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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549


FORM 10-K

Annual Report Pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934

|                          |  |                       
|------------------------- |  | ----------------------
|For the Fiscal Year Ended |  | Commission File Number
|December 31, 2002         |  | 1-8485                

MILACRON INC.

2090 Florence Avenue


Cincinnati, Ohio 45206


(513) 487-5000


|                         |  |                      
|------------------------ |  | ---------------------
|Incorporated in Delaware |  | I.R.S. No. 31-1062125



---

Securities Registered Pursuant to Section 12(b) of the
Act:

|                                                        |  |                                                                                 
|------------------------------------------------------- |  | --------------------------------------------------------------------------------
|Title of Each Class:Common Shares  Par Value
    $1.00 |  | Name of Each Exchange
    on Which Registered:
    New York Stock Exchange, Inc.

Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by
Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for
the past 90 days.



| |                          | 
| | ------------------------ | 
| | Yes x               No o | 

Indicate by check mark if disclosure of
delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be
contained, to the best of registrants knowledge, in
definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any
amendment to this
Form 10-K. x

Indicate by check mark whether the registrant is
an accelerated filer (as defined in Exchange Act
Rule 12b-2).



| |                          | 
| | ------------------------ | 
| | Yes x               No o | 

The aggregate market value of voting stock held
by non-affiliates of the registrant is $265,666,739 at
June 30, 2002*

*Voting stock held by officers, directors and
principal holders is not included in the computation. The
company, however, has not made a determination that such
individuals are affiliates within the meaning of
Rule 405 under the Securities Act of 1933.

Number of shares of Common Stock, $1.00 par
value, outstanding as of February 28, 2003: 33,771,939

Documents Incorporated by
Reference:PART III  Proxy statement, dated March 25, 2003



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TABLE OF CONTENTS



|                                           |                                                                                               |  |  |  |  |  |  | 
|------------------------------------------ | --------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I                                    
|                                           | Item 1. Business                                                                             
|                                           | Executive Officers of the Registrant                                                         
|                                           | Item 2. Properties                                                                           
|                                           | Item 3. Legal Proceedings                                                                    
|                                           | Item 4. Submission of Matters to a Vote of Security Holders                                  
|PART II                                   
|                                           | Item 5. Market for the RegistrantsCommon Equity and RelatedStockholder Matters              
|                                           | Item 6. Selected Financial Data                                                              
|                                           | Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
|                                           | Item 7A. Quantitative and QualitativeDisclosures About Market Risk                           
|                                           | Item 8. Financial Statements and Supplementary Data                                          
|                                           | Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 
|PART III                                  
|                                           | Item 10. Directors and Executive Officers of the Registrant                                  
|                                           | Item 11. Executive Compensation                                                              
|                                           | Item 12. Security Ownership of Certain Beneficial Owners and Management                      
|                                           | Item 13. Certain Relationships and Related Transactions                                      
|                                           | Item 14. Controls and Procedures                                                             
|PART IV                                   
|                                           | Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K                     
|                                           | Schedule II  Valuation and Qualifying Accounts and Reserves                                 
|                                           | Signatures                                                                                   
|                                           | Certifications                                                                               
|                                           | Item15(c) and (d) Index to Certain Exhibits and Financial Statement Schedules               
|EX-4 (2)(a) Fiscal Agency Agreement       
|EX-4 (2)(b) Subscription Agreement        
|EX-10.9 Supplemental Exec. Retirement Plan
|EX-10.30 Waiver & Agreement               
|EX-11 Computation of Per-Share Earnings   
|EX-21 Subsidiaries of the Registrant      
|EX-23 Consent of Independent Auditors     
|EX-99.1 Certification                     



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Milacron Inc.

2002 Form 10-K


Table of Contents


|         |  |                                                                                           |  |      |    | 
|-------- |  | ----------------------------------------------------------------------------------------- |  | ---- | -- | 
|         |  |                                                                                           |  | Page
|         |  |                                                                                           |  |     
|        
|PART I   |  |                                                                                           |  |     
|Item 1.  |  | Business                                                                                  |  |      | 2  | 
|         |  | Executive Officers of the Registrant                                                      |  |      | 7  | 
|Item 2.  |  | Properties                                                                                |  |      | 8  | 
|Item 3.  |  | Legal Proceedings                                                                         |  |      | 8  | 
|Item 4.  |  | Submission of Matters to a Vote of Security
    Holders                                   |  |      | 8  | 
|PART II  |  |                                                                                           |  |     
|Item 5.  |  | Market for the Registrants Common Equity
    and Related Stockholder Matters             |  |      | 8  | 
|Item 6.  |  | Selected Financial Data                                                                   |  |      | 9  | 
|Item 7.  |  | Managements Discussion and Analysis of
    Financial Condition and Results of Operations |  |      | 10 | 
|Item 7A. |  | Quantitative and Qualitative Disclosures About
    Market Risk                            |  |      | 21 | 
|Item 8.  |  | Financial Statements and Supplementary Data                                               |  |      | 21 | 
|Item 9.  |  | Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure  |  |      | 49 | 
|PART III |  |                                                                                           |  |     
|Item 10. |  | Directors and Executive Officers of the Registrant                                        |  |      | 49 | 
|Item 11. |  | Executive Compensation                                                                    |  |      | 49 | 
|Item 12. |  | Security Ownership of Certain Beneficial Owners
    and Management                        |  |      | 49 | 
|Item 13. |  | Certain Relationships and Related Transactions                                            |  |      | 49 | 
|Item 14. |  | Controls and Procedures                                                                   |  |      | 49 | 
|PART IV  |  |                                                                                           |  |     
|Item 15. |  | Exhibits, Financial Statement Schedules and
    Reports on Form 8-K                       |  |      | 50 | 
|         |  | Schedule II  Valuation and
    Qualifying Accounts and Reserves                          |  |      | 54 | 
|         |  | Signatures                                                                                |  |      | 55 | 
|         |  | Certifications                                                                            |  |      | 56 | 
|         |  | Index to Certain Exhibits and Financial Statement
    Schedules                           |  |      | 58 | 



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PART I




Item 1.      Business

General

Milacron is a global company focused primarily on
manufacturing and selling plastics-processing equipment and
supplies. We also blend and sell industrial fluids for
metalworking applications on a worldwide basis. We operate four
business segments:




|  |                                       
|- | --------------------------------------
| | Machinery technologies  North America
| 
| | Machinery technologies  Europe       
| 
| | Mold technologies                     
| 
| | Industrial fluids                     

Our first three segments provide plastics
processors with a broad range of technologically advanced
products and services  machinery, tooling, parts and
applications expertise  required for todays
plastics processing techniques. Our fourth segment is a leading
supplier of industrial fluids, whose unique formulations meet
many stringent performance, health and safety requirements in a
wide variety of metalworking applications.

Starting out in the 1860s as a screw and tap
maker in a small shop in downtown Cincinnati, the company was
first incorporated in 1884. As a successor to that business,
Milacron was most recently incorporated in Delaware in 1983.
Known throughout most of our history as a leading machine tool
maker serving metalworking industries, during the last five
years we have divested this business as well as our carbide
metalcutting insert businesses in order to focus exclusively on
plastics technologies and industrial fluids.

Accounting for 86% of consolidated sales from
continuing operations in 2002, our plastics technologies
segments manufacture and sell equipment and turnkey systems for
the three most common methods of processing plastic 
injection molding, extrusion and blow molding  as
well as related mold tooling and components, MRO (maintenance,
repair and operating) supplies and value-added services for
these same methods. Major global markets for our plastics
technologies include packaging, automotive, components, building
materials, consumer goods, medical, housewares, electrical and
electronics.

In our industrial fluids segment, representing
14% of total sales from continuing operations, we blend and sell
coolants, lubricants, process cleaners, corrosion inhibitors and provide related value-added services to a
variety of metalworking industries. Major global markets for our
industrial fluids include automotive and transportation,
machinery, components, aerospace, consumer goods and off-road
equipment.

In the second half of the 1990s, Milacron
benefited from a strong economy with high levels of sales and
growing profitability. Strategic acquisitions allowed us to grow
our core businesses faster than the general economy. In 2001,
however, we entered what turned out to be the deepest and
longest recession in the North American manufacturing sector in
50 years. Furthermore, in 2002, while the recession
continued in North America, demand in European markets began to
soften. As a result, consolidated sales from continuing
operations fell from peak levels of $994 million in 1999
and $975 million in 2000 to $755 million in 2001 and
$693 million in 2002, and we sustained substantial losses
in both 2001 and 2002. Our net loss from all operations
including restructuring costs was $35.7 million, or $1.08
per share, in 2001 and $222.9 million, or $6.67 per share,
in 2002. From continuing operations, excluding restructuring
costs, Milacron lost $17.7 million, or $.55 per share, in
2001 and $9.6 million, or $.30 per share, in 2002.

We maintain an Internet website at
www.milacron.com. Our site provides company, product and service
information, including our annual and quarterly reports and
other filings, as well as our latest news releases, stock
information, investor presentations and conference calls. The
information contained on our website is not incorporated by
reference in this report.

Strategic Acquisitions and
Divestitures

Milacron has made a number of key acquisitions
and divestitures designed to strengthen our core
businesses  plastics technologies and industrial
fluids  on a global basis. In the last five years, we
have made 12 acquisitions in plastics technologies and
three in industrial fluids. During this time we have also
divested five businesses, most of them metalworking product
lines. In plastics, we have diversified into durable goods and
consumable products, which are less sensitive to economic cycles
and generally have higher margins than capital goods. In 2002,
capital goods accounted for about 50% of our plastics sales,
compared to approximately 85% in 1992. Through recent
acquisitions we have also expanded our industrial fluids to
include process cleaners and products for metalforming and heat
treating.




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Due to exceptionally weak business conditions we
made no significant acquisitions in 2002. Additions to our
continuing operations in the last five years have been:

|                          |  |      |  |                              
|------------------------- |  | ---- |  | -----------------------------
|                         
|                         
|Acquisition               |  | Date |  | Product Lines                
|                         
|                         
|Northern Supply           |  | 1998 |  | Plastics processing supplies 
|Wear Technology           |  | 1998 |  | Extruder barrels and screws  
|Autojectors               |  | 1998 |  | Vertical injection machines  
|Uniloy                    |  | 1998 |  | Blow molding systems         
|Manpo Chemicals           |  | 1998 |  | Metalworking fluids          
|Master Unit Die           |  | 1998 |  | Mold bases, tooling          
|Nickerson                 |  | 1999 |  | Plastics tooling and supplies
|Producto Chemicals        |  | 1999 |  | Metalworking cleaning fluids 
|Oak International         |  | 1999 |  | Metalforming fluids          
|Akron Extruders           |  | 2000 |  | Single-screw extruders       
|Rite-Tek Canada           |  | 2000 |  | Plastics MRO supplies        
|Ontario Heater and Supply |  | 2000 |  | Plastics MRO supplies        
|Progress Precision        |  | 2001 |  | Extruder barrels and screws  
|Reform Flachstahl         |  | 2001 |  | Mold bases and components    
|EOC Normalien             |  | 2001 |  | Mold bases and components    
|                         

Milacron is committed to growing profitability in
each of our business segments and we will seek to divest any
operation or product line that is not critical to our core
businesses or not likely to meet our growth targets. In 2002 we
sold our large metalcutting tool businesses  Valenite
in North America and Widia and Werkö in Europe and
Asia  and we also initiated plans to seek strategic
alternatives for our round metalcutting tool and grinding wheel
businesses. In the last five years, we have divested the
following five businesses:

|                         |  |      |      |               |  |                                       |  | 
|------------------------ |  | ---- | ---- | ------------- |  | ------------------------------------- |  | 
|                        
|                        
|Divestiture              |  | Date |      | Product Lines
|                        
|                        
|Machine Tools            |  |      | 1998 |               |  | Metalworking machinery               
|European Extrusion       |  |      | 1999 |               |  | Plastics extrusion systems           
|Widia Magnet Engineering |  |      | 2000 |               |  | Industrial magnets                   
|Valenite                 |  |      | 2002 |               |  | Carbide inserts, tool holders        
|Widia and Werkö          |  |      | 2002 |               |  | Carbide inserts, tool holders, drills
|                        

Cost Cutting and Efficiency
Initiatives

In the normal course of business, and especially
during a prolonged period of depressed manufacturing activity in
many world markets, we take every opportunity to reduce our cost
structure and increase our overall efficiency and responsiveness
to our customers.


Milacrons cost reduction program in North
America and Europe over the past three years has entailed
closing 14 manufacturing plants and eliminating approximately
1,400, or 27%, of our manufacturing and administrative positions
worldwide, while generating an annualized payroll savings of
more than $60 million.

In 2002, we undertook the consolidation of the
manufacture of North American container blow molding and
structural foam machines with our integrated machinery
manufacturing center in Batavia, Ohio. For the remaining mold
making and blow molding applications and support operations, we
moved into smaller, more efficient facilities in the Manchester,
Michigan area. In addition, we consolidated our mold
technologies manufacturing and support operations in both North
America and Europe. For these consolidations, expected to be
complete in 2003, Milacron estimates total pretax charges of
$7 to $8 million and annualized pretax cost savings in
excess of $4 million. We took about half of these charges
in 2002 and expect to realize most of the annualized cost
savings for 2003. Cash costs for these initiatives are estimated
at about $6 million, most of which will be spent in 2003.

Milacron is committed to better serving our
customers and to improving our competitive advantage through the
implementation of Lean and Six Sigma processes. Since adopting
these processes in mid-2001 as part of our total quality
leadership business philosophy, over one-third of our employees
have received Lean/ Six Sigma training and hundreds of
cross-functional teams have solved problems and improved process
efficiency. The primary goal of these efforts is to shorten lead
times, which improves our response time to customers and reduces
our overall working capital requirements.

Research and Development, New Product 
 Development and Capital Expenditures

We emphasize efficient investment in research and
development and in new capital equipment to support rapid new
product introductions, enhance our global competitive position
and achieve sales growth. In 2002, we focused our investment on
customer-driven development. To these ends we invested $15.8
million, or 2.3% of sales, in R&D in 2002, compared to
$21.1 million, or 2.8% of sales, in 2001.


Patents

Milacron holds a number of patents pertaining to
both plastics technologies and industrial fluids, none of which
are material to their respective business segments.


Employees

The average number of employees from continuing
operations at Milacron was 4,090 people in 2002. Of these, about
half were employed outside the U.S. As of year-end 2002, our
employment from continuing operations was about 4,000 people.




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MILACRON
INC.  4 FORM 10-K




---



Segment Information

Segment and geographic information for the years
ended December 31, 2002, 2001 and 2000 is included in the
notes to Milacrons consolidated financial statements on
pages 44 through 47 of this Form 10-K.


Plastics Technologies

Products and Services.We believe Milacron is the
worlds broadest-line supplier of machinery, mold bases and
related tooling, supplies and services to process plastics. With
combined 2002 sales of $597 million, our plastics
technologies businesses are organized in three segments:

Machinery technologies  North
America



|  |                                                                                        
|- | ---------------------------------------------------------------------------------------
| | Injection molding systems, parts and services
    supplied from North America and India
| 
| | Blow molding systems, parts, molds and services
    supplied from North America        
| 
| | Extrusion systems, parts and services supplied
    from North America                  

Machinery technologies 
Europe



|  |                                                                         
|- | ------------------------------------------------------------------------
| | Injection molding systems, parts and services
    supplied from Europe  
| 
| | Blow molding systems, parts, molds and services
    supplied from Europe

Mold technologies



|  |                                                                            
|- | ---------------------------------------------------------------------------
| | Injection mold bases, related components/tooling
    and services worldwide
| 
| | MRO  aftermarket parts and supplies
    worldwide                         

Milacron strives to be the one-stop supplier of
choice for the needs of plastics processors. We offer full lines
of advanced injection molding, extrusion and blow molding
equipment and systems, and specialty auxiliary equipment for all
types of plastics processing, as well as supplies and
replacement parts. To maximize productivity and profitability,
customers count on Milacrons technology innovations,
value-added services and comprehensive applications expertise.
Milacron is a leading maker and supplier of mold bases and
related tooling, components and supplies for the injection
mold-making industry, and we make complete molds for blow
molding. We are also a supplier of aftermarket MRO (maintenance,
repair and operating) items for plastics processing, and we
provide retrofit and rebuild services for older equipment
manufactured by Milacron and others.

Injection molding is a very versatile process
that is used to make a wide variety of plastic products, ranging
from auto components, toothbrushes and computer devices to
mobile phones, toys, medical equipment and DVDs. We are leading
the global industry shift to all-electric injection molding
technology, which is cleaner, quieter, more accurate and more
energy efficient than traditional hydraulic machines. Milacron
is also a recognized technology leader in multi-material
injection molding, offering systems that significantly reduce
the total cost per molded part. And our patented PC-based
control technology for plastics molding machines assures
high-quality part production and brings the power of the
Internet and improved communications to the shop floor.

In blow molding, we believe Milacron is the
number-one maker of systems to produce HDPE (high density
polyethylene) containers, as well as the worlds largest
producer of industrial blow molding equipment, which is used to
make such hollow or semi-hollow products as automotive
components, toys, furniture, luggage, and storage and shipping
containers. In addition to providing turnkey, state-of-the-art
blow molding systems, we are an integrated supplier of molds,
tooling, aftermarket parts and services, and applications
expertise.

Our high-output twin-screw extruders are sold in
North America to produce a wide variety of PVC (polyvinyl
chloride) and plastic composite products, such as siding,
decking, fencing and pipe used in commercial and home
construction markets. Smaller models of our single-screw
extruders serve such end markets as plastics film and medical
tubing. We also supply a full line of new and rebuilt
high-performance barrels and screws, which are the productivity
and value components in the extrusion business, for all makes
and models of extruders.

Milacrons pre-engineered mold bases and
components for injection molding are market leaders in their
categories in North America and Europe. We offer the widest
range of standard and special mold technologies and the latest
advances in quick-change molds, hot runner systems and
art-to-part metal printing of complex molds. Independent mold
makers are our largest customer category.

We sell MRO supplies and services primarily
through catalogs to OEM (original equipment manufacturers) and
aftermarket customers around the world. Known for carrying
high-quality products at competitive prices, we strive to become
an extension of our customers businesses by meeting their
day-to-day needs for small tools, gauges, temperature
regulators, nozzles, screw tips, lubricants, safety supplies and
thousands of other items.

Our service and service parts organization
continues to grow worldwide. We supplement our own service
technicians with a network of independent providers for 24-hour
response across North and South America and in many European
countries. Customers have the option of ordering parts and
service over the phone or via the Internet.

Markets.One
of the largest industries in the world, plastics processing is a
major contributor to the vitality of industrialized economies
and to the continuing growth of developing areas. Markets for
plastics processing systems and supplies have grown steadily for
over half a century, as plastics and plastic composites continue
to replace tradi-



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tional materials such as metal, wood, paper and
glass. Plastics have increasingly become the material of choice
for many, if not most, manufactured goods.


Advancements in material development and in
processing equipment continue to make plastic products more
functional and less expensive, thus spurring secular growth.
Thanks to superior strength-to-weight ratios, plastics are
increasingly used in transportation-related applications. And
consumer demand for safer, more convenient products continues to
drive general demand for plastic products.

Milacron competes in a global market, estimated
to be $12 billion on an annualized basis, for plastics
equipment and supplies. Our product mix generally parallels the
major segments of this market. About two-thirds of the market
consists of capital equipment, which is highly sensitive to
general economic cycles and capital spending patterns. In
addition, demand is often shaped by other factors such as
fluctuations in resin pricing and availability, oil, gas and
electricity prices, the impact of interest rates on new housing
starts and auto sales, the introduction of new products or
models, and consumer confidence and spending. Changes in
currency exchange rates may also affect our customers
businesses and, in turn, the demand for processing equipment. To
reduce our dependency on capital goods cycles, we have focused
on expanding our durable and consumable product offerings.

It has been well known for many decades that,
generally speaking, the use of plastics is environmentally
friendly and actually conserves energy when compared to making
the same products out of metal, wood, paper or glass. To further
address environmental concerns, however, many polymer suppliers,
machinery makers and processors are actively developing and
improving methods of recycling. As a member of the trade
association, The Society of the Plastics Industry, Milacron
continues to work with other leading companies to make plastics
a part of the solution to the challenges of energy and
environmental conservation.

Geographic Sales.About 67% of our plastics
technologies products and services in 2002 were sold to
customers in North America. European sales made up about 24% of
the total, with the remainder coming from Asia and the rest of
the world.

Distribution.We sell our plastics machinery and
systems through a combination of direct sales and independent
agents, who are spread geographically throughout our key
markets. We sell our mold bases, supplies and components through
a direct distribution network in North America and Europe and
through a large network of joint venture sales and service
offices in Asia. We market MRO supplies in traditional printed
catalogs as well as through electronic catalogs and over the
Internet.

Milacron maintains sales, marketing and customer
service facilities in major cities across North America, Europe
and Asia. We also sell through large networks of distributors
and/or sales and service offices in all major countries. A great
number of our mold technology products are sold through catalogs
and telemarketing, and we are rapidly developing e-business
capabilities for Internet sales and distribution in all our
businesses.

Customers.Our plastics technologies
customers are involved in making a wide range of everyday
products: from food and beverage containers to refrigerator
liners; from electronic and medical components to digital
cameras and razors; from milk bottles to plastic-lumber decking.
Key markets in order of 2002 sales were packaging, automotive,
industrial components, building materials, consumer goods and
toys, custom molders, medical devices, housewares, and
electrical and electronics.

Production Facilities.For our three plastics
technologies segments, Milacron maintains the following
principal production facilities:

|                              |  |                                                                         
|----------------------------- |  | ------------------------------------------------------------------------
|                             
|                             
|Facility Location             |  | Products                                                                
|                             
|                             
|Ahmedabad, India              |  | Injection molding machines                                              
|Batavia, Ohio*                |  | Injection molding machines, blow molding
    machines, extrusion systems
|Charlevoix, Michigan          |  | Mold components                                                         
|Corby, England                |  | Injection molding components                                            
|Fulda, Germany                |  | Mold components                                                         
|Greenville, Michigan*         |  | Mold base manufacturing                                                 
|Lewistown, Pennsylvania       |  | Mold components                                                         
|Madison Heights, Michigan     |  | Mold base components                                                    
|Magenta, Italy*               |  | Blow molding machines                                                   
|Mahlberg, Germany             |  | Mold components                                                         
|Malterdingen, Germany         |  | Injection molding machines                                              
|Manchester, Michigan (a)      |  | Molds for blow molding                                                  
|McPherson, Kansas*            |  | Extrusion screws and barrels                                            
|Mechelen, Belgium             |  | Mold components                                                         
|Melrose Park, Illinois        |  | Special mold base components                                            
|Mississauga, Ontario, Canada* |  | Extrusion screws                                                        
|Mt. Orab, Ohio                |  | Plastics machinery parts                                                
|Policka, Czech Republic*      |  | Blow molding machines                                                   
|Windsor, Ontario, Canada      |  | Machinery for mold bases                                                
|Youngwood, Pennsylvania       |  | Mold bases and components                                               
|                             



|    |                                                                                    
|--- | -----------------------------------------------------------------------------------
|(a) | The operations of this facility will be relocated
    in the first quarter of 2003.

|  |       
|- | ------
|* | Leased

Competition.The markets for plastics
technologies are global and highly competitive and include North
American, European and Asian competitors. We believe Milacron
has the number-one share of the North American market and the
number-two share worldwide. Some of our competitors are larger
than us, most are smaller, and only a few compete in more than
one product category. Principal com-



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petitive factors in the plastics technologies
industry are product features, technology, performance,
reliability, quality, delivery, price and customer service.


Industrial Fluids

Products and Services.We provide metalworking industries
worldwide with a wide variety of coolants, lubricants, forming
fluids, process cleaners and corrosion inhibitors used in the
shaping of metal products. Customers count on our extensive
knowledge of chemistry and metalworking applications to maximize
their productivity.

With 2002 sales of $96 million, our
industrial fluids segment consists of:



|  |                                                                  
|- | -----------------------------------------------------------------
| | Metalcutting and metalforming coolants and
    lubricants        
| 
| | Process cleaners, corrosion inhibitors and
    specialty products

Coolants are required in the vast majority of
metalworking operations, including cutting, grinding, stamping
and forming, to achieve desired part quality and output through
higher metal-removal rates and longer tool life. Our family of
premium fluids meets the demands of todays toughest
metalworking operations, offering unmatched machining and
grinding performance. One of our more popular blends, for
example, can increase the life of grinding wheels by a
hundredfold or more in certain applications compared to
conventional fluids. For over 50 years, our specialty has
been synthetic, or water-based, fluids, which provide excellent
lubricity and are generally cleaner than oil-based products.
More recently, our new high-performance green fluids
made from vegetable oils have been gaining acceptance among
metalworking customers concerned with environmental and/or
disposal issues.

We add value for our customers by helping them
maintain the safety and effectiveness of their fluids and by
offering them our expertise in fluid/tool synergies in order to
optimize their metalworking operations. Optimized fluid and tool
selection can provide significant productivity gains and cost
savings.

Our strength is in the area of metal removal
(metalcutting and grinding), but we also blend and sell stamping
and metalforming fluids, process cleaners, corrosion inhibitors
and other specialty products for metalworking, all of which
represent good growth opportunities for us.

Markets.Key
markets for our industrial fluids include the whole spectrum of
metalworking industries: from automotive, aircraft and machinery
makers and job shops to manufacturers of appliances,
agricultural equipment, and consumer and sporting goods.
Milacron fluids are also used in the production of glass and
mirrors and in high-tech processes such as silicon wafer slicing
and polishing.

Our industrial fluids compete in a global market
that is estimated to be $2.5 billion on an annualized
basis. Over one-third of the market consists of metalcutting and
grinding fluids, with metalforming fluids and process cleaners
each accounting for about one-quarter of the market. Demand for
our fluids is generally directly proportional to levels of
industrial production, although we specifically target
higher-growth areas such as machining and forming exotic alloys
and aluminum. Factors affecting our customers production
rates and ultimately demand for our fluids include auto and
machinery sales, consumer spending and confidence, interest
rates, energy prices and currency exchange rates.

Environmental, health and safety concerns could
negatively affect demand for metalworking fluids. When it comes
to industrial fluids, Milacron places very high importance on
employee safety and environmental protection. In a proactive
approach to continually improve the health and environmental
effects of metalworking fluids, we work both locally and
internationally with suppliers, customers and regulatory
authorities and we support and participate in research and
educational programs regarding metalworking fluids.

Geographic Sales.About 57% of our 2002 industrial
fluid sales were made to customers in North America, while
another 35% were to European customers. The remaining sales were
to customers in Asia and the rest of the world.

Distribution.Milacrons industrial fluids
are sold primarily through industrial distributors, with some
direct sales, as well as through traditional printed catalogs
and electronic catalogs over the Internet. We produce most of
what we sell, and most of what we make is sold under our own
brand names. In addition, some of our fluids are sold under
brand names of other companies through their own market channels.

Customers.Our metalworking fluids are
involved in making all kinds of products: from automotive power
train components to aluminum soft drink cans, from air
conditioners and glass mirrors to bearings and golf clubs, not
to mention a wide variety of industrial components.

Markets for our industrial fluids in order of
importance based on 2002 sales were automotive and
transportation, job shops, industrial components, consumer
goods, industrial machinery, off-road and other heavy equipment,
aerospace, oil and primary metals, packaging, housewares and
electrical. The largest customer category, automotive and
transportation, accounted for 42% of fluid sales in 2002.



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##### Table of Contents



Production Facilities.For our industrial fluids segment,
Milacron maintains the following principal production facilities:

|                             |  |                                                               
|---------------------------- |  | --------------------------------------------------------------
|                            
|                            
|Facility Location            |  | Products                                                      
|                            
|                            
|Cincinnati, Ohio             |  | Metalworking fluids                                           
|Corby, England*              |  | Metalforming fluids                                           
|Grenada, Mississippi*        |  | Metalforming fluids                                           
|Livonia, Michigan            |  | Process cleaners, corrosion inhibitors, specialty
    products
|Sturgis, Michigan            |  | Metalforming fluids                                           
|Ulsan, South Korea           |  | Metalworking fluids                                           
|Vlaardingen, The Netherlands |  | Metalworking fluids                                           
|                            



|  |       
|- | ------
|* | Leased

Competition.We believe Milacron holds a
leadership position in world markets for water-based, or
synthetic, metalworking fluids. Our competitors range from large
petrochemical companies to smaller companies specializing in
similar fluids. Principal competitive factors in this business
include market coverage, product performance, delivery, price
and customer service.




Executive Officers of the Registrant

The following information is included in
accordance with the provisions for Part III, Item 10:

|                               |  |                                                          |  |                                                                                                                                                                                                                                                                                                                                                               
|------------------------------ |  | -------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                              
|                              
|                               |  | Positions Held During                                   
|Name and Age                   |  | Position                                                 |  | Last Five Years                                                                                                                                                                                                                                                                                                                                               
|                              
|                              
|Ronald D. Brown
    (49)       |  | Chairman and Chief Executive Officer                     |  | Elected Chairman and Chief Executive Officer in
    2001. Also served as President and Chief Operating Officer from
    1999 to 2002, Prior thereto was Vice President 
    Finance and Administration and Chief Financial Officer from 1997
    and Vice President  Finance and Chief Financial
    Officer from 1993. Has served as a Director since 1999.
|Harold J. Faig
    (54)        |  | President and Chief Operating Officer                    |  | Elected President and Chief Operating Officer in
    2002. Prior thereto was Group Vice President 
    Plastics Technologies from 1994.                                                                                                                                                                                                                      
|James R. Christie (a)
    (57) |  | Group Vice President  Metalworking
    Technologies     |  | Elected Group Vice President 
    Metalworking Technologies in 2000. Prior thereto was Vice
    President  Metalworking Technologies from 1997 and
    President of Valenite from 1993.                                                                                                                                                                     
|Barbara G. Kasting
    (50)    |  | Vice President  Total Quality
    Leadership            |  | Elected Vice President  Total Quality
    Leadership in 2002. Prior thereto was Vice President 
    Human Resources from 1997 and Assistant Treasurer from 1995.                                                                                                                                                                                            
|Robert P. Lienesch
    (57)    |  | Vice President  Finance and Chief
    Financial Officer |  | Elected Vice President  Finance and
    Chief Financial Officer in 1999. Also served as Treasurer until
    2001. Elected Vice President and Treasurer in 1998. Prior
    thereto was Controller from 1989.                                                                                                                                                  
|Hugh C. ODonnell
    (51)     |  | Vice President, General Counsel and Secretary            |  | Elected Vice President, General Counsel and
    Secretary in 1999. Prior thereto was Corporate Counsel from 1992.                                                                                                                                                                                                                                             
|Ross A. Anderson
    (46)      |  | Controller                                               |  | Elected Controller in 2002. Prior thereto was
    Group Controller, Plastics Technologies from 1998 and
    Controller, U.S. Plastics Machinery from 1989.                                                                                                                                                                                                    
|John C. Francy
    (38)        |  | Treasurer                                                |  | Elected Treasurer in 2001. Prior thereto was
    Assistant Treasurer from 1998 and Director of Treasury
    Operations from 1997.                                                                                                                                                                                                                             
|                              

Notes:




| |                                                                                                                                                
| | -----------------------------------------------------------------------------------------------------------------------------------------------
| | The parenthetical figure below the name of each
    individual indicates his or her age at most recent birthday
    prior to December 31, 2002.

There are no family relationships among the
executive officers of the Registrant.

Officers of the company are elected each year by
the Board of Directors.



| |     |                                         
| | --- | ----------------------------------------
| | (a) | Mr. Christie retired at the end of 2002.



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##### Table of Contents





---



MILACRON
INC.  8 FORM 10-K




---






Item 2.   Properties

We lease our corporate headquarters building from
a third party. This building is located in Cincinnati, Ohio.


The remaining information required by Item 2
is included in Part I on pages 5 and 7 of this Form 10-K.




Item 3.   Legal Proceedings

Various lawsuits arising during the normal course
of business are pending against the company and its consolidated
subsidiaries. In such lawsuits, multiple plaintiffs allege
personal injury involving metalworking fluids supplied and/or
managed by the company, some of which seek substantial dollar
amounts. The company is vigorously defending these claims and
believes it has reserves and insurance coverage sufficient to
cover potential exposures.


While, in the opinion of management, the
liability resulting from these matters will not have a
significant effect on the companys consolidated financial
position or results of operations, the outcome of individual
matters cannot be predicted with reasonable certainty at this
time.






|        |                                                    
|------- | ---------------------------------------------------
|Item 4. | Submission of Matters to a Vote of Security Holders

There were no matters submitted to a vote of
security holders during the fourth quarter of 2002.







PART II







|        |                                                                              
|------- | -----------------------------------------------------------------------------
|Item 5. | Market for the Registrants Common Equity and Related
    Stockholder Matters

The companys common shares are listed on
the New York Stock Exchange. Such shares are also traded on the
Cincinnati Stock Exchange, Boston Stock Exchange, Pacific Stock
Exchange, Philadelphia Stock Exchange and Midwest Stock
Exchange, with options traded on the Philadelphia Stock
Exchange. As of February 28, 2003, there were approximately
4,530 holders of record of the companys common shares. The
companys Preferred shares are not actively traded.


