of them incur any liability for failure to give any such notice. 9. MUTILATED, LOST, STOLEN OR DESTROYED OLD NOTES. Any holder whose Old Notes have been mutilated, lost, stolen or destroyed should contact the Exchange Agent at the address indicated above for further instructions. 10. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions relating to the procedure for tendering, as well as requests for additional copies of the Prospectus and this Letter, may be directed to the Exchange Agent, at the address and telephone number indicated above. TO BE COMPLETED BY ALL TENDERING HOLDERS (SEE INSTRUCTION 5) PAYOR'S NAME: CINCINNATI MILACRON INC. PART 1--PLEASE PROVIDE TIN: YOUR TIN IN THE BOX AT ----------------------- RIGHT AND CERTIFY BY SIGN- (SOCIAL SECURITY NUMBER ING AND DATING BELOW. OR EMPLOYER IDENTIFICATION NUMBER) SUBSTITUTE FORM W-9 DEPARTMENT OF PART 2--TIN APPLIED FOR THE TREASURY [_] INTERNAL ------------------------------------------------------------ REVENUE SERVICE CERTIFICATION: UNDER THE PENALTIES OF PERJURY, I CERTIFY PAYOR'S THAT: REQUEST FOR TAXPAYER (1) the number shown on this form is my correct Taxpayer IDENTIFICATION Identification Number (or I am waiting for a number NUMBER ("TIN") to be issued to me). AND CERTIFICATION (2) I am not subject to backup withholding either be- cause: (a) I am exempt from backup withholding, or (b) I have not been notified by the Internal Revenue Service (the "IRS") that I am subject to backup withholding as a result of a failure to report all interest or dividends, or (c) the IRS has notified me that I am no longer subject to backup withhold- ing, and (3) any other information provided on this form is true and correct. SIGNATURE ......................... DATE ................ - -------------------------------------------------------------------------------- You must cross out item (2) of the above certification if you have been notified by the IRS that you are subject to backup withholding because of underreporting of interest or dividends on your tax return and you have not been notified by the IRS that you are no longer subject to backup withholding. YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 2 OF SUBSTITUTE FORM W-9 CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER I certify under penalties of perjury that a taxpayer identification number has not been issued to me, and either (a) I have mailed or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue Service Center or Social Security Administrative Office or (b) I intend to mail or deliver an application in the near future. I understand that if I do not provide a taxpayer identification number by the time of the exchange, 31 percent of all reportable payments made to me thereafter will be withheld until I provide a number. -------------------------------------------------- ----------------------- SIGNATURE DATE EX-99.2 5 FORM OF NOTICE OF GUARANTEED DELIVERY EXHIBIT 99.2 NOTICE OF GUARANTEED DELIVERY FOR CINCINNATI MILACRON INC. This form or one substantially equivalent hereto must be used to accept the Exchange Offer of Cincinnati Milacron Inc. (the "Company") made pursuant to the Prospectus, dated July 21, 1995 (the "Prospectus"), and the enclosed Letter of Transmittal (the "Letter of Transmittal") if certificates for Old Notes of the Company are not immediately available or if the procedure for book-entry transfer cannot be completed on a timely basis or time will not permit all required documents to reach the Company prior to 5:00 P.M., New York City time, on the Expiration Date of the Exchange Offer. Such form may be delivered or transmitted by facsimile transmission, mail or hand delivery to BankAmerica National Trust Company (the "Exchange Agent") as set forth below. In addition, in order to utilize the guaranteed delivery procedure to tender Old Notes pursuant to the Exchange Offer, a completed, signed and dated Letter of Transmittal (or facsimile thereof) must also be received by the Exchange Agent prior to 5:00 P.M., New York City time, on the Expiration Date. Capitalized terms not defined herein are defined in the Prospectus. BANKAMERICA NATIONAL TRUST COMPANY, EXCHANGE AGENT By Mail: Facsimile Transmission Number: By Hand/Overnight BankAmerica National (212) 390-3116 Delivery: Trust Company BankAmerica