Milacron's Q4 Operating Results Show Improvement

CINCINNATI, OHIO, February 11, 2003...Milacron Inc. (NYSE: MZ) showed significant progress in the fourth quarter of 2002, as improvements in operating efficiency resulted in a modest profit from continuing operations on essentially flat sales compared with a year ago.

“Thanks to extraordinary efforts by our employees worldwide, we ended 2002 on a very positive note,” said Ronald D. Brown, chairman and chief executive officer. “We saw increasing benefits from our diligent execution of cost-cutting and consolidation efforts of the past year and we entered 2003 with substantially less debt and a stronger balance sheet.”

Fourth-quarter 2002 earnings from continuing operations before restructuring charges came in at the high end of the range of guidance provided by the company in November. Including losses from discontinued operations and restructuring charges, Milacron posted a significantly smaller net loss compared to the fourth quarter a year ago.

Fourth Quarter 2002
Sales of $192 million from continuing operations - plastics technologies and industrial fluids - were effectively even with $187 million in the fourth quarter of 2001 when excluding favorable currency translation effects.

In the fourth quarter of 2002 Milacron earned $1.0 million after tax from continuing operations, a $20- million improvement over the year-ago quarter on essentially flat sales. Including losses from discontinued operations, the company recorded a net loss in the quarter of $5.5 million, or $.17 per share. This compared to a net loss of $21.9 million, or $.66 per share, in the fourth quarter of 2001, which included $1.2 million in losses from discontinued operations. The quarterly net losses included after-tax restructuring costs of $2.6 million in 2002 and $7.8 million in 2001. In accordance with current accounting rules, amortization of goodwill was excluded from earnings in 2002 but had the effect of increasing the fourth-quarter 2001 loss by $1.8 million after tax.

Manufacturing margins excluding restructuring costs were 17.4% in the fourth quarter of 2002, up from 14.4% a year ago. New orders from continuing operations were $186 million, up 7% from $174 million in the fourth quarter of 2001 and 4% from the third quarter of 2002, reflecting slightly improved demand for plastics machinery.

Year 2002
Despite an 8% sales volume decline, in 2002 Milacron achieved positive earnings from continuing operations of $0.6 million before interest, taxes and nonrecurring items, compared to an operating loss of $11.0 million in 2001.

Sales from continuing operations were $693 million in 2002, down from $755 million a year ago. The company’s 2002 net loss was $222.9 million, or $6.67 per share, and included on an after-tax basis: a writedown of goodwill of $187.7 million, losses from discontinued operations of $16.8 million, and restructuring charges of $8.8 million.

“We made significant progress in 2002,” Brown said. “We strengthened our balance sheet by generating cash from operations and making two major divestitures, which allowed us to reduce net debt by over $300 million. We accelerated our implementation of Lean and Six Sigma and cut our primary working capital requirements by $40 million. We also executed restructuring and cost-cutting programs throughout our operations, which helped bring us back into the black on an operating basis in the fourth quarter.”

Segment Results

Machinery Technologies-North America [machinery and related parts and services for injection molding, blow molding and extrusion supplied from North America and India] New orders in the fourth quarter were $88 million, a 10% increase from $80 million a year ago. Sales of $97 million were up 7% from $91 million in the fourth quarter of 2001. Helped by restructuring and other cost-cutting measures implemented over the past several quarters, this segment posted operating earnings (earnings before interest, taxes and restructuring charges) of $5.8 million compared to an operating loss of $4.6 million in the year-ago quarter.

For the year 2002, new orders in this segment were $321 million, down from $337 million in 2001. Sales declined year over year to $314 million from $362 million. Operating earnings for 2002 were $8.0 million compared to an operating loss of $13.5 million in 2001.

Machinery Technologies-Europe [machinery and related parts and services for injection molding and blow molding supplied from Europe] New orders rose 26% to $34 million from $27 million in the fourth quarter of 2001, with about one-third of the gain coming from favorable currency translation. Sales of $31 million were essentially flat with those of the year-ago quarter when excluding currency effects. This segment reduced its operating loss to $1.5 million from $7.5 million in the fourth quarter of 2001.

For the year 2002, new orders in this segment were $122 million, up $8 million from 2001, mostly due to favorable currency translation. Sales of $117 million declined from $123 million in the prior year despite favorable currency effects. For 2002 the segment posted an operating loss of $8.1 million, $1.0 million better than its operating loss of $9.1 million in 2001.