The following table shows the price range of the
common shares for 2001 and 2002, as reported by the New York
Stock Exchange. Cash dividends of $.12 per common share were
paid in each of the first three quarters of 2001. Cash dividends
of $.01 per common share were paid in the fourth quarter of 2001
and each quarter of 2002. Our revolving credit facility
(discussed on page 41 of this Form 10-K) currently limits
the payment of cash dividends to $.01 per share in each quarter.

|                                 |              |      |       |       |  |   |       |       | 
|-------------------------------- | ------------ | ---- | ----- | ----- |  | - | ----- | ----- | 
|                                
|                                
|Common Stock Price Range         |              |     
|                                
|                                
|                                 |              | High |       | Low  
|                                
|                                
|2001, quarter ended
    March 31 |              | $    | 22.94 |       |  | $ | 15.25 |      
|                                 | June 30      |      |       | 19.35 |  |   |       | 15.67 | 
|                                 | September 30 |      |       | 19.00 |  |   |       | 11.75 | 
|                                 | December 31  |      |       | 16.85 |  |   |       | 10.82 | 
|2002, quarter ended
    March 31 |              | $    | 16.60 |       |  | $ | 10.92 |      
|                                 | June 30      |      |       | 14.63 |  |   |       | 9.65  | 
|                                 | September 30 |      |       | 10.31 |  |   |       | 4.20  | 
|                                 | December 31  |      |       | 8.15  |  |   |       | 3.10  | 
|                                



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##### Table of Contents






Item 6.   Selected Financial Data

|                                                                                                          |                  |         |        |      |       |      |         |       |       |      |         |       |      |   |         |       |      |   |         |       |      |  
|--------------------------------------------------------------------------------------------------------- | ---------------- | ------- | ------ | ---- | ----- | ---- | ------- | ----- | ----- | ---- | ------- | ----- | ---- | - | ------- | ----- | ---- | - | ------- | ----- | ---- | -
|                                                                                                         
|                                                                                                         
|                                                                                                         
|(Dollars
in millions,
except per-share amounts)                                                           |                  | 2002    |        | 2001 |       | 2000 |         | 1999  |       | 1998
|                                                                                                         
|                                                                                                         
|Summary of Operations                                                                                     |                  |         |        |      |       |      |         |       |       |      |         |       |      |   |         |       |      |   |         |      
|Sales                                                                                                     |                  | $       | 693.2  |      |       | $    | 755.2   |       |       | $    | 974.5   |       |      | $ | 994.3   |       |      | $ | 881.4   |      
|Earnings (loss) from continuing operations before
    cumulative effect of change in method of accounting |                  |         | (18.4  | )(a) |       |      | (28.7   | )(a)  |       |      | 48.8    | (a)   |      |   | 60.6    | (a)   |      |   | 46.4    |      
|                                                                                                          | Per common share |         |        |      |       |      |         |       |       |      |         |       |      |   |         |       |      |   |         |       |     
|                                                                                                          |                  | Basic   |        |      | (.56  | )    |         |       | (.87  | )    |         |       | 1.39 |   |         |       | 1.64 |   |         |       | 1.19 |  
|                                                                                                          |                  | Diluted |        |      | (.56  | )(b) |         |       | (.87  | )(b) |         |       | 1.39 |   |         |       | 1.63 |   |         |       | 1.18 |  
|Earnings (loss) from discontinued operations                                                              |                  |         | (16.8  | )(c) |       |      | (7.0    | )     |       |      | 23.5    |       |      |   | 9.5     |       |      |   | (4.9    | )(c) 
|                                                                                                          | Per common share |         |        |      |       |      |         |       |       |      |         |       |      |   |         |       |      |   |         |       |     
|                                                                                                          |                  | Basic   |        |      | (.50  | )    |         |       | (.21  | )    |         |       | .67  |   |         |       | .26  |   |         |       | (.13 | )
|                                                                                                          |                  | Diluted |        |      | (.50  | )(b) |         |       | (.21  | )(b) |         |       | .67  |   |         |       | .26  |   |         |       | (.13 | )
|Cumulative effect of change in method of
    accounting                                                   |                  |         | (187.7 | )(d) |       |      |        |       |       |      |        |       |      |   |        |       |      |   |        |      
|                                                                                                          | Per common share |         |        |      |       |      |         |       |       |      |         |       |      |   |         |       |      |   |         |       |     
|                                                                                                          |                  | Basic   |        |      | (5.61 | )    |         |       |      |      |         |       |     |   |         |       |     |   |         |       |     |  
|                                                                                                          |                  | Diluted |        |      | (5.61 | )(b) |         |       |      |      |         |       |     |   |         |       |     |   |         |       |     |  
|Net earnings (loss)                                                                                       |                  |         | (222.9 | )    |       |      | (35.7   | )     |       |      | 72.3    |       |      |   | 70.1    |       |      |   | 41.5    |      
|                                                                                                          | Per common share |         |        |      |       |      |         |       |       |      |         |       |      |   |         |       |      |   |         |       |     
|                                                                                                          |                  | Basic   |        |      | (6.67 | )    |         |       | (1.08 | )    |         |       | 2.06 |   |         |       | 1.90 |   |         |       | 1.06 |  
|                                                                                                          |                  | Diluted |        |      | (6.67 | )(b) |         |       | (1.08 | )(b) |         |       | 2.06 |   |         |       | 1.89 |   |         |       | 1.05 |  
|                                                                                                         
|Financial Position at Year-End                                                                            |                  |         |        |      |       |      |         |       |       |      |         |       |      |   |         |       |      |   |         |      
|Working capital related to continuing operations                                                          |                  |         | 157.5  |      |       |      | 166.9   |       |       |      | 92.8    |       |      |   | (14.0   | )     |      |   | 35.3    |      
|Property, plant and equipment-net                                                                         |                  |         | 149.8  |      |       |      | 165.8   |       |       |      | 165.0   |       |      |   | 171.5   |       |      |   | 190.2   |      
|Total assets                                                                                              |                  |         | 915.7  |      |       |      | 1,512.3 |       |       |      | 1,464.9 |       |      |   | 1,536.7 |       |      |   | 1,557.1 |      
|Long-term debt                                                                                            |                  |         | 255.4  |      |       |      | 501.1   |       |       |      | 371.3   |       |      |   | 286.0   |       |      |   | 318.9   |      
|Total debt                                                                                                |                  |         | 301.5  |      |       |      | 576.7   |       |       |      | 457.2   |       |      |   | 500.4   |       |      |   | 476.4   |      
|Net debt (total debt less cash and cash
    equivalents)                                                  |                  |         | 179.2  |      |       |      | 486.6   |       |       |      | 423.4   |       |      |   | 422.7   |       |      |   | 434.9   |      
|Shareholders equity                                                                                      |                  |         | 134.0  |      |       |      | 434.9   |       |       |      | 484.4   |       |      |   | 490.9   |       |      |   | 476.6   |      
|                                                                                                          | Per common share |         |        | 3.79 |       |      |         | 12.80 |       |      |         | 14.37 |      |   |         | 13.18 |      |   |         | 12.45 |     
|                                                                                                         
|Other Data                                                                                                |                  |         |        |      |       |      |         |       |       |      |         |       |      |   |         |       |      |   |         |      
|Dividends paid to common shareholders                                                                     |                  |         | 1.4    |      |       |      | 12.4    |       |       |      | 16.8    |       |      |   | 17.9    |       |      |   | 18.8    |      
|                                                                                                          | Per common share |         |        | .04  |       |      |         | .37   |       |      |         | .48   |      |   |         | .48   |      |   |         | .48   |     
|Capital expenditures                                                                                      |                  |         | 6.2    |      |       |      | 13.5    |       |       |      | 26.5    |       |      |   | 23.9    |       |      |   | 34.2    |      
|Depreciation and amortization                                                                             |                  |         | 23.0   |      |       |      | 34.9    |       |       |      | 35.4    |       |      |   | 34.9    |       |      |   | 30.4    |      
|Backlog of unfilled orders at year-end                                                                    |                  |         | 76.4   |      |       |      | 61.2    |       |       |      | 100.0   |       |      |   | 153.0   |       |      |   | 141.7   |      
|Employees (average)                                                                                       |                  |         | 4,090  |      |       |      | 4,672   |       |       |      | 4,789   |       |      |   | 5,240   |       |      |   | 6,126   |      
|                                                                                                         

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | Includes restructuring costs of
    $13.9 million ($8.8 million after tax) in 2002,
    $17.5 million ($11.0 million after tax) in 2001,
    $1.4 million ($.9 million after tax) in 2000 and
    $7.2 million ($4.8 million after tax) in 1999. In
    1999, also includes a gain $13.1 million
    ($10.1 million after tax) on the sale of the companys
    European extrusion systems business.                                                                                                                                                                                                                                                                                                                                               
|(b) | For 2002 and 2001, diluted earnings per common
    share is equal to basic earnings per share because the inclusion
    of potentially dilutive securities would result in a smaller
    loss per common share.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|(c) | In 2002, includes a loss on the sale of the
    companys Widia and Werkö metalcutting tools
    businesses of $20.4 million ($14.9 million after tax),
    a gain on the sale of the companys Valenite metalcutting
    tools business of $53.3 million ($31.3 million after
    tax), a charge of $35.9 million ($9.9 million after
    tax) for the planned dispositions of the companys round
    metalcutting tools and grinding wheels businesses and a benefit
    of $2.3 million ($1.9 million after tax) from the
    adjustment of reserves related to the 1998 sale of the
    companys machine tools segment. In 1998, includes a loss
    of $45.9 million ($35.2 million after tax) on the sale
    of the machine tools segment.
|(d) | Represents a goodwill impairment charge related
    to the adoption of a new accounting standard effective
    January 1, 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    



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##### Table of Contents





---



MILACRON
INC.  10 FORM 10-K




---








|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|Item 7. | Managements Discussion and Analysis of Financial
    Condition and Results of Operations

Effective December 31, 2002, Milacron began
reporting four business segments: machinery
technologies  North America, machinery
technologies  Europe, mold technologies and
industrial fluids. The first three segments comprise
Milacrons plastics technologies business.

Acquisitions

As described more fully in the notes to the
consolidated financial statements, in the years 2000 through
2002 Milacron completed a total of seven acquisitions of smaller
companies that are now included in its plastics technologies
segments. The most significant were the 2001 acquisitions of
Reform Flachstahl (Reform) and EOC Normalien (EOC), two
businesses headquartered in Germany that manufacture and
distribute mold bases and components for injection molding. In
the aggregate, the seven acquired businesses had annual sales of
approximately $65 million as of the respective acquisition
dates.


Presence Outside the U.S.

Beginning with the acquisition of Ferromatik in
1993, Milacron has significantly expanded its presence outside
the U.S. and become more globally balanced. For 2002, markets
outside the U.S. represented the following percentages of our
consolidated sales: Europe 26%; Canada and Mexico 8%; Asia 6%;
and the rest of the world 3%. As a result of this geographic
mix, foreign currency exchange rate fluctuations affect the
translation of our sales and earnings, as well as consolidated
shareholders equity. During 2002, the weighted-average
exchange rate of the euro was stronger in relation to the U.S.
dollar than in 2001. As a result, Milacron experienced favorable
translation effects on new orders and sales of $8 million
and $12 million, respectively. The effect on earnings was
not material.


Between December 31, 2001 and
December 31, 2002, the euro strengthened against the dollar
by approximately 14% which caused a majority of a
$6 million increase in consolidated shareholders
equity due to favorable foreign currency translation adjustments.

If the euro should weaken against the U.S. dollar
in future periods, we could experience a negative effect in
translating our European new orders, sales and earnings when
compared to historical results.

Significant Accounting Policies and Judgments

The consolidated financial statements discussed
herein have been prepared in accordance with generally accepted
accounting principles in the United States, which require
management to make estimates and assumptions that affect the
amounts that are included therein. The following is a summary of
certain accounting policies, estimates and judgmental matters
that management believes are significant to Milacrons
reported financial position and results of operations.
Additional accounting policies are described in the note
captioned Summary of Significant Accounting Policies
on pages 27 through 29 of this Form 10-K, which should be
read in connection with the discussion that follows. Management
regularly reviews its estimates and judgments and the
assumptions regarding future events and economic conditions that
serve as their basis. While management believes the estimates
used in the preparation of the consolidated financial statements
to be reasonable in the circumstances, the recorded amounts
could vary under different conditions or assumptions.

Deferred Tax Assets and Valuation
Allowances

At December 31, 2002, Milacron had
significant deferred tax assets related to U.S. and non-U.S. net
operating loss and tax credit carryforwards and to charges that
have been deducted for financial reporting purposes but which
are not yet deductible for income tax reporting. These charges
include the effect of adopting Statement of Financial Accounting
Standards No. 142 and a charge to equity related to minimum
pension funding. At December 31, 2002, we have provided
valuation allowances against some of these assets. Valuation
allowances serve to reduce the recorded deferred tax assets to
amounts reasonably expected to be realized as tax savings in the
future. The establishment of valuation allowances and their
subsequent adjustment requires a significant amount of judgment
because the realization of deferred tax assets 
particularly those assets related to net operating loss
carryforwards  is generally contingent on the
generation of taxable income, the reversal of deferred tax
liabilities in the future and the availability of qualified tax
planning strategies. In determining the need for valuation
allowances, management considers its long-range internal
operating plans, which are based on the current economic
environment, managements best estimate of future economic
conditions in the countries in which Milacron operates, and the
effect of potential economic changes on the companys
various operations.


At December 31, 2002, Milacron had a U.S.
federal net operating loss carryforward of $12 million
which expires in 2022. Deferred tax assets related to this loss
carryforward and to additional state and local loss
carryforwards totaled $14 million. Additional deferred tax
assets totaling approximately $127 million have also been
provided for book deductions not currently deductible for tax
purposes including the writedown of goodwill, postretirement
health care benefit costs and accrued pension liabilities. No
valuation allowances have been provided with respect to these
assets because management believes they will be fully realized.
This judgment is based on the availability of qualified tax
planning strategies, the expectation of increased U.S.
industrial production and capital spending in 2003 and on the
significant reductions in Milacrons cost structure that
have been achieved in recent years and that will be achieved
through the restructuring programs that are currently in
progress and that may be announced in the future (see
Restructuring Costs on page 13).

At December 31, 2002, Milacron had non-U.S.
net operating loss carryforwards  principally in The
Nether-



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##### Table of Contents



lands, Germany and Italy  totaling
$152 million and related deferred tax assets of
$52 million. Valuation allowances totaling $36 million
have been provided with respect to these assets. Management
believes that it is more likely than not that portions of the
net operating loss carryforwards in these jurisdictions will be
utilized. However, there is currently insufficient positive
evidence to conclude that no valuation allowances are required.


If managements current estimates and the
related assumptions change in the future, Milacron may be
required to record new valuation allowances or increase the
allowances that are already recorded. This would result in
additional income tax expense in the period of the change.
Conversely, reductions of valuation allowances as a result of
changes in estimates or assumptions would have a beneficial
effect on Milacrons provision for income taxes.

Accounts Receivable, Inventory and Warranty
Reserves

Milacrons internal accounting policies
require that each of its operations maintain appropriate
reserves for uncollectible receivables, inventory obsolescence
and warranty costs in accordance with generally accepted
accounting principles. Because of the diversity of
Milacrons customers and product lines, the specific
procedures used to calculate these reserves vary by location but
in all cases must conform to company guidelines. Reserves are
required to be reviewed and adjusted as necessary on a quarterly
basis.


Allowances for doubtful accounts are generally
established using specific percentages of the gross receivable
amounts based on their age as of a particular balance sheet
date. The amounts calculated through this process are then
adjusted for known credit risks and collection problems.
Write-offs of accounts receivable for Milacrons continuing
operations have averaged $2.4 million during the last three
years. While management believes that the companys
reserves for doubtful accounts are reasonable in the
circumstances, adverse changes in general economic conditions or
in the financial condition of Milacrons major customers
could result in the need for additional reserves in the future.

Reserves for inventory obsolescence are generally
calculated by applying specific percentages to inventory
carrying values based on the level of usage and sales in recent
years. These calculations are then adjusted based on current
economic trends, expected product line changes, changes in
customer requirements and other factors. In 2002,
Milacrons continuing operations recorded new inventory
obsolescence reserves totaling $6.9 million and utilized
$3.6 million of such reserves in connection with the
disposal of obsolete inventory. Management believes that
Milacrons reserves are appropriate in light of its
historical results and its assumptions regarding the future.
However, adverse economic changes or changes in customer
requirements could necessitate the recording of additional
reserves through charges to earnings in the future.

Milacrons warranty reserves are of two
types  normal and
extraordinary. Normal warranty reserves are intended
to cover routine costs associated with the repair or replacement
of products sold in the ordinary course of business during the
warranty period. These reserves are accrued on a
percentage-of-sales method based on the ratio of actual warranty
costs over a representative number of years to sales revenues
from products sold with warranties over the same period. The
percentages are required to be adjusted at least annually.
Extraordinary warranty reserves are intended to cover major
problems related to a single machine or customer order or to
problems related to a large number of machines or other type of
product. These reserves are intended to cover the estimated
costs of resolving the problems based on all relevant facts and
circumstances. In recent years, costs related to extraordinary
warranty problems have not been significant. In 2002,
Milacrons continuing operations accrued warranty reserves
totaling $3.6 million and incurred warranty related costs
totaling $3.2 million. While management believes that the
companys warranty reserves are adequate in the
circumstances, unforeseen problems related to unexpired warranty
obligations could result in a requirement for additional
reserves in the future.

Impairment of Long-Lived Assets and
Goodwill

Milacron reviews the carrying values of its
long-lived assets annually. These reviews are conducted by
comparing the estimates of undiscounted future cash flows that
are included in Milacrons long-range internal operating
plans to the carrying values of the related assets. No growth in
operating cash flows beyond the third year is assumed. Under
this methodology, impairment would be deemed to exist if the
carrying values exceeded the expected future cash flow amounts.
In 2002, Milacron reviewed the aggregate carrying values of
selected groups of its long-lived assets under the provisions of
Statement of Financial Accounting Standards No. 144,
Accounting for the Impairment or Disposal of Long-Lived
Assets. The assets included in these reviews consisted
principally of property, plant and equipment and, where
applicable, intangible assets other than goodwill. Based on
these reviews, it was determined that the maximum period of time
to recover the carrying values of the tested groups of assets
through undiscounted cash flows is approximately 13 years
and that the weighted-average recovery period is approximately
30% of the remaining average lives of the assets. Based on the
results of the reviews, no impairment charges were recorded in
2002.


In years prior to 2002, Milacron reviewed the
carrying value of goodwill annually using estimated undiscounted
future cash flows in a manner similar to the methodology
described above. Using this approach in 2001, the maximum period
of time to recover the carrying value of recorded goodwill
through undiscounted cash flows was determined to be
approximately 12 years and the weighted-average recovery
period was approximately 18% of the average remaining
amortization period. However, effective January 1, 2002
Milacron adopted Statement of Financial



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Accounting Standards No. 142, Goodwill
and Other Intangible Assets (SFAS No. 142), which
requires that goodwill be tested for impairment using
probability-weighted cash flows discounted at market interest
rates. The change from undiscounted to discounted cash flows
resulted in a pretax goodwill impairment charge of
$247.5 million ($187.7 million after tax) that was
recorded as the cumulative effect of a change in accounting
method as of January 1, 2002. As required by SFAS
No. 142, Milacron conducted its first annual review of the
remaining goodwill balances as of October 1, 2002. This
review resulted in an additional pretax impairment charge of
$1.0 million (with no tax benefit) that was recorded in the
fourth quarter.


Insurance Reserves

Through its wholly-owned insurance subsidiary,
Milacron Assurance Ltd. (MAL), Milacron is primarily
self-insured for many types of risks, including general
liability, product liability, environmental claims and
workers compensation for certain domestic employees. MAL,
which is incorporated in Bermuda and is subject to the insurance
laws and regulations of that jurisdiction, establishes reserves
commensurate with known or estimated exposures under the
policies it issues to Milacron. Exposure for general and product
liability claims is supplemented by reinsurance coverage in some
cases and by excess liability coverage in all policy years.
Workers compensation claims in excess of certain limits
are insured with commercial carriers. At December 31, 2002,
MAL had reserves for known claims and incurred but not reported
claims under all coverages totaling approximately
$28 million. A majority of this amount is included in
long-term accrued liabilities in the Consolidated Balance Sheet
at that date.


MALs reserves are established based on
known claims, including those arising from litigation, and
managements best estimates of the ultimate exposures
thereunder (after consideration of excess carriers
liabilities) and on estimates of the cost of incurred but not
reported claims. For certain types of exposures, MAL and the
company utilize actuarially calculated estimates prepared by
outside consultants to ensure the adequacy of the reserves.
Reserves are reviewed and adjusted quarterly based on all
evidence available as of the respective balance sheet dates.
While the ultimate amount of MALs exposure to claims is
dependent on future events that cannot be predicted with
certainty, management believes that the recorded reserves are
adequate in the circumstances. However, claims in excess of the
recorded amounts could adversely affect earnings in the future
when additional information becomes available.

Pensions

Milacron maintains defined benefit and defined
contribution pension plans that provide retirement benefits to
substantially all U.S. employees and certain non-U.S. employees.
The most significant of these plans is the principal defined
benefit plan for certain U.S. employees, which is also the only
defined benefit plan that is funded. Before deducting charges of
$4.7 million for supplemental retirement benefits, Milacron
recorded normal pension income of $9.4 million related to
this plan in 2002. Expense related to the other plans totaled
$5.5 million.


A significant factor in determining the amount of
income recorded for the funded U.S. plan is the expected
long-term rate of return on plan assets. In 2002 and in several
preceding years, Milacron used an expected long-term rate of
return of 9 1/2%. However, the company will begin using a
rate of return of 9% beginning in 2003. This rate was developed
based on the current mix of equity and debt securities included
in the plans assets and on the historical returns on those
types of investments judgmentally reduced to reflect more
conservative expectations of future returns. In evaluating
future returns on equity securities, the existing portfolio was
stratified to separately consider large and small capitalization
investments as well as international securities. Based on the
methodology described below, the change from the 9 1/2%
rate of return assumption to the lower 9% rate will have the
effect of reducing the amount of pension income that would
otherwise be reportable in 2003 by approximately $2 million.

In determining the amount of pension income or
expense to be recognized, the expected long-term rate of return
is applied to a calculated value of plan assets that recognizes
changes in fair value over a three-year period. This practice is
intended to reduce year-to-year volatility in recorded pension
income or expense but it can have the effect of delaying the
recognition of differences between actual returns on assets and
expected returns based on the long-term rate of return
assumption. At December 31, 2002, the market value of
Milacrons pension assets was $343 million whereas the
calculated value of these assets was $430 million. The
difference arises because the latter amount includes only two
thirds and one third of the asset-related losses incurred in
2001 and 2002, respectively. In the absence of significant
asset-related gains in 2003, recognition of additional deferred
losses in 2004 and 2005 will have the effect of significantly
increasing the amount of pension expense to be recognized in
those years in relation to 2003.

In addition to the expected rate of return on
plan assets, recorded pension income or expense includes the
effects of service cost  the actuarial cost of
benefits earned during a period  and interest on the
plans liabilities to participants. These amounts are
determined actuarially based on current discount rates and
assumptions regarding matters such as future salary increases
and mortality. Differences in actual experience in relation to
these assumptions are generally not recognized immediately but
rather are deferred together with asset-related gains or losses.
When cumulative asset-related and liability-related gains or
losses exceed the greater of 10% of total liabilities or assets,
the excess is amortized and included in pension income or
expense. At December 31, 2001, the discount rate used to
value the liabilities of the principal U.S. plan was reduced
from 7 3/4% to 7 1/4%. The rate was further lowered to
6 1/2% at December 31, 2002. The combined effects of
these changes and the losses in relation to the



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long-term rate of return assumption discussed
above have resulted in cumulative losses in excess of the 10%
corridor. Amortization of these losses will adversely affect
pension expense in 2003 by approximately $3 million.


As discussed above, Milacron recorded pension
income of $9.4 million related to its principal U.S. plan
in 2002. However, due to the combined effects of the lower rate
of return assumption, the asset-related losses incurred in
recent years and the amortization of cumulative losses, Milacron
expects to record pension expense related to this plan of
approximately $1 million in 2003. In the absence of significant
asset-related gains or an increase in the plans discount
rate, expense for 2004 and beyond could be as much as
$10 million per year.

Because of the significant decrease in the value
of the assets of the funded plan for U.S. employees during 2001
and 2002 and the simultaneous decreases in the plans
discount rate, Milacron was required to record a minimum pension
liability adjustment of $118 million effective
December 31, 2002 and to significantly reduce the carrying
value of the pension asset related to the plan. These
adjustments were recorded as a component of accumulated other
comprehensive loss and therefore did not affect reported
earnings. However, they resulted in a $95 million after-tax
reduction of shareholders equity.

Results of Operations

In an effort to help readers better understand
the composition of Milacrons operating results, certain of
the discussions that follow include references to restructuring
costs and other items of income and expense. Accordingly, those
discussions should be read in connection with (i) the
tables on page 18 of this Form 10-K under the caption
Comparative Operating Results and (ii) the
consolidated financial statements and notes thereto that are
included herein on pages 23 through 47.

Discontinued Operations

As discussed more fully in the notes to the
consolidated financial statements, in the third quarter of 2002
Milacron completed the sales of its Valenite, Widia and
Werkö metalcutting tools businesses and began to explore
strategic alternatives for the sale of its round metalcutting
tools and grinding wheels businesses. All of these businesses
are reported as discontinued operations in the consolidated
financial statements. The comparisons of results of operations
that follow exclude these businesses and relate solely to the
companys continuing operations unless otherwise indicated.


2002 Compared to 2001

New Orders and Sales

In 2002, consolidated new orders for continuing
operations totaled $703 million, a decrease of $19 million,
or 3%, in relation to orders of $722 million in 2001. Sales
decreased from $755 million to $693 million. The
decreases occurred despite favorable currency effects and the
contributions of the 2001 acquisitions. As was the case for much
of 2001, low levels of industrial production and capital
spending in the plastics processing industry penalized results
in 2002. However, order levels and shipments increased modestly
in the fourth quarter.


Export orders totaled $66 million in 2002
compared to $78 million in 2001 while export sales
decreased from $82 million to $71 million. In both
cases, the decreases resulted from reduced export volume for
plastics processing machinery. Sales of all segments to non-U.S.
customers, including exports, totaled $296 million, or 43%
of sales, in 2002 compared to $307 million, or 41% of
sales, in 2001. Sales of products manufactured outside the U.S.
were $257 million in 2002 and $256 million in 2001.

Milacrons backlog of unfilled orders was
$76 million at December 31, 2002 and $61 million
at December 31, 2001. The increase resulted principally
from higher fourth quarter order levels for plastics processing
machinery worldwide.

Margins, Costs and Expenses

After deducting $1.9 million of
restructuring costs related to product line discontinuation in
2002 and $3.1 million of such costs in 2001, the
consolidated manufacturing margin increased modestly from 17.0%
to 17.3%. Excluding these costs, margins were 17.5% in 2002 and
17.4% in 2001. Despite our aggressive cost reduction efforts,
lower order and sales volume and reduced manufacturing cost
absorption continued to depress the margins of certain segments
as described below.


In 2002, total selling and administrative expense
decreased in dollar amount due to our ongoing cost reduction
initiatives and reduced variable selling costs that resulted
from lower sales volume. As a percentage of sales, selling
expense held steady at 13.4%. Administrative expense decreased
by 5% in relation to 2001.

Other expense-net decreased from
$12.9 million in 2001 to an insignificant net amount in
2002. The amount for 2002 includes $4.5 million of royalty
income from the licensing of patented technology whereas the
amount for 2001 includes goodwill amortization expense of
$10.8 million and a gain of $2.6 million on the sale
of surplus real estate.

Interest expense net of interest income totaled
$23.3 million in 2002 and $22.5 million in 2001.

Restructuring Costs

In response to exceptionally low order levels, in
the third and fourth quarters of 2001 we implemented plans to
consolidate manufacturing operations and further reduce
Milacrons cost structure. These plans, which are discussed
more fully in the notes to the consolidated financial
statements, resulted in pretax charges to earnings from
continuing operations of $17.8 million, including
$14.1 million in 2001 and $3.7 million in 2002. In
2001, we also initiated a plan to integrate the operations of
EOC and Reform, both of which were acquired in the second
quarter of that year, with




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our existing mold base and components business in
Europe. The total cost of completing the integration was
$9.2 million, of which $1.2 million is included in
reserves for employee termination benefits and facility exit
costs that were established in the allocations of the EOC and
Reform acquisition costs. The remainder was charged to expense,
including $3.4 million in 2001 and $4.6 million in
2002.


In connection with the plans initiated in 2001,
Milacron recorded pretax restructuring costs related to
continuing operations of $8.3 million in 2002 compared to
$17.5 million in 2001. Cash costs for the restructuring
actions and the integration of EOC and Reform were
$13.2 million in 2002. In the aggregate, the actions
initiated in 2001 are generating over $35 million in
annualized cost savings, most of which were realized in 2002.

In the third quarter of 2002, we approved
additional restructuring plans for the purpose of further
reducing the companys cost structure in certain businesses
and to reduce corporate costs as a result of the dispositions of
Widia, Werkö and Valenite. These actions resulted in third
quarter restructuring expenses of $1.3 million.

In November, 2002, we announced additional
restructuring initiatives intended to improve operating
efficiency and customer service. The first action involves the
transfer of all manufacturing of container blow molding machines
and structural foam systems from the plant in Manchester,
Michigan to our more modern and efficient facility near
Cincinnati, Ohio. The mold making operation in Manchester will
also be moved to a smaller, more cost-effective location near
the existing facility. In the second initiative, the manufacture
of special mold bases for injection molding at the Monterey
Park, California plant is being phased out and transferred to
various other facilities in North America. These additional
actions are expected to result in incremental restructuring
costs of $7 to $8 million, of which $4.3 million was
charged to expense in 2002 with the remainder to be recorded in
2003. The total cash cost of these initiatives is expected to be
approximately $6 million, most of which will be spent in
2003. The pretax annualized cost savings are expected to exceed
$4 million, most of which will be realized in 2003.

Early in 2003, the company initiated a plan for
the further restructuring of its European blow molding machinery
operations at a cost of up to $6 million. Additional
restructuring actions at other locations may be announced later
in the year. The cost of all of these actions, including an
additional $3 to $4 million to complete the actions
initiated in 2002 that are discussed in the preceding paragraph,
could total $9 to $12 million in 2003.

Results By Segment

Machinery technologies  North
America In 2002, the
machinery technologies  North America segment had
orders and sales of $321 million and $314 million,
respectively. In 2001, the segments orders totaled
$337 million and sales were $362 million. While new
business and shipment levels remained low for much of the year
due to depressed capital spending levels in the plastics
processing industry, volume increased modestly in the fourth
quarter. Despite lower sales volume, the segments
manufacturing margin improved in 2002 as a result of our cost
reduction and restructuring efforts. After deducting
restructuring costs of $6.7 million, the segment had an
operating profit of $1.3 million in 2002 compared to an
operating loss of $20.3 million in 2001 which includes
restructuring costs of $6.8 million. Excluding
restructuring, the segments operating profit was
$8.0 million in 2002 compared to a loss of
$13.5 million in 2001. The amounts for 2002 include the
previously discussed $4.5 million of royalty income.
Goodwill amortization expense included in the 2001 amounts
totaled $3.9 million.

Machinery technologies 
Europe New orders were
$122 million in 2002, an increase of $8 million in
relation to the prior year that was due principally to favorable
currency effects. Sales decreased from $123 million to
$117 million despite favorable currency effects.
Manufacturing margins also decreased slightly in 2002. Including
a credit of $.4 million related to the reversal of excess
restructuring reserves that had been accrued in 2001, the
segment had an operating loss of $7.7 million in 2002
compared to a loss of $16.0 million in 2001. The amount for 2001
includes restructuring costs of $6.9 million and goodwill
amortization expense of $1.4 million. Excluding
restructuring costs, the segments loss was
$8.1 million in 2002 compared to a loss of
$9.1 million in 2001. Results for 2002 continued to be
penalized by operating problems related to the consolidation of
the segments European blow molding systems business that
was completed in 2001.

Mold
technologies The mold
technologies segment had new orders of $174 million in
2002, a decrease of $10 million in relation to orders of
$184 million in 2001. Sales also decreased by
$10 million from $185 million to $175 million.
The decreases were due in part to low levels of industrial
production and capacity utilization in the North American
plastics industry but order levels and shipments also decreased
in the segments European operations. Due to reduced
volume, the segments manufacturing margin decreased by
approximately one percentage point. Including restructuring
costs of $6.4 million, the segment had an operating loss of
$1.1 million in 2002 compared to an operating profit of
$8.6 million in 2001 which is net of restructuring costs of
$3.5 million. Excluding restructuring, the segment had an
operating profit of $5.3 million in 2002 compared to
$12.1 million in the prior year. The margin decrease and
reduction in profitability were due principally to costs and
inefficiencies related to the integration of EOC and Reform (see
Acquisitions) with the segments existing European mold
base business. The amounts for 2002 include a fourth quarter
goodwill impairment charge of $1.0 million related to a
small business unit in the segment. Goodwill amortization
expense in 2001 was $5.2 million.

Industrial
fluids In the
industrial fluids segment, new orders and sales both increased
from $93 million in 2001 to



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$96 million in 2002. Approximately one half
of the increases resulted from favorable currency effects. The
segments manufacturing margin decreased only modestly but
its operating profit fell from $17.8 million, which
excludes $.3 million of restructuring costs, to
$14.4 million in 2002. The profitability decrease resulted
principally from the absence of one-time favorable adjustments
in 2001 that did not recur in 2002. Expense for goodwill
amortization in 2001 was $.3 million.


Loss Before Income Taxes

Milacrons pretax loss in 2002 was
$36.6 million compared to a loss of $51.0 million in
2001. The 2002 amount includes restructuring costs of
$13.9 million, partially offset by the previously discussed
$4.5 million of royalty income. The amount for 2001
includes goodwill amortization expense of $10.8 million,
$17.5 million of restructuring costs and the
$2.6 million land sale gain. Excluding all of these items,
the companys loss for 2002 was $27.2 million compared
to a loss of $25.3 million in 2001.


Income Taxes

During 2002, Milacron recorded a net benefit
related to income taxes due to the combined effects of operating
losses in the U.S. and a favorable effective tax rate for
non-U.S. operations. The losses incurred by our U.S. operations
resulted in tax benefits based on the federal statutory rate and
the companys effective tax rate for state and local tax
purposes, in both cases adjusted for permanent differences and
applicable credits. The favorable tax rate for non-U.S.
operations was due in part to permanent deductions in The
Netherlands partially offset by increases in valuation
allowances (as discussed below) in Germany and Italy. The
consolidated effective tax rate also benefited from the
favorable resolution of tax contingencies related to the U.S.
and other jurisdictions.


Milacron entered both 2002 and 2001 with
significant net operating loss carryforwards in certain
jurisdictions along with valuation allowances against the
carryforwards and other deferred tax assets. Valuation
allowances are evaluated periodically and revised based on a
more likely than not assessment of whether the
related deferred tax assets will be realized. Increases or
decreases in these valuation allowances serve to unfavorably or
favorably impact our effective tax rate.

Loss From Continuing Operations

Milacrons 2002 loss from continuing
operations was $18.4 million, or $.56 per share, compared
to a loss of $28.7 million, or $.87 per share, in 2001.
After excluding after-tax restructuring costs of
$8.8 million and after-tax royalty income of
$2.8 million, the loss for 2002 was $12.4 million. The
loss from continuing operations for 2001 includes after-tax
goodwill amortization expense of $7.0 million, after-tax
restructuring costs of $11.0 million, and the after-tax
land sale gain of $1.6 million. Excluding these items, the
loss for 2001 was $12.3 million.


Discontinued Operations

The companys discontinued
operations  Valenite, Widia, Werkö, grinding
wheels and round metalcutting tools  had combined
losses from operations of $25.2 million, or $.75 per share,
in 2002 compared to losses of $7.0 million, or $.21 per
share, in 2001. The adverse comparison to 2001 resulted from
depressed levels of industrial production in North America,
Europe and India as well as inefficiencies associated with
managing businesses in the process of being sold.


As described more fully in the notes to the
consolidated financial statements, in 2002 discontinued
operations includes a net gain of $8.4 million that
resulted from a gain of $31.3 million on the sale of
Valenite and a benefit of $1.9 million from adjustments of
reserves related to the 1998 divestiture of the companys
machine tools segment. These amounts were partially offset by
losses on the sale of Widia and Werkö of $14.9 million
and on the planned dispositions of the round metalcutting tools
and grinding wheels businesses totaling $9.9 million. The
latter amount was recorded as a charge to earnings in the fourth
quarter. The amounts for the Valenite and the Widia and
Werkö transactions have been revised in the fourth quarter
from the amounts previously recognized to reflect final purchase
price adjustments and to adjust reserves and tax effects to
reflect more recent estimates of expected liabilities or
benefits.

Cumulative Effect of Change in Method of
Accounting

Effective January 1, 2002, Milacron recorded
a pretax goodwill impairment charge of $247.5 million
($187.7 after tax or $5.61 per share) as the cumulative effect
of a change in method of accounting in connection with the
adoption of Statement of Financial Accounting Standards
No. 142. Approximately 75% of the pretax charge related to
the companys Uniloy and round metalcutting tools
businesses, the latter of which is now reported as a
discontinued operation. The amount of the charge was larger than
originally anticipated due principally to higher than expected
appraisal values for certain tangible and intangible assets of
the mold technologies segment.


Net Loss

Including the effects of discontinued operations
and the change in method of accounting, Milacron had a net loss
of $222.9 million, or $6.67 per share, in 2002 compared to
a net loss of $35.7 million, or $1.08 per share, in 2001.


2001 Compared to 2000

New Orders and Sales

Consolidated new orders for continuing operations
were $722 million in 2001, a decrease of $215 million,
or 23%, in relation to the prior year. Sales also decreased by
23% from $975 million in 2000 to $755 million in 2001.
Adverse currency effects reduced reported new orders and sales
by $8 million and $9 million, respectively, while
acquisitions contributed $28 million of incremental orders
and




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$29 million of sales. Orders and sales for
operations in North America were penalized by low levels of
industrial production and depressed levels of capital spending
for plastics processing machinery. While order levels and sales
decreased to a lesser degree in Europe, economic conditions in
that region began to soften in the second half of the year.


Export orders decreased from $89 million in
2000 to $78 million in 2001 and export sales fell from
$97 million to $82 million. Both decreases resulted
principally from lower export demand for U.S.-built plastics
processing machinery. Sales of all segments to non-U.S. markets
totaled $307 million both in 2001 and 2000. For 2001 and
2000, products manufactured outside the U.S. approximated 34%
and 26% of sales, respectively, while products sold outside the
U.S. approximated 41% and 31% of sales, respectively.

At December 31, 2001, Milacrons
backlog of unfilled orders was $61 million compared to
$100 million at December 31, 2000.

Margins, Costs and Expenses

Including restructuring costs related to product
line discontinuation, the consolidated manufacturing margin for
2001 was 17.0% compared to 23.8% in 2000. Excluding
restructuring costs, the 2001 consolidated manufacturing margin
was 17.4%. Lower sales volume and the related underabsorption of
manufacturing costs penalized the margins of all segments, but
especially the results of the machinery technologies 
North America segment. These effects became more acute in the
second half of the year.


