##### Table of Contents









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 December 31,
2003

Commission File Number 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:            |  | Name of Each Exchange on Which
    Registered:
|Common Shares  Par Value $1.00 |  | 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 þ          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.     þ

Indicate by check
mark whether the registrant is an accelerated filer (as defined
in Exchange Act
Rule 12b-2).     Yes þ          No o

The aggregate
market value of voting stock held by non-affiliates of the
registrant was $104,469,158 at June 30, 2003.

*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
March 1, 2004: 34,877,937

DOCUMENTS INCORPORATED BY REFERENCE:

PART III 
Proxy statement, to be dated on or before April 29.



---






---










MILACRON INC.

2003 FORM 10-K


TABLE OF CONTENTS

|                                               |  |                                                                                           |  |      |    | 
|---------------------------------------------- |  | ----------------------------------------------------------------------------------------- |  | ---- | -- | 
|                                               |  |                                                                                           |  | Page
|                                               |  |                                                                                           |  |     
|PART I                                        
|Item 1.                                        |  | Business                                                                                  |  |      | 2  | 
|                                               |  | Executive Officers of the
    Registrant                                                  |  |      | 10 | 
|Item 2.                                        |  | Properties                                                                                |  |      | 10 | 
|Item 3.                                        |  | Legal Proceedings                                                                         |  |      | 10 | 
|Item 4.                                        |  | Submission of Matters to a
    Vote of Security Holders                                   |  |      | 11 | 
|PART II                                       
|Item 5.                                        |  | Market for the
    Registrants Common Equity and Related Stockholder
    Matters         |  |      | 11 | 
|Item 6.                                        |  | Selected Financial Data                                                                   |  |      | 11 | 
|Item 7.                                        |  | Managements Discussion
    and Analysis of Financial Condition and Results of Operations |  |      | 12 | 
|Item 7A.                                       |  | Quantitative and Qualitative
    Disclosures About Market Risk                            |  |      | 38 | 
|Item 8.                                        |  | Financial Statements and
    Supplementary Data                                           |  |      | 38 | 
|Item 9.                                        |  | Changes in and Disagreements
    with Accountants on Accounting and Financial Disclosure  |  |      | 83 | 
|Item 9A.                                       |  | Controls and Procedures                                                                   |  |      | 83 | 
|PART III                                      
|Item 10.                                       |  | Directors and Executive
    Officers of the Registrant                                    |  |      | 83 | 
|Item 11.                                       |  | Executive Compensation                                                                    |  |      | 84 | 
|Item 12.                                       |  | Security Ownership of
    Certain Beneficial Owners and Management                        |  |      | 84 | 
|Item 13.                                       |  | Certain Relationships and
    Related Transactions                                        |  |      | 84 | 
|Item 14.                                       |  | Principal Accountant Fees
    and Services                                                |  |      | 85 | 
|PART IV                                       
|Item 15.                                       |  | Exhibits, Financial
    Statement Schedules and Reports on Form 8-K                       |  |      | 85 | 
|                                               |  | Schedule II 
    Valuation and Qualifying Accounts and Reserves                          |  |      | 92 | 
|                                               |  | Signatures                                                                                |  |      | 93 | 
|                                               |  | Index to Certain Exhibits
    and Financial Statement Schedules                           |  |      | 94 | 
|FINANCING AGREEMENT                           
|NOTE PURCHASE AGREEMENT                       
|REGISTRATION RIGHTS AGREEMENT                 
|AMENDMENT NO. 1 TO RIGHTS AGREEMENT           
|1994 LONG-TERM INCENTIVE PLAN                 
|1997 LONG-TERM INCENTIVE PLAN                 
|2002 SHORT-TERM INCENTIVE PLAN                
|RETIREMENT PLAN FOR NON-EMPLOYEE DIRECTORS    
|COMPENSATION DEFERRAL PLAN                    
|AMENDMENT TO EXECUTIVE SEVERANCE AGREEMENT    
|STATEMENT RE COMPUTATION OF PER-SHARE EARNINGS
|SUBSIDIARIES OF THE REGISTRANT                
|CONSENT OF EXPERTS AND COUNSEL                
|302 CERTIFICATION                             
|302 CERTIFICATION                             
|906 CERTIFICATION                             



1



---



##### Table of Contents






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 with unique formulations that 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, in the late 1990s we
divested this business and in the past five years divested our
metalcutting carbide insert and round tool businesses in order
to focus exclusively on plastics technologies and industrial
fluids.

Accounting for 86% of consolidated sales from
continuing operations in 2003, 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, building materials,
components, consumer goods, housewares, medical, electrical and
electronics.

In our industrial fluids segment, representing
14% of total sales from continuing operations, we develop,
manufacture 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, industrial components,
machinery, off-road equipment, appliances and housewares,
aerospace, oil and primary metals.