National Trust Company Corporate Trust (For Eligible Institutions Only) Operations Confirm by Telephone: Corporate Trust P.O. Box 464 Bowling (212) 390-3039 Operations Green Station One World Trade Center New York, New York 18th Floor 10274-0464 New York, New York 10048 For Information Call: (212) 390-2853 DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY. Ladies and Gentlemen: Upon the terms and conditions set forth in the Prospectus and the accompanying Letter of Transmittal, the undersigned hereby tenders to the Company the principal amount of Old Notes set forth below, pursuant to the guaranteed delivery procedure described in "The Exchange Offer--Guaranteed Delivery Procedures" section of the Prospectus. Principal Amount of Old Notes Tendered: If Old Notes will be delivered by $ ____________________________________ book-entry transfer to The Depository Trust Company, provide account number. Certificate Nos. (if available): ______________________________________ Total Principal Amount Represented by Old Notes Certificate(s): $ ____________________________________ Account Number _______________________ - -------------------------------------------------------------------------------- ALL AUTHORITY HEREIN CONFERRED OR AGREED TO BE CONFERRED SHALL SURVIVE THE DEATH OR INCAPACITY OF THE UNDERSIGNED AND EVERY OBLIGATION OF THE UNDERSIGNED HEREUNDER SHALL BE BINDING UPON THE HEIRS, PERSONAL REPRESENTATIVES, SUCCESSORS AND ASSIGNS OF THE UNDERSIGNED. - -------------------------------------------------------------------------------- PLEASE SIGN HERE X ___________________________ -------- X ___________________________ -------- Signature(s) of Owner(s) Date or Authorized Signatory Area Code and Telephone Number: _______________________ Must be signed by the holder(s) of Old Notes as the name(s) of such holder(s) appear(s) on the Old Notes certificate(s) or on a security position listing, or by person(s) authorized to become registered holder(s) by endorsement and documents transmitted with this Notice of Guaranteed Delivery. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer or other person acting in a fiduciary or representative capacity, such person must set forth his or her full title below. PLEASE PRINT NAME(S) AND ADDRESS(ES) Name(s): -------------------------------------------------------------------- -------------------------------------------------------------------- -------------------------------------------------------------------- Capacity: -------------------------------------------------------------------- Address(es): -------------------------------------------------------------------- -------------------------------------------------------------------- -------------------------------------------------------------------- GUARANTEE The undersigned, a member of a registered national securities exchange, or a member of the National Association of Securities Dealers, Inc., or a commercial bank or trust company having an office or correspondent in the United States, hereby guarantees that the certificates representing the principal amount of Old Notes tendered hereby in proper form for transfer, or timely confirmation of the book-entry transfer of such Old Notes into the Exchange Agent's account at The Depository Trust Company pursuant to the procedures set forth in "The Exchange Offer -- Guaranteed Delivery Procedures" section of the Prospectus, together with a properly completed and duly executed Letter of Transmittal (or facsimile thereof) with any required signature guarantee and any other documents required by the Letter of Transmittal, will be received by the Exchange Agent at the address set forth above, no later than five New York Stock Exchange trading days after the date of execution hereof. _____________________________________ _____________________________________ Name of Firm Authorized Signature _____________________________________ _____________________________________ Address Title _____________________________________ Name: _______________________________ Zip Code (Please Type or Print) Area Code and Tel. No.: _____________ Dated: ______________________________ NOTE: DO NOT SEND CERTIFICATES FOR OLD NOTES WITH THIS FORM. CERTIFICATES FOR OLD NOTES SHOULD ONLY BE SENT WITH YOUR LETTER OF TRANSMITTAL. EX-99.3 6 BROKER