In response to the general economic slowdown, we
continued to reduce production costs to meet lower levels of
demand and implemented stringent cost reduction measures
throughout our operations. In the first two quarters of 2001, we
eliminated more than 480 positions in North America in response
to lower order and shipment levels. During the third and fourth
quarters, we announced plans to further reduce our cost
structure and break-even point by consolidating a number of
smaller manufacturing facilities and further reducing general
overhead levels (see Restructuring Costs). These actions in 2001
are in addition to the programs to improve operating efficiency
that were initiated in 1999 and completed in 2000. We also began
making structural improvements in the way we run our businesses,
including the use of Six Sigma and Lean
manufacturing techniques throughout our operations to reduce
cycle times and working capital requirements.

For 2001, total selling and administrative
expense decreased in dollar amount due to reduced variable
selling expenses and the aggressive cost reduction measures
implemented in recent years. As a percentage of sales, however,
selling expense increased from 10.6% to 13.4% due in part to
modestly higher expense for bad debts. Administrative expense
decreased by almost 10% due principally to

the benefits derived from the aforementioned cost
reduction programs.


Other expense-net totaled $12.9 million in
2001 compared to $7.0 million in 2000. The amount for 2001
includes a pretax gain of $2.6 million ($1.6 million
after tax) on the sale of surplus real estate while the amount
for 2000 includes $8.3 million ($5.2 million after
tax) of revenue from the licensing of patented plastics
processing technology.

For 2001, net interest expense related to
continuing operations increased despite a general reduction in
short term interest rates. Substantially all of the 2001
interest expense attributable to the companys revolving
credit facility has been allocated to discontinued operations
due to mandatory debt repayments using the divestiture proceeds.
As a result, interest on fixed-rate debt represents a higher
percentage of interest expense in continuing operations in 2001
than was the case in 2000.

Restructuring Costs

In 1999, we initiated two separate programs to
improve operating efficiency and strengthen synergies between
certain recently acquired businesses and our previously existing
operations. The first program involved the consolidation of our
European blow molding operations into a new manufacturing
facility located near Milan, Italy at a cost of
$5.6 million. In the fourth quarter of 1999 we initiated a
second plan to improve operating efficiency and reduce costs at
additional businesses through the closure of three smaller
manufacturing plants and the elimination of approximately 130
manufacturing overhead and administrative positions at a total
cost of $7.9 million. Completion of these plans in 2000 resulted
in charges to earnings from continuing operations of
$1.4 million in that year.


As discussed more fully in the notes to the
consolidated financial statements, in the third and fourth
quarters of 2001 we formally approved plans to consolidate
additional operations and further reduce the companys cost
structure at a cost of $17.8 million. Of the total cost of
the plans, $14.1 million was recorded in 2001, including
reserves totaling $9.9 million for employee termination
benefits and facility exit costs, $.5 million for
supplemental retirement benefits to be funded through the
companys principal U.S. pension plan, and
$3.1 million for product line discontinuation and certain
other inventory writedowns. The plans involved the closure of
four manufacturing facilities and several sales and
administrative locations and the elimination of approximately
450 manufacturing and administrative positions. The 2001 cash
cost of implementing these plans was $5.8 million. During
2001, we also approved a plan to integrate the operations of EOC
and Reform with our existing mold base and components business
in Europe at a cost of $9.2 million which includes reserves
for employee termination benefits and facility exit costs of
$1.2 million that were established in the allocations of
the respective acquisition costs. The remainder was charged to
expense, including $3.4 million in 2001. Cash costs of the
integration in 2001 totaled $1.1 million.



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Results by Segment

Machinery technologies  North
America The machinery
technologies  North America segment had orders of
$337 million and sales of $362 million in 2001
compared to orders of $513 million and sales of
$550 million in 2000. Low levels of industrial production
in North America resulted in significantly reduced demand for
the segments plastics machinery products which represent a
substantial portion of its sales revenues. The segments
manufacturing margin also decreased due to underabsorption of
manufacturing costs despite major cost reduction and downsizing
initiatives. Principally as a result of decreased volume, the
segment had a 2001 operating loss of $20.3 million which
includes $6.8 million of restructuring costs. Excluding
restructuring, the segments loss in 2001 was
$13.5 million compared to earnings of $66.7 million in
2000 which is net of $.5 million of restructuring costs and
includes the previously discussed $8.3 million of royalty
income.

Machinery technologies 
Europe In 2001, the
machinery technologies  Europe segment had orders of
$114 million, a decrease of 20% in relation to 2000 orders
of $143 million. The segments sales decreased from
$145 million in 2000 to $123 million in 2001, or
approximately 15%. The decreases in relation to the prior year
were due in part to adverse currency effects and increasingly
soft economic conditions in Europe in the second half of the
year. Consistent with the decrease in sales and orders,
manufacturing margins decreased and the segment had an operating
loss of $16.0 million in 2001 compared to operating
earnings of $1.7 million in 2000. The segments
restructuring costs were $6.9 million in 2001 and
$.5 million in 2000. Excluding these amounts, the loss for
2001 was $9.1 million compared to earnings of
$2.2 million in 2000. Problems arising from the eighteen
month long reorganization of the segments blow molding
machinery operations, which was completed in 2001, contributed
to the adverse margin and earnings comparisons. As previously
discussed, these problems continued into 2002.

Mold
technologies The mold
technologies segment had new orders of $184 million in 2001
compared to orders of $191 million in 2000. The
segments sales were $185 million in 2001 and
$190 million in 2000. The decreases occurred despite the
contributions of the acquisitions of EOC and Reform (see
Acquisitions) and resulted principally from lower levels of
industrial production and capacity utilization in the plastics
processing industry in North America. Adverse currency effects
also contributed to the decreases. The segments
manufacturing margin decreased by approximately five percentage
points due to reduced volume. Including restructuring costs of
$3.5 million, the segment had operating earnings of
$8.6 million in 2001 compared to earnings of
$27.1 million in 2000. Excluding restructuring costs, the
segments operating earnings decreased from
$27.2 million in 2000 to $12.1 million in 2001.

Industrial
fluids Orders for
industrial fluids decreased from $102 million in 2000 to
$93 million in 2001 while the segments sales
decreased from $101 million to $93 million. The
decreases occurred principally in North America due to reduced
levels of industrial production. Manufacturing margins decreased
modestly but the segments operating profit increased from
$17.5 million to $17.8 million as a result of
favorable one-time adjustments. Excluding restructuring costs of
$.3 million the segments earnings for 2001 were
$18.1 million.

Earnings (Loss) Before Income Taxes

For 2001, Milacrons loss before income
taxes was $51.0 million compared to earnings of
$68.2 million in 2000. The amount for 2001 includes
restructuring costs of $17.5 million compared to
$1.4 million in 2000. Excluding restructuring,
Milacrons 2001 pretax loss was $33.5 million compared
to earnings of $69.6 million in 2000. The same factors that
caused the significant reductions in order levels and
sales  low levels of industrial production and
significantly lower levels of capital spending in the plastics
processing industry  were the principal reasons for
the adverse comparison to 2000.


Income Taxes

During 2001, Milacron recorded a net benefit
related to income taxes due to the combined effects of operating
losses in the U.S. and an unfavorable effective tax rate for
non-U.S. operations. The losses incurred by our U.S. operations
resulted in tax benefits based on the federal statutory rate and
the companys effective tax rate for state and local tax
purposes, in both cases adjusted for permanent differences and
applicable credits. The unfavorable tax rate for non-U.S.
operations was due in part to increases in valuation allowances
(as discussed below) which was partially offset by a favorable
ruling from a non-U.S. tax authority and the resolution of tax
contingencies in other jurisdictions.


Milacron entered both 2001 and 2000 with
significant net operating loss carryforwards in certain
jurisdictions, along with valuation allowances against the
carryforwards and other deferred tax assets. Valuation
allowances are evaluated periodically and revised based on a
more likely than not assessment of whether the
related deferred tax assets will be realized. Increases or
decreases in these valuation allowances serve to unfavorably or
favorably affect our effective tax rate. Milacrons
effective tax rate for 2000 was less than the federal statutory
rate due principally to reductions of valuation allowances and
to favorable rulings from various taxing authorities.

Earnings (Loss) from Continuing
Operations

In 2001, Milacron had a loss from continuing
operations of $28.7 million, or $.87 per share, compared to
earnings of $48.8 million, or $1.39 per share, in 2000. The
2001 loss includes after-tax restructuring costs of
$11.0 million. In 2000, after-tax restructuring costs were
$.9 million. Excluding restructuring costs, Milacrons
loss from continuing operations for 2001 was $17.7 million,
compared to earnings of $49.7 million, in 2000.




---



##### Table of Contents



Discontinued Operations

In 2001, Milacrons discontinued
operations  Widia, Werkö, Valenite, grinding
wheels and round metalcutting tools  had combined
after-tax losses of $7.0 million, or $.21 per share,
compared to earnings of $23.5 million, or $.67 per share,
in 2000. As was the case for continuing operations, the adverse
comparison resulted principally from low levels of industrial
production in North America, especially in the automotive and
aerospace industries, and from softening economic conditions in
Europe in the second half of 2001.


Net Earnings (Loss)

Including discontinued operations, Milacron had a
net loss of $35.7 million, or $1.08 per share, in 2001
compared to net earnings of $72.3 million, or $2.06 per
share, in 2000.


Comparative Operating Results

Due to the significant effects of restructuring
costs in recent years, the following tables are provided to
assist the reader in better understanding Milacrons
operating earnings (loss) excluding these amounts. In
addition to restructuring costs, the final two tables of this
section present Milacrons earnings (loss) on a
consistent basis with respect to goodwill amortization and
further adjusted to exclude certain non-operating gains.




---

Machinery Technologies  North
America


Operating Results





|                                   |  |      |     |      |  |      |       |   |  |   |      | 
|---------------------------------- |  | ---- | --- | ---- |  | ---- | ----- | - |  | - | ---- | 
|(In millions)                      |  | 2002 |     | 2001 |  | 2000
|                                  
|                                  
|Operating earnings (loss)          |  | $    | 1.3 |      |  | $    | (20.3 | ) |  | $ | 66.7 | 
|Restructuring costs                |  |      | 6.7 |      |  |      | 6.8   |   |  |   | 0.5  | 
|                                   |  |      |     |      |  |      |       |   |  |   |      | 
|Adjusted operating earnings (loss) |  | $    | 8.0 |      |  | $    | (13.5 | ) |  | $ | 67.2 | 
|                                   |  |      |     |      |  |      |       |   |  |   |      | 
|                                  



---

Machinery Technologies 
Europe


Operating Results





|                                   |  |      |      |      |  |      |       |   |  |   |     | 
|---------------------------------- |  | ---- | ---- | ---- |  | ---- | ----- | - |  | - | --- | 
|(In millions)                      |  | 2002 |      | 2001 |  | 2000
|                                  
|                                  
|Operating earnings (loss)          |  | $    | (7.7 | )    |  | $    | (16.0 | ) |  | $ | 1.7 | 
|Restructuring costs                |  |      | (.4  | )    |  |      | 6.9   |   |  |   | .5  | 
|                                   |  |      |      |      |  |      |       |   |  |   |     | 
|Adjusted operating earnings (loss) |  | $    | (8.1 | )    |  | $    | (9.1  | ) |  | $ | 2.2 | 
|                                   |  |      |      |      |  |      |       |   |  |   |     | 
|                                  



---

Mold Technologies


Operating Results





|                            |  |      |      |      |  |      |      |  |  |   |      | 
|--------------------------- |  | ---- | ---- | ---- |  | ---- | ---- |  |  | - | ---- | 
|(In millions)               |  | 2002 |      | 2001 |  | 2000
|                           
|                           
|Operating earnings (loss)   |  | $    | (1.1 | )    |  | $    | 8.6  |  |  | $ | 27.1 | 
|Restructuring costs         |  |      | 6.4  |      |  |      | 3.5  |  |  |   | .1   | 
|                            |  |      |      |      |  |      |      |  |  |   |      | 
|Adjusted operating earnings |  | $    | 5.3  |      |  | $    | 12.1 |  |  | $ | 27.2 | 
|                            |  |      |      |      |  |      |      |  |  |   |      | 
|                           



---

Industrial Fluids


Operating Results





|                            |  |      |      |      |  |      |      |  |  |   |      | 
|--------------------------- |  | ---- | ---- | ---- |  | ---- | ---- |  |  | - | ---- | 
|(In millions)               |  | 2002 |      | 2001 |  | 2000
|                           
|                           
|Operating earnings          |  | $    | 14.4 |      |  | $    | 17.8 |  |  | $ | 17.5 | 
|Restructuring costs         |  |      |     |      |  |      | .3   |  |  |   |     | 
|                            |  |      |      |      |  |      |      |  |  |   |      | 
|Adjusted operating earnings |  | $    | 14.4 |      |  | $    | 18.1 |  |  | $ | 17.5 | 
|                            |  |      |      |      |  |      |      |  |  |   |      | 
|                           



---

Earnings (Loss) Before Income Taxes





|                                              |  |      |       |      |  |      |       |   |  |   |      |  
|--------------------------------------------- |  | ---- | ----- | ---- |  | ---- | ----- | - |  | - | ---- | -
|(In millions)                                 |  | 2002 |       | 2001 |  | 2000
|                                             
|                                             
|Earnings (loss) before income taxes           |  | $    | (36.6 | )    |  | $    | (51.0 | ) |  | $ | 68.2 |  
|Restructuring costs                           |  |      | 13.9  |      |  |      | 17.5  |   |  |   | 1.4  |  
|                                              |  |      |       |      |  |      |       |   |  |   |      |  
|Earnings (loss) excluding restructuring costs |  |      | (22.7 | )    |  |      | (33.5 | ) |  |   | 69.6 |  
|Goodwill amortization                         |  |      |      |      |  |      | 10.8  |   |  |   | 11.0 |  
|Royalty income                                |  |      | (4.5  | )    |  |      |      |   |  |   | (8.3 | )
|Gain on sale of surplus land                  |  |      |      |      |  |      | (2.6  | ) |  |   |     |  
|                                              |  |      |       |      |  |      |       |   |  |   |      |  
|Adjusted earnings (loss)                      |  | $    | (27.2 | )    |  | $    | (25.3 | ) |  | $ | 72.3 |  
|                                              |  |      |       |      |  |      |       |   |  |   |      |  
|                                             



---

Earnings (Loss) From Continuing
Operations





|                                              |  |      |       |      |  |      |       |   |  |   |      |  
|--------------------------------------------- |  | ---- | ----- | ---- |  | ---- | ----- | - |  | - | ---- | -
|(In millions)                                 |  | 2002 |       | 2001 |  | 2000
|                                             
|                                             
|Earnings (loss) from continuing operations    |  | $    | (18.4 | )    |  | $    | (28.7 | ) |  | $ | 48.8 |  
|Restructuring costs                           |  |      | 8.8   |      |  |      | 11.0  |   |  |   | 0.9  |  
|                                              |  |      |       |      |  |      |       |   |  |   |      |  
|Earnings (loss) excluding restructuring costs |  |      | (9.6  | )    |  |      | (17.7 | ) |  |   | 49.7 |  
|Goodwill amortization                         |  |      |      |      |  |      | 7.0   |   |  |   | 7.1  |  
|Royalty income                                |  |      | (2.8  | )    |  |      |      |   |  |   | (5.2 | )
|Gain on sale of surplus land                  |  |      |      |      |  |      | (1.6  | ) |  |   |     |  
|                                              |  |      |       |      |  |      |       |   |  |   |      |  
|Adjusted earnings (loss)                      |  | $    | (12.4 | )    |  | $    | (12.3 | ) |  | $ | 51.6 |  
|                                              |  |      |       |      |  |      |       |   |  |   |      |  
|                                             

Market Risk

Foreign Currency Exchange Rate Risk

Milacron uses foreign currency forward exchange
contracts to hedge its exposure to adverse changes in foreign
currency exchange rates related to firm commitments arising from
international transactions. The company does not hold or issue
derivative instruments for trading purposes. At
December 31, 2002, Milacron had outstanding forward
contracts totaling $5.0 million compared to
$2.8 million at December 31, 2001. The annual
potential loss from a hypothetical 10% adverse change in foreign
currency exchange rates would not be material at either date.


Interest Rate Risk

At December 31, 2002, Milacrons
continuing operations had fixed interest rate debt of
$246 million, including $115 million of 8 3/8%
Notes due March 15, 2004, and
115 million
($118 million) of 7 5/8% Eurobonds due April 6,




---



##### Table of Contents



2005. We also had floating rate debt totaling
$55 million, with interest fluctuating based primarily on
changes in LIBOR. At December 31, 2001, fixed rate debt
related to continuing operations totaled $220 million, and
floating rate debt totaled $357 million. We can also sell
up to $50 million ($45 million effective
January 31, 2003) of accounts receivable under our
receivables purchase agreement which results in financing fees
that fluctuate based on changes in commercial paper rates. As a
result, annual interest expense and financing fees fluctuate
based on changes in short-term borrowing rates. The potential
annual loss on floating rate debt from a hypothetical 10%
increase in interest rates would be approximately
$.4 million at December 31, 2002 and $2.0 million
at December 31, 2001.


Liquidity and Sources of Capital

At December 31, 2002, Milacron had cash and
cash equivalents of $122 million, representing an increase
of $32 million since December 31, 2001.


As of December 31, 2002, Milacrons
current ratio related to continuing operations was 1.6 compared
to 1.7 at December 31, 2001.

In 2002, operating activities provided
$36 million cash compared to a $5 million use of cash
in 2001. The generation of cash in 2002 was due principally to
our aggressive working capital management initiatives which
included programs to further reduce inventories. The amount for
2001 includes the negative effects of a $16 million
reduction of the amount of accounts receivable sold under our
receivables purchase agreement. However, cash flow from
operations in 2001 benefited from reductions in accounts
receivable in the normal course of business due to lower sales
volume and from significant reductions in inventories that were
achieved through our working capital reduction plan.

Investing activities provided $301 million
of cash in 2002 due almost entirely to the proceeds from the
sales of Valenite, Widia and Werkö. In 2001, investing
activities used $37 million of cash, including
$29 million for acquisitions and $14 million for
capital expenditures.

In 2002, financing activities used
$303 million of cash due to repayments of borrowings under
lines of credit using the divestiture proceeds and cash provided
by operations. Financing activities provided $102 million
of cash in 2001 due to net additional borrowings of
$119 million, the effects of which were partially offset by
dividends of $13 million.

Total shareholders equity was
$134 million at December 31, 2002, a decrease of
$301 million from December 31, 2001. The decrease
resulted principally from the $223 million net loss
incurred during 2002 which includes the $188 million
cumulative effect adjustment related to goodwill impairment. In
addition, the company recorded a $95 million after-tax
minimum pension liability adjustment as a component of
accumulated other comprehensive loss. This adjustment is more
fully described above in the section captioned Significant
Accounting Policies and Judgments.

The companys debt and lease obligations for
2003 and beyond are shown in the table that follows.



---

Debt and Lease Obligations





|                                     |  |      |      |      |  |      |       |      |  |       |       |  |  |   |     |  |  |   |      | 
|------------------------------------ |  | ---- | ---- | ---- |  | ---- | ----- | ---- |  | ----- | ----- |  |  | - | --- |  |  | - | ---- | 
|                                     |  |      |      |      |  |      |       |      |  | After
|(In millions)                        |  | 2003 |      | 2004 |  | 2005 |       | 2006 |  | 2006 
|                                    
|                                    
|Long-term debt and lease obligations |  | $    | 1.1  |      |  | $    | 117.5 |      |  | $     | 122.8 |  |  | $ | 1.6 |  |  | $ | 13.5 | 
|Revolving credit facility            |  |      |     |      |  |      | 42.0  |      |  |       |      |  |  |   |    |  |  |   |     | 
|Other lines of credit                |  |      | 3.0  |      |  |      |      |      |  |       |      |  |  |   |    |  |  |   |     | 
|                                     |  |      |      |      |  |      |       |      |  |       |       |  |  |   |     |  |  |   |      | 
|Total debt obligations               |  |      | 4.1  |      |  |      | 159.5 |      |  |       | 122.8 |  |  |   | 1.6 |  |  |   | 13.5 | 
|Operating leases                     |  |      | 16.6 |      |  |      | 12.9  |      |  |       | 10.4  |  |  |   | 7.5 |  |  |   | 10.1 | 
|                                     |  |      |      |      |  |      |       |      |  |       |       |  |  |   |     |  |  |   |      | 
|Total debt and lease obligations     |  | $    | 20.7 |      |  | $    | 172.4 |      |  | $     | 133.2 |  |  | $ | 9.1 |  |  | $ | 23.6 | 
|                                     |  |      |      |      |  |      |       |      |  |       |       |  |  |   |     |  |  |   |      | 
|                                    

Note: The above table excludes contingent
liabilities of up to $17.4 million related to sales of
receivables and loan guarantees and $24.8 million of
purchase price adjustments that will be paid to the buyers of
Valenite, Widia and Werkö in the first quarter of 2003.

Our ability to satisfy our 2003 obligations and
other liquidity needs is a function of a number of factors, the
most important of which include: our available cash and cash
equivalents, our continued ability to borrow under our revolving
credit facility and other lines of credit, our ability to
continue to utilize our U.S. receivables purchase agreement and
other similar arrangements, and our cash flow from operating
activities.

At December 31, 2002, we had cash and cash
equivalents of approximately $122 million.

At December 31, 2002, Milacron had lines of
credit with various U.S. and non-U.S. banks totaling
approximately $143 million, including a $106 million
committed revolving credit facility. At December 31, 2002,
$54 million was drawn against the facility, including
outstanding letters of credit of $12 million. The facility
includes a number of financial covenants and at
December 31, 2002, was scheduled to mature on
December 31, 2004. As discussed below, the facility was
amended in February, 2003 to, among other things, change the
maturity date to March 15, 2004.



---



##### Table of Contents



Effective December 30, 2002 the revolving
credit facility was amended to, among other things, reduce the
commitment amount from $110 million to $106 million in
connection with a reorganization of our round metalcutting tools
business in anticipation of its expected sale.

The current agreement includes covenants,
including those which (i) require the company to achieve
specified minimum levels of quarterly cumulative EBITDA and
(ii) limit the incurrence of new debt. At December 31,
2002, the company was in compliance with these covenants. The
company had $122 million of cash at December 31, 2002
and the ability to borrow an additional $31 million for
general corporate purposes under the revolving credit facility.
The company could also borrow approximately $12 million
under existing lines of credit other than the facility. The
facility also allows over $72 million of additional
indebtedness from other sources.

Effective February 11, 2003, the revolving
credit facility was amended to, among other things, reduce the
facility to $85 million reflecting a reduction in projected
cash requirements for 2003. In addition to a reduction in the
four-quarter cumulative trailing EBITDA covenant and suspension
of the leverage test for all of 2003, the amended agreement
requires further permanent reductions in the facility on
June 30, 2003, September 30, 2003 and
December 15, 2003 to $75 million, $65 million and
$55 million, respectively. The maturity date of the
facility was changed from December 31, 2004 to
March 15, 2004.

For 2003, the companys significant cost
cutting actions coupled with an expected modest, gradual
improvement in business conditions cause us to believe that
operating earnings will continue to increase, which should allow
us to continue to meet the covenants. However, if unforeseen
market conditions develop or the company is otherwise unable to
meet the covenants, it is possible that it would not be in
compliance. In that event, we would attempt to renegotiate the
covenants with the bank group to assure compliance. However, our
lenders actions are not controllable by us and if the
renegotiations were not successful, the company could be placed
in default under the agreement, which would allow the lenders to
declare the outstanding borrowings currently due and payable. In
addition, due to cross-default provisions in Milacrons
other agreements, over 90% of our other debt could become
payable in full and our receivables purchase program (as
discussed below) could be terminated if we were in default under
the credit facility. Were these events to occur, we would
experience a material adverse impact on our reported liquidity,
financial position and results of operations.

In addition to the revolving credit facility, as
of December 31, 2002 we had a number of other credit lines
totaling $37 million, of which approximately
$12 million was available for future borrowing. Under the
terms of the revolving credit facility as amended, increases in
debt are primarily limited to current lines of credit and
certain other indebtedness from other sources.

Milacrons debt and credit are rated by
Standard & Poors (S&P) and Moodys Investors
Service (Moodys). On October 25, 2002, Moodys
announced it had lowered Milacrons senior implied and
senior secured rating one notch from Ba3 with a negative
outlook to B1 with a stable outlook and
Milacrons senior unsecured rating one notch from B1 with a
negative outlook to B2 with a stable
outlook. On November 20, 2002, S&P announced it
had lowered Milacrons corporate credit rating to B+ from
BB- with a negative outlook. At the same time, the
rating on the companys senior secured bank facility was
lowered to B+ from BB-. Milacrons senior unsecured debt
was affirmed at B.

None of the companys debt instruments
include rating triggers that would accelerate maturity or
increase interest rates. Accordingly, the rating changes are
expected to have no significant short-term effect, although they
could potentially affect the types and cost of credit facilities
and debt instruments available to the company in the future.

Another important source of liquidity is our
accounts receivable purchase program. Although the agreement
could be terminated upon the occurrence of certain events, some
of which may be beyond our control, we expect to continue to be
able to use the program at least through December 31, 2003.
At December 31, 2002, $41 million of the
$50 million facility was utilized. Of the total amount
utilized, approximately $6 million relates to the grinding
wheels and round metalcutting tools businesses that are being
treated as discontinued operations. The amount available to the
company was reduced to $45 million effective
January 31, 2003 and will be further reduced by
$2.5 million effective with each of the disposals of the
companys grinding wheels and round metalcutting tools
businesses. As the amount of eligible accounts receivable
increases due to improved business conditions, we expect to be
able to utilize the remaining amounts available under the
facility.

Milacron expects to generate positive cash flow
from operating activities during 2003, which will be partially
offset by up to $15 million for capital expenditures.

Assuming there is no further significant
deterioration in the markets we serve, we believe that
Milacrons current cash position, cash flow from
operations, available credit lines and capacity to sell
receivables will be sufficient to meet the companys
operating and capital requirements in 2003.

Cautionary Statement

Milacron wishes to caution readers about all of
the forward-looking statements in the Managements
Discussion and Analysis section and elsewhere. These
include all statements that speak about the future or are based
on our interpretation of factors that might affect our
businesses. Milacron believes the following important factors,
among others, could affect its actual results in 2003 and beyond
and cause them to differ materially from those expressed in any
of our forward-looking statements:




|  |                                                  
|- | -------------------------------------------------
| | global and regional economic conditions, consumer



---



##### Table of Contents



|  |                                                                                                                                                                                                                                                                                                                                  
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  | spending, capital spending levels and industrial
    production, particularly in segments related to the level of
    automotive production and spending in the construction industry;                                                                                                                                           
| 
| | fluctuations in currency exchange rates of U.S.
    and foreign countries, including countries in Europe and Asia
    where Milacron has several principal manufacturing facilities
    and where many of our customers, competitors and suppliers are
    based;                                                                
| 
| | Milacrons continued ability to borrow under
    its lines of credit and sell accounts receivable under its
    receivables purchase agreement;                                                                                                                                                                                  
| 
| | fluctuations in interest rates which affect the
    cost of borrowing under Milacrons lines of credit and
    financing costs related to the sale of domestic accounts
    receivable;                                                                                                                                          
| 
| | production and pricing levels of important raw
    materials, including plastic resins, which are a key material
    used by purchasers of Milacrons plastics technologies
    products, as well as steel, oil, and industrial grains used in
    the production of grinding wheels;                                            
| 
| | lower than anticipated levels of plant
    utilization resulting in production inefficiencies and higher
    costs, whether related to the delay of new product
    introductions, improved production processes or equipment, or
    labor relations issues;                                                                    
| 
| | customer acceptance of new products introduced
    during 2002 and products that will be introduced in 2003;                                                                                                                                                                                                                     
| 
| | any major disruption in production at key
    customer or supplier facilities or at Milacrons facilities;                                                                                                                                                                                                                       
| 
| | disruptions in global or regional commerce due to
    wars, social, civil or political unrest in the non-U.S.
    countries in which Milacron operates and to acts of terrorism,
    continued threats of terrorism and military, political and
    economic responses (including heightened security measures) to
    terrorism;
| 
| | alterations in trade conditions in and between
    the U.S. and non-U.S. countries where Milacron does business,
    including export duties, import controls, quotas and other trade
    barriers;                                                                                                                              
| 
| | changes in tax, environmental and other laws and
    regulations in the U.S. and non-U.S. countries where Milacron
    does business;                                                                                                                                                                                            
| 
| | litigation, claims or assessments, including but
    not limited to claims or problems related to product liability,
    warranty or environmental issues; and                                                                                                                                                                   
| 
| | fluctuations in stock market valuations of
    pension plan assets that could result in reduced pension income,
    increased pension expense and reduced shareholders equity.                                                                                                                                                  






|         |                                                           
|-------- | ----------------------------------------------------------
|Item 7A. | Quantitative and Qualitative Disclosures About Market Risk

The Information required by Item 7A is
included in Item 7 on pages 18 and 19 of this
Form 10-K.







|        |                                            
|------- | -------------------------------------------
|Item 8. | Financial Statements and Supplementary Data

Beginning on page 23 and continuing through page
48 are the consolidated financial statements with applicable
notes and the related Report of Independent Auditors, and the
supplementary financial information specified by Item 302
of Regulation S-K.




---



##### Table of Contents



Responsibility for Financial Reporting

Financial Statements

The management of Milacron Inc. has prepared the
accompanying financial statements and is responsible for their
integrity and objectivity. The statements, which include amounts
that are based on managements best estimates and
judgments, have been prepared in conformity with generally
accepted accounting principles and are free of material
misstatement. Management also prepared the other information in
this Form 10-K and is responsible for its accuracy and
consistency with the financial statements.


Internal Control System

Milacron Inc. maintains a system of internal
control over financial reporting and over safeguarding of assets
against unauthorized acquisition, use or disposition that is
designed to provide reasonable assurance to the companys
management and Board of Directors regarding the preparation of
reliable published annual and quarterly financial statements and
such asset safeguarding. The system contains self-monitoring
mechanisms, and actions are taken to correct deficiencies as
they are identified. Even an effective internal control system,
no matter how well designed, has inherent
limitations  including the possibility of the
circumvention or overriding of controls  and
therefore can provide only reasonable assurance with respect to
financial statement preparation and such asset safeguarding.
Further, because of changes in conditions, internal control
system effectiveness may vary over time.


The company assessed its internal control system
as of December 31, 2002 in relation to criteria for
effective internal control over the preparation of its published
annual and quarterly financial statements described in
Internal Control  Integrated Framework
issued by the Committee of Sponsoring Organizations of the
Treadway Commission. Based on this assessment, the company
believes that, as of December 31, 2002, its system of
internal control over the preparation of its published annual
and quarterly financial statements and over the safeguarding of
assets against unauthorized acquisition, use or disposition met
those criteria.

|                        |  |  |                             | 
|----------------------- |  |  | --------------------------- | 
|Ronald D. Brown         |  |  | Robert P. Lienesch          | 
|Chairman and            |  |  | Vice President - Finance    | 
|Chief Executive Officer |  |  | and Chief Financial Officer | 

February 10, 2003



---



##### Table of Contents



Consolidated Statements of Earnings

Milacron Inc. and Subsidiaries 
 Fiscal years ended December 31, 2002, 2001 and 2000


|                                                                                                                               |                                                |                                                         |                       |       |       |       |       |       |       |       |       |       |       |       | 
|------------------------------------------------------------------------------------------------------------------------------ | ---------------------------------------------- | ------------------------------------------------------- | --------------------- | ----- | ----- | ----- | ----- | ----- | ----- | ----- | ----- | ----- | ----- | ----- | 
|                                                                                                                              
|                                                                                                                              
|(In millions, except per-share amounts)                                                                                        |                                                | 2002                                                    |                       | 2001  |       | 2000 
|                                                                                                                              
|                                                                                                                              
|Sales                                                                                                                          |                                                | $                                                       | 693.2                 |       |       | $     | 755.2 |       |       | $     | 974.5 |      
|                                                                                                                               | Cost of products sold                          |                                                         |                       | 571.6 |       |       |       | 623.7 |       |       |       | 742.4 |      
|                                                                                                                               | Cost of products sold related to restructuring |                                                         |                       | 1.9   |       |       |       | 3.1   |       |       |       |      |      
|                                                                                                                               |                                                |                                                         |                       |       |       |       |       |       |       |       |       |      
|                                                                                                                               |                                                | Total cost of products sold                             |                       |       | 573.5 |       |       |       | 626.8 |       |       |       | 742.4 |      
|                                                                                                                               |                                                |                                                         |                       |       |       |       |       |       |       |       |       |      
|                                                                                                                               |                                                |                                                         | Manufacturing margins |       |       | 119.7 |       |       |       | 128.4 |       |       |       | 232.1 | 
|Other costs and expenses                                                                                                       |                                                |                                                         |                       |       |       |       |       |       |       |       |       |      
|                                                                                                                               | Selling and administrative                     |                                                         |                       | 121.0 |       |       |       | 129.6 |       |       |       | 134.6 |      
|                                                                                                                               | Restructuring costs                            |                                                         |                       | 12.0  |       |       |       | 14.4  |       |       |       | 1.4   |      
|                                                                                                                               | Other expensenet                              |                                                         |                       |      |       |       |       | 12.9  |       |       |       | 7.0   |      
|                                                                                                                               |                                                |                                                         |                       |       |       |       |       |       |       |       |       |      
|                                                                                                                               |                                                | Total other costs and expenses                          |                       |       | 133.0 |       |       |       | 156.9 |       |       |       | 143.0 |      
|                                                                                                                               |                                                |                                                         |                       |       |       |       |       |       |       |       |       |      
|Operating earnings (loss)                                                                                                      |                                                |                                                         | (13.3                 | )     |       |       | (28.5 | )     |       |       | 89.1  |      
|Interest                                                                                                                       |                                                |                                                         |                       |       |       |       |       |       |       |       |       |      
|                                                                                                                               | Income                                         |                                                         |                       | 2.2   |       |       |       | 1.7   |       |       |       | 1.6   |      
|                                                                                                                               | Expense                                        |                                                         |                       | (25.5 | )     |       |       | (24.2 | )     |       |       | (22.5 | )    
|                                                                                                                               |                                                |                                                         |                       |       |       |       |       |       |       |       |       |      
|                                                                                                                               |                                                | Interestnet                                            |                       |       | (23.3 | )     |       |       | (22.5 | )     |       |       | (20.9 | )    
|                                                                                                                               |                                                |                                                         |                       |       |       |       |       |       |       |       |       |      
|Earnings (loss) from continuing operations
    before income taxes and cumulative effect of change in method of
    accounting |                                                |                                                         | (36.6                 | )     |       |       | (51.0 | )     |       |       | 68.2  |      
|Provision (benefit) for income taxes                                                                                           |                                                |                                                         | (18.2                 | )     |       |       | (22.3 | )     |       |       | 19.4  |      
|                                                                                                                               |                                                |                                                         |                       |       |       |       |       |       |       |       |       |      
|Earnings (loss) from continuing
    operations before cumulative effect of change in method of
    accounting                  |                                                |                                                         | (18.4                 | )     |       |       | (28.7 | )     |       |       | 48.8  |      
|Discontinued operations net of income taxes                                                                                    |                                                |                                                         |                       |       |       |       |       |       |       |       |       |      
|                                                                                                                               | Earnings (loss) from operations                |                                                         |                       | (25.2 | )     |       |       | (7.0  | )     |       |       | 23.5  |      
|                                                                                                                               | Net gain on divestitures                       |                                                         |                       | 8.4   |       |       |       |      |       |       |       |      |      
|                                                                                                                               |                                                |                                                         |                       |       |       |       |       |       |       |       |       |      
|                                                                                                                               |                                                | Total discontinued operations                           |                       |       | (16.8 | )     |       |       | (7.0  | )     |       |       | 23.5  |      
|Cumulative effect of change in method of
    accounting                                                                        |                                                |                                                         | (187.7                | )     |       |       |      |       |       |       |      |      
|                                                                                                                               |                                                |                                                         |                       |       |       |       |       |       |       |       |       |      
|Net earnings (loss)                                                                                                            |                                                | $                                                       | (222.9                | )     |       | $     | (35.7 | )     |       | $     | 72.3  |      
|                                                                                                                               |                                                |                                                         |                       |       |       |       |       |       |       |       |       |      
|Earnings (loss) per common
    share                                                                                           |                                                |                                                         |                       |       |       |       |       |       |       |       |       |      
|                                                                                                                               | Basic                                          |                                                         |                       |       |       |       |       |       |       |       |       |       |      
|                                                                                                                               |                                                | Continuing operations                                   |                       | $     | (.56  | )     |       | $     | (.87  | )     |       | $     | 1.39  |      
|                                                                                                                               |                                                | Discontinued operations                                 |                       |       | (.50  | )     |       |       | (.21  | )     |       |       | .67   |      
|                                                                                                                               |                                                | Cumulative effect of change in method of
    accounting |                       |       | (5.61 | )     |       |       |      |       |       |       | -     |      
|                                                                                                                               |                                                |                                                         |                       |       |       |       |       |       |       |       |       |      
|                                                                                                                               |                                                |                                                         | Net earnings (loss)   |       | $     | (6.67 | )     |       | $     | (1.08 | )     |       | $     | 2.06  | 
|                                                                                                                               |                                                |                                                         |                       |       |       |       |       |       |       |       |       |      
|                                                                                                                               | Diluted                                        |                                                         |                       |       |       |       |       |       |       |       |       |       |      
|                                                                                                                               |                                                | Continuing operations                                   |                       | $     | (.56  | )     |       | $     | (.87  | )     |       | $     | 1.39  |      
|                                                                                                                               |                                                | Discontinued operations                                 |                       |       | (.50  | )     |       |       | (.21  | )     |       |       | .67   |      
|                                                                                                                               |                                                | Cumulative effect of change in method of
    accounting |                       |       | (5.61 | )     |       |       |      |       |       |       |      |      
|                                                                                                                               |                                                |                                                         |                       |       |       |       |       |       |       |       |       |      
|                                                                                                                               |                                                |                                                         | Net earnings (loss)   |       | $     | (6.67 | )     |       | $     | (1.08 | )     |       | $     | 2.06  | 
|                                                                                                                               |                                                |                                                         |                       |       |       |       |       |       |       |       |       |      
|                                                                                                                              

See notes to consolidated financial statements.