In the late 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. Beginning in
the second half of 2000 through the third quarter of 2003,
Milacron experienced the most severe and prolonged downturn in
the North American manufacturing sector since the 1930s. During
this recession in North America, with both European and Asian
markets also in decline, our global plastics technologies sales
fell 30%, resulting in a 95% decrease in operating earnings. We
responded quickly and dramatically, but despite our significant
cost-cutting initiatives, the unprecedented industry slump had a
major negative impact on our financial results and significantly
impaired our liquidity and access to capital. For the
12 months ended December 31, 2003, Milacron generated
consolidated sales of $740 million and a consolidated net
loss of approximately $192 million.

Beginning in September 2003 and continuing
through the end of the year, we began to see increases in
plastic part production and in capacity utilization of plastics
processors. Historically, a pickup in demand for machinery
typically begins after two or three quarters of growth in
production and utilization rates. So, while demand for our
capital equipment remains at depressed levels at the beginning
of 2004, there are signs of an

2



---



##### Table of Contents



industry upturn and long-term economic trends and
factors support a strong recovery in our plastics technologies
businesses over time.


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

Subsequent Events  Refinancing
Actions

On March 12, 2004, we entered into two new
financing arrangements to repay our 8 3/8% Notes due
March 15, 2004, the outstanding debt under our revolving
credit facility which was terminated on March 12, 2004, and
our obligations under our receivables purchase agreement which
was terminated on March 12, 2004 (see Liquidity and Sources
of Capital  Refinancing Actions on page 35 and
Subsequent Events on page 77.)

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 seven acquisitions in plastics technologies and two in
industrial fluids. During this time we have also divested six
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 2003,
capital goods accounted for 41% of our plastics sales, compared
to 69% in 1992. Through recent acquisitions we have also
expanded our industrial fluids to include process cleaners and
products for metalforming and heat treating.

Due to exceptionally weak business conditions we
made no significant acquisitions in 2002 or 2003. Additions to
our continuing operations in the last five years have been:

|                          |  |      |      |               |  |                              
|------------------------- |  | ---- | ---- | ------------- |  | -----------------------------
|Acquisition               |  | Date |      | Product Lines
|                          |  |      |      |              
|Nickerson Machinery       |  |      | 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 |               |  | Extrusion feed 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 carbide insert businesses in North
America, Europe and Asia, and our

3



---



##### Table of Contents



round metalcutting tool business in Germany. In
2003, we sold our North American round metalcutting tool
businesses and continued to seek strategic alternatives for our
grinding wheels business.


|                              |  |      |      |               |  |  |                               | 
|----------------------------- |  | ---- | ---- | ------------- |  |  | ----------------------------- | 
|Divestiture                   |  | Date |      | Product Lines
|                              |  |      |      |              
|European extrusion            |  |      | 1999 |               |  |  | Plastics extrusion systems    | 
|Widia magnet engineering      |  |      | 2000 |               |  |  | Industrial magnets            | 
|Valenite/ Widia               |  |      | 2002 |               |  |  | Carbide inserts, tool holders | 
|Werkö                         |  |      | 2002 |               |  |  | Round metalcutting tools      | 
|Talbot/ Minnesota Twist Drill |  |      | 2003 |               |  |  | Round metalcutting tools      | 

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 aggressively seek opportunities 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 nine manufacturing plants and eliminating approximately
1,200 manufacturing and administrative positions worldwide,
while generating an annualized cost savings of $69 million.

In 2002, we consolidated the manufacture of our
North American container blow molding and structural foam
machines and our mold technologies manufacturing and support in
North America. For these consolidations, substantially completed
in 2003, Milacron recorded total pretax charges of
$8.7 million and estimates annualized pretax cost savings
in excess of $5 million. We took about half of these
charges in 2002 and realized most of the annual cost savings in
2003. Cash costs for these initiatives were $3.6 million,
most of which was spent in 2003. In 2003, we also completed the
consolidation of our European mold technologies operations in
Europe that had begun late in 2001. These actions resulted in
the elimination of approximately 230 additional positions and
expense of $9.8 million. Cash costs were $9.0 million
over the three year period and the annualized savings will
exceed $5 million.

In 2003, we initiated additional actions intended
to further reduce our cost structure and improve operating
efficiency and customer service. These actions included the
further restructuring of our European blow molding operations
and the discontinuation of certain of its lines and the closure
of an additional mold technologies plant in Europe. In the third
quarter we began to implement additional overhead cost
reductions in each of our plastics technologies segments and at
the corporate office. These actions involve the relocation of
production, voluntary early retirement programs, the
reorganization of our sales structure and general overhead
reductions, and the elimination of an additional 300 positions
in North America and Europe. In 2003 we charged
$11.2 million to expense for these actions and spent
$3.4 million in cash. Approximately $4 million of cash
will be spent in 2004. The annualized cost savings are expected
to be $20 million.

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 40% of our employees have
received Lean/ Six Sigma training and hundreds of
cross-functional teams have solved problems and improved process
efficiency. The goal of these efforts is to shorten customer
response times and increase cash flow while reducing 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 2003, we focused our investment on
customer-driven development. To these ends we invested
$17.8 million, or 2.4% of sales, in R&D in 2003,
compared to $15.8 million, or 2.3% of sales, in 2002.

4



---



##### Table of Contents



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 3,760 people in 2003. Of these, half
were outside the U.S. As of year-end 2003, our employment
from continuing operations was about 3,500 people.

