Milacron Reports Second Quarter Loss of $.22 Per Share From Continuing Operations Before Restructuring Charges - In Line With Expectation

Sales, Orders and Operating Cash Flow Stabilized

CINCINNATI , OHIO , July 24, 2002...Milacron Inc. (NYSE: MZ) today reported a net loss of $.93 per share for the second quarter, including $.71 per share in losses from discontinued operations and restructuring charges. The loss from continuing operations before restructuring costs of $.22 per share was in line with the company’s most recent guidance. Though down year over year, sales rose modestly compared to the first quarter, as orders and operating cash flow held steady.

Second Quarter Results
Sales from continuing operations – plastics technologies, industrial fluids, grinding wheels and round tools – in the second quarter of 2002 were $188 million, down 11% from the second quarter of 2001 but up 7% from the first quarter of 2002. New orders of $187 million were down 2% from the year-ago quarter and flat with the preceding quarter.

Milacron posted a net loss for the second quarter of $31.1 million, or $.93 per share. This included, on an after-tax basis: a charge of $15.3 million, or $.46 per share, for the estimated loss on the anticipated sale of its overseas metalcutting tool business; an operating loss of $6.6 million, or $.19 per share, from discontinued operations: overseas metalcutting tools (Widia and Werkö) and North American metalcutting insert tools (Valenite); and restructuring charges of $2.1 million, or $.06 per share. Excluding the effects of discontinued operations and restructuring charges, the company’s after-tax operating loss was $7.1 million, or $.22 per share.

Net earnings in the second quarter of 2001 were $1.1 million, or $.03 per share, which included earnings from discontinued operations of $1.9 million, or $.06 per share, as well as a one-time after-tax gain of $1.6 million, or $.05 per share, on the sale of excess real estate. In accordance with newly adopted accounting rules, amortization of goodwill is excluded from earnings in 2002 but had the effect of reducing second quarter 2001 earnings by $2.2 million, or $.07 per share, after tax. Excluding the effects of discontinued operations, the land sale and goodwill amortization, there was a loss from continuing operations in the second quarter of 2001 of $0.2 million, or $.01 per share.

For comparison purposes, in the first quarter of 2002, Milacron had a net loss of $13.1 million, or $.39 per share, which included a loss of $3.5 million, or $.10 per share, from discontinued operations, restructuring charges of $3.3 million, or $.10 per share, and one-time royalty income of $2.8 million, or $.08 per share. Excluding the effects of discontinued operations, restructuring charges and royalty income, losses from continuing operations in the first quarter of 2002 were $9.1 million, or $.27 per share.

Manufacturing margins in the second quarter improved to 17.4% compared to 14.0% in the first quarter, and operating cash flow or EBITDA (earnings before interest, taxes, depreciation and amortization) held steady at $3.4 million.

“We are taking major steps to position Milacron for the future,” said Ronald D. Brown, chairman, president and chief executive officer. “During this prolonged period of depressed manufacturing activity in many of our world markets, we are taking the opportunity to improve our balance sheet, reduce our cost structure and increase our overall effectiveness and responsiveness to our customers.

“The anticipated proceeds from the sale of our Widia, Werkö and Valenite businesses will substantially reduce our debt and thus strengthen our financial flexibility. The execution of our restructuring program is generating over $35 million in annualized cost savings, most of which we are realizing this year. And the implementation of Lean and Six Sigma process improvements throughout our organization is shortening our lead times, allowing us to respond faster to customer demands. Evidence of this improved efficiency is showing up in the form of higher manufacturing margins and less working capital required to support sales, particularly inventory, which has been slashed by one-third from year-ago levels,” Brown said.