---



##### Table of Contents



Consolidated Balance Sheets

Milacron Inc. and Subsidiaries


December 31, 2002 and 2001


|                                               |                                                                                       |                                              |                   |        |       |       |         |         |       |       | 
|---------------------------------------------- | ------------------------------------------------------------------------------------- | -------------------------------------------- | ----------------- | ------ | ----- | ----- | ------- | ------- | ----- | ----- | 
|                                              
|                                              
|(In millions, except par value)                |                                                                                       | 2002                                         |                   | 2001  
|                                              
|                                              
|Assets                                         |                                                                                       |                                              |                   |        |       |       |         |        
|Current assets                                 |                                                                                       |                                              |                   |        |       |       |         |        
|                                               | Cash and cash equivalents                                                             |                                              | $                 | 122.3  |       |       | $       | 90.1    |      
|                                               | Notes and accounts receivable, less allowances of
    $12.4 in 2002 and $10.0 in 2001 |                                              |                   | 89.3   |       |       |         | 88.5    |      
|                                               | Inventories                                                                           |                                              |                   |        |       |       |         |         |      
|                                               |                                                                                       | Raw materials                                |                   |        | 30.5  |       |         |         | 30.1  |      
|                                               |                                                                                       | Work-in-process and finished parts           |                   |        | 85.7  |       |         |         | 113.4 |      
|                                               |                                                                                       | Finished products                            |                   |        | 31.4  |       |         |         | 34.4  |      
|                                               |                                                                                       |                                              |                   |        |       |       |         |        
|                                               |                                                                                       |                                              | Total inventories |        |       | 147.6 |         |         |       | 177.9 | 
|                                               | Other current assets                                                                  |                                              |                   | 69.6   |       |       |         | 55.3    |      
|                                               |                                                                                       |                                              |                   |        |       |       |         |        
|                                               |                                                                                       | Current assets of continuing operations      |                   |        | 428.8 |       |         |         | 411.8 |      
|                                               | Assets of discontinued operations                                                     |                                              |                   | 16.0   |       |       |         | 455.7   |      
|                                               |                                                                                       |                                              |                   |        |       |       |         |        
|                                               |                                                                                       | Total current assets                         |                   |        | 444.8 |       |         |         | 867.5 |      
|Property, plant and equipment  net            |                                                                                       |                                              | 149.8             |        |       |       | 165.8   |        
|Goodwill                                       |                                                                                       |                                              | 143.3             |        |       |       | 353.2   |        
|Other noncurrent assets                        |                                                                                       |                                              | 177.8             |        |       |       | 125.8   |        
|                                               |                                                                                       |                                              |                   |        |       |       |         |        
|Total assets                                   |                                                                                       | $                                            | 915.7             |        |       | $     | 1,512.3 |        
|                                               |                                                                                       |                                              |                   |        |       |       |         |        
|Liabilities and Shareholders
    Equity       |                                                                                       |                                              |                   |        |       |       |         |        
|Current liabilities                            |                                                                                       |                                              |                   |        |       |       |         |        
|                                               | Borrowings under lines of credit                                                      |                                              | $                 | 45.0   |       |       | $       | 71.7    |      
|                                               | Long-term debt and capital lease obligations due
    within one year                  |                                              |                   | 1.1    |       |       |         | 3.9     |      
|                                               | Trade accounts payable                                                                |                                              |                   | 68.8   |       |       |         | 59.1    |      
|                                               | Advance billings and deposits                                                         |                                              |                   | 17.5   |       |       |         | 17.0    |      
|                                               | Accrued and other current liabilities                                                 |                                              |                   | 138.9  |       |       |         | 93.2    |      
|                                               |                                                                                       |                                              |                   |        |       |       |         |        
|                                               |                                                                                       | Current liabilities of continuing operations |                   |        | 271.3 |       |         |         | 244.9 |      
|                                               | Liabilities of discontinued operations                                                |                                              |                   | 10.9   |       |       |         | 166.8   |      
|                                               |                                                                                       |                                              |                   |        |       |       |         |        
|                                               |                                                                                       | Total current liabilities                    |                   |        | 282.2 |       |         |         | 411.7 |      
|Long-term accrued liabilities                  |                                                                                       |                                              | 244.1             |        |       |       | 164.6   |        
|Long-term debt                                 |                                                                                       |                                              | 255.4             |        |       |       | 501.1   |        
|                                               |                                                                                       |                                              |                   |        |       |       |         |        
|                                               | Total liabilities                                                                     |                                              |                   | 781.7  |       |       |         | 1,077.4 |      
|Commitments and contingencies                  |                                                                                       |                                              |                  |        |       |       |        |        
|Shareholders equity                           |                                                                                       |                                              |                   |        |       |       |         |        
|                                               | 4% Cumulative Preferred shares                                                        |                                              |                   | 6.0    |       |       |         | 6.0     |      
|                                               | Common shares, $1 par value (outstanding: 33.8 in
    2002 and 33.5 in 2001)          |                                              |                   | 33.8   |       |       |         | 33.5    |      
|                                               | Capital in excess of par value                                                        |                                              |                   | 283.5  |       |       |         | 281.4   |      
|                                               | Reinvested earnings (accumulated deficit)                                             |                                              |                   | (59.5  | )     |       |         | 165.0   |      
|                                               | Accumulated other comprehensive loss                                                  |                                              |                   | (129.8 | )     |       |         | (51.0   | )    
|                                               |                                                                                       |                                              |                   |        |       |       |         |        
|                                               |                                                                                       | Total shareholders equity                   |                   |        | 134.0 |       |         |         | 434.9 |      
|                                               |                                                                                       |                                              |                   |        |       |       |         |        
|Total liabilities and shareholders
    equity |                                                                                       | $                                            | 915.7             |        |       | $     | 1,512.3 |        
|                                               |                                                                                       |                                              |                   |        |       |       |         |        
|                                              

See notes to consolidated financial statements.




---



##### Table of Contents



Consolidated Statements of Comprehensive Income and
Shareholders Equity

Milacron Inc. and Subsidiaries


Fiscal years ended December 31, 2002, 2001
and 2000


|                                                              |                                    |         |        |         |         |           |        |        |        |            |     |           |        |          |        |   |       |   |       |   |  |   |        |       |   |   |        |       |  
|------------------------------------------------------------- | ---------------------------------- | ------- | ------ | ------- | ------- | --------- | ------ | ------ | ------ | ---------- | --- | --------- | ------ | -------- | ------ | - | ----- | - | ----- | - |  | - | ------ | ----- | - | - | ------ | ----- | -
|                                                             
|                                                             
|                                                              |                                    | Other   |        |         | 4%      |           |        |       
|                                                              |                                    | Compre- |        |         | Compre- |           | Cumu-  |        | Common |            |     |           |        | Rein-    |        |   | Total |  
|                                                              |                                    | hensive |        | hensive |         | lative    |        | Shares |        | Capital in |     |           | vested |          | Share-
|                                                              |                                    | Income  |        | Income  |         | Preferred |        | $1 Par |        | Excess of  |     | Earnings  |        | holders
|(In millions, except per-share amounts)                       |                                    | (Loss)  |        | (Loss)  |         | Shares    |        | Value  |        | Par Value  |     | (Deficit) |        | Equity  
|                                                             
|                                                             
|Balance at year-end 1999                                      |                                    |         |        |         |         | $         | (35.4  | )      |        | $          | 6.0 |           |        | $        | 36.8   |   |       | $ | 325.5 |   |  | $ | 158.0  |       |   | $ | 490.9  |      
|Stock options exercised and net restricted stock
    activity |                                    |         |        |         |         |           |        |        |        |            |     |           |        |          | (.1    | ) |       |   | 2.0   |   |  |   |        |       |   |   | 1.9    |      
|Purchases of treasury and other common shares                 |                                    |         |        |         |         |           |        |        |        |            |     |           |        |          | (3.4   | ) |       |   | (46.0 | ) |  |   |        |       |   |   | (49.4  | )    
|Net earnings for the year                                     |                                    | $       | 72.3   |         |         |           |        |        |        |            |     |           |        |          |        |   |       |   |       |   |  |   | 72.3   |       |   |   | 72.3   |      
|Other comprehensive loss                                      |                                    |         | (14.3  | )       |         |           | (14.3  | )      |        |            |     |           |        |          |        |   |       |   |       |   |  |   |        |       |   |   | (14.3  | )    
|                                                              |                                    |         |        |         |         |           |        |        |        |            |     |           |        |          |        |   |       |   |       |   |  |   |        |       |   |   |        |      
|Total comprehensive income                                    |                                    | $       | 58.0   |         |         |           |        |        |        |            |     |           |        |          |        |   |       |   |       |   |  |   |        |       |   |   |        |      
|                                                              |                                    |         |        |         |         |           |        |        |        |            |     |           |        |          |        |   |       |   |       |   |  |   |        |       |   |   |        |      
|Cash dividends                                                |                                    |         |        |         |         |           |        |        |        |            |     |           |        |          |        |   |       |   |       |   |  |   |        |       |   |   |        |      
|                                                              | Preferred shares ($4.00 per share) |         |        |         |         |           |        |        |        |            |     |           |        |          |        |   |       |   |       |   |  |   |        | (.2   | ) |   |        | (.2   | )
|                                                              | Common shares ($.48 per share)     |         |        |         |         |           |        |        |        |            |     |           |        |          |        |   |       |   |       |   |  |   |        | (16.8 | ) |   |        | (16.8 | )
|                                                              |                                    |         |        |         |         |           |        |        |        |            |     |           |        |          |        |   |       |   |       |   |  |   |        |       |   |   |        |      
|Balance at year-end 2000                                      |                                    |         |        |         |         |           | (49.7  | )      |        |            | 6.0 |           |        |          | 33.3   |   |       |   | 281.5 |   |  |   | 213.3  |       |   |   | 484.4  |      
|Stock options exercised and net restricted stock
    activity |                                    |         |        |         |         |           |        |        |        |            |     |           |        |          | .5     |   |       |   | 6.7   |   |  |   |        |       |   |   | 7.2    |      
|Purchases of treasury and other common shares                 |                                    |         |        |         |         |           |        |        |        |            |     |           |        |          | (.3    | ) |       |   | (6.8  | ) |  |   |        |       |   |   | (7.1   | )    
|Net loss for the year                                         |                                    | $       | (35.7  | )       |         |           |        |        |        |            |     |           |        |          |        |   |       |   |       |   |  |   | (35.7  | )     |   |   | (35.7  | )    
|Other comprehensive loss                                      |                                    |         | (1.3   | )       |         |           | (1.3   | )      |        |            |     |           |        |          |        |   |       |   |       |   |  |   |        |       |   |   | (1.3   | )    
|                                                              |                                    |         |        |         |         |           |        |        |        |            |     |           |        |          |        |   |       |   |       |   |  |   |        |       |   |   |        |      
|Total comprehensive loss                                      |                                    | $       | (37.0  | )       |         |           |        |        |        |            |     |           |        |          |        |   |       |   |       |   |  |   |        |       |   |   |        |      
|                                                              |                                    |         |        |         |         |           |        |        |        |            |     |           |        |          |        |   |       |   |       |   |  |   |        |       |   |   |        |      
|Cash dividends                                                |                                    |         |        |         |         |           |        |        |        |            |     |           |        |          |        |   |       |   |       |   |  |   |        |       |   |   |        |      
|                                                              | Preferred shares ($4.00 per share) |         |        |         |         |           |        |        |        |            |     |           |        |          |        |   |       |   |       |   |  |   |        | (.2   | ) |   |        | (.2   | )
|                                                              | Common shares ($.37 per share)     |         |        |         |         |           |        |        |        |            |     |           |        |          |        |   |       |   |       |   |  |   |        | (12.4 | ) |   |        | (12.4 | )
|                                                              |                                    |         |        |         |         |           |        |        |        |            |     |           |        |          |        |   |       |   |       |   |  |   |        |       |   |   |        |      
|Balance at year-end 2001                                      |                                    |         |        |         |         |           | (51.0  | )      |        |            | 6.0 |           |        |          | 33.5   |   |       |   | 281.4 |   |  |   | 165.0  |       |   |   | 434.9  |      
|Stock options exercised and net restricted stock
    activity |                                    |         |        |         |         |           |        |        |        |            |     |           |        |          | .1     |   |       |   | .4    |   |  |   |        |       |   |   | .5     |      
|Reissuance of treasury shares                                 |                                    |         |        |         |         |           |        |        |        |            |     |           |        |          | .2     |   |       |   | 1.7   |   |  |   |        |       |   |   | 1.9    |      
|Net loss for the year                                         |                                    | $       | (222.9 | )       |         |           |        |        |        |            |     |           |        |          |        |   |       |   |       |   |  |   | (222.9 | )     |   |   | (222.9 | )    
|Other comprehensive loss                                      |                                    |         | (78.8  | )       |         |           | (78.8  | )      |        |            |     |           |        |          |        |   |       |   |       |   |  |   |        |       |   |   | (78.8  | )    
|                                                              |                                    |         |        |         |         |           |        |        |        |            |     |           |        |          |        |   |       |   |       |   |  |   |        |       |   |   |        |      
|Total comprehensive loss                                      |                                    | $       | (301.7 | )       |         |           |        |        |        |            |     |           |        |          |        |   |       |   |       |   |  |   |        |       |   |   |        |      
|                                                              |                                    |         |        |         |         |           |        |        |        |            |     |           |        |          |        |   |       |   |       |   |  |   |        |       |   |   |        |      
|Cash dividends                                                |                                    |         |        |         |         |           |        |        |        |            |     |           |        |          |        |   |       |   |       |   |  |   |        |       |   |   |        |      
|                                                              | Preferred shares ($4.00 per share) |         |        |         |         |           |        |        |        |            |     |           |        |          |        |   |       |   |       |   |  |   |        | (.2   | ) |   |        | (.2   | )
|                                                              | Common shares ($.04 per share)     |         |        |         |         |           |        |        |        |            |     |           |        |          |        |   |       |   |       |   |  |   |        | (1.4  | ) |   |        | (1.4  | )
|                                                              |                                    |         |        |         |         |           |        |        |        |            |     |           |        |          |        |   |       |   |       |   |  |   |        |       |   |   |        |      
|Balance at year-end 2002                                      |                                    |         |        |         |         | $         | (129.8 | )      |        | $          | 6.0 |           |        | $        | 33.8   |   |       | $ | 283.5 |   |  | $ | (59.5  | )     |   | $ | 134.0  |      
|                                                              |                                    |         |        |         |         |           |        |        |        |            |     |           |        |          |        |   |       |   |       |   |  |   |        |       |   |   |        |      
|                                                             

See notes to consolidated financial statements.




---



##### Table of Contents



Consolidated Statements of Cash Flows

Milacron Inc. and Subsidiaries


Fiscal years ended December 31, 2002, 2001
and 2000


|                                                                      |                                 |                                                             |                                                         |                                                  |        |        |       |   |       |       |       |   |        |        |       |  
|--------------------------------------------------------------------- | ------------------------------- | ----------------------------------------------------------- | ------------------------------------------------------- | ------------------------------------------------ | ------ | ------ | ----- | - | ----- | ----- | ----- | - | ------ | ------ | ----- | -
|                                                                     
|                                                                     
|(In millions)                                                         |                                 | 2002                                                        |                                                         | 2001                                             |        | 2000  
|                                                                     
|                                                                     
|Increase (decrease) in cash and cash
    equivalents                  |                                 |                                                             |                                                         |                                                  |        |        |       |   |       |       |       |  
|                                                                      | Operating activities cash flows |                                                             |                                                         |                                                  |        |        |       |   |       |       |       |   |       
|                                                                      |                                 | Net earnings (loss)                                         |                                                         | $                                                | (222.9 | )      |       | $ | (35.7 | )     |       | $ | 72.3   |       
|                                                                      |                                 | Operating activities providing (using) cash                 |                                                         |                                                  |        |        |       |   |       |       |       |   |        |       
|                                                                      |                                 |                                                             | Loss (earnings) from discontinued operations            |                                                  |        | 25.2   |       |   |       | 7.0   |       |   |        | (23.5  | )    
|                                                                      |                                 |                                                             | Net gain on divestitures                                |                                                  |        | (8.4   | )     |   |       |      |       |   |        |       |      
|                                                                      |                                 |                                                             | Cumulative effect of change in method of
    accounting |                                                  |        | 187.7  |       |   |       |      |       |   |        |       |      
|                                                                      |                                 |                                                             | Depreciation                                            |                                                  |        | 22.0   |       |   |       | 23.7  |       |   |        | 24.4   |      
|                                                                      |                                 |                                                             | Amortization of goodwill and other intangibles          |                                                  |        | 1.0    |       |   |       | 11.2  |       |   |        | 11.0   |      
|                                                                      |                                 |                                                             | Restructuring costs                                     |                                                  |        | 13.9   |       |   |       | 17.5  |       |   |        |       |      
|                                                                      |                                 |                                                             | Deferred income taxes                                   |                                                  |        | (16.7  | )     |   |       | (15.6 | )     |   |        | 7.4    |      
|                                                                      |                                 |                                                             | Working capital changes                                 |                                                  |        |        |       |   |       |       |       |   |        |        |      
|                                                                      |                                 |                                                             |                                                         | Notes and accounts receivable                    |        |        | 9.7   |   |       |       | 41.2  |   |        |        | 9.5   |  
|                                                                      |                                 |                                                             |                                                         | Inventories                                      |        |        | 36.0  |   |       |       | 44.9  |   |        |        | (18.4 | )
|                                                                      |                                 |                                                             |                                                         | Other current assets                             |        |        | 2.4   |   |       |       | (.3   | ) |        |        | (7.4  | )
|                                                                      |                                 |                                                             |                                                         | Trade accounts payable                           |        |        | 6.9   |   |       |       | (36.9 | ) |        |        | .3    |  
|                                                                      |                                 |                                                             |                                                         | Other current liabilities                        |        |        | (11.0 | ) |       |       | (43.2 | ) |        |        | (14.2 | )
|                                                                      |                                 |                                                             | Decrease in other noncurrent assets                     |                                                  |        | (6.0   | )     |   |       | (19.3 | )     |   |        | (12.8  | )    
|                                                                      |                                 |                                                             | Decrease in long-term accrued liabilities               |                                                  |        | (4.2   | )     |   |       | (3.2  | )     |   |        | (2.5   | )    
|                                                                      |                                 |                                                             | Other-net                                               |                                                  |        | .3     |       |   |       | 3.4   |       |   |        | (5.1   | )    
|                                                                      |                                 |                                                             |                                                         |                                                  |        |        |       |   |       |       |       |  
|                                                                      |                                 |                                                             |                                                         | Net cash provided (used) by operating activities |        |        | 35.9  |   |       |       | (5.3  | ) |        |        | 41.0  |  
|                                                                      | Investing activities cash flows |                                                             |                                                         |                                                  |        |        |       |   |       |       |       |   |       
|                                                                      |                                 | Capital expenditures                                        |                                                         |                                                  | (6.2   | )      |       |   | (13.5 | )     |       |   | (26.5  | )     
|                                                                      |                                 | Net disposals of property, plant and equipment              |                                                         |                                                  | 7.5    |        |       |   | 5.1   |       |       |   | 9.5    |       
|                                                                      |                                 | Divestitures                                                |                                                         |                                                  | 303.9  |        |       |   |      |       |       |   | (3.0   | )     
|                                                                      |                                 | Acquisitions                                                |                                                         |                                                  | (4.3   | )      |       |   | (28.6 | )     |       |   | (7.1   | )     
|                                                                      |                                 |                                                             |                                                         |                                                  |        |        |       |   |       |       |       |  
|                                                                      |                                 |                                                             | Net cash provided (used) by investing activities        |                                                  |        | 300.9  |       |   |       | (37.0 | )     |   |        | (27.1  | )    
|                                                                      | Financing activities cash flows |                                                             |                                                         |                                                  |        |        |       |   |       |       |       |   |       
|                                                                      |                                 | Dividends paid                                              |                                                         |                                                  | (1.6   | )      |       |   | (12.6 | )     |       |   | (17.0  | )     
|                                                                      |                                 | Issuance of long-term debt                                  |                                                         |                                                  | 11.5   |        |       |   | 5.4   |       |       |   | 110.1  |       
|                                                                      |                                 | Repayments of long-term debt                                |                                                         |                                                  | (1.3   | )      |       |   | (5.5  | )     |       |   | (150.2 | )     
|                                                                      |                                 | Increase (decrease) in borrowings under
    lines of credit |                                                         |                                                  | (311.6 | )      |       |   | 118.7 |       |       |   | 1.3    |       
|                                                                      |                                 | Issuance of common shares                                   |                                                         |                                                  | .4     |        |       |   | 4.1   |       |       |   |       |       
|                                                                      |                                 | Purchase of treasury and other common shares                |                                                         |                                                  |       |        |       |   | (7.7  | )     |       |   | (48.4  | )     
|                                                                      |                                 |                                                             |                                                         |                                                  |        |        |       |   |       |       |       |  
|                                                                      |                                 |                                                             | Net cash provided (used) by financing activities        |                                                  |        | (302.6 | )     |   |       | 102.4 |       |   |        | (104.2 | )    
|Effect of exchange rate fluctuations on cash
    and cash equivalents |                                 |                                                             | 5.6                                                     |                                                  |        |        | (.7   | ) |       |       | (1.5  | )
|Cash flows related to discontinued
    operations                     |                                 |                                                             | (7.6                                                    | )                                                |        |        | (3.1  | ) |       |       | 47.9  |  
|                                                                      |                                 |                                                             |                                                         |                                                  |        |        |       |   |       |       |       |  
|Increase (decrease) in cash and cash
    equivalents                  |                                 |                                                             | 32.2                                                    |                                                  |        |        | 56.3  |   |       |       | (43.9 | )
|Cash and cash equivalents at beginning of year                        |                                 |                                                             | 90.1                                                    |                                                  |        |        | 33.8  |   |       |       | 77.7  |  
|                                                                      |                                 |                                                             |                                                         |                                                  |        |        |       |   |       |       |       |  
|Cash and cash equivalents at end of
    year                          |                                 | $                                                           | 122.3                                                   |                                                  |        | $      | 90.1  |   |       | $     | 33.8  |  
|                                                                      |                                 |                                                             |                                                         |                                                  |        |        |       |   |       |       |       |  
|                                                                     

See notes to consolidated financial statements.




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##### Table of Contents



Notes to Consolidated Financial Statements

Summary of Significant Accounting Policies

Use of Estimates

The preparation of financial statements in
conformity with generally accepted accounting principles
requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those
estimates.


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
non-U.S. operations are translated into U.S. dollars at
period-end exchange rates. Net exchange gains or losses
resulting from such translation are excluded from net earnings
and accumulated in a separate component of shareholders
equity. Income and expense accounts are translated at
weighted-average exchange rates for the period. Gains and losses
from foreign currency transactions are included in other
expense-net in the Consolidated Statements of Earnings and are
not material in any year presented.


Revenue Recognition

The company recognizes sales revenue when
products are shipped to unaffiliated customers, legal title has
passed and all significant contractual obligations of the
company have been satisfied. The company provides for estimated
post-sale warranty costs as revenue is recognized (see Warranty
Reserves). Appropriate provisions are also made for returns for
credit and uncollectible accounts.


Income Taxes

The company provides deferred income taxes for
cumulative temporary differences between the financial reporting
basis and income tax basis of its assets and liabilities.
Provisions are made for all currently payable federal and state
and local income taxes at applicable tax rates. Provisions are
also made for any additional taxes on anticipated distributions
from subsidiaries.


Earnings Per Common Share

Basic earnings per common share data are based on
the weighted-average number of common shares outstanding during
the respective periods. Diluted earnings per common share data
are based on the weighted-average number of common shares
outstanding adjusted to include the effects of potentially
dilutive stock options and certain restricted shares.


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 certain 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 amounts
related to capital leases, are stated at cost or, for assets
acquired through business combinations, at fair value at the
dates of the respective acquisitions. For financial reporting
purposes, depreciation is generally determined on the
straight-line method using estimated useful lives of the assets.
Depreciation expense related to continuing operations was
$22.0 million, $23.7 million and $24.4 million
for 2002, 2001 and 2000, respectively.


Property, plant and equipment that are idle and
held for sale are valued at the lower of historical cost less
accumulated depreciation or fair value less cost to sell.
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.

Goodwill

In 2001 and prior years, goodwill, which
represents the excess of acquisition cost over the fair value of
net assets acquired in business combinations, was amortized on
the straight-line method over periods ranging from 10 to
40 years. Amortization expense charged to earnings from
continuing operations amounted to $10.8 million in 2001 and
$11.0 million in 2000. Beginning in 2002, goodwill is no
longer amortized but rather is reviewed annually for impairment.
The company has elected to conduct its annual impairment reviews
as of October 1 of each year and base its assessments of
possible impairment on the discounted present value of the
operating cash flows of its various reporting units (see Change
in Method of Accounting and Goodwill and Other Intangible
Assets).


Long-Lived Assets

The company evaluates its long-lived assets for
impairment when facts and circumstances suggest that the
carrying amounts of these assets might not be recoverable.
Beginning in 2002, goodwill and certain other intangible assets
are excluded from these reviews and are tested for impairment on
a stand-alone basis.




---



##### Table of Contents



Notes to Consolidated Financial Statements


Warranty Reserves

The company maintains warranty reserves intended
to cover future costs associated with its warranty obligations.
These reserves are based on estimates of the amounts of those
costs. Warranty costs are classified into two groups 
normal and extraordinary. Normal warranty costs represent repair
costs incurred in the ordinary course of business and reserves
are calculated using a percentage of sales approach consistent
with past experience. Extraordinary warranty costs are unique
major problems associated with a single machine, customer order,
or a set of problems related to a large number of machines.
Extraordinary warranty reserves are estimated based on specific
facts and circumstances. The companys policy is to adjust
its warranty reserves quarterly.


Retirement Benefit Plans

The company maintains various defined benefit and
defined contribution pension plans covering substantially all
U.S. employees and certain non-U.S. employees. For defined
benefit plans, pension benefits are based primarily on length of
service and compensation. The companys policy is to fund
the plans in accordance with applicable laws and regulations.


Stock-Based Compensation

The company accounts for stock-based
compensation, including stock options, under the provisions of
Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees, and the
related interpretations. Because all stock options outstanding
under the companys 1997 Long-Term Incentive Plan and
predecessor plans have exercise prices equal to the fair market
value of the underlying common shares at the respective grant
dates, no compensation expense is recognized in earnings. The
following table illustrates on a pro forma basis the effect on
net earnings (loss) and earnings (loss) per common share if the
stock options granted from 1995 through 2002 had been accounted
for based on their fair values as determined under the
provisions of Statement of Financial Accounting Standards
No. 123, Accounting for Stock-Based
Compensation.




---

Pro Forma Earnings (Loss)


|                                                                                     |         |             |        |      |       |      |       |   |       |   |      |   |      | 
|------------------------------------------------------------------------------------ | ------- | ----------- | ------ | ---- | ----- | ---- | ----- | - | ----- | - | ---- | - | ---- | 
|(In millions, except per-share amounts)                                              |         | 2002        |        | 2001 |       | 2000
|                                                                                    
|                                                                                    
|Net earnings (loss) as reported                                                      |         | $           | (222.9 | )    |       | $    | (35.7 | ) |       | $ | 72.3 |  
|Effect on reported earnings (loss) of
    accounting for stock options at fair value |         |             | (2.2   | )    |       |      | (2.0  | ) |       |   | (1.6 | )
|                                                                                     |         |             |        |      |       |      |       |   |       |   |      |  
|Pro forma net earnings (loss)                                                        |         | $           | (225.1 | )    |       | $    | (37.7 | ) |       | $ | 70.7 |  
|                                                                                     |         |             |        |      |       |      |       |   |       |   |      |  
|Earnings (loss) per common share                                                     |         |             |        |      |       |      |       |   |       |   |      |  
|                                                                                     | Basic   |             |        |      |       |      |       |   |       |   |      |   |     
|                                                                                     |         | As reported |        | $    | (6.67 | )    |       | $ | (1.08 | ) |      | $ | 2.06 | 
|                                                                                     |         |             |        |      |       |      |       |   |       |   |      |  
|                                                                                     |         | Pro forma   |        | $    | (6.73 | )    |       | $ | (1.14 | ) |      | $ | 2.02 | 
|                                                                                     |         |             |        |      |       |      |       |   |       |   |      |  
|                                                                                     | Diluted |             |        |      |       |      |       |   |       |   |      |   |     
|                                                                                     |         | As reported |        | $    | (6.67 | )    |       | $ | (1.08 | ) |      | $ | 2.06 | 
|                                                                                     |         |             |        |      |       |      |       |   |       |   |      |  
|                                                                                     |         | Pro forma   |        | $    | (6.73 | )    |       | $ | (1.14 | ) |      | $ | 2.01 | 
|                                                                                     |         |             |        |      |       |      |       |   |       |   |      |  
|                                                                                    

Additional information regarding stock options
and expense related to restricted shares granted under the 1997
Long-Term Incentive Plan is included in the note captioned
Stock-Based Compensation.

Derivative Financial Instruments

The company enters into foreign currency forward
exchange contracts, which are a type of derivative financial
instrument, on an ongoing basis commensurate with known or
expected exposures. The purpose of this practice is to minimize
the potentially adverse effects of foreign currency exchange
rate fluctuations on the companys operating results. The
company does not currently hold other types of derivative
financial instruments and does not engage in speculation.


At December 31, 2002, the company had
outstanding forward contracts totaling $5.0 million, which
generally mature in six months or less. Substantially all of
these contracts have been designated as cash flow hedges with
any gains or losses in their fair value being recorded as a
component of accumulated other comprehensive income or loss
pending completion of the transaction being hedged.

Change in Method of Accounting

Effective January 1, 2002, the company
adopted Statement of Financial Accounting Standards
No. 142, Goodwill and Other Intangible Assets.
As required by this standard, during 2002 the company completed
the transitional reviews of recorded goodwill balances as of
January 1, 2002. These transitional reviews resulted in a
pretax goodwill impairment charge of $247.5 million ($187.7
after tax or $5.61 per share) that has been recorded as the
cumulative effect of a change in method of accounting as of
January 1,




---



##### Table of Contents



Notes to Consolidated Financial Statements


2002. Approximately 75% of the pretax charge
related to the companys Uniloy and round metalcutting
tools businesses, the latter of which is now reported as a
discontinued operation.

Recently Issued Pronouncements

In June, 2002, the Financial Accounting Standards
Board (FASB) issued Statement of Financial Accounting Standards
No. 146, Accounting for Costs Associated with Exit or
Disposal Activities (SFAS No. 146). This standard
establishes revised guidelines for the recognition of
restructuring costs. Previously the company accounted for its
restructuring initiatives under the provisions of Emerging
Issues Task Force Consensus No. 94-3, Liability
Recognition for Certain Employee Termination Benefits and Other
Costs to Exit an Activity but will adopt SFAS No. 146
effective January 1, 2003. Adoption of the standard is not
expected to significantly change the types of costs reported as
restructuring costs but has the potential to change the timing
of their recognition.


In November, 2002, the FASB issued Interpretation
No. 45, Guarantors Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others (Interpretation No. 45). In
addition to requiring additional disclosure of direct and
indirect guarantees and product warranty policies and reserves,
Interpretation No. 45 requires that the fair values of
certain types of guarantee arrangements made after
December 31, 2002 be recognized as liabilities as of their
inception dates. The company is evaluating the effects of
Interpretation No. 45. However, management currently
believes the effects will not be significant.

In December, 2002, the FASB issued Statement of
Financial Accounting Standards No. 148, Accounting
for Stock Based Compensation  Transition and
Disclosure (SFAS No. 148). This standard amends
Statement of Financial Accounting Standards No. 123,
Accounting for Stock Based Compensation (SFAS
No. 123) to provide two additional transition methods and
requires expanded disclosure regarding the pro forma effects of
accounting for stock options at fair value by entities that have
not voluntarily adopted SFAS No. 123. The additional
disclosures have been included in the notes to these
consolidated financial statements. However, because the company
currently has no plans to account for stock options at fair
value, the issuance of the standard will have no additional
effects at this time.

Discontinued Operations

In 2002, the company announced a strategy of
focusing its capital and resources on building its position as a
premier supplier of plastics processing technologies and
strengthening its worldwide industrial fluids business. In
connection with this strategy, during 2002 the company sold two
businesses that had been included in its former metalworking
technologies segment and initiated efforts to seek strategic
alternatives for two other businesses of the segment.


On August 30, 2002, the company completed
the sale of its Widia and Werkö metalcutting tools
businesses to Kennametal, Inc. for
188 million
in cash (approximately $185 million), subject to
post-closing adjustments. In a separate but contingent
transaction, the company purchased an additional 26% of the
shares of Widia India, thereby increasing its ownership interest
from 51% to 77%. The entire 77% of the Widia India shares was
included in the sale transaction. After deducting post-closing
adjustments that will be paid in the first quarter of 2003,
transaction costs and expenses and the cost to increase the
companys ownership interest in Widia India, the ultimate
net cash proceeds from the sale will total approximately
$135 million, most of which has been used to repay bank
borrowings. The sale resulted in an after-tax loss of $14.9
million. Approximately $7 million of the loss resulted from
the recognition of the cumulative foreign currency translation
adjustments that had been recorded in accumulated other
comprehensive loss since the acquisition of Widia in 1995.

On August 9, 2002, the company completed the
sale of its Valenite metalcutting tools business to Sandvik AB
for $175 million in cash. After deducting post-closing
adjustments that will be paid in the first quarter of 2003,
transaction costs and sale-related expenses, the net cash
proceeds from the sale will be approximately $145 million,
a majority of which has been used to repay bank borrowings. The
company recorded an after-tax gain on the sale of
$31.3 million.

During the third quarter of 2002, the company
retained advisors to explore strategic alternatives for its
round metalcutting tools and grinding wheels businesses and in
the fourth quarter initiated plans for their sale. Both
businesses are being actively marketed and the sales are
expected to be completed in the first half of 2003. Completion
of the sales is currently expected to result in after-tax losses
totaling approximately $9.9 million which were recorded as
charges to earnings in the fourth quarter of 2002.

All of the businesses discussed above are
reported as discontinued operations and the consolidated
financial statements for all prior periods have been adjusted to
reflect this presentation. Operating results for all of the
businesses included in discontinued operations are presented in
the following table.