Mold Technologies [mold bases and related parts and services, as well as maintenance, repair and operating (MRO) supplies for injection molding worldwide] Sales in the quarter were $43 million, down from $47 million a year ago, with all of the decline coming from the segment’s European operations, as North American operations held up compared to a year ago. Hampered by lower sales volumes and costs and inefficiencies related to the integration and consolidation of European acquisitions, operating earnings declined to $0.1 million including a goodwill writedown of $1.0 million, down from $1.7 million in the year-ago quarter.

Sales in this segment for the year were $175 million, down $10 million from 2001. Operating earnings fell to $5.3 million from $12.1 million in the prior year.

Industrial Fluids [water-based and oil-based coolants, lubricants and cleaners for metalcutting and metalforming operations worldwide] Sales of $25 million were essentially flat with those of the fourth quarter a year ago after adjusting for currency translation effects. Operating earnings were $3.9 million, compared to $5.0 million in the fourth quarter 2001, which included favorable one-time adjustments.

Sales in 2002 for this segment were $96 million, up from $93 million in 2001, as favorable currency translation accounted for about half the increase. The segment’s operating earnings were $14.4 million in 2002, down from $18.1 million in 2001, which, as in the fourth quarter, included one-time adjustments.

Discontinued Operations
In August 2002, Milacron sold its North American metalcutting insert tool business, Valenite, to Sandvik for $175 million, subject to post-closing adjustments, and its European and Indian metalcutting tool businesses, Widia and Werkö, to Kennametal Inc. for €188 million, also subject to post-closing adjustments. Cash costs for divestiture expenses and post-closing adjustments were approximately $7 million in the fourth quarter and are projected to be about $25 million in the first quarter of 2003, all within the reserves established by the company at the time of the closings.

In the fourth quarter, Milacron’s discontinued round tool and grinding wheel operations had sales of $42 million and after-tax losses of $6.5 million, primarily related to adjustments of the carrying value of these businesses.

Charge for Goodwill Impairment
In accordance with Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets,” Milacron took a $247 million pre-tax charge for goodwill impairment retroactive to the beginning of 2002 to cover both continuing and discontinued operations. On an after-tax basis, the writedown was $188 million, or $5.61 per share. The charge had no effect on cash flow.

Pension Plan Assets
Financial market declines in 2002 significantly reduced the asset value of Milacron’s primary U.S. defined benefit plan and resulted in a non-cash charge to equity of $95 million after tax in the fourth quarter. The charge had no effect on cash flow or net income. Given the plan’s reduced asset value and lower assumptions for return and discount rates, Milacron expects about $1 million in pension expense in 2003, compared to pension income of approximately $9 million in 2002. The plan continues to meet all the funding requirements under ERISA regulations, and at its current funding level, the company will not be required to make any cash contribution before September 2004. Based on current projections, the required 2004 contribution would be less than $10 million.

Financial Flexibility
Milacron ended the fourth quarter with $122 million in cash, up from $114 million at the beginning of the quarter. The company said that its revolving credit facility has been amended to provide for relaxed covenants through 2003, with an agreement to reduce the commitment gradually from $85 million to $55 million by year-end. At December 31, 2002, the company had drawn $42 million and issued $12 million in letters of credit under this facility. The company also said its accounts receivable liquidity facility has been extended to December 31, 2003. At year-end 2002, the company had sold $41 million of receivables under the program, which is now capped at $45 million.

Milacron has no significant debt repayment obligations until March 15, 2004, at which time the company’s revolving credit facility and $115 million of 8-3/8% public notes mature. The company is currently considering a variety of available alternatives to refinance its capital structure.

Outlook
“Three of the market sectors we serve are holding up well during this recession: automotive, packaging and medical,” Brown said. “Although there are still no clear signs of recovery in the other sectors, Milacron remains committed to achieving further gains in operating results in 2003. We will do so by focusing on areas we can control, namely cost reductions, efficiency improvements and better working capital management, to compensate for factors beyond our control, such as the economy, increased insurance costs and a decline in pension income, to list a few. Given the seasonality of our business, we believe we are likely to record modest losses in the first half of the year to be offset by comparable or greater earnings in the second half of the year.

“Through it all we continue to strengthen our competitive position as a global leader in plastics technologies and industrial fluids. We are enhancing our ability to respond quickly and fully to the upturn whenever it comes, which will help us maximize shareholder value in the long run,” he said.

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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.

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First incorporated in 1884, Milacron is a leading global supplier of plastics-processing technologies and industrial fluids, with about 3,500 employees and 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).