DEALER LETTER EXHIBIT 99.3 CINCINNATI MILACRON INC. OFFER TO EXCHANGE ITS REGISTERED 7 7/8% NOTES DUE 2000 FOR ANY AND ALL OF ITS OUTSTANDING 7 7/8% NOTES DUE 2000 TO:BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES AND OTHER NOMINEES: Cincinnati Milacron Inc. (the "Company") is offering to exchange (the "Exchange Offer"), upon and subject to the terms and conditions set forth in the Prospectus, dated July 21, 1995 (the "Prospectus"), and the enclosed Letter of Transmittal (the "Letter of Transmittal"), its registered 7 7/8% Notes Due 2000 (the "New Notes") for any and all of its outstanding 7 7/8% Notes Due 2000 (the "Old Notes"). The Exchange Offer is being made in order to satisfy certain obligations of the Company contained in the Exchange Registration Rights Agreement dated as of May 10, 1995, between the Company and the other signatory thereto. We are requesting that you contact your clients for whom you hold Old Notes regarding the Exchange Offer. For your information and for forwarding to your clients for whom you hold Old Notes registered in your name or in the name of your nominee, or who hold Old Notes registered in their own names, we are enclosing the following documents: 1. Prospectus dated July 21, 1995; 2. The Letter of Transmittal for your use and for the information of your clients; 3. A Notice of Guaranteed Delivery to be used to accept the Exchange Offer if certificates for Old Notes are not immediately available or time will not permit all required documents to reach the Exchange Agent prior to the Expiration Date (as defined below) or if the procedure for book-entry transfer cannot be completed on a timely basis; 4. A form of letter which may be sent to your clients for whose account you hold Old Notes registered in your name or the name of your nominee, with space provided for obtaining such clients' instructions with regard to the Exchange Offer; 5. Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9; and 6. Return envelopes addressed to BankAmerica National Trust Company, the Exchange Agent for the Old Notes. YOUR PROMPT ACTION IS REQUESTED. THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON AUGUST 22, 1995, UNLESS EXTENDED BY THE COMPANY (THE "EXPIRATION DATE"). THE OLD NOTES TENDERED PURSUANT TO THE EXCHANGE OFFER MAY BE WITHDRAWN AT ANY TIME BEFORE 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE. To participate in the Exchange Offer, a duly executed and properly completed Letter of Transmittal (or facsimile thereof), with any required signature guarantees and any other required documents, should be sent to the Exchange Agent and certificates representing the Old Notes should be delivered to the Exchange Agent, all in accordance with the instructions set forth in the Letter of Transmittal and the Prospectus. If holders of Old Notes wish to tender, but it is impracticable for them to forward their certificates for Old Notes prior to the expiration of the Exchange Offer or to comply with the book-entry transfer procedures on a timely basis, a tender may be effected by following the guaranteed delivery procedures described in the Prospectus under "The Exchange Offer--Guaranteed Delivery Procedures". The Company will, upon request, reimburse brokers, dealers, commercial banks and trust companies for reasonable and necessary costs and expenses incurred by them in forwarding the Prospectus and the related documents to the beneficial owners of Old Notes held by them as nominee or in a fiduciary capacity. The Company will pay or cause to be paid all stock transfer taxes applicable to the exchange of Old Notes pursuant to the Exchange Offer, except as set forth in Instruction 6 of the Letter of Transmittal. Any inquiries you may have with respect to the Exchange Offer, or requests for additional copies of the enclosed materials, should be directed to the Exchange Agent for the Old Notes, at its address and telephone number set forth on the front of the Letter of Transmittal. Very truly yours, Cincinnati Milacron Inc. NOTHING HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY OTHER PERSON AS AN AGENT OF THE COMPANY OR THE EXCHANGE AGENT, OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENTS ON BEHALF OF EITHER OF THEM WITH RESPECT TO THE EXCHANGE OFFER, EXCEPT FOR STATEMENTS EXPRESSLY MADE