---



##### Table of Contents



Notes to Consolidated Financial Statements




---

Earnings (Loss) From Discontinued Operations


|                                                                             |  |      |       |      |  |      |       |   |  |   |       |  
|---------------------------------------------------------------------------- |  | ---- | ----- | ---- |  | ---- | ----- | - |  | - | ----- | -
|(In millions)                                                                |  | 2002 |       | 2001 |  | 2000
|                                                                            
|                                                                            
|Sales                                                                        |  | $    | 325.0 |      |  | $    | 507.5 |   |  | $ | 609.7 |  
|                                                                             |  |      |       |      |  |      |       |   |  |   |       |  
|Operating earnings (loss) including restructuring
    costs                  |  |      | (26.8 | )    |  |      | (13.1 | ) |  |   | 50.6  |  
|Allocated interest expense                                                   |  |      | (10.9 | )    |  |      | (16.7 | ) |  |   | (18.6 | )
|                                                                             |  |      |       |      |  |      |       |   |  |   |       |  
|Earnings (loss) before income taxes and
    minority shareholders interests |  |      | (37.7 | )    |  |      | (29.8 | ) |  |   | 32.0  |  
|Provision (benefit) for income taxes                                         |  |      | (10.4 | )    |  |      | (23.6 | ) |  |   | 6.0   |  
|                                                                             |  |      |       |      |  |      |       |   |  |   |       |  
|Earnings (loss) before minority
    shareholders interests                  |  |      | (27.3 | )    |  |      | (6.2  | ) |  |   | 26.0  |  
|Minority shareholders interests                                             |  |      | (2.1  | )    |  |      | .8    |   |  |   | 2.5   |  
|                                                                             |  |      |       |      |  |      |       |   |  |   |       |  
|Earnings (loss) from discontinued operations                                 |  | $    | (25.2 | )    |  | $    | (7.0  | ) |  | $ | 23.5  |  
|                                                                             |  |      |       |      |  |      |       |   |  |   |       |  
|                                                                            

As reflected in the preceding table, allocated
interest expense includes interest on debt assumed or expected
to be assumed by the respective buyers, interest on borrowings
that were required to be repaid using a portion of the proceeds
from the Widia and Werkö transaction and the Valenite
transaction, and an allocated portion of other consolidated
interest expense based on the ratio of net assets sold or to be
sold to consolidated assets.

As presented in the Consolidated Statement of
Earnings for 2002, the line captioned Net gain on
divestitures includes the following components.



---

Gain (Loss) on Divestiture of Discontinued
Operations


|                                                                                                  |  |      |       |  
|------------------------------------------------------------------------------------------------- |  | ---- | ----- | -
|(In millions)                                                                                     |  | 2002
|                                                                                                 
|                                                                                                 
|Gain on sale of Valenite                                                                          |  | $    | 31.3  |  
|Loss on sale of Widia and Werkö                                                                   |  |      | (14.9 | )
|Estimated loss on divestitures of round
    metalcutting tools and grinding wheels businesses     |  |      | (9.9  | )
|Adjustment of reserves related to the 1998
    divestiture of the companys machine tools segment |  |      | 1.9   |  
|                                                                                                  |  |      |       |  
|Net gain on divestitures                                                                          |  | $    | 8.4   |  
|                                                                                                  |  |      |       |  
|                                                                                                 

The major classes of assets and liabilities of
discontinued operations in the Consolidated Balance Sheets as of
December 31, 2002 and December 31, 2001 are as follows:



---

Assets and Liabilities of Discontinued
Operations


|                                                                       |              |                   |     |      |      |   |       |       |       | 
|---------------------------------------------------------------------- | ------------ | ----------------- | --- | ---- | ---- | - | ----- | ----- | ----- | 
|(In millions)                                                          |              | 2002              |     | 2001
|                                                                      
|                                                                      
|Cash and cash equivalents                                              |              | $                 |    |      |      | $ | 20.3  |      
|Notes and accounts receivable                                          |              |                   | 1.4 |      |      |   | 66.6  |      
|Inventories                                                            |              |                   | 7.9 |      |      |   | 140.6 |      
|Other current assets                                                   |              |                   | .1  |      |      |   | 20.7  |      
|Property, plant and equipment  net                                    |              |                   | 6.6 |      |      |   | 129.7 |      
|Goodwill and other noncurrent assets                                   |              |                   |    |      |      |   | 77.8  |      
|                                                                       |              |                   |     |      |      |   |       |      
|                                                                       | Total assets |                   |     | 16.0 |      |   |       | 455.7 |      
|Amounts payable to banks and current portion of
    long-term debt     |              |                   | .4  |      |      |   | 14.6  |      
|Trade accounts payable                                                 |              |                   | 4.4 |      |      |   | 33.7  |      
|Other current liabilities                                              |              |                   | 1.4 |      |      |   | 60.5  |      
|Long-term debt                                                         |              |                   | 2.7 |      |      |   | 12.2  |      
|Long-term accrued liabilities and minority
    shareholders interests |              |                   | 2.0 |      |      |   | 45.8  |      
|                                                                       |              |                   |     |      |      |   |       |      
|                                                                       |              | Total liabilities |     |      | 10.9 |   |       |       | 166.8 | 
|                                                                       |              |                   |     |      |      |   |       |      
|Net assets                                                             |              | $                 | 5.1 |      |      | $ | 288.9 |      
|                                                                       |              |                   |     |      |      |   |       |      
|                                                                      

Restructuring Costs

In the third and fourth quarters of 2001, the
companys management formally approved plans to consolidate
certain manufacturing operations and reduce its cost structure.
Implementation of these plans has resulted in pretax charges to
earnings from continuing operations of $17.8 million. Of
the total cost of the plans, $14.1 million was recorded in
2001. An additional $3.7 million was charged to expense in
continuing operations during 2002. In addition to the amounts
related to continuing operations, the companys
discontinued operations recorded restructuring charges of
$12.9 million in 2001 and $3.8 million in 2002.


As they relate to continuing operations, the 2001
plans involved the closure of four manufacturing facilities in
North America and the elimination of several sales and
administrative locations worldwide. The consolidations and
overhead reductions resulted in the elimination of approximately
450 manufacturing and administrative positions within the
companys continuing operations, principally in the U.S.
and Europe. The cash cost of implementing the plans related to
continuing operations was $11.2 million. Of the total cash
cost, $5.8 million was spent in 2001 and an additional
$5.4 million was spent in 2002.

During 2001, the companys management also
approved a plan to integrate the operations of EOC and Reform
(see Acquisitions) with the companys existing European
mold base and components business. The total cost of the
integration was $9.2 million, of which $1.2 million



---



##### Table of Contents



Notes to Consolidated Financial Statements


was included in reserves for employee termination
benefits and facility exit costs that were established in the
allocations of the EOC and Reform acquisition costs. The
remainder was charged to expense, including $3.4 million in
the fourth quarter of 2001 and $4.6 million in 2002. As approved
by management, the plan involved the consolidation of the
manufacturing operations of five facilities located in Germany
and Belgium into three facilities, the reorganization of
warehousing and distribution activities in Europe, and the
elimination of approximately 230 manufacturing and
administrative positions. The total cash cost of the integration
plan was $8.9 million, of which $1.1 million was spent
in 2001. An additional $7.8 million was spent in 2002.

In connection with all of the plans initiated in
2001, the company recorded pretax restructuring costs related to
continuing operations of $8.3 million in 2002 and
$17.5 million in 2001. Cash costs for the restructuring and
integration actions totaled $13.2 million in 2002 and
$6.9 million in 2001.

In the third quarter of 2002, the companys
management approved additional restructuring plans for the
purpose of further reducing the companys cost structure in
certain businesses and to reduce corporate costs as a result of
the disposition of Widia, Werkö and Valenite. These actions
resulted in third quarter restructuring expense of
$1.3 million.

In November, 2002, the company announced
additional restructuring initiatives intended to improve
operating efficiency and customer service. The first action
involves the transfer of all manufacturing of container blow
molding machines and structural foam systems from the plant in
Manchester, Michigan to the companys more modern and
efficient facility near Cincinnati, Ohio. The mold making
operation in Manchester will also move to a smaller location
near the existing facility. In the second initiative, the
manufacture of special mold bases for injection molding at the
Monterey Park, California plant is being phased out and
transferred to various other facilities in North America. These
additional actions are expected to result in incremental
restructuring costs of $7 to $8 million. Of the total cost
of the actions, $4.3 million was charged to expense in 2002
with the remainder being recorded in 2003. The total cash cost
of these initiatives is expected to be approximately
$6 million, substantially all of which will be spent in
2003. The pretax annualized cost savings are expected to exceed
$4 million, most of which will be realized in 2003.

Early in 2003, the company initiated a plan for
the further restructuring of its European blow molding machinery
operations at a cost of up to $6 million. Additional
restructuring actions at other locations may be announced later
in the year. The cost of all of these actions, including an
additional $3 to $4 million to complete the actions
initiated in 2002 that are discussed in the preceding paragraph,
could total $9 to $12 million in 2003.

The following table presents the components of
the line captioned Restructuring costs in the
Consolidated Statements of Earnings for the years 2002, 2001 and
2000. The amounts for 2000 relate to actions initiated in 1999
to improve operating efficiency and reduce costs and to
consolidate the European operations of the companys blow
molding systems business.



---

Restructuring Costs


|                                                                                   |                                      |      |      |      |   |      |      |     |   |   |     |     |  
|---------------------------------------------------------------------------------- | ------------------------------------ | ---- | ---- | ---- | - | ---- | ---- | --- | - | - | --- | --- | -
|(In millions)                                                                      |                                      | 2002 |      | 2001 |   | 2000
|                                                                                  
|                                                                                  
|Accruals for termination benefits and facility
    exit costs                      |                                      | $    | 2.9  |      |   | $    | 9.9  |     |   | $ |    |    
|Supplemental retirement benefits                                                   |                                      |      | 2.9  |      |   |      | .5   |     |   |   |    |    
|Other restructuring costs                                                          |                                      |      |      |      |   |      |      |     |   |   |     |    
|                                                                                   | Costs charged to expense as incurred |      |      | 4.0  |   |      |      | 3.8 |   |   |     | 1.1 |  
|                                                                                   | Reserve adjustments                  |      |      | (.5  | ) |      |      | (.1 | ) |   |     | (.2 | )
|                                                                                   |                                      |      |      |      |   |      |      |     |   |   |     |    
|                                                                                   |                                      |      | 9.3  |      |   |      | 14.1 |     |   |   | .9  |    
|Costs related to the blow molding consolidation
    and EOC and Reform integration |                                      |      | 4.6  |      |   |      | 3.4  |     |   |   | .5  |    
|                                                                                   |                                      |      |      |      |   |      |      |     |   |   |     |    
|Total restructuring costs                                                          |                                      | $    | 13.9 |      |   | $    | 17.5 |     |   | $ | 1.4 |    
|                                                                                   |                                      |      |      |      |   |      |      |     |   |   |     |    
|                                                                                  

The status of the reserves for the initiatives
discussed above is summarized in the following tables. The
amounts included therein relate solely to continuing operations.
To the extent that any unused reserves that were established in
the allocation of acquisition cost remain after the completion
of the EOC and Reform consolidations, those amounts will be
applied as reductions of the goodwill arising from the
respective acquisitions.



---



##### Table of Contents



Notes to Consolidated Financial Statements




---

Restructuring Reserves


|                                                                                   |                     |           |      |           |  |       |     |         |  |   |       |      |   |   |     |    | 
|---------------------------------------------------------------------------------- | ------------------- | --------- | ---- | --------- |  | ----- | --- | ------- |  | - | ----- | ---- | - | - | --- | -- | 
|                                                                                  
|2002                                                                              
|                                                                                  
|                                                                                  
|                                                                                   |                     | Usage     |      |          
|                                                                                   |                     | Beginning |      |           |  | and   |     | Ending 
|(In millions)                                                                      |                     | Balance   |      | Additions |  | Other |     | Balance
|                                                                                  
|                                                                                  
|Blow molding consolidation and EOC and Reform
    integration Termination benefits |                     | $         | 4.2  |           |  | $     | .8  |         |  | $ | (3.3  | )    |   | $ | 1.7 |   
|                                                                                   | Facility exit costs |           |      | .2        |  |       |     |        |  |   |       | (.2  | ) |   |     |   | 
|                                                                                   |                     |           |      |           |  |       |     |         |  |   |       |      |   |   |     |   
|                                                                                   |                     |           | 4.4  |           |  |       | .8  |         |  |   | (3.5  | )    |   |   | 1.7 |   
|Restructuring costs Termination benefits                                           |                     |           | 7.1  |           |  |       | 2.0 |         |  |   | (6.0  | )    |   |   | 3.1 |   
|                                                                                   | Facility exit costs |           |      | .8        |  |       |     | .9      |  |   |       | (1.1 | ) |   |     | .6 | 
|                                                                                   |                     |           |      |           |  |       |     |         |  |   |       |      |   |   |     |   
|                                                                                   |                     |           | 7.9  |           |  |       | 2.9 |         |  |   | (7.1  | )    |   |   | 3.7 |   
|                                                                                   |                     |           |      |           |  |       |     |         |  |   |       |      |   |   |     |   
|Total reserves related to continuing operations                                    |                     | $         | 12.3 |           |  | $     | 3.7 |         |  | $ | (10.6 | )    |   | $ | 5.4 |   
|                                                                                   |                     |           |      |           |  |       |     |         |  |   |       |      |   |   |     |   
|                                                                                  

|                                                              |                      |           |     |           |  |       |      |         |  |   |      |      |   |   |      |     | 
|------------------------------------------------------------- | -------------------- | --------- | --- | --------- |  | ----- | ---- | ------- |  | - | ---- | ---- | - | - | ---- | --- | 
|                                                             
|2001                                                         
|                                                             
|                                                             
|                                                              |                      | Usage     |     |          
|                                                              |                      | Beginning |     |           |  | and   |      | Ending 
|(In millions)                                                 |                      | Balance   |     | Additions |  | Other |      | Balance
|                                                             
|                                                             
|Blow molding consolidation and EOC and Reform
    integration |                      |           |     |           |  |       |      |         |  |   |      |      |   |   |      |    
|                                                              | Termination benefits |           | $   | 1.4       |  |       | $    | 3.7     |  |   | $    | (.9  | ) |   | $    | 4.2 | 
|                                                              | Facility exit costs  |           |     | .2        |  |       |      |        |  |   |      |     |   |   |      | .2  | 
|                                                              |                      |           |     |           |  |       |      |         |  |   |      |      |   |   |      |    
|                                                              |                      |           | 1.6 |           |  |       | 3.7  |         |  |   | (.9  | )    |   |   | 4.4  |    
|Restructuring costs                                           |                      |           |     |           |  |       |      |         |  |   |      |      |   |   |      |    
|                                                              | Termination benefits |           |     | .2        |  |       |      | 8.7     |  |   |      | (1.8 | ) |   |      | 7.1 | 
|                                                              | Facility exit costs  |           |     | .3        |  |       |      | 1.2     |  |   |      | (.7  | ) |   |      | .8  | 
|                                                              |                      |           |     |           |  |       |      |         |  |   |      |      |   |   |      |    
|                                                              |                      |           | .5  |           |  |       | 9.9  |         |  |   | (2.5 | )    |   |   | 7.9  |    
|                                                              |                      |           |     |           |  |       |      |         |  |   |      |      |   |   |      |    
|Total reserves related to continuing operations               |                      | $         | 2.1 |           |  | $     | 13.6 |         |  | $ | (3.4 | )    |   | $ | 12.3 |    
|                                                              |                      |           |     |           |  |       |      |         |  |   |      |      |   |   |      |    
|                                                             

Restructuring reserves related to discontinued
operations were $.2 million at December 31, 2002,
$6.9 million at December 31, 2001, and
$.2 million at December 31, 2000.

Acquisitions

In 2000, the company acquired Akron Extruders, a
manufacturer of single-screw plastics extrusion machinery and
Ontario Heater and Supply Company and Rite-Tek Canada, both of
which specialize in the distribution of maintenance, repair and
operating supplies for the plastics processing industry. In the
aggregate, these businesses had annual sales of approximately
$10 million as of the respective acquisition dates.


In 2001, the company acquired Reform Flachstahl
(Reform) and EOC Normalien (EOC), two businesses headquartered
in Germany that manufacture and distribute mold bases and
components for plastics injection molding. The company also
acquired Progress Precision, a Canadian manufacturer of barrels
and screws and provider of related services for plastics
extrusion, injection molding and blow molding. The combined
sales of the three businesses as of their respective acquisition
dates were approximately $53 million.

In February, 2002, the company acquired the
remaining 74% of the outstanding shares of Ferromatik Milacron
A/ S, which sells and services Ferromatik injection molding
machines in Denmark. Ferromatik Milacron A/S, which has annual
sales of approximately $4 million, was previously accounted
for on the equity method but is now fully consolidated beginning
in 2002.

Akron Extruders and Progress Precision are
included in the machinery technologies  North America
segment while Ontario Heater and Supply, Rite-Tek Canada, Reform
and EOC are included in the mold technologies segment.
Ferromatik Milacron A/ S is included in machinery
technologies  Europe. All of the acquisitions were
accounted for under the purchase method and were financed
through the use of available cash and bank borrowings. The
aggregate cost of the acquisitions, including professional fees
and other related costs, totaled $.9 million in 2002,
$32.1 million in 2001 and was $4.7 million for 2000.
The allocation of the aggregate cost of the acquisitions to the
assets acquired and liabilities assumed is presented in the
table that follows.



---

Allocation of Acquisition Cost


|                              |                   |      |    |      |  |      |      |      |  |   |     |     | 
|----------------------------- | ----------------- | ---- | -- | ---- |  | ---- | ---- | ---- |  | - | --- | --- | 
|(In millions)                 |                   | 2002 |    | 2001 |  | 2000
|                             
|                             
|Cash and cash equivalents     |                   | $    |   |      |  | $    |     |      |  | $ | .2  |    
|Accounts receivable           |                   |      | .4 |      |  |      | 6.4  |      |  |   | .8  |    
|Inventories                   |                   |      | .7 |      |  |      | 8.3  |      |  |   | 1.0 |    
|Other current assets          |                   |      |   |      |  |      | .1   |      |  |   | .1  |    
|Property, plant and equipment |                   |      | .3 |      |  |      | 11.1 |      |  |   | .1  |    
|Goodwill                      |                   |      | .4 |      |  |      | 13.8 |      |  |   | 3.5 |    
|                              |                   |      |    |      |  |      |      |      |  |   |     |    
|                              | Total assets      |      |    | 1.8  |  |      |      | 39.7 |  |   |     | 5.7 | 
|Current liabilities           |                   |      | .8 |      |  |      | 7.6  |      |  |   | 1.0 |    
|Long-term debt                |                   |      | .1 |      |  |      |     |      |  |   |    |    
|                              |                   |      |    |      |  |      |      |      |  |   |     |    
|                              | Total liabilities |      |    | .9   |  |      |      | 7.6  |  |   |     | 1.0 | 
|                              |                   |      |    |      |  |      |      |      |  |   |     |    
|Total acquisition cost        |                   | $    | .9 |      |  | $    | 32.1 |      |  | $ | 4.7 |    
|                              |                   |      |    |      |  |      |      |      |  |   |     |    
|                             

In the 2001 allocation of acquisition cost,
current liabilities includes $1.2 million for the
integration of EOC and Reform with the companys existing
mold base and components business in Europe (see Restructuring
Costs).

Unaudited pro forma sales and earnings
information is not presented because the amounts would not vary
materially from the comparable amounts reflected in the
companys historical Consolidated Statements of Earnings
for any year.

Research and Development

Charges to operations for the research and
development activities of continuing operations are summarized
below.




---



##### Table of Contents



Notes to Consolidated Financial Statements




---

Research and Development





|                         |  |      |      |      |  |      |      |  |  |   |      | 
|------------------------ |  | ---- | ---- | ---- |  | ---- | ---- |  |  | - | ---- | 
|(In millions)            |  | 2002 |      | 2001 |  | 2000
|                        
|                        
|Research and development |  | $    | 15.8 |      |  | $    | 21.1 |  |  | $ | 24.9 | 
|                         |  |      |      |      |  |      |      |  |  |   |      | 
|                        

Retirement Benefit Plans

Pension cost for all defined benefit plans is
summarized in the following table. For all years presented, the
table includes amounts for plans for certain employees in the
U.S. and Germany.




---

Pension (Income) Expense





|                                                 |  |      |       |      |  |      |       |   |  |   |       |  
|------------------------------------------------ |  | ---- | ----- | ---- |  | ---- | ----- | - |  | - | ----- | -
|(In millions)                                    |  | 2002 |       | 2001 |  | 2000
|                                                
|                                                
|Service cost (benefits earned during the period) |  | $    | 4.6   |      |  | $    | 4.4   |   |  | $ | 5.0   |  
|Interest cost on projected benefit obligation    |  |      | 34.5  |      |  |      | 34.2  |   |  |   | 33.3  |  
|Expected return on plan assets                   |  |      | (45.9 | )    |  |      | (45.1 | ) |  |   | (43.5 | )
|Supplemental retirement benefits (a)             |  |      | 4.7   |      |  |      | .8    |   |  |   |      |  
|Amortization of unrecognized prior service cost  |  |      | .8    |      |  |      | .5    |   |  |   | .5    |  
|Amortization of unrecognized gains and losses    |  |      | .5    |      |  |      | (.2   | ) |  |   | .4    |  
|                                                 |  |      |       |      |  |      |       |   |  |   |       |  
|Pension income                                   |  | $    | (.8   | )    |  | $    | (5.4  | ) |  | $ | (4.3  | )
|                                                 |  |      |       |      |  |      |       |   |  |   |       |  
|                                                



|    |                                                                                                                                                                                                                                                                     
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | In 2002, $2.9 million is included in the
    line captioned Restructuring costs in the
    Consolidated Statement of Earnings and $1.8 million is
    included in results of discontinued operations. In 2001,
    $.5 million is included in restructuring costs.

The following table summarizes changes in the
projected benefit obligation for all defined benefit plans.



---

Projected Benefit Obligation





|                                         |  |      |        |      |  |   |        |  
|---------------------------------------- |  | ---- | ------ | ---- |  | - | ------ | -
|(In millions)                            |  | 2002 |        | 2001
|                                        
|                                        
|Balance at beginning of year             |  | $    | (472.5 | )    |  | $ | (434.8 | )
|Service cost                             |  |      | (4.6   | )    |  |   | (4.4   | )
|Interest cost                            |  |      | (34.5  | )    |  |   | (34.2  | )
|Benefits paid                            |  |      | 38.3   |      |  |   | 35.9   |  
|Actuarial loss                           |  |      | (7.2   | )    |  |   | (6.5   | )
|Plan amendment                           |  |      |       |      |  |   | (3.5   | )
|Supplemental retirement benefits         |  |      | (4.7   | )    |  |   | (.8    | )
|Changes in discount rates                |  |      | (40.7  | )    |  |   | (24.3  | )
|Foreign currency translation adjustments |  |      | (1.3   | )    |  |   | .1     |  
|                                         |  |      |        |      |  |   |        |  
|Balance at end of year                   |  | $    | (527.2 | )    |  | $ | (472.5 | )
|                                         |  |      |        |      |  |   |        |  
|                                        

The following table summarizes the changes in
plan assets for the U.S. plans. Consistent with customary
practice in Germany, the plan for employees in that country has
not been funded.



---

Plan Assets





|                             |  |      |       |      |  |   |       |  
|---------------------------- |  | ---- | ----- | ---- |  | - | ----- | -
|(In millions)                |  | 2002 |       | 2001
|                            
|                            
|Balance at beginning of year |  | $    | 432.0 |      |  | $ | 482.3 |  
|Actual investment loss       |  |      | (53.2 | )    |  |   | (16.1 | )
|Benefits paid                |  |      | (36.1 | )    |  |   | (34.2 | )
|                             |  |      |       |      |  |   |       |  
|Balance at end of year       |  | $    | 342.7 |      |  | $ | 432.0 |  
|                             |  |      |       |      |  |   |       |  
|                            

The assets of the principal U.S. plan
consist primarily of stocks, debt securities and mutual funds.
The plan also includes common shares of the company with a
market value of $15.8 million in 2002 and
$38.3 million in 2001.

The following table sets forth the funded status
of the plans for U.S. employees at year-end 2002 and 2001.



---

Funded Status at Year-End





|                                                                          |  |      |        |      |  |   |        |  
|------------------------------------------------------------------------- |  | ---- | ------ | ---- |  | - | ------ | -
|(In millions)                                                             |  | 2002 |        | 2001
|                                                                         
|                                                                         
|Vested benefit obligation                                                 |  | $    | (471.0 | )    |  | $ | (419.3 | )
|                                                                          |  |      |        |      |  |   |        |  
|Accumulated benefit obligation                                            |  | $    | (485.0 | )    |  | $ | (431.5 | )
|                                                                          |  |      |        |      |  |   |        |  
|Projected benefit obligation                                              |  | $    | (516.6 | )    |  | $ | (463.7 | )
|Plan assets at fair value                                                 |  |      | 342.7  |      |  |   | 432.0  |  
|                                                                          |  |      |        |      |  |   |        |  
|Deficiency of plan assets in relation to
    projected benefit obligation |  |      | (173.9 | )    |  |   | (31.7  | )
|Unrecognized net loss                                                     |  |      | 187.4  |      |  |   | 40.4   |  
|Unrecognized prior service cost                                           |  |      | 4.9    |      |  |   | 5.7    |  
|                                                                          |  |      |        |      |  |   |        |  
|Prepaid pension cost                                                      |  | $    | 18.4   |      |  | $ | 14.4   |  
|                                                                          |  |      |        |      |  |   |        |  
|                                                                         

The presentation of the amounts reflected in the
previous table in the Consolidated Balance Sheets at
December 31, 2002 and December 31, 2001 is reflected
in the following table.



---

Balance Sheet Presentation





|                                             |  |      |        |      |  |   |       |  
|-------------------------------------------- |  | ---- | ------ | ---- |  | - | ----- | -
|(In millions)                                |  | 2002 |        | 2001
|                                            
|                                            
|Prepaid pension cost                         |  | $    |       |      |  | $ | 28.1  |  
|Intangible asset                             |  |      | 4.1    |      |  |   |      |  
|Accrued pension cost                         |  |      | (132.5 | )    |  |   | (13.7 | )
|Accumulated other comprehensive
    loss (a) |  |      | 146.8  |      |  |   |      |  
|                                             |  |      |        |      |  |   |       |  
|                                             |  | $    | 18.4   |      |  | $ | 14.4  |  
|                                             |  |      |        |      |  |   |       |  
|                                            

|    |                                                                                                                      
|--- | ---------------------------------------------------------------------------------------------------------------------
|(a) | Represents the pretax amount of an after-tax
    charge to accumulated other comprehensive loss of
    $95.4 million.

The intangible asset at December 31, 2002
and the prepaid pension cost amount at December 31, 2001
are included in other noncurrent assets in the Consolidated



---



##### Table of Contents



Notes to Consolidated Financial Statements


Balance Sheets as of the respective dates.
Accrued pension cost is included in long-term accrued
liabilities.

The following table sets forth the status of the
companys defined benefit pension plan for certain
employees in Germany.



---

Status at Year-End





|                               |  |      |       |      |  |   |      |  
|------------------------------ |  | ---- | ----- | ---- |  | - | ---- | -
|(In millions)                  |  | 2002 |       | 2001
|                              
|                              
|Vested benefit obligation      |  | $    | (7.5  | )    |  | $ | (6.1 | )
|                               |  |      |       |      |  |   |      |  
|Accumulated benefit obligation |  | $    | (8.8  | )    |  | $ | (7.3 | )
|                               |  |      |       |      |  |   |      |  
|Projected benefit obligation   |  | $    | (10.5 | )    |  | $ | (8.8 | )
|Unrecognized net (gain) loss   |  |      | (.1   | )    |  |   | .2   |  
|                               |  |      |       |      |  |   |      |  
|Accrued pension cost           |  | $    | (10.6 | )    |  | $ | (8.6 | )
|                               |  |      |       |      |  |   |      |  
|                              

The following table presents the weighted-average
actuarial assumptions used for all defined benefit plans in
2002, 2001 and 2000.



---

Actuarial Assumptions





|                                                 |  |      |     |      |  |      |     |   |  |  |     |  
|------------------------------------------------ |  | ---- | --- | ---- |  | ---- | --- | - |  |  | --- | -
|                                                 |  | 2002 |     | 2001 |  | 2000
|                                                
|                                                
|Discount rate                                    |  |      | 6.5 | %    |  |      | 7.2 | % |  |  | 7.7 | %
|Expected long-term rate of return on plan assets |  |      | 9.5 | %    |  |      | 9.5 | % |  |  | 9.5 | %
|Rate of increase in future compensation levels   |  |      | .7  | %    |  |      | 4.2 | % |  |  | 5.1 | %
|                                                

The company also maintains certain defined
contribution and 401(k) plans. Participation in these plans is
available to certain U.S. employees. Costs included in
continuing operations for these plans were $1.6 million,
$2.6 million and $5.4 million in 2002, 2001 and 2000,
respectively.

In addition to pension benefits, the company also
provides varying levels of postretirement health care benefits
to certain U.S. employees. Substantially all such employees
are covered by the companys principal plan, under which
benefits are provided to employees who retire from active
service after having attained age 55 and ten years of
service. The plan is contributory in nature. For employees
retiring prior to 1980, such contributions are based on varying
percentages of the current per-contract cost of benefits, with
the company funding any excess over these amounts. For employees
retiring after 1979, the dollar amount of the companys
current and future contributions is frozen.

The following table presents the components of
the companys postretirement health care cost under the
principal U.S. plan.



---

Postretirement Health Care Cost





|                                                                   |  |      |     |      |  |      |     |   |  |   |     |  
|------------------------------------------------------------------ |  | ---- | --- | ---- |  | ---- | --- | - |  | - | --- | -
|(In millions)                                                      |  | 2002 |     | 2001 |  | 2000
|                                                                  
|                                                                  
|Service cost (benefits earned during the period)                   |  | $    | .1  |      |  | $    | .1  |   |  | $ | .1  |  
|Interest cost on accumulated postretirement
    benefit obligation |  |      | 1.7 |      |  |      | 1.9 |   |  |   | 2.0 |  
|Amortization of unrecognized gains                                 |  |      | (.4 | )    |  |      | (.5 | ) |  |   | (.5 | )
|                                                                   |  |      |     |      |  |      |     |   |  |   |     |  
|Postretirement health care cost                                    |  | $    | 1.4 |      |  | $    | 1.5 |   |  | $ | 1.6 |  
|                                                                   |  |      |     |      |  |      |     |   |  |   |     |  
|                                                                  

The following table summarizes changes in the
accumulated postretirement benefit obligation for the principal
U.S. plan.



---

Accumulated Postretirement Benefit
Obligation





|                                   |  |      |       |      |  |   |       |  
|---------------------------------- |  | ---- | ----- | ---- |  | - | ----- | -
|(In millions)                      |  | 2002 |       | 2001
|                                  
|                                  
|Balance at beginning of year       |  | $    | (26.5 | )    |  | $ | (25.6 | )
|Service cost                       |  |      | (.1   | )    |  |   | (.1   | )
|Interest cost                      |  |      | (1.7  | )    |  |   | (1.9  | )
|Benefits paid net of contributions |  |      | 3.0   |      |  |   | 3.3   |  
|Actuarial gain (loss)              |  |      | 1.7   |      |  |   | (.4   | )
|Change in discount rate            |  |      | (1.3  | )    |  |   | (1.8  | )
|                                   |  |      |       |      |  |   |       |  
|Balance at end of year             |  | $    | (24.9 | )    |  | $ | (26.5 | )
|                                   |  |      |       |      |  |   |       |  
|                                  

The following table presents the components of
the companys liability for postretirement health care
benefits under the principal U.S. plan.



---

Accrued Postretirement Health Care
Benefits





|                                              |                                    |      |       |       |   |   |       |       |  
|--------------------------------------------- | ---------------------------------- | ---- | ----- | ----- | - | - | ----- | ----- | -
|(In millions)                                 |                                    | 2002 |       | 2001 
|                                             
|                                             
|Accumulated postretirement benefit obligation |                                    |      |       |       |   |   |       |      
|                                              | Retirees                           |      | $     | (18.7 | ) |   | $     | (20.5 | )
|                                              | Fully eligible active participants |      |       | (2.3  | ) |   |       | (2.4  | )
|                                              | Other active participants          |      |       | (3.9  | ) |   |       | (3.6  | )
|                                              |                                    |      |       |       |   |   |       |      
|                                              |                                    |      | (24.9 | )     |   |   | (26.5 | )    
|Unrecognized net gain                         |                                    |      | (5.5  | )     |   |   | (5.5  | )    
|                                              |                                    |      |       |       |   |   |       |      
|Accrued postretirement health care benefits   |                                    | $    | (30.4 | )     |   | $ | (32.0 | )    
|                                              |                                    |      |       |       |   |   |       |      
|                                             

The discount rate used in calculating the
accumulated postretirement benefit obligation was 6.5% for 2002
and 7.25% for 2001. For 2003, the assumed rate of increase in
health care costs used to calculate the accumulated
postretirement benefit obligation is 9.0%. This rate is assumed
to decrease in varying degrees annually to 5.0% for years after
2010. Because the dollar amount of the companys
contributions for most employees is frozen, a one percent change
in each year in relation to the above assumptions would not



---



##### Table of Contents



Notes to Consolidated Financial Statements


significantly change the accumulated
postretirement benefit obligation or the total cost of the plan.

Income Taxes

Deferred income taxes reflect the net tax effects
of temporary differences between the carrying amounts of assets
and liabilities for financial reporting purposes and the amounts
used for income tax purposes. The significant components of the
companys deferred tax assets and liabilities as of
year-end 2002 and 2001 are as follows:




---

Components of Deferred Tax Assets and
Liabilities





|                         |                                                                                                             |                                |                                                 |      |       |       |      |      |       |      | 
|------------------------ | ----------------------------------------------------------------------------------------------------------- | ------------------------------ | ----------------------------------------------- | ---- | ----- | ----- | ---- | ---- | ----- | ---- | 
|(In millions)            |                                                                                                             | 2002                           |                                                 | 2001
|                        
|                        
|Deferred tax assets      |                                                                                                             |                                |                                                 |      |       |       |      |     
|                         | Net operating loss carryforwards                                                                            |                                | $                                               | 67.3 |       |       | $    | 40.0 |      
|                         | Tax credit carryforwards                                                                                    |                                |                                                 | 10.7 |       |       |      | 6.3  |      
|                         | Accrued postretirement health care benefits                                                                 |                                |                                                 | 10.0 |       |       |      | 12.0 |      
|                         | Inventories, due principally to obsolescence
    reserves and additional costs inventoried for tax purposes |                                |                                                 | 7.3  |       |       |      | 5.5  |      
|                         | Accrued employee benefits other than pensions and
    retiree health care benefits                          |                                |                                                 | 4.0  |       |       |      | 6.2  |      
|                         | Accrued pension cost                                                                                        |                                |                                                 | 8.4  |       |       |      | 7.6  |      
|                         | Accrued warranty cost                                                                                       |                                |                                                 | 1.4  |       |       |      | 2.6  |      
|                         | Accrued taxes                                                                                               |                                |                                                 | 2.8  |       |       |      | 1.5  |      
|                         | Accounts receivable, due principally to
    allowances for doubtful accounts                                |                                |                                                 | 1.1  |       |       |      | 1.8  |      
|                         | Goodwill                                                                                                    |                                |                                                 | 31.3 |       |       |      |     |      
|                         | Accrued pension costs                                                                                       |                                |                                                 | 39.9 |       |       |      |     |      
|                         | Accrued liabilities and other                                                                               |                                |                                                 | 24.9 |       |       |      | 19.7 |      
|                         |                                                                                                             |                                |                                                 |      |       |       |      |     
|                         |                                                                                                             | Total deferred tax assets      |                                                 |      | 209.1 |       |      |      | 103.2 |     
|                         |                                                                                                             | Less valuation allowances      |                                                 |      | (36.1 | )     |      |      | (17.5 | )   
|                         |                                                                                                             |                                |                                                 |      |       |       |      |     
|                         |                                                                                                             |                                | Deferred tax assets net of valuation allowances |      |       | 173.0 |      |      |       | 85.7 | 
|Deferred tax liabilities |                                                                                                             |                                |                                                 |      |       |       |      |     
|                         | Property, plant and equipment, due principally to
    differences in depreciation methods                   |                                |                                                 | 9.4  |       |       |      | 10.2 |      
|                         | Inventories                                                                                                 |                                |                                                 | 6.5  |       |       |      | 9.8  |      
|                         | Goodwill                                                                                                    |                                |                                                 |     |       |       |      | 21.4 |      
|                         | Prepaid pension costs                                                                                       |                                |                                                 |     |       |       |      | 9.8  |      
|                         |                                                                                                             |                                |                                                 |      |       |       |      |     
|                         |                                                                                                             | Total deferred tax liabilities |                                                 |      | 15.9  |       |      |      | 51.2  |     
|                         |                                                                                                             |                                |                                                 |      |       |       |      |     
|Net deferred tax assets  |                                                                                                             | $                              | 157.1                                           |      |       | $     | 34.5 |     
|                         |                                                                                                             |                                |                                                 |      |       |       |      |     
|                        

Summarized in the following tables are the
companys earnings from continuing operations before income
taxes, its provision for income taxes, the components of the
provision for deferred income taxes and a reconciliation of the
U.S. statutory rate to the tax provision rate.