Segment Results
Plastics Technologies
The group’s sales in the quarter were $146 million, down from $169 million in the second quarter of 2001 but up from $136 million in the first quarter this year. The sales decline from a year ago came from the injection molding and blow molding machinery businesses, whereas the sales improvement from the prior quarter came from higher shipments of injection molding machines. Sales of extrusion products, mold technologies and MRO (maintenance, repair and operating) supplies have held relatively steady with both the year-ago quarter and the prior quarter. New orders were $145 million versus $148 million a year ago and $147 in the prior quarter.

On a pre-tax operating basis, the segment lost $0.3 million in the second quarter. This compared to earnings of $0.4 million in the second quarter last year and earnings of $1.1 million in the first quarter this year. First quarter 2002 segment earnings, however, included lump-sum royalty payments of $4.5 million, pre-tax.

Metalworking Technologies
The group’s sales from continuing operations – industrial fluids, round cutting tools and grinding wheels – were $42 million in the second quarter, off from $44 million in the second quarter of 2001 but up from $39 million in the first quarter of the year. Sales in all three businesses were up from the first quarter. New orders of $43 million were even with the year-ago quarter and up from $40 million in the prior quarter.

Segment operating earnings improved to $2.0 million, up from $1.9 million in 2001 and from $0.3 million in the first quarter of 2002.

Discontinued Operations
As announced on May 6, Milacron has a definitive agreement to sell its European and Indian metalcutting tool businesses, Widia and Werkö, to Kennametal Inc., a global producer of metalcutting tools headquartered in Latrobe, PA, for €188 million, subject to post-closing adjustments. Net cash proceeds from the sale are expected to be about $150 million, the bulk of which will be used to pay down bank debt. In a revision of preliminary estimates, the company has recorded a newly estimated after-tax loss on the sale of $15.3 million, or $.46 per share, in the second quarter. Most of this loss, over $13 million, consists of a reclassification of currency translation adjustments that had previously been recognized and thus does not affect shareholders’ equity. The transaction is expected to close in the very near future.

On June 18, Milacron announced a definitive agreement to sell Valenite, its North American metalcutting insert tool business, to Sandvik, a global producer of metalcutting tools headquartered in Sweden, for $175 million in cash, subject to post-closing adjustments. From the sale, Milacron expects to receive net cash proceeds of approximately $150 million, the bulk of which will be used to pay down bank debt. The company estimates an after-tax gain on the sale of $27 million to $30 million, or $0.80 to $0.90 per share, to be recorded upon closing, which is anticipated within a month.

Outlook
“While it appears that the recession in the manufacturing sector has bottomed out, we have yet to see convincing signs of a recovery,” Brown said. “Orders from our continuing businesses were flat compared to the first quarter and, in fact, have been at roughly the same level for the past several quarters. Since visibility is poor, we are not counting on a significant pickup in demand for the rest of this year. Nevertheless, thanks to our aggressive cost-reduction efforts, we expect to narrow our loss in the third quarter and approach break-even in the fourth.

“As for the longer term, Milacron is becoming a more focused, leaner, and financially stronger company. As a result, we have renewed optimism that, by concentrating our resources on the businesses where we are best positioned, namely plastics and industrial fluids, we can create and maximize shareholder value in the long run,” Brown said.

Financial Statements (MS Excel file)
Click Here for free MS Excel viewer for financial statements.

The forward-looking statements above by their nature involve risks and uncertainties that could significantly impact operations, markets, products and expected results.  For further information please refer to the Cautionary Statement included in the company’s most recent Form 10-Q on file with the Securities and Exchange Commission.

_________________________

First incorporated in 1884, Milacron is a leading global supplier of plastics-processing technologies and industrial fluids, with major manufacturing facilities in North America, Europe and Asia. For further information, visit www.milacron.com or call the toll-free investor line: 800-909-MILA (800-909-6452).

Note: To access the open investor conference call live on 7/24 at 1:00 p.m. EDT, go to www.milacron.com or dial (719) 457-2661.
For the conference call replay from 7/25 to 8/1, go to www.milacron.com or dial (719) 457-0820, passcode: #528529.