Segment Information

Segment and geographic information for the years
ended December 31, 2003, 2002 and 2001 is included in the
notes to Milacrons consolidated financial statements on
pages 40 through 80 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 2003 sales of $636 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 a one-stop source 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 of 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
also 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 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 compared to traditional hydraulic machines.
Milacron is also a recognized technology leader in
multi-material injection molding, offering systems that
significantly reduce the customers 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.

5



---



##### Table of Contents



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 to make hollow or
semi-hollow products such 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 support.

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

Advancements in material development and in
processing equipment capabilities 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 $13 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, as
well as our after-market services and support.

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 and 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.

6



---



##### Table of Contents



Geographic Sales.About 62% of our plastics technologies products and services in
2003 were sold to customers in North America. European sales
made up about 27% of the total, with the remainder coming from
Asia and the rest of the world.

Distribution.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.

We sell our plastics machinery and systems
through a combination of direct sales force 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, through a
large network of joint venture sales and service offices in
Asia, over the Internet and via telemarketing. We market our MRO
supplies in traditional printed catalogs, as well as through
electronic catalogs and over the internet.

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 end markets in order of 2003 sales were packaging,
automotive and transportation, building materials, industrial
components, consumer goods and toys, custom molders, appliances
and housewares, medical devices, 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 bases                                                                  
|Greenville, Michigan*        |  | Mold bases                                                                  
|Lewistown, Pennsylvania      |  | Mold components                                                             
|Madison Heights, Michigan    |  | Hot runner systems                                                          
|Magenta, Italy*              |  | Blow molding machines                                                       
|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       |  | Mold bases                                                                  
|Mississauga, Ontario, Canada |  | Extrusion screws                                                            
|Mt. Orab, Ohio               |  | Plastics machinery parts                                                    
|Policka, Czech Republic      |  | Blow molding machines                                                       
|Windsor, Ontario, Canada     |  | Mold bases                                                                  
|Youngwood, Pennsylvania      |  | Mold bases and components                                                   



---



|    |  |                                                               
|--- |  | --------------------------------------------------------------
|(a) |  | The operations of this facility will be relocated
    in 2004.
|   
|*   |  | 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-three share worldwide. A
few of our competitors are larger than us, most

7



---



##### Table of Contents



are smaller, and only a few compete in more than
one product category. Principal competitive 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 2003 sales of $104 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 water-based synthetic fluids, which provide excellent
lubricity and are generally more environmentally friendly than
oil-based products. More recently, our new high-performance
green fluids made from vegetable oils have been
gaining acceptance, albeit limited, 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 our customers with 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.

The markets in which our industrial fluids
compete total $2.5 billion on an annualized, global 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 56% of our 2003 industrial fluid sales were made to
customers in North America, while another 37% were to European
customers. The remaining sales were to customers in Asia and the
rest of the world.

8



---



##### Table of Contents



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 2003 sales were automotive and
transportation, industrial components, industrial machinery, job
shops, off-road and other heavy equipment, appliances and
housewares, aerospace, oil and primary metals, and consumer
goods. The largest customer category, automotive and
transportation, accounted for 38% of fluid sales in 2003.

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

|                             |  |                                                               
|---------------------------- |  | --------------------------------------------------------------
|Facility Location            |  | Products                                                      
|                             |  |                                                               
|Cincinnati, Ohio             |  | Metalworking fluids                                           
|Corby, England*              |  | Metalworking 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.

9



---



##### Table of Contents






Executive Officers of the Registrant

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

|                        |  |                                                          |  |                                                                                                                                                                                                                                                                                                    
|----------------------- |  | -------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Name and Age            |  | Position                                                 |  | Positions Held During Last Five Years                                                                                                                                                                                                                                                              
|                        |  |                                                          |  |                                                                                                                                                                                                                                                                                                    
|Ronald D. Brown (50)    |  | Chairman, President and Chief Executive Officer          |  | Elected Chairman and Chief Executive Officer in
    2001. Also served as President and Chief Operating Officer from
    1999 to 2002 and in 2003. Prior thereto was Vice
    President  Finance and Administration and Chief
    Financial Officer from 1997. Has served as a Director since 1999.
|Robert P. Lienesch (58) |  | 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.                                                                                                                                   
|Hugh C. ODonnell (52)  |  | 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 (47)   |  | Controller                                               |  | Elected Controller in 2002. Prior thereto was
    Group Controller, Plastics Technologies from 1998.                                                                                                                                                                                               
|John C. Francy (39)     |  | Treasurer                                                |  | Elected Treasurer in 2001. Prior thereto was
    Assistant Treasurer from 1998.                                                                                                                                                                                                                    



---

Notes:



| |                                                                                                                                         
| | ----------------------------------------------------------------------------------------------------------------------------------------
| | The parenthetical figure below the name of each
    individual indicates his age at most recent birthday prior to
    December 31, 2003.
|
| | 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.                                                            






|        |           
|------- | ----------
|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 7 and 9 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 several such lawsuits, some of which seek
substantial amounts, multiple plaintiffs allege personal injury
involving products, including metalworking fluids, supplied
and/or managed by the company. 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.