IN THE PROSPECTUS OR THE LETTER OF TRANSMITTAL. Enclosures EX-99.4 7 FORM OF LETTER TO CLIENTS EXHIBIT 99.4 CINCINNATI MILACRON INC. OFFER TO EXCHANGE ITS REGISTERED 7 7/8 NOTES DUE 2000 FOR ANY AND ALL OF ITS OUTSTANDING 7 7/8 NOTES DUE 2000 TO OUR CLIENTS: Enclosed for your consideration is a Prospectus, dated July 21, 1995 (the "Prospectus"), and the enclosed Letter of Transmittal (the "Letter of Transmittal"), relating to the offer (the "Exchange Offer") of Cincinnati Milacron Inc. (the "Company") to exchange its registered 7 7/8% Notes Due 2000 (the "New Notes") for any and all of its outstanding 7 7/8% Notes Due 2000 (the "Old Notes"), upon the terms and subject to the conditions described in the Prospectus. The Exchange Offer is being made in order to satisfy certain obligations of the Company contained in the Exchange Registration Rights Agreement dated as of May 10, 1995, between the Company and the other signatory thereto. This material is being forwarded to you as the beneficial owner of the Old Notes carried by us in your account but not registered in your name. A TENDER OF SUCH OLD NOTES MAY ONLY BE MADE BY US AS THE HOLDER OF RECORD AND PURSUANT TO YOUR INSTRUCTIONS. Accordingly, we request instructions as to whether you wish us to tender on your behalf the Old Notes held by us for your account, pursuant to the terms and conditions set forth in the enclosed Prospectus and Letter of Transmittal. Your instructions should be forwarded to us as promptly as possible in order to permit us to tender the Old Notes on your behalf in accordance with the provisions of the Exchange Offer. The Exchange Offer will expire at 5:00 p.m., New York City time, on August 22, 1995, unless extended by the Company (the "Expiration Date"). Any Old Notes tendered pursuant to the Exchange Offer may be withdrawn at any time before 5:00 p.m., New York City time, on the Expiration Date. Your attention is directed to the following: 1. The Exchange Offer is for any and all Old Notes. 2. The Exchange Offer is subject to certain conditions set forth in the Prospectus in the section captioned "The Exchange Offer--Conditions". 3. Any transfer taxes incident to the transfer of Old Notes from the holder to the Company will be paid by the Company, except as otherwise provided in the Instructions in the Letter of Transmittal. 4. The Exchange Offer expires at 5:00 p.m., New York City time, on August 22, 1995, unless extended by the Company. If you wish to have us tender your Old Notes, please so instruct us by completing, executing and returning to us the instruction form on the back of this letter. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR INFORMATION ONLY AND MAY NOT BE USED DIRECTLY BY YOU TO TENDER OLD NOTES. INSTRUCTIONS WITH RESPECT TO THE EXCHANGE OFFER The undersigned acknowledge(s) receipt of your letter and the enclosed material referred to therein relating to the Exchange Offer made by Cincinnati Milacron Inc. with respect to its Old Notes. This will instruct you to tender the Old Notes held by you for the account of the undersigned, upon and subject to the terms and conditions set forth in the Prospectus and the related Letter of Transmittal. Please tender the Old Notes held by you for my account as indicated below: AGGREGATE PRINCIPAL AMOUNT OF OLD NOTES 7 7/8% Notes Due 2000 . . . . . . . . _____________________________________ [_]Please do not tender any Old Notes held by you for my account. Dated: _______________________ , 1995 _____________________________________ _____________________________________ Signature(s) _____________________________________ _____________________________________ _____________________________________ Please print name(s) here _____________________________________ _____________________________________ Address(es) _____________________________________ Area Code(s) and Telephone Number(s) _____________________________________ Tax Identification or Social Security No(s). None of the Old Notes held by us for your account will be tendered unless we receive written instructions from you to do so. Unless a specific contrary instruction is given in the space provided, your signature(s) hereon shall constitute an instruction to us to tender all the Old Notes held by us for your account. -----END PRIVACY-ENHANCED MESSAGE-----