---

Earnings (Loss) Before Income Taxes





|              |  |      |       |      |  |      |       |   |  |   |      | 
|------------- |  | ---- | ----- | ---- |  | ---- | ----- | - |  | - | ---- | 
|(In millions) |  | 2002 |       | 2001 |  | 2000
|             
|             
|United States |  | $    | (25.6 | )    |  | $    | (39.9 | ) |  | $ | 46.6 | 
|Non-U.S.      |  |      | (11.0 | )    |  |      | (11.1 | ) |  |   | 21.6 | 
|              |  |      |       |      |  |      |       |   |  |   |      | 
|              |  | $    | (36.6 | )    |  | $    | (51.0 | ) |  | $ | 68.2 | 
|              |  |      |       |      |  |      |       |   |  |   |      | 
|             

As presented in the above table, earnings
(loss) from U.S. operations in 2002 includes
restructuring costs of $9.8 million, while earnings from
non-U.S. operations includes $4.1 million of such
costs. Earnings from U.S. and non-U.S. operations in 2001
include restructuring costs of $6.7 million and
$10.8 million, respectively. In 2000, earnings from
U.S. operations and non-U.S. operations include
restructuring costs of $1.0 million, and $.4 million,
respectively.



---

Provision (Benefit) for Income Taxes





|                             |                 |      |       |       |   |      |       |       |   |   |      |      |  
|---------------------------- | --------------- | ---- | ----- | ----- | - | ---- | ----- | ----- | - | - | ---- | ---- | -
|(In millions)                |                 | 2002 |       | 2001  |   | 2000
|                            
|                            
|Current provision (benefit)  |                 |      |       |       |   |      |       |       |   |   |      |     
|                             | United States   |      | $     | (4.4  | ) |      | $     | (10.5 | ) |   | $    | 7.8  |  
|                             | State and local |      |       | .2    |   |      |       | (.6   | ) |   |      | (5.4 | )
|                             | Non-U.S.        |      |       | 2.7   |   |      |       | 4.4   |   |   |      | 9.6  |  
|                             |                 |      |       |       |   |      |       |       |   |   |      |     
|                             |                 |      | (1.5  | )     |   |      | (6.7  | )     |   |   | 12.0 |     
|Deferred provision (benefit) |                 |      |       |       |   |      |       |       |   |   |      |     
|                             | United States   |      |       | (12.3 | ) |      |       | (10.4 | ) |   |      | 9.2  |  
|                             | Non-U.S.        |      |       | (4.4  | ) |      |       | (5.2  | ) |   |      | (1.8 | )
|                             |                 |      |       |       |   |      |       |       |   |   |      |     
|                             |                 |      | (16.7 | )     |   |      | (15.6 | )     |   |   | 7.4  |     
|                             |                 |      |       |       |   |      |       |       |   |   |      |     
|                             |                 | $    | (18.2 | )     |   | $    | (22.3 | )     |   | $ | 19.4 |     
|                             |                 |      |       |       |   |      |       |       |   |   |      |     
|                            



---

Components of the Provision (Benefit) for
Deferred Income Taxes





|                                                                                    |  |      |       |      |  |      |       |   |  |   |      |  
|----------------------------------------------------------------------------------- |  | ---- | ----- | ---- |  | ---- | ----- | - |  | - | ---- | -
|(In millions)                                                                       |  | 2002 |       | 2001 |  | 2000
|                                                                                   
|                                                                                   
|Change in valuation allowances                                                      |  | $    | 19.2  |      |  | $    | 6.4   |   |  | $ | (2.0 | )
|Change in deferred taxes related to operating
    loss and tax credit carryforwards |  |      | (31.7 | )    |  |      | (27.6 | ) |  |   | .5   |  
|Depreciation and amortization                                                       |  |      | 6.3   |      |  |      | 6.8   |   |  |   | 4.5  |  
|Inventories and accounts receivable                                                 |  |      | (4.4  | )    |  |      | (5.2  | ) |  |   | (.9  | )
|Accrued pension and other employee costs                                            |  |      | 3.1   |      |  |      | 4.4   |   |  |   | 1.4  |  
|Other                                                                               |  |      | (9.2  | )    |  |      | (.4   | ) |  |   | 3.9  |  
|                                                                                    |  |      |       |      |  |      |       |   |  |   |      |  
|                                                                                    |  | $    | (16.7 | )    |  | $    | (15.6 | ) |  | $ | 7.4  |  
|                                                                                    |  |      |       |      |  |      |       |   |  |   |      |  
|                                                                                   



---



##### Table of Contents



Notes to Consolidated Financial Statements




---

Reconciliation of the U.S. Statutory Rate to
the Tax Provision Rate





|                                   |                                                          |      |       |       |   |      |       |       |   |  |      |      |  
|---------------------------------- | -------------------------------------------------------- | ---- | ----- | ----- | - | ---- | ----- | ----- | - |  | ---- | ---- | -
|                                   |                                                          | 2002 |       | 2001  |   | 2000
|                                  
|                                  
|U.S. statutory tax rate            |                                                          |      | (35.0 | )%    |   |      | (35.0 | )%    |   |  | 35.0 | %   
|Increase (decrease) resulting from |                                                          |      |       |       |   |      |       |       |   |  |      |     
|                                   | Effect of changes in valuation allowances                |      |       | 31.8  |   |      |       | 12.5  |   |  |      | (2.8 | )
|                                   | Losses without current tax benefits                      |      |       | (.2   | ) |      |       | (.1   | ) |  |      |     |  
|                                   | Adjustment of tax reserves                               |      |       | (4.7  | ) |      |       | (17.4 | ) |  |      | .3   |  
|                                   | Statutory tax rate changes                               |      |       |      |   |      |       | 1.9   |   |  |      | 2.0  |  
|                                   | U.S. federal income tax credits                          |      |       |      |   |      |       |      |   |  |      | (1.0 | )
|                                   | Effect of operations outside the U.S.                    |      |       | (38.1 | ) |      |       | (2.1  | ) |  |      | .8   |  
|                                   | State and local income taxes, net of federal
    benefit |      |       | (2.1  | ) |      |       | (3.4  | ) |  |      | (5.0 | )
|                                   | Other                                                    |      |       | (1.4  | ) |      |       | (.1   | ) |  |      | (.9  | )
|                                   |                                                          |      |       |       |   |      |       |       |   |  |      |     
|                                   |                                                          |      | (49.7 | )%    |   |      | (43.7 | )%    |   |  | 28.4 | %   
|                                   |                                                          |      |       |       |   |      |       |       |   |  |      |     
|                                  

At year-end 2002 the company had a U.S. net
operating loss carryforward of approximately $12 million
that expires in 2022. In addition, certain of the companys
non-U.S. subsidiaries had net operating loss carryforwards
aggregating approximately $152 million, substantially all
of which have no expiration dates.

Undistributed earnings of foreign subsidiaries
which are intended to be indefinitely reinvested aggregated
$98 million at the end of 2002. No deferred income taxes
have been recorded with respect to this amount.

In 2002, the company received net tax refunds
totaling $14.2 million. Income taxes of $4.1 million
and $11.8 million were paid in 2001 and 2000, respectively.

Earnings Per Common Share

The following tables present the calculation of
earnings available to common shareholders and a reconciliation
of the shares used to calculate basic and diluted earnings per
common share.




---

Earnings Applicable to Common
Shareholders





|                                                      |  |      |        |      |  |      |       |   |  |   |      |  
|----------------------------------------------------- |  | ---- | ------ | ---- |  | ---- | ----- | - |  | - | ---- | -
|(In millions)                                         |  | 2002 |        | 2001 |  | 2000
|                                                     
|                                                     
|Net earnings (loss)                                   |  | $    | (222.9 | )    |  | $    | (35.7 | ) |  | $ | 72.3 |  
|Dividends on Preferred shares                         |  |      | (.2    | )    |  |      | (.2   | ) |  |   | (.2  | )
|                                                      |  |      |        |      |  |      |       |   |  |   |      |  
|Earnings (loss) applicable to common
    shareholders |  | $    | (223.1 | )    |  | $    | (35.9 | ) |  | $ | 72.1 |  
|                                                      |  |      |        |      |  |      |       |   |  |   |      |  
|                                                     



---

Reconciliation of Shares





|                                                           |  |      |        |      |  |      |        |  |  |  |        | 
|---------------------------------------------------------- |  | ---- | ------ | ---- |  | ---- | ------ |  |  |  | ------ | 
|(In thousands)                                             |  | 2002 |        | 2001 |  | 2000
|                                                          
|                                                          
|Weighted-average common shares outstanding                 |  |      | 33,482 |      |  |      | 33,222 |  |  |  | 34,935 | 
|Effect of dilutive stock options and restricted
    shares |  |      |       |      |  |      |       |  |  |  | 111    | 
|                                                           |  |      |        |      |  |      |        |  |  |  |        | 
|Weighted-average common shares assuming dilution           |  |      | 33,482 |      |  |      | 33,222 |  |  |  | 35,046 | 
|                                                           |  |      |        |      |  |      |        |  |  |  |        | 
|                                                          

In 2002 and 2001, weighted-average shares
assuming dilution excludes the effect of potentially dilutive
stock options and restricted shares because their inclusion
would result in a smaller loss per common share. Had they been
included, weighted-average shares assuming dilution would have
been 33,513 thousand in 2002 and 33,340 thousand in
2001. The weighted-average shares assuming dilution amount for
2000 presented above excludes restricted shares subject to
contingent vesting based on the attainment of specified earnings
objectives (see Stock-Based Compensation).

Receivables

The company maintains a receivables purchase
agreement with a third party financial institution. As accounts
receivable are generated from customer sales made by certain of
the companys consolidated U.S. subsidiaries, those
receivables are sold to Milacron Commercial Corp (MCC), a
wholly-owned consolidated subsidiary. MCC then sells, on a
revolving basis, an undivided percentage interest in designated
pools of accounts receivable to the financial institution. As
existing receivables are collected, MCC sells undivided
percentage interests in new eligible receivables. Accounts that
become 60 days past due are no longer eligible to be sold
and the company is at risk for credit losses for which it
maintains an allowance for doubtful accounts.


As of December 31, 2002, the company could
receive up to $50 million at a cost of funds linked to
commercial paper rates. The amount available to the company was
reduced to $45 million effective January 31, 2003 and
will be further reduced by $2.5 million effective with each
of the sales of the companys grinding wheels and round
metalcutting tools businesses. The receivables purchase
agreement expires in 2004. The related liquidity facility backed
by the financial institution and three other commercial banks
requires periodic renewals at their option. The liquidity
facility currently expires on December 31, 2003.



---



##### Table of Contents



Notes to Consolidated Financial Statements


At December 31, 2002, December 31, 2001
and December 31, 2000, the undivided interest in the
companys gross accounts receivable from continuing
operations that had been sold to the purchaser aggregated
$34.6 million, $36.3 million and $52.2 million,
respectively. The amounts sold are reflected as reductions of
accounts receivable in the Consolidated Balance Sheets as of the
respective dates. Increases and decreases in the amount sold are
reported as operating cash flows in the Consolidated Statements
of Cash Flows. Costs related to the sales were $1.2 million
in 2002, $2.2 million in 2001 and $3.5 million in 2000.
These amounts are included in other expense-net in the
Consolidated Statements of Earnings.

Certain of the companys subsidiaries also
sell accounts receivable on an ongoing basis. In some cases,
these sales are made with recourse, in which case appropriate
reserves for potential losses are recorded at the sale date. At
December 31, 2002 and December 31, 2001, the gross
amounts of accounts receivable that had been sold under these
arrangements totaled $5.0 million and $6.9 million,
respectively.

The company also periodically sells with recourse
notes receivable arising from customer purchases of plastics
processing machinery and, in a limited number of cases,
guarantees the repayment of all or a portion of notes receivable
from its customers to third party lenders. At December 31,
2002, the companys maximum exposure under these
arrangements totaled $12.4 million. In the event a customer
were to fail to repay a note, the company would generally regain
title to the machinery for later resale as used equipment. Costs
related to sales of notes receivable and guarantees have not
been material in the past.

Inventories

Inventories amounting to $57.9 million in
2002 and $64.1 million in 2001 are stated at LIFO cost. If
stated at FIFO cost, such inventories would be greater by
approximately $15.7 million in 2002 and $16.2 million
in 2001.


As presented in the Consolidated Balance Sheets,
inventories are net of reserves for obsolescence of
$24.2 million and $19.0 million in 2002 and 2001,
respectively.

Goodwill and Other Intangible Assets

The carrying value of goodwill related to
continuing operations totaled $143.3 million and
$353.2 million at December 31, 2002 and
December 31, 2001, respectively. The decrease resulted
principally from the cumulative effect impairment charge
recorded in connection with the adoption of Statements of
Financial Accounting Standards No. 142 (see Change in
Method of Accounting). The companys other intangible
assets, which are included in other noncurrent assets in the
Consolidated Balance Sheets, are not significant.


In addition to the impairment charge recorded as
a change in method of accounting, the company also recorded an
impairment charge of $1.0 million (with no tax benefit)
related to a small business that is included in the mold
technologies segment. This amount is included in other
expense-net in the Consolidated Statement of Earnings for 2002.
The amount of the charge was determined based on a comparison of
the present value of the business units projected cash
flows to the historical carrying value of its assets (including
goodwill) and liabilities.



---



##### Table of Contents



Notes to Consolidated Financial Statements


Changes in goodwill during the years ended
December 31, 2002 and December 31, 2001 are presented
in the following table.



---

Changes in Goodwill





|                                         |  |              |        |              |  |              |       |            |  |       |       |   |  |   |      |  |  |  |        |  
|---------------------------------------- |  | ------------ | ------ | ------------ |  | ------------ | ----- | ---------- |  | ----- | ----- | - |  | - | ---- |  |  |  | ------ | -
|                                        
|2002                                    
|                                        
|                                        
|                                         |  | Machinery    |        |             
|                                         |  | Technologies |        | Machinery    |  |             
|                                         |  | North        |        | Technologies |  | Mold         |       | Industrial |  |      
|(In millions)                            |  | America      |        | Europe       |  | Technologies |       | Fluids     |  | Total
|                                        
|                                        
|Balance at beginning of year             |  | $            | 129.6  |              |  | $            | 46.9  |            |  | $     | 166.6 |   |  | $ | 10.1 |  |  |  | $353.2 |  
|Goodwill acquired                        |  |              | .1     |              |  |              | .4    |            |  |       | 5.0   |   |  |   |     |  |  |  | 5.5    |  
|Impairment charges (a)                   |  |              | (112.4 | )            |  |              | (46.9 | )          |  |       | (60.1 | ) |  |   |     |  |  |  | (219.4 | )
|Foreign currency translation adjustments |  |              |       |              |  |              | .1    |            |  |       | 3.8   |   |  |   | .1   |  |  |  | 4.0    |  
|                                         |  |              |        |              |  |              |       |            |  |       |       |   |  |   |      |  |  |  |        |  
|Balance at end of year                   |  | $            | 17.3   |              |  | $            | .5    |            |  | $     | 115.3 |   |  | $ | 10.2 |  |  |  | $143.3 |  
|                                         |  |              |        |              |  |              |       |            |  |       |       |   |  |   |      |  |  |  |        |  




|                                         |  |              |       |              |  |              |      |            |  |       |       |   |  |   |      |   |  |   |       |  
|---------------------------------------- |  | ------------ | ----- | ------------ |  | ------------ | ---- | ---------- |  | ----- | ----- | - |  | - | ---- | - |  | - | ----- | -
|                                        
|2001                                    
|                                        
|                                        
|                                         |  | Machinery    |       |             
|                                         |  | Technologies |       | Machinery    |  |             
|                                         |  | North        |       | Technologies |  | Mold         |      | Industrial |  |      
|(In millions)                            |  | America      |       | Europe       |  | Technologies |      | Fluids     |  | Total
|                                        
|                                        
|Balance at beginning of year             |  | $            | 130.8 |              |  | $            | 48.4 |            |  | $     | 164.6 |   |  | $ | 10.6 |   |  | $ | 354.4 |  
|Goodwill acquired                        |  |              | 2.7   |              |  |              |     |            |  |       | 7.3   |   |  |   |     |   |  |   | 10.0  |  
|Amortization                             |  |              | (3.9  | )            |  |              | (1.4 | )          |  |       | (5.2  | ) |  |   | (.3  | ) |  |   | (10.8 | )
|Foreign currency translation adjustments |  |              |      |              |  |              | (.1  | )          |  |       | (.1   | ) |  |   | (.2  | ) |  |   | (.4   | )
|                                         |  |              |       |              |  |              |      |            |  |       |       |   |  |   |      |   |  |   |       |  
|Balance at end of year                   |  | $            | 129.6 |              |  | $            | 46.9 |            |  | $     | 166.6 |   |  | $ | 10.1 |   |  | $ | 353.2 |  
|                                         |  |              |       |              |  |              |      |            |  |       |       |   |  |   |      |   |  |   |       |  



---



|    |                                                                                                  
|--- | -------------------------------------------------------------------------------------------------
|(a) | Excludes an additional impairment charge of
    $29.6 million related to discontinued operations.



---



##### Table of Contents



Notes to Consolidated Financial Statements


The following table presents the effects on net
earnings (loss) and basic and diluted earnings
(loss) per common share of excluding expense for the
amortization of goodwill for all periods presented.



---

Goodwill Amortization





|                                                        |                                                         |      |        |       |   |      |       |       |   |   |      |      | 
|------------------------------------------------------- | ------------------------------------------------------- | ---- | ------ | ----- | - | ---- | ----- | ----- | - | - | ---- | ---- | 
|(In millions except                                     |                                                         |      |        |       |   |     
|per-share amounts)                                      |                                                         | 2002 |        | 2001  |   | 2000
|                                                       
|                                                       
|Net earnings (loss) as reported                         |                                                         | $    | (222.9 | )     |   | $    | (35.7 | )     |   | $ | 72.3 |     
|Goodwill amortization, net of income taxes (a)          |                                                         |      |       |       |   |      | 8.5   |       |   |   | 8.5  |     
|                                                        |                                                         |      |        |       |   |      |       |       |   |   |      |     
|Net earnings (loss) excluding goodwill
    amortization |                                                         | $    | (222.9 | )     |   | $    | (27.2 | )     |   | $ | 80.8 |     
|                                                        |                                                         |      |        |       |   |      |       |       |   |   |      |     
|Basic earnings (loss) per common share                  |                                                         |      |        |       |   |      |       |       |   |   |      |     
|                                                        | Net earnings (loss) as reported                         |      | $      | (6.67 | ) |      | $     | (1.08 | ) |   | $    | 2.06 | 
|                                                        | Goodwill amortization, net of income taxes              |      |        |      |   |      |       | .26   |   |   |      | .26  | 
|                                                        |                                                         |      |        |       |   |      |       |       |   |   |      |     
|                                                        | Net earnings (loss) excluding goodwill
    amortization |      | $      | (6.67 | ) |      | $     | (.82  | ) |   | $    | 2.32 | 
|                                                        |                                                         |      |        |       |   |      |       |       |   |   |      |     
|Diluted earnings (loss) per common share                |                                                         |      |        |       |   |      |       |       |   |   |      |     
|                                                        | Net earnings (loss) as reported                         |      | $      | (6.67 | ) |      | $     | (1.08 | ) |   | $    | 2.06 | 
|                                                        | Goodwill amortization, net of income taxes              |      |        |      |   |      |       | .26   |   |   |      | .26  | 
|                                                        |                                                         |      |        |       |   |      |       |       |   |   |      |     
|                                                        | Net earnings (loss) excluding goodwill
    amortization |      | $      | (6.67 | ) |      | $     | (.82  | ) |   | $    | 2.32 | 
|                                                        |                                                         |      |        |       |   |      |       |       |   |   |      |     
|                                                       



|    |                                                                                     
|--- | ------------------------------------------------------------------------------------
|(a) | In both 2001 and 2000, includes $1.5 million
    related to discontinued operations.

Property, Plant and Equipment

The components of property, plant and equipment,
including amounts related to capital leases, are shown in the
following table.




---

Property, Plant and Equipment 
Net





|                              |  |      |        |      |  |   |        |  
|----------------------------- |  | ---- | ------ | ---- |  | - | ------ | -
|(In millions)                 |  | 2002 |        | 2001
|                             
|                             
|Land                          |  | $    | 10.6   |      |  | $ | 10.2   |  
|Buildings                     |  |      | 112.6  |      |  |   | 102.9  |  
|Machinery and equipment       |  |      | 210.9  |      |  |   | 215.6  |  
|                              |  |      |        |      |  |   |        |  
|                              |  |      | 334.1  |      |  |   | 328.7  |  
|Less accumulated depreciation |  |      | (184.3 | )    |  |   | (162.9 | )
|                              |  |      |        |      |  |   |        |  
|                              |  | $    | 149.8  |      |  | $ | 165.8  |  
|                              |  |      |        |      |  |   |        |  
|                             

Liabilities

The components of accrued and other current
liabilities are shown in the following tables.




---

Accrued and Other Current
Liabilities





|                                                                |  |      |       |      |  |   |      | 
|--------------------------------------------------------------- |  | ---- | ----- | ---- |  | - | ---- | 
|(In millions)                                                   |  | 2002 |       | 2001
|                                                               
|                                                               
|Accrued salaries, wages and other compensation                  |  | $    | 22.6  |      |  | $ | 23.8 | 
|Reserves for post-closing adjustments and
    transaction costs |  |      | 43.3  |      |  |   |     | 
|Other accrued expenses                                          |  |      | 73.0  |      |  |   | 69.4 | 
|                                                                |  |      |       |      |  |   |      | 
|                                                                |  | $    | 138.9 |      |  | $ | 93.2 | 
|                                                                |  |      |       |      |  |   |      | 
|                                                               

The following table summarizes changes in the
companys warranty reserves. These reserves are included in
accrued and other current liabilities in the Consolidated
Balance Sheets.



---

Warranty Reserves





|                                         |  |      |      |      |  |   |      |  
|---------------------------------------- |  | ---- | ---- | ---- |  | - | ---- | -
|(In millions)                            |  | 2002 |      | 2001
|                                        
|                                        
|Balance at beginning of year             |  | $    | 6.0  |      |  | $ | 6.7  |  
|Accruals                                 |  |      | 3.6  |      |  |   | 2.2  |  
|Payments                                 |  |      | (3.2 | )    |  |   | (2.7 | )
|Warranty expirations                     |  |      | (.7  | )    |  |   | (.8  | )
|Reserves of acquired subsidiaries        |  |      |     |      |  |   | .7   |  
|Foreign currency translation adjustments |  |      | .2   |      |  |   | (.1  | )
|                                         |  |      |      |      |  |   |      |  
|Balance at end of year                   |  | $    | 5.9  |      |  | $ | 6.0  |  
|                                         |  |      |      |      |  |   |      |  
|                                        

The components of long-term accrued liabilities
are shown in the following table.



---

Long-Term Accrued Liabilities





|                                            |  |      |       |      |  |   |       | 
|------------------------------------------- |  | ---- | ----- | ---- |  | - | ----- | 
|(In millions)                               |  | 2002 |       | 2001
|                                           
|                                           
|Accrued pensions and other compensation     |  | $    | 39.2  |      |  | $ | 37.6  | 
|Minimum pension liability                   |  |      | 117.7 |      |  |   |      | 
|Accrued postretirement health care benefits |  |      | 33.3  |      |  |   | 35.0  | 
|Accrued and deferred income taxes           |  |      | 20.9  |      |  |   | 59.1  | 
|Other                                       |  |      | 33.0  |      |  |   | 32.9  | 
|                                            |  |      |       |      |  |   |       | 
|                                            |  | $    | 244.1 |      |  | $ | 164.6 | 
|                                            |  |      |       |      |  |   |       | 
|                                           



---



##### Table of Contents



Notes to Consolidated Financial Statements


Long-Term Debt

The components of long-term debt are shown in the
following table.




---

Long-Term Debt





|                          |  |      |       |      |  |   |       |  
|------------------------- |  | ---- | ----- | ---- |  | - | ----- | -
|(In millions)             |  | 2002 |       | 2001
|                         
|                         
|8 3/8% Notes due 2004     |  | $    | 115.0 |      |  | $ | 115.0 |  
|7 5/8% Eurobonds due 2005 |  |      | 118.1 |      |  |   | 103.5 |  
|Revolving credit facility |  |      |      |      |  |   | 274.3 |  
|Capital lease obligations |  |      | 17.5  |      |  |   | 6.1   |  
|Other                     |  |      | 5.9   |      |  |   | 6.1   |  
|                          |  |      |       |      |  |   |       |  
|                          |  |      | 256.5 |      |  |   | 505.0 |  
|Less current maturities   |  |      | (1.1  | )    |  |   | (3.9  | )
|                          |  |      |       |      |  |   |       |  
|                          |  | $    | 255.4 |      |  | $ | 501.1 |  
|                          |  |      |       |      |  |   |       |  
|                         

As of December 31, 2002, borrowings under
the companys revolving credit facility (see Lines of
Credit) totaled $42.0 million and are included in
borrowings under lines of credit in the Consolidated Balance
Sheet. At December 31, 2001, long-term debt included
$274.3 million of the total of $326.3 million borrowed
under the facility. The long-term amount at December 31,
2001 was included in long-term debt on the basis that it would
be outstanding for over one year were it not for the
divestitures of Widia, Werkö and Valenite (see Discontinued
Operations). In 2002, the company used approximately
$270 million of the net cash proceeds from the divestitures
of these businesses to repay bank debt which was primarily
classified as long-term at December 31, 2001.

The borrowings under the revolving credit
facility that were included in long-term debt at
December 31, 2001 were at variable interest rates that had
a weighted-average of 5.3%.

Except for the 8 3/8% Notes due 2004 and the
7 5/8% Eurobonds due 2005, the carrying amount of the
companys long-term debt approximates fair value. At
year-end 2002, the fair value of the 8 3/8% Notes due 2004
was approximately $92.0 million and the fair value of the
7 5/8% Eurobonds due 2005 was approximately
$80.3 million. These amounts are based on quoted prices as
of December 31, 2002.

The 7 5/8% Eurobonds due 2005 are a direct
obligation of Milacron Capital Holdings B.V., a wholly-owned
consolidated subsidiary, and have been guaranteed by the company.

Certain of the above long-term debt obligations
contain various restrictions and financial covenants. Amounts
borrowed under the revolving credit facility are collateralized.
Except for obligations under capital leases and certain non-U.S.
bank borrowings, none of the companys other indebtedness
is secured.

Total interest paid was $35.8 million in
2002, $40.5 million in 2001 and $33.1 million in 2000.
Of these amounts, interest related to continuing operations was
$25.1 million in 2002, $23.7 million in 2001 and
$14.5 million in 2000.

Maturities of long-term debt excluding capital
leases for the five years after 2002 are shown in the following
table.



---

Maturities of Long-Term Debt





|              |  |   |       | 
|------------- |  | - | ----- | 
|(In millions) |  |  
|             
|             
|2003          |  | $ | .3    | 
|2004          |  |   | 116.1 | 
|2005          |  |   | 121.4 | 
|2006          |  |   | .2    | 
|2007          |  |   |      | 
|             

Assets related to capital lease obligations
totaling $15.7 million at December 31, 2002 and
$6.7 million at December 31, 2001 are included in
property, plant and equipment-net in the Consolidated Balance
Sheets. Amortization of leased assets is included in
depreciation expense and interest on lease obligations is
included in interest expense. Future minimum payments for
capital leases during the next five years and in the aggregate
thereafter are shown in the following table.



---

Capital Lease Payments





|                             |  |   |      |  
|---------------------------- |  | - | ---- | -
|(In millions)                |  |  
|                            
|                            
|2003                         |  | $ | 1.8  |  
|2004                         |  |   | 2.4  |  
|2005                         |  |   | 2.6  |  
|2006                         |  |   | 2.5  |  
|2007                         |  |   | 2.5  |  
|After 2007                   |  |   | 11.0 |  
|                             |  |   |      |  
|Total capital lease payments |  |   | 22.8 |  
|Less interest component (a)  |  |   | (5.3 | )
|                             |  |   |      |  
|Capital lease obligations    |  | $ | 17.5 |  
|                             |  |   |      |  
|                            



|    |                                          
|--- | -----------------------------------------
|(a) | Includes $1.0 million applicable to 2003.

The company also leases certain equipment and
facilities under operating leases, some of which include varying
renewal and purchase options. Future minimum rental payments
applicable to noncancellable operating leases during



---



##### Table of Contents



Notes to Consolidated Financial Statements


the next five years and in the aggregate
thereafter are shown in the following table.



---

Rental Payments





|              |  |   |      | 
|------------- |  | - | ---- | 
|(In millions) |  |  
|             
|             
|2003          |  | $ | 16.6 | 
|2004          |  |   | 12.9 | 
|2005          |  |   | 10.4 | 
|2006          |  |   | 7.5  | 
|2007          |  |   | 5.1  | 
|After 2007    |  |   | 5.0  | 
|             

Rent expense related to continuing operations was
$17.5 million, $11.2 million and $12.9 million in
2002, 2001 and 2000, respectively.

Lines of Credit

At December 31, 2002, the company had lines
of credit with various U.S. and non-U.S. banks totaling
approximately $143 million, including a $106 million
committed revolving credit facility that expires on
March 31, 2004. These credit facilities support the
discounting of receivables, letters of credit and leases in
addition to providing borrowings under varying terms. At
December 31, 2002, $54 million was drawn against the
revolving credit facility including outstanding letters of
credit of $12 million. The revolving credit facility, which
includes certain financial covenants, limits the payment of cash
dividends and imposes certain restrictions on share repurchases,
capital expenditures and cash acquisitions. The covenants
include those which (i) require the company to achieve
specified minimum levels of quarterly cumulative EBITDA
(earnings before interest, taxes, depreciation and amortization)
adjusted to exclude restructuring costs and certain other items
as specified in the agreement and (ii) limit the incurrence
of new debt. The company was in compliance with these covenants
at December 31, 2002. The company has pledged as collateral
for borrowings under the facility the capital stock of its
principal domestic subsidiaries as well as the inventories of
the company and all of its domestic subsidiaries and certain
other domestic tangible and intangible assets.


Effective December 30, 2002, the revolving
credit facility was amended to, among other things, reduce the
commitment amount from $110 million to $106 million in
conjunction with a reorganization of the companys round
metalcutting tools business in anticipation of its expected sale.

At December 31, 2002, the company had the
ability to borrow an additional $31 million for general
corporate purposes under the revolving credit facility. The
company could also borrow approximately $12 million under
existing lines of credit other than the facility. The facility
also allows over $72 million of additional indebtedness
from other sources.

Effective February 11, 2003, the revolving
credit facility was amended to, among other things, reduce the
facility to $85 million reflecting a reduction in projected
cash requirements for 2003. In addition to a reduction in the
four-quarter cumulative trailing EBITDA covenant and suspension
of the leverage test for all of 2003, the agreement requires
further permanent reductions in the facility on June 30,
2003, September 30, 2003 and December 15, 2003 to
$75 million, $65 million and $55 million,
respectively. The maturity date of the facility was changed from
December 31, 2004 to March 15, 2004.

The weighted-average interest rate on borrowings
under lines of credit outstanding was 5.2% as of
December 31, 2002 and 5.4% as of December 31, 2001.

Shareholders Equity

In February, 2000, the companys Board of
Directors approved a share repurchase program authorizing the
repurchase of up to four million common shares on the open
market, of which 3,272,800 were repurchased during 2000. An
additional 200,000 shares were repurchased in the first
quarter of 2001 in connection with this authorization. Under the
terms of the amended revolving credit facility (see Lines of
Credit) the company agreed that no additional repurchases will
be made. In total, the company purchased 3,349,938 treasury
shares in 2000 at a cost of $48.7 million. An additional
43,516 shares were purchased on the open market for
management incentive and employee benefit programs. A total of
78,000 treasury shares were reissued in 2000 in connection with
restricted share grants.


In 2001, the company repurchased a total of
260,000 treasury shares on the open market at a cost of
$5.2 million. An additional 109,440 shares were
repurchased in connection with stock option exercises,
restricted stock grants and employee benefit programs. Stock
option exercises also resulted in the issuance of 28,500
previously unissued shares. A total of 426,543 treasury shares
were reissued in 2001 in connection with management incentive
and employee benefit programs.

In 2002, a total of 221,250 treasury shares were
reissued in connection with grants of restricted shares and
stock option exercises. An additional 147,473 shares were
reissued for contributions to employee benefit plans and for the
purchase of technology rights from a German manufacturer of
plastics extrusion machinery. These reductions in treasury
shares were partially offset by the cancellation of 81,448
restricted shares that were added to the treasury share balance
in lieu of their cancellation.



---



##### Table of Contents



Notes to Consolidated Financial Statements




---

Shareholders Equity 
Preferred and Common Shares





|                                                                                                                                            |  |      |      |      |  |  |      | 
|------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ---- | ---- |  |  | ---- | 
|(In millions, except per-share                                                                                                              |  |      |      |     
|amounts)                                                                                                                                    |  | 2002 |      | 2001
|                                                                                                                                           
|                                                                                                                                           
|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, 2002: 33,753,781
    shares; 2001: 33,467,506 shares |  |      | 33.8 |      |  |  | 33.5 | 
|                                                                                                                                           

As presented in the previous table, common shares
outstanding are net of treasury shares of 5,853,307 in 2002 and
6,140,582 in 2001.

The company has authorized 10 million serial
preference shares with $1 par value. None of these shares have
been issued.

Holders of company common shares have one vote
per share until they have held their shares at least 36
consecutive months, after which they are entitled to ten votes
per share.

The company has a stockholder rights plan which
provides for the issuance of one nonvoting preferred stock right
for each common share issued as of February 5, 1999 or
issued subsequent thereto. Each right, if activated, will
entitle the holder to purchase 1/1000 of a share of
Series A Participating Cumulative Preferred Stock at an
initial exercise price of $70.00. Each 1/1000 of a preferred
share will be entitled to participate in dividends and vote on
an equivalent basis with one whole common share. Initially, the
rights are not exercisable. The rights will become exercisable
if any person or group acquires, or makes a tender offer for,
more than 15% of the companys outstanding common shares.
In the event that any party should acquire more than 15% of the
companys common shares without the approval of the Board
of Directors, the rights entitle all other shareholders to
purchase the preferred shares at a substantial discount. In
addition, if a merger occurs with any potential acquirer owning
more than 15% of the shares outstanding, holders of rights other
than the potential acquirer will be able to purchase the
acquirers common stock at a substantial discount. The
rights plan expires in February, 2009.