10



---



##### Table of Contents








|        |                                                        
|------- | -------------------------------------------------------
|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 2003.




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 March 1, 2004, there were approximately
4,235 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 2002 and 2003, as reported by the
New York Stock Exchange. Cash dividends of $.01 per
common share were paid in each quarter of 2002 and in the first
two quarters of 2003. No dividends were paid in the last two
quarters of 2003. Our revolving credit facility (discussed on
page 68 of this Form 10-K) limited the payment of cash
dividends to $.01 per share in each quarter.



| |                         
| | ------------------------
| | Common Stock Price Range

|                    |              |      |   |       |  |  |   |       | 
|------------------- | ------------ | ---- | - | ----- |  |  | - | ----- | 
|                    |              | High |   | Low  
|                    |              |      |   |      
|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  | 
|2003, quarter ended |              |      |   |       |  |  |   |      
|                    | March 31     |      | $ | 6.55  |  |  | $ | 3.76  | 
|                    | June 30      |      |   | 5.59  |  |  |   | 4.08  | 
|                    | September 30 |      |   | 5.00  |  |  |   | 2.00  | 
|                    | December 31  |      |   | 4.47  |  |  |   | 2.23  | 






|        |                        
|------- | -----------------------
|Item 6. | Selected Financial Data

|                                                                                                          |                  |                                                 |        |      |       |      |       |      |      |      |       |      |      |      |       |     |      |   |       |     |      | 
|--------------------------------------------------------------------------------------------------------- | ---------------- | ----------------------------------------------- | ------ | ---- | ----- | ---- | ----- | ---- | ---- | ---- | ----- | ---- | ---- | ---- | ----- | --- | ---- | - | ----- | --- | ---- | 
|                                                                                                          |                  | 2003                                            |        | 2002 |       | 2001 |       | 2000 |      | 1999
|                                                                                                          |                  |                                                 |        |      |       |      |       |      |      |     
|                                                                                                          |                  |                                                
|                                                                                                          |                  | (Dollars in millions, except per-share amounts)
|Summary of Operations                                                                                     |                  |                                                 |        |      |       |      |       |      |      |      |       |      |      |      |       |     |      |   |       |    
|Sales                                                                                                     |                  | $                                               | 739.7  |      |       | $    | 693.2 |      |      | $    | 755.2 |      |      | $    | 974.5 |     |      | $ | 994.3 |    
|Earnings (loss) from continuing operations before
    cumulative effect of change in method of accounting |                  |                                                 | (184.5 | )(a) |       |      | (18.4 | )(a) |      |      | (28.7 | )(a) |      |      | 48.8  | (a) |      |   | 60.6  | (a)
|                                                                                                          | Per common share |                                                 |        |      |       |      |       |      |      |      |       |      |      |      |       |     |      |   |       |     |     
|                                                                                                          |                  | Basic                                           |        |      | (5.49 | )    |       |      | (.56 | )    |       |      | (.87 | )    |       |     | 1.39 |   |       |     | 1.64 | 
|                                                                                                          |                  | Diluted                                         |        |      | (5.49 | )(b) |       |      | (.56 | )(b) |       |      | (.87 | )(b) |       |     | 1.39 |   |       |     | 1.63 | 
|Earnings (loss) from discontinued operations                                                              |                  |                                                 | (7.2   | )(c) |       |      | (16.8 | )(c) |      |      | (7.0  | )    |      |      | 23.5  |     |      |   | 9.5   |    
|                                                                                                          | Per common share |                                                 |        |      |       |      |       |      |      |      |       |      |      |      |       |     |      |   |       |     |     
|                                                                                                          |                  | Basic                                           |        |      | (.21  | )    |       |      | (.50 | )    |       |      | (.21 | )    |       |     | .67  |   |       |     | .26  | 
|                                                                                                          |                  | Diluted                                         |        |      | (.21  | )(b) |       |      | (.50 | )(b) |       |      | (.21 | )(b) |       |     | .67  |   |       |     | .26  | 

11



---



##### Table of Contents



|                                                         |                  |                                                 |        |       |       |      |        |      |       |      |         |       |       |      |         |       |      |  |         |       |      | 
|-------------------------------------------------------- | ---------------- | ----------------------------------------------- | ------ | ----- | ----- | ---- | ------ | ---- | ----- | ---- | ------- | ----- | ----- | ---- | ------- | ----- | ---- |  | ------- | ----- | ---- | 
|                                                         |                  | 2003                                            |        | 2002  |       | 2001 |        | 2000 |       | 1999
|                                                         |                  |                                                 |        |       |       |      |        |      |       |     
|                                                         |                  |                                                
|                                                         |                  | (Dollars in millions, except per-share amounts)
|Cumulative effect of change in method of
    accounting  |                  |                                                 |       |       |       |      | (187.7 | )(d) |       |      |        |       |       |      |        |       |      |  |        |      
|                                                         | Per common share |                                                 |        |       |       |      |        |      |       |      |         |       |       |      |         |       |      |  |         |       |     
|                                                         |                  | Basic                                           |        |       |      |      |        |      | (5.61 | )    |         |       |      |      |         |       |     |  |         |       |     | 
|                                                         |                  | Diluted                                         |        |       |      |      |        |      | (5.61 | )(b) |         |       |      |      |         |       |     |  |         |       |     | 
|Net earnings (loss)                                      |                  |                                                 | (191.7 | )     |       |      | (222.9 | )    |       |      | (35.7   | )     |       |      | 72.3    |       |      |  | 70.1    |      
|                                                         | Per common share |                                                 |        |       |       |      |        |      |       |      |         |       |       |      |         |       |      |  |         |       |     
|                                                         |                  | Basic                                           |        |       | (5.70 | )    |        |      | (6.67 | )    |         |       | (1.08 | )    |         |       | 2.06 |  |         |       | 1.90 | 
|                                                         |                  | Diluted                                         |        |       | (5.70 | )(b) |        |      | (6.67 | )(b) |         |       | (1.08 | )(b) |         |       | 2.06 |  |         |       | 1.89 | 
|Financial Position at Year End                           |                  |                                                 |        |       |       |      |        |      |       |      |         |       |       |      |         |       |      |  |         |      
|Working capital of continuing operations                 |                  |                                                 | 11.8   |       |       |      | 157.5  |      |       |      | 166.9   |       |       |      | 92.8    |       |      |  | (14.0   | )    
|Property, plant and equipment  net                      |                  |                                                 | 140.8  |       |       |      | 149.8  |      |       |      | 165.8   |       |       |      | 165.0   |       |      |  | 171.5   |      
|Total assets                                             |                  |                                                 | 711.5  |       |       |      | 915.7  |      |       |      | 1,512.3 |       |       |      | 1,464.9 |       |      |  | 1,536.7 |      
|Long-term debt                                           |                  |                                                 | 163.5  |       |       |      | 255.4  |      |       |      | 501.1   |       |       |      | 371.3   |       |      |  | 286.0   |      
|Total debt                                               |                  |                                                 | 323.4  |       |       |      | 301.5  |      |       |      | 576.7   |       |       |      | 457.2   |       |      |  | 500.4   |      
|Net debt (total debt less cash and cash
    equivalents) |                  |                                                 | 230.6  |       |       |      | 179.2  |      |       |      | 486.6   |       |       |      | 423.4   |       |      |  | 422.7   |      
|Shareholders equity (deficit)                           |                  |                                                 | (33.9  | )     |       |      | 134.0  |      |       |      | 434.9   |       |       |      | 484.4   |       |      |  | 490.9   |      
|                                                         | Per common share |                                                 |        | (1.15 | )     |      |        | 3.79 |       |      |         | 12.80 |       |      |         | 14.37 |      |  |         | 13.18 |     
|Other Data                                               |                  |                                                 |        |       |       |      |        |      |       |      |         |       |       |      |         |       |      |  |         |      
|Dividends paid to common shareholders                    |                  |                                                 | .7     |       |       |      | 1.4    |      |       |      | 12.4    |       |       |      | 16.8    |       |      |  | 17.9    |      
|                                                         | Per common share |                                                 |        | .02   |       |      |        | .04  |       |      |         | .37   |       |      |         | .48   |      |  |         | .48   |     
|Capital expenditures                                     |                  |                                                 | 6.5    |       |       |      | 6.2    |      |       |      | 13.5    |       |       |      | 26.5    |       |      |  | 23.9    |      
|Depreciation and amortization                            |                  |                                                 | 21.7   |       |       |      | 23.0   |      |       |      | 34.9    |       |       |      | 35.4    |       |      |  | 34.9    |      
|Backlog of unfilled orders at year-end                   |                  |                                                 | 92.0   |       |       |      | 76.4   |      |       |      | 61.2    |       |       |      | 100.0   |       |      |  | 153.0   |      
|Employees (average)                                      |                  |                                                 | 3,760  |       |       |      | 4,090  |      |       |      | 4,672   |       |       |      | 4,789   |       |      |  | 5,240   |      



---



|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Includes restructuring costs of
    $27.1 million ($25.5 million after tax) in 2003,
    $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 2003
    and 2002, also includes goodwill impairment charges of
    $65.6 million and $1.0 million, respectively, with no
    tax benefit. In 1999, includes a gain of $13.1 million
    ($10.1 million after tax) on the sale of the European
    extrusion systems business.
|   
|(b) |  | For 2003, 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 2003, includes net expense of $.8 million
    related to adjustments of previously recorded gains and losses
    on divestitures of discontinued operations. In 2002, includes a
    net gain of $8.4 million on the divestiture of the Valenite
    and Widia and Werkö metalcutting tools businesses, the
    planned divestiture of the round metalcutting tools and grinding
    wheels businesses and adjustments of reserves related to the
    1998 sale of the machine tools segment.                                                                                       
|   
|(d) |  | Represents a goodwill impairment charge related
    to the adoption of a new accounting standard.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      






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

Executive Summary



| |                 
| | ----------------
| | Company Overview

Milacron is a 120-year-old company, headquartered
in Cincinnati, Ohio, and focused primarily on manufacturing and
selling plastics processing equipment and supplies. We also
manufacture and sell industrial

12



---



##### Table of Contents



fluids for metalworking applications. We operate
both businesses on a global basis. With 3,500 employees, we have
major manufacturing facilities in the United States,
Germany, Italy, Belgium and India, and we maintain sales
and service offices in over 100 countries around the world.