Comprehensive Income (Loss)

Total comprehensive income or loss represents the
net change in shareholders equity during a period from
sources other than transactions with shareholders and, as such,
includes net earnings or loss for the period. The components of
total comprehensive income (loss) are as follows:




---

Comprehensive Income (Loss)





|                                                                                             |  |      |        |      |  |      |       |   |  |   |       |  
|-------------------------------------------------------------------------------------------- |  | ---- | ------ | ---- |  | ---- | ----- | - |  | - | ----- | -
|(In millions)                                                                                |  | 2002 |        | 2001 |  | 2000
|                                                                                            
|                                                                                            
|Net earnings (loss)                                                                          |  | $    | (222.9 | )    |  | $    | (35.7 | ) |  | $ | 72.3  |  
|Foreign currency translation adjustments                                                     |  |      | 6.2    |      |  |      | (1.3  | ) |  |   | (14.3 | )
|Reclassification of foreign currency translation
    adjustments to net gain on divestitures |  |      | 10.6   |      |  |      |      |   |  |   |      |  
|Minimum pension liability adjustment(a)                                                      |  |      | (95.4  | )    |  |      |      |   |  |   |      |  
|Cumulative effect of change in method of
    accounting                                      |  |      |       |      |  |      | (.3   | ) |  |   |      |  
|Change in fair value of foreign currency exchange
    contracts                              |  |      | (.2    | )    |  |      | .3    |   |  |   |      |  
|                                                                                             |  |      |        |      |  |      |       |   |  |   |       |  
|Total comprehensive income (loss)                                                            |  | $    | (301.7 | )    |  | $    | (37.0 | ) |  | $ | 58.0  |  
|                                                                                             |  |      |        |      |  |      |       |   |  |   |       |  
|                                                                                            



|    |                                                     
|--- | ----------------------------------------------------
|(a) | Includes an income tax benefit of
    $51.8 million.

The components of accumulated other comprehensive
loss are shown in the following table.



---

Accumulated Other Comprehensive Loss





|                                                  |  |      |        |      |  |   |       |  
|------------------------------------------------- |  | ---- | ------ | ---- |  | - | ----- | -
|(In millions)                                     |  | 2002 |        | 2001
|                                                 
|                                                 
|Foreign currency translation adjustments          |  | $    | (34.6  | )    |  | $ | (51.0 | )
|Minimum pension liability adjustment              |  |      | (95.4  | )    |  |   |      |  
|Fair value of foreign currency exchange contracts |  |      | .2     |      |  |   |      |  
|                                                  |  |      |        |      |  |   |       |  
|                                                  |  | $    | (129.8 | )    |  | $ | (51.0 | )
|                                                  |  |      |        |      |  |   |       |  
|                                                 

Contingencies

The company is involved in remedial
investigations and actions at various locations, including
former plant facilities, and EPA Superfund sites where the
company and other companies have been designated as potentially
responsible parties. The company accrues remediation costs, on
an undiscounted basis, when it is probable that a liability has
been incurred and the amount of the liability can be reasonably
estimated. Accruals for estimated losses from environmental
remediation obligations are generally recognized no later than
the completion of a remediation feasibility study. The accruals
are adjusted as further information becomes available or
circumstances change. Environmental costs have not been material
in the past.


Various lawsuits arising during the normal course
of business are pending against the company and its consolidated
subsidiaries. In several such lawsuits, multiple plain-



---



##### Table of Contents



Notes to Consolidated Financial Statements


tiffs allege personal injury involving
metalworking fluids supplied and/or managed by the company, some
of which seek substantial dollar amounts. The company is
vigorously defending these claims and believes it has reserves
and insurance coverage sufficient to cover potential exposures.

While, in the opinion of management, the
liability resulting from these matters will not have a
significant effect on the companys consolidated financial
position or results of operations, the outcome of individual
matters cannot be predicted with reasonable certainty at this
time.

Foreign Exchange Contracts

At December 31, 2002, the company had
outstanding forward contracts totaling $5.0 million, which
generally mature in periods of six months or less. These
contracts require the company and its subsidiaries to exchange
currencies on the maturity dates at exchange rates agreed upon
at inception. Substantially all of these contracts have been
designated as cash flow hedges with any gains or losses
resulting from changes in their fair value being recorded as a
component of other comprehensive income or loss pending
completion of the transaction being hedged.


Stock-Based Compensation

The 1997 Long-Term Incentive Plan (1997 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.


Under the 1997 Plan, non-qualified and incentive
stock options are granted at market value, vest in increments
over a four or five year period, and expire not more than ten
years subsequent to the award. Of the 4,617,950 stock options
outstanding at year-end 2002, 362,000 are incentive stock
options.

Summaries of stock options granted under the 1997
Plan and prior plans are presented in the following tables.



---

Stock Option Activity





|                             |           |        |           |           |   |   |       |       | 
|---------------------------- | --------- | ------ | --------- | --------- | - | - | ----- | ----- | 
|                             |           |        |           | Weighted-
|                             |           |        |           | Average  
|                             |           |        |           | Exercise 
|                             |           | Shares |           | Price    
|                            
|                            
|Outstanding at year-end 1999 |           |        | 3,750,279 |           |   | $ | 22.02 |      
|                             | Granted   |        |           | 717,800   |   |   |       | 13.51 | 
|                             | Exercised |        |           | (28,500   | ) |   |       | 9.50  | 
|                             | Cancelled |        |           | (358,304  | ) |   |       | 20.71 | 
|                             |           |        |           |           |   |   |       |      
|Outstanding at year-end 2000 |           |        | 4,081,275 |           |   |   | 20.65 |      
|                             | Granted   |        |           | 603,000   |   |   |       | 19.79 | 
|                             | Exercised |        |           | (311,350  | ) |   |       | 13.26 | 
|                             | Cancelled |        |           | (158,150  | ) |   |       | 20.91 | 
|                             |           |        |           |           |   |   |       |      
|Outstanding at year-end 2001 |           |        | 4,214,775 |           |   |   | 21.06 |      
|                             | Granted   |        |           | 829,500   |   |   |       | 13.19 | 
|                             | Exercised |        |           | (29,250   | ) |   |       | 13.97 | 
|                             | Cancelled |        |           | (397,075  | ) |   |       | 17.15 | 
|                             |           |        |           |           |   |   |       |      
|Outstanding at year-end 2002 |           |        | 4,617,950 |           |   |   | 20.03 |      
|                             |           |        |           |           |   |   |       |      
|                            



---

Exercisable Stock Options at
Year-End





|     |  |         |           | 
|---- |  | ------- | --------- | 
|     |  | Stock  
|     |  | Options
|    
|    
|2000 |  |         | 2,134,700 | 
|2001 |  |         | 2,261,538 | 
|2002 |  |         | 2,653,163 | 
|    



---

Shares Available for Future Grant at
Year-End





|     |  |        |           | 
|---- |  | ------ | --------- | 
|     |  | Shares
|    
|    
|2000 |  |        | 2,130,595 | 
|2001 |  |        | 1,658,721 | 
|2002 |  |        | 969,524   | 
|    

The following tables summarize information about
stock options outstanding at December 31, 2002.



---

Components of Outstanding Stock
Options





|         |             |             |  |           |           |           |  |  |     |  |  |   |       | 
|-------- | ----------- | ----------- |  | --------- | --------- | --------- |  |  | --- |  |  | - | ----- | 
|         |             |             |  | Average   |           | Weighted-
|Range of |             |             |  | Remaining |           | Average  
|Exercise |             | Number      |  | Contract  |           | Exercise 
|Prices   |             | Outstanding |  | Life      |           | Price    
|        
|        
|$        | 13.00-19.56 |             |  |           | 1,507,050 |           |  |  | 5.5 |  |  | $ | 13.47 | 
|         | 20.00-27.91 |             |  |           | 3,110,900 |           |  |  | 4.3 |  |  |   | 23.21 | 
|         |             |             |  |           |           |           |  |  |     |  |  |   |       | 
|         | 13.00-27.91 |             |  |           | 4,617,950 |           |  |  | 4.7 |  |  |   | 20.03 | 
|         |             |             |  |           |           |           |  |  |     |  |  |   |       | 
|        



---



##### Table of Contents



Notes to Consolidated Financial Statements




---

Components of Exercisable Stock
Options





|         |             |             |  |           |           |  |  |   |       | 
|-------- | ----------- | ----------- |  | --------- | --------- |  |  | - | ----- | 
|         |             |             |  | Weighted-
|Range of |             |             |  | Average  
|Exercise |             | Number      |  | Exercise 
|Prices   |             | Exercisable |  | Price    
|        
|        
|$        | 13.00-19.56 |             |  |           | 319,013   |  |  | $ | 16.39 | 
|         | 20.00-27.91 |             |  |           | 2,334,150 |  |  |   | 23.83 | 
|         |             |             |  |           |           |  |  |   |       | 
|         | 13.00-27.91 |             |  |           | 2,653,163 |  |  |   | 22.94 | 
|         |             |             |  |           |           |  |  |   |       | 
|        

As discussed more fully in the Stock-Based
Compensation section of the note captioned Summary of
Significant Accounting Policies, the company does not
expense stock options. For purposes of determining the pro forma
amounts presented in that section, the weighted-average
per-share fair value of stock options granted during 2002, 2001
and 2000 was $5.35, $7.61 and $4.15, respectively. The fair
values of the options were calculated as of the grant dates
using the Black-Scholes option pricing model and the following
assumptions:



---

Fair Value Assumptions





|                                      |  |      |           |      |  |      |           |   |  |  |           |  
|------------------------------------- |  | ---- | --------- | ---- |  | ---- | --------- | - |  |  | --------- | -
|                                      |  | 2002 |           | 2001 |  | 2000
|                                     
|                                     
|Dividend yield                        |  |      | .3-.7     | %    |  |      | .8-1.2    | % |  |  | 3.7       | %
|Expected volatility                   |  |      | 46-50     | %    |  |      | 39-50     | % |  |  | 38-48     | %
|Risk free interest rate at grant date |  |      | 2.98-4.28 | %    |  |      | 4.74-5.15 | % |  |  | 6.61-6.63 | %
|Expected life in years                |  |      | 2-5       |      |  |      | 2-7       |   |  |  | 2-7       |  
|                                     

Under the 1997 Plan, performance awards are
granted in the form of restricted stock awards which vest based
on the achievement of specified earnings objectives over a
three-year period. The 1997 Plan also permits the granting of
other restricted stock awards, which also vest three years from
the date of grant. During the restriction period, restricted
stock awards entitle the holder to all the rights of a holder of
common shares, including dividend and voting rights. Unvested
shares are restricted as to disposition and subject to
forfeiture under certain circumstances. Expense for restricted
shares, including performance awards, was $1.0 million in
2002. In 2001, reversals of prior years accruals for
performance grants of $.3 million offset charges to expense
totaling $.3 million for other restricted stock awards. The
amount of compensation expense recognized in 2000 for restricted
stock, including performance awards, was $.5 million.
Restricted stock award activity is as follows:



---

Restricted Stock Activity





|                                               |  |      |         |      |  |      |        |  |  |   |        | 
|---------------------------------------------- |  | ---- | ------- | ---- |  | ---- | ------ |  |  | - | ------ | 
|                                               |  | 2002 |         | 2001 |  | 2000
|                                              
|                                              
|Restricted stock granted                       |  |      | 192,000 |      |  |      | 90,500 |  |  |   | 86,000 | 
|                                               |  |      |         |      |  |      |        |  |  |   |        | 
|Weighted-average market value on date of grant |  | $    | 13.09   |      |  | $    | 19.21  |  |  | $ | 13.13  | 
|                                               |  |      |         |      |  |      |        |  |  |   |        | 
|                                              

Restricted shares awarded as performance awards
subject to contingent vesting totaled 46,000 in 2002, 51,000 in
2001 and 68,000 in 2000. Outstanding restricted shares subject
to contingent vesting totaled 141,795, 159,493 and 173,075 at
year-end 2002, 2001 and 2000, respectively. The amount
outstanding at year-end 2002 includes 52,519 shares that will be
cancelled in February, 2003 because the basic earnings per
common share objective for 2002 was not attained. In 2001 and
2000, restricted shares subject to contingent vesting of 52,806
and 42,345, respectively, were also cancelled.

Cancellations of restricted stock, including
shares cancelled to pay employee withholding taxes at maturity,
totaled 82,448 in 2002, 73,133 in 2001 and 190,434 in 2000.

Issuances of shares related to performance awards
earned under a prior plan and to deferred directors fees
totaled 1,003 in 2002, 18,525 in 2001 and 7,016 in 2000.

Organization

Effective December 31, 2002, the company
elected to revise the internal and external financial reporting
of operating results to include four segments: machinery
technologies  North America, machinery
technologies  Europe, mold technologies and
industrial fluids. The change was made to reflect recent changes
in the companys management and organizational structure
and as a result of the 2002 divestitures of the companys
Valenite, Widia and Werkö metalcutting tools businesses and
the planned divestitures of its round metalcutting tools and
grinding wheels businesses (see Discontinued Operations). The
company has operations in the United States, Canada and Mexico
and other countries located principally in Western Europe.


The companys new segments conform to its
internal management structure and are based on the nature of the
products they produce and the principal markets they serve. The
machinery technologies  North America segment
produces injection molding machines and extrusion and blow
molding systems for distribution primarily in North America at
the companys principal plastics machinery plant located
near Cincinnati, Ohio. The segment also sells specialty and
peripheral equipment for plastics processing as well as
replacement parts for its machinery products. The



---



##### Table of Contents



Notes to Consolidated Financial Statements


machinery technologies  Europe segment
manufactures injection molding machines and blow molding systems
for distribution in Europe and Asia at its principal
manufacturing plants located in Germany and Italy. The mold
technologies segment has its major operations in North America
and Europe, produces mold bases and components for injection
molding and distributes maintenance, repair and operating
supplies for all types to plastics processors. The industrial
fluids segment is also international in scope with major
blending facilities in the U.S. and The Netherlands and
manufactures and sells coolants, lubricants, corrosion
inhibitors and cleaning fluids used in metalworking.

The markets for all four segments tend to be
cyclical in nature, especially in the two machinery segments
where demand is heavily influenced by consumer confidence and
spending levels, interest rates and general capital spending
patterns, particularly in the automotive, packaging and
construction industries. The markets for the mold technologies
and industrial fluids are somewhat less cyclical and are
influenced by industrial capacity utilization and consumer
spending.

Financial data for the past three years for the
companys business segments are shown in the following
tables. The accounting policies followed by the segments are
identical to those used in the preparation of the companys
consolidated financial statements. The effects of intersegment
transactions have been eliminated. The company incurs costs and
expenses and holds certain assets at the corporate level which
relate to its business as a whole. Certain of these amounts have
been allocated to the companys business segments by
various methods, largely on the basis of usage. Management
believes that all such allocations are reasonable.



---

Total Sales by Segment





|                      |                         |                             |       |       |       |      |       |       |       |   |       |       |       | 
|--------------------- | ----------------------- | --------------------------- | ----- | ----- | ----- | ---- | ----- | ----- | ----- | - | ----- | ----- | ----- | 
|(In millions)         |                         | 2002                        |       | 2001  |       | 2000
|                     
|                     
|Plastics technologies |                         |                             |       |       |       |      |       |       |       |   |       |      
|                      | Machinery technologies |                             |       |       |       |      |       |       |       |   |       |       |      
|                      |                         | North America               |       | $     | 313.6 |      |       | $     | 361.7 |   |       | $     | 550.0 | 
|                      | Machinery technologies |                             |       |       |       |      |       |       |       |   |       |       |      
|                      |                         | Europe                      |       |       | 117.4 |      |       |       | 122.6 |   |       |       | 145.2 | 
|                      | Mold technologies       |                             |       | 174.7 |       |      |       | 184.6 |       |   |       | 190.3 |      
|                      | Eliminations            |                             |       | (8.5  | )     |      |       | (6.5  | )     |   |       | (11.7 | )    
|                      |                         |                             |       |       |       |      |       |       |       |   |       |      
|                      |                         | Total plastics technologies |       |       | 597.2 |      |       |       | 662.4 |   |       |       | 873.8 | 
|Industrial fluids     |                         |                             | 96.0  |       |       |      | 92.8  |       |       |   | 100.7 |      
|                      |                         |                             |       |       |       |      |       |       |       |   |       |      
|Total sales           |                         | $                           | 693.2 |       |       | $    | 755.2 |       |       | $ | 974.5 |      
|                      |                         |                             |       |       |       |      |       |       |       |   |       |      
|                     



---

Customer Sales by Segment





|                      |                         |                             |       |       |       |      |       |       |       |   |       |       |       | 
|--------------------- | ----------------------- | --------------------------- | ----- | ----- | ----- | ---- | ----- | ----- | ----- | - | ----- | ----- | ----- | 
|(In millions)         |                         | 2002                        |       | 2001  |       | 2000
|                     
|                     
|Plastics technologies |                         |                             |       |       |       |      |       |       |       |   |       |      
|                      | Machinery technologies |                             |       |       |       |      |       |       |       |   |       |       |      
|                      |                         | North America               |       | $     | 312.5 |      |       | $     | 359.3 |   |       | $     | 547.2 | 
|                      | Machinery technologies |                             |       |       |       |      |       |       |       |   |       |       |      
|                      |                         | Europe                      |       |       | 110.0 |      |       |       | 118.6 |   |       |       | 136.4 | 
|                      | Mold technologies       |                             |       | 174.7 |       |      |       | 184.5 |       |   |       | 190.2 |      
|                      |                         |                             |       |       |       |      |       |       |       |   |       |      
|                      |                         | Total plastics technologies |       |       | 597.2 |      |       |       | 662.4 |   |       |       | 873.8 | 
|Industrial fluids     |                         |                             | 96.0  |       |       |      | 92.8  |       |       |   | 100.7 |      
|                      |                         |                             |       |       |       |      |       |       |       |   |       |      
|Total sales           |                         | $                           | 693.2 |       |       | $    | 755.2 |       |       | $ | 974.5 |      
|                      |                         |                             |       |       |       |      |       |       |       |   |       |      
|                     



---



##### Table of Contents



Notes to Consolidated Financial Statements




---

Operating Information by Segment





|                                    |                                     |                         |                             |       |       |       |         |       |       |       |         |       |       |       | 
|----------------------------------- | ----------------------------------- | ----------------------- | --------------------------- | ----- | ----- | ----- | ------- | ----- | ----- | ----- | ------- | ----- | ----- | ----- | 
|(In millions)                       |                                     | 2002                    |                             | 2001  |       | 2000 
|                                   
|                                   
|Operating profit (loss)             |                                     |                         |                             |       |       |       |         |       |       |       |         |      
|                                    | Plastics technologies               |                         |                             |       |       |       |         |       |       |       |         |       |      
|                                    |                                     | Machinery technologies |                             |       |       |       |         |       |       |       |         |       |       |      
|                                    |                                     |                         | North America (a)           |       | $     | 8.0   |         |       | $     | (13.5 | )       |       | $     | 67.2  | 
|                                    |                                     | Machinery technologies |                             |       |       |       |         |       |       |       |         |       |       |      
|                                    |                                     |                         | Europe                      |       |       | (8.1  | )       |       |       | (9.1  | )       |       |       | 2.2   | 
|                                    |                                     | Mold technologies       |                             |       | 5.3   |       |         |       | 12.1  |       |         |       | 27.2  |      
|                                    |                                     |                         |                             |       |       |       |         |       |       |       |         |      
|                                    |                                     |                         | Total plastics technologies |       |       | 5.2   |         |       |       | (10.5 | )       |       |       | 96.6  | 
|                                    | Industrial fluids                   |                         |                             | 14.4  |       |       |         | 18.1  |       |       |         | 17.5  |      
|                                    | Restructuring costs (b)             |                         |                             | (13.9 | )     |       |         | (17.5 | )     |       |         | (1.4  | )    
|                                    | Corporate expenses (c)              |                         |                             | (15.4 | )     |       |         | (14.7 | )     |       |         | (18.8 | )    
|                                    | Other unallocated expenses (d)      |                         |                             | (3.6  | )     |       |         | (3.9  | )     |       |         | (4.8  | )    
|                                    |                                     |                         |                             |       |       |       |         |       |       |       |         |      
|Operating earnings
    (loss) (e)   |                                     |                         | (13.3                       | )     |       |       | (28.5   | )     |       |       | 89.1    |      
|Interest expense-net                |                                     |                         | (23.3                       | )     |       |       | (22.5   | )     |       |       | (20.9   | )    
|                                    |                                     |                         |                             |       |       |       |         |       |       |       |         |      
|Earnings (loss) before income taxes |                                     | $                       | (36.6                       | )     |       | $     | (51.0   | )     |       | $     | 68.2    |      
|                                    |                                     |                         |                             |       |       |       |         |       |       |       |         |      
|                                   
|Segment assets (f)                  |                                     |                         |                             |       |       |       |         |       |       |       |         |      
|                                    | Plastics technologies               |                         |                             |       |       |       |         |       |       |       |         |       |      
|                                    |                                     | Machinery technologies |                             |       |       |       |         |       |       |       |         |       |       |      
|                                    |                                     |                         | North America               |       | $     | 187.4 |         |       | $     | 220.5 |         |       | $     | 310.7 | 
|                                    |                                     | Machinery technologies |                             |       |       |       |         |       |       |       |         |       |       |      
|                                    |                                     |                         | Europe                      |       |       | 97.4  |         |       |       | 257.9 |         |       |       | 267.2 | 
|                                    |                                     | Mold technologies       |                             |       | 227.4 |       |         |       | 293.6 |       |         |       | 272.4 |      
|                                    |                                     | Other                   |                             |       | 1.0   |       |         |       | 1.9   |       |         |       | .5    |      
|                                    |                                     |                         |                             |       |       |       |         |       |       |       |         |      
|                                    |                                     |                         | Total plastics technologies |       |       | 513.2 |         |       |       | 773.9 |         |       |       | 850.8 | 
|                                    | Industrial fluids                   |                         |                             | 48.0  |       |       |         | 46.1  |       |       |         | 54.9  |      
|                                    | Cash and cash equivalents           |                         |                             | 122.3 |       |       |         | 90.1  |       |       |         | 33.8  |      
|                                    | Receivables sold                    |                         |                             | (34.6 | )     |       |         | (36.3 | )     |       |         | (52.2 | )    
|                                    | Deferred income taxes               |                         |                             | 173.0 |       |       |         | 85.7  |       |       |         | 29.3  |      
|                                    | Assets of discontinued operations   |                         |                             | 16.0  |       |       |         | 455.7 |       |       |         | 473.7 |      
|                                    | Unallocated corporate and other (g) |                         |                             | 77.8  |       |       |         | 97.1  |       |       |         | 74.6  |      
|                                    |                                     |                         |                             |       |       |       |         |       |       |       |         |      
|Total assets                        |                                     | $                       | 915.7                       |       |       | $     | 1,512.3 |       |       | $     | 1,464.9 |      
|                                    |                                     |                         |                             |       |       |       |         |       |       |       |         |      
|                                   



---

Operating Information by Segment





|                                        |                       |                         |                             |      |     |      |      |     |      |      |      |     |      |      | 
|--------------------------------------- | --------------------- | ----------------------- | --------------------------- | ---- | --- | ---- | ---- | --- | ---- | ---- | ---- | --- | ---- | ---- | 
|(In millions)                           |                       | 2002                    |                             | 2001 |     | 2000
|                                       
|                                       
|Capital expenditures                    |                       |                         |                             |      |     |      |      |     |      |      |      |    
|                                        | Plastics technologies |                         |                             |      |     |      |      |     |      |      |      |     |     
|                                        |                       | Machinery technologies |                             |      |     |      |      |     |      |      |      |     |      |     
|                                        |                       |                         | North America               |      | $   | 2.6  |      |     | $    | 4.3  |      |     | $    | 8.3  | 
|                                        |                       | Machinery technologies |                             |      |     |      |      |     |      |      |      |     |      |     
|                                        |                       |                         | Europe                      |      |     | .3   |      |     |      | 5.7  |      |     |      | 8.7  | 
|                                        |                       | Mold technologies       |                             |      | 1.7 |      |      |     | 2.4  |      |      |     | 5.1  |     
|                                        |                       |                         |                             |      |     |      |      |     |      |      |      |    
|                                        |                       |                         | Total plastics technologies |      |     | 4.6  |      |     |      | 12.4 |      |     |      | 22.1 | 
|                                        | Industrial fluids     |                         |                             | 1.5  |     |      |      | .9  |      |      |      | 3.2 |     
|                                        | Unallocated corporate |                         |                             | .1   |     |      |      | .2  |      |      |      | 1.2 |     
|                                        |                       |                         |                             |      |     |      |      |     |      |      |      |    
|Total capital expenditures              |                       | $                       | 6.2                         |      |     | $    | 13.5 |     |      | $    | 26.5 |    
|                                        |                       |                         |                             |      |     |      |      |     |      |      |      |    
|                                       
|Depreciation and amortization           |                       |                         |                             |      |     |      |      |     |      |      |      |    
|                                        | Plastics technologies |                         |                             |      |     |      |      |     |      |      |      |     |     
|                                        |                       | Machinery technologies |                             |      |     |      |      |     |      |      |      |     |      |     
|                                        |                       |                         | North America               |      | $   | 9.9  |      |     | $    | 14.0 |      |     | $    | 13.4 | 
|                                        |                       | Machinery technologies |                             |      |     |      |      |     |      |      |      |     |      |     
|                                        |                       |                         | Europe                      |      |     | 3.5  |      |     |      | 4.8  |      |     |      | 5.4  | 
|                                        |                       | Mold technologies       |                             |      | 7.4 |      |      |     | 12.8 |      |      |     | 12.0 |     
|                                        |                       |                         |                             |      |     |      |      |     |      |      |      |    
|                                        |                       |                         | Total plastics technologies |      |     | 20.8 |      |     |      | 31.6 |      |     |      | 30.8 | 
|                                        | Industrial fluids     |                         |                             | 1.5  |     |      |      | 2.6 |      |      |      | 3.9 |     
|                                        | Unallocated corporate |                         |                             | .7   |     |      |      | .7  |      |      |      | .7  |     
|                                        |                       |                         |                             |      |     |      |      |     |      |      |      |    
|Total depreciation and amortization (e) |                       | $                       | 23.0                        |      |     | $    | 34.9 |     |      | $    | 35.4 |    
|                                        |                       |                         |                             |      |     |      |      |     |      |      |      |    
|                                       



|    |                                                                                                                                                                                                                                                                                                                                                                                                            
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | In 2002 and 2000, includes royalty income from
    the licensing of patented technology of $4.5 million and
    $8.3 million, respectively.                                                                                                                                                                                                                                                                
|   
|(b) | In 2002, $6.7 million relates to machinery
    technologies  North America, $(.4) million relates to
    machinery technologies  Europe, $6.4 million
    relates to mold technologies and $1.2 million relates to
    corporate expenses. In 2001, $6.8 million relates to
    machinery technologies  North America,
    $6.9 million relates to machinery technologies  Europe,
$3.5 million relates



---



##### Table of Contents



Notes to Consolidated Financial Statements


to mold technologies and $.3 million relates
to industrial fluids. In 2000, $.5 million relates to
machinery technologies  North America,
$.5 million relates to machinery technologies 
Europe, $.1 million relates to mold technologies and
$.3 million relates to corporate expenses. In 2002 and
2001, $1.9 million and $3.1 million, respectively,
relates to product line discontinuation and is therefore
included in cost of products sold in the Consolidated Statements
of Earnings for those years.



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(c) | In 2001, includes a gain of $2.6 million on
    the sale of surplus real estate.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   
|(d) | Includes financing costs related to the sale of
    accounts receivable.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   
|(e) | In 2001, expense for goodwill amortization
    totaled $10.8 million, of which $3.9 million relates
    to machinery technologies  North America,
    $1.4 million relates to machinery technologies 
    Europe, $5.2 million relates to mold technologies and
    $.3 million relates to industrial fluids. In 2000, expense
    for goodwill amortization totaled $11.0 million, including
    $3.9 million for machinery technologies  North
    America, $1.4 million for machinery
    technologies  Europe, $5.4 million for mold
    technologies and $.3 million for industrial fluids.
|   
|(f) | Segment assets consist principally of accounts
    receivable, inventories, goodwill and property, plant and
    equipment which are considered controllable assets for
    management reporting purposes.                                                                                                                                                                                                                                                                                                                                                                                          



|    |                                                                                                                                                                                                           
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(g) | Consists principally of corporate assets,
    nonconsolidated investments, certain intangible assets, cash
    surrender value of company-owned life insurance, prepaid
    expenses and deferred charges.



---

Geographic Information





|                        |                     |                      |       |       |       |      |       |       |       |   |       |       |       | 
|----------------------- | ------------------- | -------------------- | ----- | ----- | ----- | ---- | ----- | ----- | ----- | - | ----- | ----- | ----- | 
|(In millions)           |                     | 2002                 |       | 2001  |       | 2000
|                       
|                       
|Sales (a)               |                     |                      |       |       |       |      |       |       |       |   |       |      
|                        | United States       |                      | $     | 444.4 |       |      | $     | 503.1 |       |   | $     | 736.9 |      
|                        | Non-U.S. operations |                      |       |       |       |      |       |       |       |   |       |       |      
|                        |                     | Germany              |       |       | 84.3  |      |       |       | 100.0 |   |       |       | 84.4  | 
|                        |                     | Other Western Europe |       |       | 105.8 |      |       |       | 101.3 |   |       |       | 110.4 | 
|                        |                     | Asia                 |       |       | 31.7  |      |       |       | 25.4  |   |       |       | 21.0  | 
|                        |                     | Other                |       |       | 27.0  |      |       |       | 25.4  |   |       |       | 21.8  | 
|                        |                     |                      |       |       |       |      |       |       |       |   |       |      
|Total sales             |                     | $                    | 693.2 |       |       | $    | 755.2 |       |       | $ | 974.5 |      
|                        |                     |                      |       |       |       |      |       |       |       |   |       |      
|                       
|Noncurrent assets       |                     |                      |       |       |       |      |       |       |       |   |       |      
|                        | United States       |                      | $     | 230.3 |       |      | $     | 442.6 |       |   | $     | 451.1 |      
|                        | Non-U.S. operations |                      |       |       |       |      |       |       |       |   |       |       |      
|                        |                     | Germany              |       |       | 64.7  |      |       |       | 65.0  |   |       |       | 44.3  | 
|                        |                     | Other Western Europe |       |       | 27.2  |      |       |       | 68.2  |   |       |       | 69.4  | 
|                        |                     | Asia                 |       |       | 6.0   |      |       |       | 5.9   |   |       |       | 6.2   | 
|                        |                     | Other                |       |       | 10.4  |      |       |       | 6.4   |   |       |       | 5.6   | 
|                        |                     |                      |       |       |       |      |       |       |       |   |       |      
|Total noncurrent assets |                     | $                    | 338.6 |       |       | $    | 588.1 |       |       | $ | 576.6 |      
|                        |                     |                      |       |       |       |      |       |       |       |   |       |      
|                       



|    |                                                                                                        
|--- | -------------------------------------------------------------------------------------------------------
|(a) | Sales are attributed to specific countries or
    geographic areas based on the origin of the shipment.

Sales of U.S. operations include export sales of
$70.7 million in 2002, $81.8 million in 2001 and
$97.3 million in 2000.

Total sales of the companys U.S. and
non-U.S. operations to unaffiliated customers outside the U.S.
were $295.7 million, $306.7 million and
$306.6 million in 2002, 2001 and 2000, respectively.



---



##### Table of Contents



Report of Independent Auditors

Board of Directors Milacron Inc.

We have audited the accompanying Consolidated
Balance Sheets of Milacron Inc. and subsidiaries as of
December 31, 2002 and 2001, and the related Consolidated
Statements of Earnings, Comprehensive Income and
Shareholders Equity, and Cash Flows for each of the three
years in the period ended December 31, 2002. Our audits
also included the financial statement schedule listed in the
Index at Item 15 (a). These financial statements and
schedule are the responsibility of the Companys
management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.

We conducted our audits in accordance with
auditing standards generally accepted in the United States.
Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.

In our opinion, the financial statements referred
to above present fairly, in all material respects, the
consolidated financial position of Milacron Inc. and
subsidiaries at December 31, 2002 and 2001, and the
consolidated results of their operations and their cash flows
for each of the three years in the period ended
December 31, 2002, in conformity with accounting principles
generally accepted in the United States. Also, in our opinion,
the related financial statement schedule, when considered in
relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set
forth therein.

As discussed under the heading Change in
Method of Accounting in the notes to the consolidated
financial statements, in 2002 the company changed its method of
accounting for goodwill and other intangible assets.



| |                                             
| | --------------------------------------------
| | /s/ Ernst & Young LLP 
     Cincinnati, Ohio
| | February 10, 2003                           

Supplementary Financial Information



---

Operating Results by Quarter (Unaudited)





|                                                    |                                      |       |        |       |   |       |       |       |   |   |       |      |   |   |       |      |  
|--------------------------------------------------- | ------------------------------------ | ----- | ------ | ----- | - | ----- | ----- | ----- | - | - | ----- | ---- | - | - | ----- | ---- | -
|                                                    |                                      |      
|(In millions, except per-share amounts)             |                                      | 2002 
|                                                   
|                                                   
|                                                    |                                      | Qtr 1 |        | Qtr 2 |   | Qtr 3 |       | Qtr 4
|                                                   
|                                                   
|Sales                                               |                                      | $     | 158.5  |       |   | $     | 169.9 |       |   | $ | 173.3 |      |   | $ | 191.5 |     
|Manufacturing margins                               |                                      |       | 25.3   |       |   |       | 31.4  |       |   |   | 31.6  |      |   |   | 31.4  |     
|                                                    | Percent of sales                     |       |        | 16.0  | % |       |       | 18.5  | % |   |       | 18.2 | % |   |       | 16.4 | %
|Earnings (loss) from continuing operations(a)       |                                      |       | (7.0   | )     |   |       | (7.9  | )     |   |   | (4.5  | )    |   |   | 1.0   |     
|                                                    | Per common share  basic and diluted |       |        | (.21  | ) |       |       | (.24  | ) |   |       | (.14 | ) |   |       | .03  |  
|Discontinued operations(b)                          |                                      |       | (6.1   | )     |   |       | (23.2 | )     |   |   | 19.0  |      |   |   | (6.5  | )   
|                                                    | Per common share  basic and diluted |       |        | (.18  | ) |       |       | (.69  | ) |   |       | .57  |   |   |       | (.20 | )
|Cumulative effect of change in method of accounting |                                      |       | (187.7 | )     |   |       |      |       |   |   |      |      |   |   |      |     
|                                                    | Per common share  basic and diluted |       |        | (5.62 | ) |       |       |      |   |   |       |     |   |   |       |     |  
|Net earnings (loss)                                 |                                      |       | (200.8 | )     |   |       | (31.1 | )     |   |   | 14.5  |      |   |   | (5.5  | )   
|                                                    | Per common share  basic and diluted |       |        | (6.01 | ) |       |       | (.93  | ) |   |       | .43  |   |   |       | (.17 | )
|                                                   
|                                                    |                                      | 2001 
|                                                   
|Sales                                               |                                      | $     | 201.2  |       |   | $     | 191.7 |       |   | $ | 175.5 |      |   | $ | 186.8 |     
|Manufacturing margins                               |                                      |       | 44.0   |       |   |       | 34.2  |       |   |   | 23.9  |      |   |   | 26.3  |     
|                                                    | Percent of sales                     |       |        | 21.9  | % |       |       | 17.8  | % |   |       | 13.6 | % |   |       | 14.1 | %
|Earnings (loss) from continuing operations(c)       |                                      |       | 1.9    |       |   |       | .6    |       |   |   | (10.5 | )    |   |   | (20.7 | )   
|                                                    | Per common share  basic and diluted |       |        | .05   |   |       |       | .01   |   |   |       | (.31 | ) |   |       | (.62 | )
|Discontinued operations                             |                                      |       | 1.6    |       |   |       | .5    |       |   |   | (7.9  | )    |   |   | (1.2  | )   
|                                                    | Per common share  basic and diluted |       |        | .05   |   |       |       | .02   |   |   |       | (.24 | ) |   |       | (.04 | )
|Net earnings (loss)                                 |                                      |       | 3.5    |       |   |       | 1.1   |       |   |   | (18.4 | )    |   |   | (21.9 | )   
|                                                    | Per common share  basic and diluted |       |        | .10   |   |       |       | .03   |   |   |       | (.55 | ) |   |       | (.66 | )
|                                                   



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | Includes restructuring costs of $5.0 million
    ($3.1 million after tax) in quarter 1,
    $2.9 million ($2.0 million after tax) in
    quarter 2, $1.9 million ($1.1 million after tax)
    in quarter 3 and $4.1 million ($2.6 million after
    tax) in quarter 4.                                                                                                                                                                                                                                                                                      
|   
|(b) | In quarter 2, includes a loss of
    $15.3 million related to the sale of the companys
    Widia and Werkö metalcutting tools businesses. In
    quarter 3, includes a gain of $29.4 million on the
    sale of the companys Valenite metalcutting tools business.
    In quarter 4, includes a loss of $9.9 million on the
    expected divestitures of the companys grinding wheels and
    round metalcutting tools businesses and a benefit of
    $4.2 million related to adjustments of previously
    recognized gains and losses on divestitures.



|    |                                                                                                                                                        
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------
|(c) | Includes restructuring costs of $5.9 million
    ($3.2 million after tax) in quarter 3 and
    $11.6 million ($7.8 million after tax) in
    quarter 4.