We operate in four business segments: Machinery
Technologies  North America, Machinery
Technologies  Europe, Mold Technologies and
Industrial Fluids. Our Machinery Technologies segments
manufacture and sell plastics processing equipment, including
the three most common types: injection molding, blow molding and
extrusion machinery, as well as related tooling, parts and
services throughout the world. Our Mold Technologies segment is
the leading North American and a leading global supplier of mold
bases and components used in the plastics injection molding
process. Our Industrial Fluids segment blends and sells
metalworking fluids globally for machining, stamping, grinding
and cleaning applications.

Milacron has served the plastics processing
industries since the late 1960s. Major customers for our
plastics technologies are manufacturers of packaging, autos,
building materials, industrial components, consumer goods,
appliances and housewares, medical devices, and electrical
products. The automotive industry is by far the largest customer
of our industrial fluids, followed by makers of industrial
components and machinery, off-road equipment, appliances and
housewares, and aircraft. We have made and sold industrial
fluids since the late 1940s.



| |                                                     
| | ----------------------------------------------------
| | Plastics Markets  Background and
    Recent History

Global consumption of plastics has grown steadily
since the Second World War, as plastics and plastic composites
continue to replace traditional materials such as metal, wood,
glass and paper in an increasing number of manufactured
products, particularly in the packaging, automotive, building
materials, consumer goods, housewares, electrical and medical
industries. From 1970 to 2002, global consumption of plastics
grew at a compounded annual growth rate of 6%, compared with 1%
for steel and 3% for aluminum (Source: BASF AG, Association of
Plastics Manufacturers in Europe, International Iron & Steel
Institute, U.S. Geological Survey).

Plastic part production, like industrial
production in general, has historically shown solid, mildly
cyclical growth. In every year from 1980 to 2000, plastic part
production in the U.S. showed positive year-over-year
increases, averaging 7% compound annual growth (Source: U.S.
Federal Reserve Board). The increases in plastics consumption
and corresponding plastic part production have historically
created cyclical but growing demand for our plastics machinery
and related supplies. In fact, between 1980 and 2000, our sales
of plastics equipment and supplies in North America grew at 8%
compounded annually excluding acquisitions or 11% including
acquisitions.

In the 1990s, like many other
U.S. companies, Milacron benefited from a strong, growing
economy. Our plastics technologies sales were approaching
$1 billion with good profitability. In 2000, for example,
on sales of $835 million, our plastics technologies
businesses generated over $125 million in EBITDA (earnings
before interest, taxes, depreciation and amortization) and
approximately $95 million in EBIT. However, beginning in
late 2000 through the third quarter of 2003, the
U.S. manufacturing sector experienced the most severe and
prolonged downturn since the 1930s. U.S. industrial
production, a key indicator of demand for our products, fell 6%
from June, 2000 to June, 2003, a much steeper and longer decline
than 4% in the prior downturn from June, 1990 to March, 1991
(Source: U.S. Federal Reserve Board). The plastics processing
portion of the manufacturing sector was very severely impacted.
As plastic part production slowed, capacity utilization rates of
our customers, U.S. plastics processors, dropped from the
previous peak of 86% to a low of 77% (Source: U.S. Federal
Reserve Board), and shipments of injection molding machines in
North America fell over 40% from a peak $1.2 billion
12-month moving total in 2000 to under $700 million by the
end of 2001 and through 2003 (Source: The Society of Plastics
Industry).

During this deep recession in North America, with
both European and Asian markets also in decline, albeit more
modestly, demand for many of our plastics machinery lines
declined by 40% to 50% or more, and our total global plastics
technologies sales fell 27%. Despite a series of responsive
actions, including a number

13



---



##### Table of Contents



of plant closings, head-count reductions and a
lowering of fixed costs by over $60 million annually, the
sales volume declines resulted in three loss years in 2001, 2002
and 2003.


Manufacturing in North America started to recover
in the fourth quarter of 2003 when total U.S. manufacturing
orders finally returned to their previous peak levels of 2000.
And in January 2004, the Institute for Supply Managements
manufacturing index, traditionally a very strong leading
indicator, rose to its highest level in twenty years. In the
plastics sector, U.S. processors capacity utilization
reached 81% for the first time since late 2000.

Historically, our experience has been that demand
for machinery begins to grow two or three quarters after a
pickup in production, when capacity utilization rates exceed
84%. In short, our customers need to return to sustained
profitability before they can afford to significantly increase
their investment in new equipment. So, while demand for our
plastics machinery remained at depressed levels through the end
of 2003, we are encouraged by recent economic developments and
expect to benefit from a recovery in our plastics technologies
businesses over time.



| |                                                      
| | -----------------------------------------------------
| | Industrial Fluids  Background
    and Recent History

During the manufacturing recession of 2000-2003,
overall demand for our metalworking fluids declined by about
10%, as our largest customer group, automakers, maintained
reasonably good levels of production both in North America and
worldwide. Profitability in this business, though impacted by
lower sales volumes, held up fairly well throughout the
recession, with earnings before interest and taxes in the range
of 13% to 15% of sales.



| |                          
| | -------------------------
| | Consolidated 2003 Results

Sales and new orders in 2003 were approximately
even with those of 2002 after excluding currency translation
effects, as the manufacturing recession continued in North
America through the first three quarters of the year. Our net
loss in 2003 was $192 million and included two non-cash
charges  a $66 million charge for goodwill
impairment and a $71 million tax provision to establish
valuation allowances against a portion of our deferred tax
credits  as well as $27 million in restructuring
costs.



| |                             
| | ----------------------------
| | Opportunities and Challenges

Entering 2004 there are many positive
developments bolstering Milacrons prospects for improved
operating results as well as a number of challenges and risks.
In the fourth quarter of 2003 there was a noticeable pickup in
industrial production in general and in the plastics processing
industries in particular, a sign that an economic recovery in
North America might be taking hold. The economic outlook for
Europe appears positive and the Asian markets are projected to
show continued strong growth, especially in China, where we are
working hard to expand our presence. While we expect a pickup in
our machinery businesses to lag the overall recovery by two
quarters or more, our non-machinery businesses 
currently representing over 50% of total sales, should benefit
more immediately. We believe we are well positioned to expand
our share in the higher-margin after-market sales and services
sectors of the business. Internally we continue to implement
Lean manufacturing techniques and other efficiency
measures to improve our profitability and cash flow. Finally,
the weakening of the U.S. dollar and the strengthening of
the euro in 2003 should be competitively advantageous to our
U.S.-built products in the long run.

Although we ended the year with $93 million
of cash, the biggest challenge we faced going into 2004 was the
refinancing of our debt, as our revolving credit agreement and
our receivables securitization program were both due to expire
and $115 million of senior unsecured notes were due to
mature  all in the first quarter. However, on
March 12, 2004, we entered into two new financing
arrangements that enabled us to repay these obligations by their
scheduled maturity dates. These refinancing arrangements are
discussed in depth on pages 35 through 37 of this
Form 10-K and in notes to the Consolidated Financial
Statements.

14



---



##### Table of Contents



The biggest risk we still face is the possibility
of a stall or setback in the economic recovery of the
manufacturing sector in North America, perhaps as a result of
geopolitical instability and/or rising energy prices.



| |             
| | ------------
| | Acquisitions

As described more fully in the notes to the
Consolidated Financial Statements, in the years 2001 through
2003 Milacron completed a total of five 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 five newly acquired businesses had annual
sales of approximately $63 million as of the respective
acquisition dates. In 2003, we also purchased the remaining 25%
of the shares of a consolidated subsidiary in Canada that also
manufactures mold bases and components.



| |                          
| | -------------------------
| | 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 2003, markets
outside the U.S. represented the following percentages of
our consolidated sales: Europe 29%; Canada and Mexico 7%; Asia
7%; 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 2003, the weighted-average
exchange rate of the euro was stronger in relation to the
U.S. dollar than in 2002. As a result, Milacron experienced
favorable currency translation effects on new orders and sales
of $40 million and $39 million, respectively. The
effect on earnings was not material.

Between December 31, 2002 and
December 31, 2003, the euro strengthened against the dollar
by approximately 21% which caused the majority of a
$9 million favorable adjustment to consolidated
shareholders equity.

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 44 through 47 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 that the
estimates used in the preparation of the Consolidated Financial
Statements are reasonable in the circumstances, the recorded
amounts could vary under different conditions or assumptions.



| |                                                 
| | ------------------------------------------------
| | Deferred Tax Assets and Valuation
    Allowances

At December 31, 2003, 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 write-down of goodwill and
a charge to equity related to minimum pension funding. At
December 31, 2003, we have

15



---



##### Table of Contents



provided valuation allowances against some of the
deferred tax assets. Valuation allowances serve to reduce the
recorded deferred tax assets to amounts reasonably expected to
be realized in the future. The establishment of valuation
allowances and their subsequent adjustment requires a
significant amount of judgment because expectations as to the
realization of deferred tax assets  particularly
those assets related to net operating loss
carryforwards  are 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 short-term and long-range
internal operating plans, which are based on the current
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, 2003, Milacron had
non-U.S. net operating loss carryforwards 
principally in The Netherlands, Germany and Italy 
totaling $190 million and related deferred tax assets of
$61 million. Valuation allowances totaling $51 million
had been provided with respect to these assets as of that date.
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 in some
non-U.S. jurisdictions  primarily Germany and
Italy  to conclude that no valuation allowances are
required.

At December 31, 2003, Milacron had a
U.S. federal net operating loss carryforward of
$63 million, of which $17 million and $46 million
expire in 2022 and 2023, respectively. Deferred tax assets
related to this loss carryforward, as well as to federal tax
credit carryforwards ($13 million) and additional state and
local loss carryforwards ($10 million), totaled
$45 million. Additional deferred tax assets totaling
approximately $117 million had 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. The deductions for
financial reporting purposes are expected to be deducted for
income tax purposes in future periods, at which time they will
have the effect of decreasing taxable income or increasing the
net operating loss carryforward. The latter will have the effect
of extending its ultimate expiration beyond 2023.