MILACRON
INC.  48 FORM 10-K






---



##### Table of Contents








|        |                                                                                         
|------- | ----------------------------------------------------------------------------------------
|Item 9. | Changes in and Disagreements with Accountants on Accounting
    and Financial Disclosure

Not applicable.




PART III






|         |                                                   
|-------- | --------------------------------------------------
|Item 10. | Directors and Executive Officers of the Registrant

The information required by the first part of
Item 10 is (i) incorporated herein by reference to the
Election of Directors section of the companys
proxy statement dated March 25, 2003 and (ii) included
in Part I Executive Officers of the Registrant,
on page 7 of this Form 10-K.

The information required by the second part of
Item 10 is incorporated herein by reference to the
Section 16(a) Beneficial Ownership Reporting
Compliance section of the companys proxy statement
dated March 25, 2003.




Item 11.      Executive
Compensation

The following sections of the companys
proxy statement dated March 25, 2003 are incorporated
herein by reference:



| |                                                                                                                                                                                                                                                                                                                                                                                                                   
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Board of Directors and Board
    Committees  Compensation and Benefits,
    Retirement Benefits, Executive Severance
    Agreements, Personnel and Compensation Committee
    Report on Executive Compensation, Summary
    Compensation Table, Option Grants in Last Fiscal
    Year, Aggregated Option Exercises in Last Year and
    Fiscal Year-End Option Values, and Performance
    Graph.






|         |                                                                   
|-------- | ------------------------------------------------------------------
|Item 12. | Security Ownership of Certain Beneficial Owners and
    Management

The Principal Holders of Voting
Securities section and the Share Ownership of
Directors and Executive Officers sections of the
companys proxy statement dated March 25, 2003 are
incorporated herein by reference.

Securities Authorized for Issuance Under Equity Compensation
Plans



---

Equity Compensation Plan Information





|                                                               |  |                               |  |                               |  |                                    
|-------------------------------------------------------------- |  | ----------------------------- |  | ----------------------------- |  | -----------------------------------
|                                                               |  |                               |  |                               |  | Number of securities remaining     
|                                                               |  | Number of securities to be    |  |                               |  | available for future issuance under
|                                                               |  | issued upon exercise of       |  | Weighted-average exercise     |  | equity compensation plans[c]       
|                                                               |  | outstanding options, warrants |  | price of outstanding options, |  | (excluding securities reflected in 
|Plan Category                                                  |  | and rights[a]                 |  | warrants and rights[b]        |  | column[a])                         
|                                                              
|                                                              
|Equity compensation plans not approved by
    security holders |  |                              |  |                              |  |                                   
|Equity compensation plans approved by security
    holders     |  | 4,617,950                     |  | $20.03                        |  | 969,524                            
|                                                               |  |                               |  |                               |  |                                    
|Total                                                          |  | 4,617,950                     |  | $20.03                        |  | 969,524                            
|                                                              






|         |                                               
|-------- | ----------------------------------------------
|Item 13. | Certain Relationships and Related Transactions

The Certain Relationships and Related
Transactions section of the companys proxy statement
dated March 25, 2003 are incorporated herein by reference.




Item 14.      Controls and
Procedures

As of a date (the Evaluation Date)
within 90 days prior to the date of this report, the
company conducted an evaluation (under the supervision and with
the participation of the companys management, including
the chief executive officer and chief financial officer),
pursuant to Rule 13a-15 promulgated under the Securities
Exchange Act of 1934, as amended (the Exchange Act),
of the effectiveness of the design and operation of the
companys disclosure controls and procedures. Based on this
evaluation, the companys chief executive officer and chief
financial officer concluded that as of the Evaluation Date such
disclosure controls and procedures were reasonably designed to
ensure that information required to be disclosed by the company
in reports it files or submits under the Exchange Act is
recorded, processed, summarized and reported within the time
periods specified in the rules and forms of the Securities and
Exchange Commission.



---



##### Table of Contents



Since December 31, 2002 (the
Evaluation Date), there have not been any
significant changes in internal controls or in other factors
that could significantly affect the internal controls.




PART IV






|         |                                                                    
|-------- | -------------------------------------------------------------------
|Item 15. | Exhibits, Financial Statement Schedules and Reports on
    Form 8-K

Item 15 (a) (1) & (2) 
List of Financial Statements and Financial Statement
Schedules.

The following consolidated financial statements
of Milacron Inc. and subsidiaries are included in Item 8:

|                                                                                                   |  |      |    | 
|-------------------------------------------------------------------------------------------------- |  | ---- | -- | 
|                                                                                                   |  | Page
|                                                                                                   |  |     
|Consolidated Statements of Earnings 
    2002, 2001 and 2000                                      |  |      | 23 | 
|Consolidated Balance Sheets  2002 and
    2001                                                    |  |      | 24 | 
|Consolidated Statements of Comprehensive Income
    and Shareholders Equity  2002, 2001 and 2000 |  |      | 25 | 
|Consolidated Statements of Cash Flows 
    2002, 2001 and 2000                                    |  |      | 26 | 
|Notes to Consolidated Financial Statements                                                         |  |      | 27 | 
|Report of Independent Auditors                                                                     |  |      | 48 | 
|Supplementary Financial Information                                                                |  |      | 48 | 

The following consolidated financial statement
schedule of Milacron Inc. and subsidiaries for the years ended
2002, 2001 and 2000 is filed herewith pursuant to
Item 15(d):

|                                                                 |  |  |    | 
|---------------------------------------------------------------- |  |  | -- | 
|Schedule II  Valuation and
    Qualifying Accounts and Reserves |  |  | 54 | 

All other schedules for which provision is made
in the applicable accounting regulation of the Securities and
Exchange Commission are not required under the related
instructions or are inapplicable, and therefore have been
omitted.

Item 15 (a) (3)  List of
Exhibits



|   |                                                                                                   
|-- | --------------------------------------------------------------------------------------------------
|2. | Plan of Acquisition, Reorganization, Arrangement,
    Liquidation, or Succession  not applicable.
|  
|3. | Articles of Incorporation and By-Laws.                                                            



| |     |                                                                                                                              
| | --- | -----------------------------------------------------------------------------------------------------------------------------
| | 3.1 | Restated Certificate of Incorporation filed with
    the Secretary of State of the State of Delaware on
    November 17, 1998



| |   |                                                                                                                           
| | - | --------------------------------------------------------------------------------------------------------------------------
| |  | Incorporated herein by reference to the
    companys Registration Statement on Form S-8
    (Registration No. 333-70733).



| |     |                    
| | --- | -------------------
| | 3.2 | By-Laws, as amended



| |   |                                                                                                                           
| | - | --------------------------------------------------------------------------------------------------------------------------
| |  | Incorporated herein by reference to the
    companys Registration Statement on Form S-8
    (Registration No. 333-70733).



|   |                                                                               
|-- | ------------------------------------------------------------------------------
|4. | Instruments Defining the Rights of Security
    Holders, Including Indentures:



| |     |                      
| | --- | ---------------------
| | 4.1 | 8 3/8% Notes due 2004



| |   |                                                                                                                                                         
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Incorporated herein by reference to the
    companys Amendment No. 3 to Form S-4
    Registration Statement dated July 7, 1994 (File
    No. 33-53009).



| |     |                                 
| | --- | --------------------------------
| | 4.2 | 7 5/8% Guaranteed Bonds due 2005



| |   |                                                                                                                                                                   
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Fiscal Agency Agreement among Milacron Capital
    Holdings B.V., Milacron Inc., Duetsche Bank AG London and
    Deutsche Bank Luxemburg S.A. dated April 6, 2000.
|
| |  | Filed herewith                                                                                                                                                    
|
| |  | Subscription Agreement between ABN AMRO Bank
    N.V., Milacron Holdings B.V., and Milacron Inc. dated
    April 5, 2000.                                         
|
| |  | Filed herewith                                                                                                                                                    



| |     |                                                                                                                                                                                                                                                                               
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 4.3 | Milacron Inc. hereby agrees to furnish to the
    Securities and Exchange Commission, upon its request, the
    instruments with respect to long-term debt for securities
    authorized thereunder which do not exceed 10% of the
    registrants total consolidated assets.



|   |                                        
|-- | ---------------------------------------
|9. | Voting Trust Agreement  not applicable



|    |                    
|--- | -------------------
|10. | Material Contracts:



| |      |                                       
| | ---- | --------------------------------------
| | 10.1 | Milacron 1991 Long-Term Incentive Plan



| |   |                                                                                            
| | - | -------------------------------------------------------------------------------------------
| |  | Incorporated herein by reference to the
    companys Proxy Statement dated March 22, 1991.



---



##### Table of Contents





| |      |                                       
| | ---- | --------------------------------------
| | 10.2 | Milacron 1994 Long-Term Incentive Plan



| |   |                                                                                            
| | - | -------------------------------------------------------------------------------------------
| |  | Incorporated herein by reference to the
    companys Proxy Statement dated March 24, 1994.



| |      |                                                   
| | ---- | --------------------------------------------------
| | 10.3 | Milacron 1997 Long-Term Incentive Plan, as amended



| |   |                                                                                                          
| | - | ---------------------------------------------------------------------------------------------------------
| |  | Incorporated herein by reference to the
    companys Form 10-Q for the quarter ended
    March 31, 2001.



| |      |                                                   
| | ---- | --------------------------------------------------
| | 10.4 | Milacron 2002 Short-Term Management Incentive Plan



| |   |                                                                                                          
| | - | ---------------------------------------------------------------------------------------------------------
| |  | Incorporated herein by reference to the
    companys Form 10-Q for the quarter ended
    March 31, 2002.



| |      |                                               
| | ---- | ----------------------------------------------
| | 10.5 | Milacron Supplemental Pension Plan, as amended



| |   |                                                                                                      
| | - | -----------------------------------------------------------------------------------------------------
| |  | Incorporated by reference to the companys
    Form 10-K for the fiscal year ended December 31, 1999.



| |      |                                                  
| | ---- | -------------------------------------------------
| | 10.6 | Milacron Supplemental Retirement Plan, as amended



| |   |                                                                                                      
| | - | -----------------------------------------------------------------------------------------------------
| |  | Incorporated by reference to the companys
    Form 10-K for the fiscal year ended December 31, 1999.



| |      |                                                                               
| | ---- | ------------------------------------------------------------------------------
| | 10.7 | Milacron Inc. Plan for the Deferral of
    Directors Compensation, as amended



| |   |                                                                                                      
| | - | -----------------------------------------------------------------------------------------------------
| |  | Incorporated by reference to the companys
    Form 10-K for the fiscal year ended December 31, 1998.



| |      |                                                                         
| | ---- | ------------------------------------------------------------------------
| | 10.8 | Milacron Inc. Retirement Plan for Non-Employee
    Directors, as amended



| |   |                                                                                                      
| | - | -----------------------------------------------------------------------------------------------------
| |  | Incorporated by reference to the companys
    Form 10-K for the fiscal year ended December 31, 1998.



| |      |                                                                
| | ---- | ---------------------------------------------------------------
| | 10.9 | Milacron Supplemental Executive Retirement Plan,
    as amended



| |   |               
| | - | --------------
| |  | Filed herewith



| |       |                                                                                                                                                                                                                                    
| | ----- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 10.10 | Amended and Restated Revolving Credit Agreement
    dated as of November 30, 1998 among Milacron Inc.,
    Cincinnati Milacron Kunststoffmaschinen Europe GmbH, the lenders
    listed therein and Bankers Trust Company, as Agent.



| |   |                                                                                                      
| | - | -----------------------------------------------------------------------------------------------------
| |  | Incorporated by reference to the companys
    Form 10-K for the fiscal year ended December 31, 1998.



| |       |                                                
| | ----- | -----------------------------------------------
| | 10.11 | Milacron Compensation Deferral Plan, as amended



| |   |                                                                                                      
| | - | -----------------------------------------------------------------------------------------------------
| |  | Incorporated by reference to the companys
    Form 10-K for the fiscal year ended December 31, 1999.



| |       |                                                                                                                                            
| | ----- | -------------------------------------------------------------------------------------------------------------------------------------------
| | 10.12 | Rights Agreement dated as of February 5,
    1999, between Milacron Inc. and Chase Mellon Shareholder
    Services, L.L.C., as Rights Agent



| |   |                                                                                                                   
| | - | ------------------------------------------------------------------------------------------------------------------
| |  | Incorporated herein by reference to the
    companys Registration Statement on Form 8-A (File
    No. 001-08485).



| |       |                                                                                                                                                                           
| | ----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 10.13 | Purchase and Sale Agreement between UNOVA, Inc.,
    UNOVA Industrial Automation Systems, Inc., UNOVA U.K. Limited
    and Cincinnati Milacron Inc. dated August 20, 1998.



| |   |                                                                                      
| | - | -------------------------------------------------------------------------------------
| |  | Incorporated herein by reference to the
    companys Form 8-K dated October 2, 1998.



| |       |                                                                                                                                               
| | ----- | ----------------------------------------------------------------------------------------------------------------------------------------------
| | 10.14 | Purchase and Sale Agreement between Johnson
    Controls, Inc., Hoover Universal, Inc. and Cincinnati Milacron
    Inc., dated August 3, 1998.



| |   |                                                                                         
| | - | ----------------------------------------------------------------------------------------
| |  | Incorporated herein by reference to the
    companys Form 8-K dated September 30, 1998.



| |       |                                                                                                                                                                                                                                                                                               
| | ----- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 10.15 | Amendment Number One dated as of March 31,
    1999 to the Amended and Restated Revolving Credit Agreement
    dated as of November 30, 1998 among Milacron Inc.,
    Cincinnati Milacron Kunststoffmaschinen Europe GmbH, the lenders
    listed therein and Bankers Trust Company, as Agent.



| |   |                                                                                                      
| | - | -----------------------------------------------------------------------------------------------------
| |  | Incorporated by reference to the companys
    Form 10-K for the fiscal year ended December 31, 1999.



| |       |                                              
| | ----- | ---------------------------------------------
| | 10.16 | Milacron Supplemental Executive Pension Plan.



| |   |                                                                                                      
| | - | -----------------------------------------------------------------------------------------------------
| |  | Incorporated by reference to the companys
    Form 10-K for the fiscal year ended December 31, 1999.



| |       |                                                                                                                     
| | ----- | --------------------------------------------------------------------------------------------------------------------
| | 10.17 | Milacron Compensation Deferral Plan Trust
    Agreement by and between Milacron Inc. and Reliance Trust
    Company.



| |   |                                                                                                      
| | - | -----------------------------------------------------------------------------------------------------
| |  | Incorporated by reference to the companys
    Form 10-K for the fiscal year ended December 31, 1999.



| |       |                                                                                                                       
| | ----- | ----------------------------------------------------------------------------------------------------------------------
| | 10.18 | Milacron Supplemental Retirement Plan Trust
    Agreement by and between Milacron Inc. and Reliance Trust
    Company.



| |   |                                                                                                      
| | - | -----------------------------------------------------------------------------------------------------
| |  | Incorporated by reference to the companys
    Form 10-K for the fiscal year ended December 31, 1999.



| |       |                                                                                                                                                                                                                                                                                                                                 
| | ----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 10.19 | Amendment Number Two dated as of January 31,
    2000 to the Amended and Restated Revolving Credit Agreement
    dated as of November 30, 1998 among Milacron Inc.,
    Cincinnati Grundstucksverwaltung GmbH, Milacron
    Kunststoffmaschinen Europe GmbH, the lenders listed therein and
    Bankers Trust Company, as Agent.



| |   |                                                                                               
| | - | ----------------------------------------------------------------------------------------------
| |  | Incorporated by reference to the companys
    Form 10-Q for the quarter ended March 31, 2000.



| |       |                                                                                                                                                                                                                                                                                                                                                         
| | ----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 10.20 | Amendment Number Three dated as of July 13,
    2000 to the Amended and Restated Revolving Credit Agreement
    dated as of November 30, 1998 among Milacron Inc., Milacron
    Kunststoffmaschinen Europe GmbH, Milacron Metalworking
    Technologies Holding GmbH, Milacron B.V., the lenders listed
    therein and Bankers Trust Company, as Agent.



| |   |                                                                                              
| | - | ---------------------------------------------------------------------------------------------
| |  | Incorporated by reference to the companys
    Form 10-Q for the quarter ended June 30, 2000.



---



##### Table of Contents





| |       |                                                                                                                                                                                                                                                                                                                                                         
| | ----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 10.21 | Amendment Number Four dated as of August 8,
    2001 to the Amended and Restated Revolving Credit Agreement
    dated as of November 30, 1998 among Milacron Inc., Milacron
    Kunststoffmaschinen Europe GmbH, Milacron Metalworking
    Technologies Holding GmbH, Milacron B.V., the lenders listed
    therein and Bankers Trust Company, as Agent.



| |   |                                                                                              
| | - | ---------------------------------------------------------------------------------------------
| |  | Incorporated by reference to the companys
    Form 10-Q for the quarter ended June 30, 2001.



| |       |                                                                                                                                                                                                                                                                                                                                                             
| | ----- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 10.22 | Amendment Number Five dated as of
    September 30, 2001 to the Amended and Restated Revolving
    Credit Agreement dated as of November 30, 1998 among
    Milacron Inc., Milacron Kunststoffmaschinen Europe GmbH,
    Milacron Metalworking Technologies Holding GmbH, Milacron B.V.,
    the lenders listed therein and Bankers Trust Company, as Agent.



| |   |                                                                                
| | - | -------------------------------------------------------------------------------
| |  | Incorporated by reference to the companys
    Form 8-K dated October 15, 2001.



| |       |                                                                                                                                                                                                                                                                                                                                                                               
| | ----- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 10.23 | Amendment Number Six dated as of March 14,
    2002 to the Amended and Restated Revolving Credit Agreement
    dated as of November 30, 1998 among Milacron Inc., Milacron
    Kunststoffmaschinen Europe GmbH, Milacron Metalworking Holding
    GmbH, Milacron B.V., the lenders listed therein and Bankers
    Trust Company, as Agent and PNC Bank as Documentation Agent.



| |   |                                                                              
| | - | -----------------------------------------------------------------------------
| |  | Incorporated by reference to the companys
    Form 8-K dated March 14, 2002.



| |       |                                                                                                             
| | ----- | ------------------------------------------------------------------------------------------------------------
| | 10.24 | Stock Purchase Agreement dated as of May 3,
    2002 among Milacron Inc., Milacron B.V., and Kennametal Inc.



| |   |                                                                           
| | - | --------------------------------------------------------------------------
| |  | Incorporated by reference to the companys
    Form 8-K dated May 3, 2002.



| |       |                                                                                                                                                                                                                                                                                                                                                     
| | ----- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 10.25 | Amendment dated June 17, 2002 to the Amended
    and Restated Revolving Credit Agreement dated as of
    November 30, 1998 among Milacron Inc., Milacron
    Kunststoffmaschinen Europe GmbH, Milacron Metalworking GmbH,
    Milacron B.V., the lenders listed therein and Bankers Trust
    Company, as Agent and PNC Bank as Documentation Agent.



| |   |                                                                             
| | - | ----------------------------------------------------------------------------
| |  | Incorporated by reference to the companys
    Form 8-K dated June 17, 2002.



| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | ----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 10.26 | Letter Agreement dated May 3, 2002 with
    respect to the Amended and Restated Revolving Credit Agreement
    dated as of November 30, 1998 among Milacron Inc., Milacron
    Kunststoffmaschinen Europe GmbH, Milacron Metalworking GmbH,
    Milacron B.V., the lenders listed therein and Bankers Trust
    Company, as Agent and PNC Bank as Documentation Agent entered
    into in connection with entering into a definitive agreement or
    the sale of the Widia business.



| |   |                                                                           
| | - | --------------------------------------------------------------------------
| |  | Incorporated by reference to the companys
    Form 8-K dated May 3, 2002.



| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | ----- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 10.27 | Letter Agreement dated June 17, 2002 with
    respect to the Amended and Restated Revolving Credit Agreement
    dated as of November 30, 1998 among Milacron Inc., Milacron
    Kunststoffmaschinen Europe GmbH, Milacron Metalworking GmbH,
    Milacron B.V., the lenders listed therein and Bankers Trust
    Company, as Agent and PNC Bank as Documentation Agent amending
    the letter agreement entered into in connection with entering
    into a definitive agreement or the sale of the Widia business.



| |   |                                                                           
| | - | --------------------------------------------------------------------------
| |  | Incorporated by reference to the companys
    Form 8-K dated May 3, 2002.



| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | ----- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 10.28 | Letter Agreement dated June 17, 2002 with
    respect to the Amended and Restated Revolving Credit Agreement
    dated as of November 30, 1998 among Milacron Inc., Milacron
    Kunststoffmaschinen Europe GmbH, Milacron Metalworking GmbH,
    Milacron B.V., the lenders listed therein and Bankers Trust
    Company, as Agent and PNC Bank as Documentation Agent entered
    into in connection with entering into a definitive agreement or
    the sale of the Valenite business.



| |   |                                                                           
| | - | --------------------------------------------------------------------------
| |  | Incorporated by reference to the companys
    Form 8-K dated May 3, 2002.



| |       |                                                                                            
| | ----- | -------------------------------------------------------------------------------------------
| | 10.29 | Stock Purchase Agreement dated as of
    June 17, 2002 among Milacron Inc., and Sandvik AB.



| |   |                                                                             
| | - | ----------------------------------------------------------------------------
| |  | Incorporated by reference to the companys
    Form 8-K dated June 17, 2002.



| |       |                                                                                                                                                                                                                                                                                                                                                    
| | ----- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 10.30 | Waiver and Agreement dated as of
    December 30, 2002 to the Amended and Restated Revolving
    Credit Agreement dated as of November 30, 1998 among
    Milacron Inc., Milacron Kunststoffmaschinen Europe GmbH,
    Milacron B.V., the lenders listed therein and Deutsche Bank
    Trust Company, as Agent and PNC Bank as Documentation Agent.



| |   |               
| | - | --------------
| |  | Filed herewith



| |       |                                                                                                                                                                                                                                                                                                                                                     
| | ----- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 10.31 | Amendment Number Seven dated as of November 6,
    2002 to the Amended and Restated Revolving Credit Agreement
    dated as of November 30, 1998 among Milacron Inc., Milacron
    Kunststoffmaschinen Europe GmbH, Milacron B.V., the lenders
    listed therein and Deutsche Bank Trust Company, as Agent and PNC
    Bank as Documentation Agent.



| |   |                                                                                
| | - | -------------------------------------------------------------------------------
| |  | Incorporated by reference to the companys
    Form 8-K dated November 6, 2002.



|    |                                                                                                              
|--- | -------------------------------------------------------------------------------------------------------------
|11. | Statement Regarding Computation of Per-Share
    Earnings                                                    
|   
|12. | Statement Regarding Computation of
    Ratios  not applicable                                               
|   
|13. | Annual report to security holders, Form 10-Q
    or quarterly report to security holders  not
    applicable



---



##### Table of Contents





|    |                                                                                    
|--- | -----------------------------------------------------------------------------------
|16. | Letter regarding Change in Certifying
    Accountant  not applicable              
|   
|18. | Letter regarding Change in Accounting
    Principles  not applicable              
|   
|21. | Subsidiaries of the Registrant                                                     
|   
|22. | Published Report Regarding Matters Submitted to
    Vote of Security Holders  none
|   
|23. | Consent of Experts and Counsel                                                     
|   
|24. | Power of Attorney  not applicable                                                 
|   
|99. | Additional Exhibits                                                                

99.1    Section 906
Certification

Item 15 (b)  Reports on
Form 8-K



| |   |                                                                                                                                                                                                        
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | A current report on Form 8-K, Items 7
    and 9 dated October 14, 2002 was filed concerning the press
    release issued by the company which affirmed guidance relating
    to third quarter earnings.



| |   |                                                                                                                                                                                             
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | A current report on Form 8-K, Items 5 and 7
    dated November 6, 2002 was filed concerning Amendment
    Number Seven to the companys Amended and Restated
    Revolving Credit Agreement.
|
| |  | A current report on Form 8-K, Items 5,
    7 and 9 dated November 7, 2002 was filed concerning the
    press release issued by the company disclosing third quarter
    earnings.           

Item 15 (c) & (d)  Index
to Certain Exhibits and Financial Statement Schedules

The responses to these portions of Item 15
are submitted as a separate section of this report.



---



##### Table of Contents



Milacron Inc. and Subsidiaries




Schedule II  Valuation and
Qualifying Accounts and Reserves


Years ended 2002, 2001 and 2000


(In thousands)


|                |                                          |            |  |            |  |            |  |            |  |           |    |         |     |  |        |            |      |  |  |          | 
|--------------- | ---------------------------------------- | ---------- |  | ---------- |  | ---------- |  | ---------- |  | --------- | -- | ------- | --- |  | ------ | ---------- | ---- |  |  | -------- | 
|                |                                          |            |  |            |  |            |  |           
|Col. A          |                                          | Col. B     |  | Col. C     |  | Col. D     |  | Col. E    
|               
|               
|                |                                          |            |  |           
|                |                                          | Additions  |  |           
|                |                                          |            |  |           
|                |                                          | Balance at |  | Charged to |  |            |  |            |  | Balance  
|                |                                          | Beginning  |  | Cost and   |  | Other      |  | Deductions |  | at End   
|Description     |                                          | of Period  |  | Expenses   |  |  Describe |  |  Describe |  | of Period
|               
|               
|Year ended 2002 |                                          |            |  |            |  |            |  |            |  |           |    |         |     |  |        |            |      |  |  |         
|                | Allowance for doubtful accounts          |            |  | $10,017    |  |            |  | $  3,939   |  |           |    | $   616 | (a) |  |        | $  (2,218  | )(b) |  |  | $12,354  | 
|               
|                | Restructuring and consolidation reserves |            |  | $12,365    |  |            |  | $  3,629   |  |           |    | $   519 | (a) |  |        | $(10,622   | )(b) |  |  | $  5,362 | 
|                |                                          |            |  |            |  |            |  |            |  |           |    |         |     |  | (529   | )(d)       |      |  |  |         
|               
|                | Allowance for inventory obsolescence     |            |  | $19,031    |  |            |  | $  6,916   |  |           |    | $1,869  | (a) |  |        | $ (3,647   | )(b) |  |  | $24,169  | 
|               
|Year ended 2001 |                                          |            |  |            |  |            |  |            |  |           |    |         |     |  |        |            |      |  |  |         
|                | Allowance for doubtful accounts          |            |  | $  9,354   |  |            |  | $  3,437   |  |           |    | $   324 | (c) |  |        | $      (38 | )(a) |  |  | $10,017  | 
|                |                                          |            |  |            |  |            |  |            |  |           |    |         |     |  | (3,060 | )(a)       |      |  |  |         
|               
|                | Restructuring and consolidation reserves |            |  | $  2,060   |  |            |  | $12,435    |  |           |    | $1,133  | (c) |  |        | $ (3,252   | )(b) |  |  | $12,365  | 
|                |                                          |            |  |            |  |            |  |            |  |           | 98 | (a)     |     |  | (109   | )(d)       |      |  |  |         
|               
|                | Allowance for inventory obsolescence     |            |  | $17,700    |  |            |  | $10,347    |  |           |    |         |     |  |        | $ (9,016   | )(b) |  |  | $19,031  | 
|               
|Year ended 2000 |                                          |            |  |            |  |            |  |            |  |           |    |         |     |  |        |            |      |  |  |         
|                | Allowance for doubtful accounts          |            |  | $  7,347   |  |            |  | $  3,906   |  |           |    |         |     |  |        | $    (226  | )(a) |  |  | $  9,354 | 
|                |                                          |            |  |            |  |            |  |            |  |           |    |         |     |  | (1,673 | )(b)       |      |  |  |         
|               
|                | Restructuring and consolidation reserves |            |  | $  8,802   |  |            |  |            |  |           |    |         |     |  |        | $    (525  | )(a) |  |  | $  2,060 | 
|                |                                          |            |  |            |  |            |  |            |  |           |    |         |     |  | (5,983 | )(b)       |      |  |  |         
|                |                                          |            |  |            |  |            |  |            |  |           |    |         |     |  | (234   | )(d)       |      |  |  |         
|               
|                | Allowance for inventory obsolescence     |            |  | $19,953    |  |            |  | $  2,454   |  |           |    |         |     |  |        | $ (1,205   | )(a) |  |  | $17,700  | 
|                |                                          |            |  |            |  |            |  |            |  |           |    |         |     |  | (3,502 | )(b)       |      |  |  |         
|               

|    |                                                                         
|--- | ------------------------------------------------------------------------
|(a) | Represents foreign currency translation
    adjustments during the year.
|   
|(b) | Represents amounts charged against the reserves
    during the year.    
|   
|(c) | Consists of reserves of subsidiaries purchased
    during the year.     
|   
|(d) | Represents reversals of excess reserves.                                



---



##### Table of Contents






Signatures

Pursuant to the requirements of Section 13
or 15(d) of the Securities Exchange Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.



| |              
| | -------------
| | Milacron Inc.



| |     |                    
| | --- | -------------------
| | By: | /s/ Ronald D. Brown

| |                          
| | -------------------------
| |                          
| | Ronald D. Brown; Chairman
| | and Chief Executive      
| | Officer, Director        
| | (Chief Executive Officer)



| |     |                   
| | --- | ------------------
| | By: | /s/ Harold J. Faig

| |                            
| | ---------------------------
| |                            
| | Harold J. Faig; President  
| | and Chief Operating Officer
| | (Chief Operating Officer)  



| |     |                       
| | --- | ----------------------
| | By: | /s/ Robert P. Lienesch

| |                                     
| | ------------------------------------
| |                                     
| | Robert P. Lienesch; Vice President 
| | Finance and Chief Financial Officer 
| | (Chief Financial Officer)           



| |     |                     
| | --- | --------------------
| | By: | /s/ Ross A. Anderson

| |                           
| | --------------------------
| |                           
| | Ross A. Anderson          
| | (Chief Accounting Officer)

Date: March 20, 2003

Pursuant to the requirements of the Securities
Exchange Act of 1934, this report has been signed by the
following persons on behalf of the registrant and in capacities
and on the dates indicated.

|                                                                      |  |                                                                                         
|--------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------
|/s/ Harry A. HammerlyHarry A. Hammerly; March 20, 2003
    (Director) |  | /s/ Darryl F. Allen
    Darryl F. Allen; March 20, 2003
    (Director)                  
|/s/ David L. BurnerDavid L. Burner; March 20, 2003
    (Director)     |  | /s/ Barbara Hackman Franklin
    Barbara Hackman Franklin; March 20, 2003
    (Director)
|/s/ Joseph A. StegerJoseph A. Steger; March 20, 2003
    (Director)   |  |                                                                                         



---



##### Table of Contents






Certifications

I, Ronald D. Brown, certify that:

1.    I have reviewed this
annual report on Form 10-K of Milacron Inc.;

2.    Based on my knowledge,
this annual report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the
period covered by this annual report;

3.    Based on my knowledge,
the financial statements, and other financial information
included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in
this annual report;

4.    The registrants
other certifying officers and I are responsible for establishing
and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and have:



| |                                                                                                                                                                                                                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) designed such disclosure controls and
    procedures to ensure that material information relating to the
    registrant, including its consolidated subsidiaries, is made
    known to us by others within those entities, particularly during
    the period in which this annual report is being prepared;
|
| | b) evaluated the effectiveness of the
    registrants disclosure controls and procedures as of a
    date within 90 days prior to the filing date of this annual
    report (the Evaluation Date); and                                                                                                      
|
| | c) presented in this annual report our
    conclusions about the effectiveness of the disclosure controls
    and procedures based on our evaluation as of the Evaluation Date;                                                                                                                                

5.    The registrants
other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrants auditors and
the audit committee of registrants board of directors (or
persons performing the equivalent functions):



| |                                                                                                                                                                                                                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) all significant deficiencies in the
    design or operation of internal controls which could adversely
    affect the registrants ability to record, process,
    summarize and report financial data and have identified for the
    registrants auditors any material weaknesses in internal
    controls; and
|
| | b) any fraud, whether or not material, that
    involves management or other employees who have a significant
    role in the registrants internal controls; and                                                                                                                                                    

6.    The registrants
other certifying officers and I have indicated in this annual
report whether there were significant changes in internal
controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.



| |     |                    
| | --- | -------------------
| | By: | /s/ RONALD D. BROWN

| |                        
| | -----------------------
| |                        
| | Ronald D. Brown        
| | Chairman and           
| | Chief Executive Officer

Date: March 20, 2003



---



##### Table of Contents



I, Robert P. Lienesch, certify that:

1.    I have reviewed this
annual report on Form 10-K of Milacron Inc.;

2.    Based on my knowledge,
this annual report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the
period covered by this annual report;

3.    Based on my knowledge,
the financial statements, and other financial information
included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in
this annual report;

4.    The registrants
other certifying officers and I are responsible for establishing
and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and have:



| |                                                                                                                                                                                                                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) designed such disclosure controls and
    procedures to ensure that material information relating to the
    registrant, including its consolidated subsidiaries, is made
    known to us by others within those entities, particularly during
    the period in which this annual report is being prepared;
|
| | b) evaluated the effectiveness of the
    registrants disclosure controls and procedures as of a
    date within 90 days prior to the filing date of this annual
    report (the Evaluation Date); and                                                                                                      
|
| | c) presented in this annual report our
    conclusions about the effectiveness of the disclosure controls
    and procedures based on our evaluation as of the Evaluation Date;                                                                                                                                

5.    The registrants
other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrants auditors and
the audit committee of registrants board of directors (or
persons performing the equivalent functions):



| |                                                                                                                                                                                                                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) all significant deficiencies in the
    design or operation of internal controls which could adversely
    affect the registrants ability to record, process,
    summarize and report financial data and have identified for the
    registrants auditors any material weaknesses in internal
    controls; and
|
| | b) any fraud, whether or not material, that
    involves management or other employees who have a significant
    role in the registrants internal controls; and                                                                                                                                                    

6.    The registrants
other certifying officers and I have indicated in this annual
report whether there were significant changes in internal
controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.



| |     |                       
| | --- | ----------------------
| | By: | /s/ ROBERT P. LIENESCH

| |                            
| | ---------------------------
| |                            
| | Robert P. Lienesch         
| | Vice President  Finance   
| | and Chief Financial Officer

Date: March 20, 2003



---



##### Table of Contents






Item 15(c) and (d)  Index to Certain Exhibits
and Financial Statement Schedules

|              |  |                                                                                                                                                                                                                                                                                                                                                    |  |                 
|------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------
|             
|Exhibit 4.2a  |  | Fiscal Agency Agreement among Milacron Capital
    Holdings B.V., Milacron Inc., Deutsche Bank AG London and
    Deutsche Bank Luxemburg S.A. dated April 6, 2000.                                                                                                                                                                                 |  | Bound Separately
|Exhibit 4.2b  |  | Subscription Agreement between ABN AMRO Bank
    N.V., Milacron Holdings B.V., and Milacron Inc. dated
    April 5, 2000.                                                                                                                                                                                                                          |  | Bound Separately
|Exhibit 10.9  |  | Milacron Supplemental Executive Retirement Plan,
    as amended                                                                                                                                                                                                                                                                                    |  | Bound Separately
|Exhibit 10.30 |  | Waiver and Agreement dated as of
    December 30, 2002 to the Amended and Restated Revolving
    Credit Agreement dated as of November 30, 1998 among
    Milacron Inc., Milacron Kunststoffmaschinen Europe GmbH,
    Milacron B.V., the lenders listed therein and Deutsche Bank
    Trust Company, as Agent and PNC Bank as Documentation Agent |  | Bound Separately
|Exhibit 11    |  | Computation of Per-Share Earnings                                                                                                                                                                                                                                                                                                                  |  | Bound Separately
|Exhibit 21    |  | Subsidiaries of the Registrant                                                                                                                                                                                                                                                                                                                     |  | Bound Separately
|Exhibit 23    |  | Consent of Experts and Counsel                                                                                                                                                                                                                                                                                                                     |  | Bound Separately
|Exhibit 99    |  | Additional Exhibits:                                                                                                                                                                                                                                                                                                                               |  |                 
|              |  | 99.1 Section 906 Certification                                                                                                                                                                                                                                                                                                                     |  | 59