The transaction entered into with Glencore
Finance AG and Mizuho International plc on
March 12, 2004 could substantially delay the timing of the
utilization of certain of the U.S. loss carryforwards and
other tax attributes that are discussed in the preceding
paragraph in future years (see Liquidity and Sources of
Capital  Refinancing Actions on page 35).

At December 31, 2002, no valuation
allowances had been provided with respect to the
U.S. deferred tax assets based on a more likely than
not assessment of whether they would be realized. This
decision was based on the availability of qualified tax planning
strategies and the expectation of increased industrial
production and capital spending in the U.S. plastics
industry. The higher sales and order levels expected in 2003 and
beyond, combined with the significant reductions in
Milacrons cost structure that had been achieved in recent
years, were expected to result in improved operating results in
relation to the losses incurred in 2002 and 2001.

At June 30, 2003, however, management
concluded that a recovery in the plastics industry and the
companys return to profitability in the U.S. would be
delayed longer than originally expected. As a result of these
delays and the incremental costs of the restructuring
initiatives announced in the third quarter of 2003, the company
expected to incur a cumulative operating loss in the
U.S. for the three year period ending December 31,
2003. In such situations, accounting principles generally
accepted in the U.S. include a presumption that
expectations of earnings in the future cannot be considered in
assessing the need for valuation allowances. Accordingly, a
charge to the tax provision of approximately $71 million
was recorded in the second quarter of 2003 to establish
valuation allowances with respect to a portion of the
companys U.S. deferred tax assets for which future
income was previously assumed.

During the second half of 2003, we increased
U.S. deferred tax assets by approximately $18 million
due to continued losses from operations and a goodwill
impairment charge, the effects of which were partially offset by
taxable income related to dividends from
non-U.S. subsidiaries. Valuation allowances were also
increased by $18 million and as a result, there was no tax
benefit for financial reporting purposes associated

16



---



##### Table of Contents



with the losses and the impairment charge. As of
December 31, 2003, U.S. deferred tax assets net of
deferred tax liabilities totaled $162 million and
U.S. valuation allowances totaled $89 million. We
continue to rely on the availability of qualified tax planning
strategies and tax carryforwards to conclude that valuation
allowances are not required with respect to U.S. deferred
tax assets totaling approximately $73 million at
December 31, 2003.


Management will reassess its conclusions
regarding the amount of valuation allowances that are required
on a quarterly basis. Further delays in a recovery in the U.S.,
particularly in capital spending in the plastics industry, could
result in changes in managements estimates and the related
assumptions and a requirement to record additional valuation
allowances against the U.S. deferred tax assets. This could
result in a further increase in income tax expense and a
corresponding decrease in shareholders equity in the
period of the change.



| |                                                         
| | --------------------------------------------------------
| | 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 $2.8 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 2003,
Milacrons continuing operations recorded new inventory
obsolescence reserves totaling $5.4 million and utilized
$5.3 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 using a
percentage-of-sales approach 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 reviewed and adjusted
as necessary 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 2003, Milacrons continuing operations
accrued warranty reserves totaling $4.9 million and
incurred warranty-related costs totaling $3.0 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.

17



---



##### Table of Contents





| |                                                 
| | ------------------------------------------------
| | Impairment of Goodwill and Long-Lived
    Assets

In years prior to 2002, Milacron reviewed the
carrying value of goodwill annually using estimated undiscounted
future cash flows. 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 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.

SFAS No. 142 requires that goodwill be
tested for impairment annually or whenever certain indicators of
impairment are determined to be present. Milacron conducted its
first annual review of goodwill balances as of October 1,
2002. This review resulted in a pretax goodwill impairment
charge related to the mold technologies segment of
$1.0 million (with no tax benefit) that was recorded in the
fourth quarter. In the third quarter of 2003, we tested the
goodwill of two businesses included in the mold technologies
segment for impairment due to the presence of certain indicators
of impairment. This review resulted in a preliminary goodwill
impairment charge of $52.3 million that was recorded in the
third quarter and subsequently adjusted to $65.6 million in
the fourth quarter after the completion of the independent
appraisals of certain tangible and intangible assets that are
required to determine their fair values. The charge resulted
from a downward adjustment of the future cash flows expected to
be generated by the businesses due to a delay in the general
economic recovery in both North America and Europe. The largest
decrease in cash flow expectations related to our European mold
base and components business due to continued weakness in the
markets it serves.

Our annual review of goodwill impairment as of
October 1, 2003 did not result in additional impairment
charges.

Milacron currently reviews the carrying values of
its long-lived assets other than goodwill 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 2003, 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 8 years and that the weighted-average
recovery period is approximately 20% of the remaining average
lives of the assets. Based on the results of the reviews, no
impairment charges were recorded in 2003.



| |                   
| | ------------------
| | 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, 2003,
MAL had reserves for known claims and incurred but not reported
claims under all

18



---



##### Table of Contents



coverages totaling approximately
$22.9 million. The 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. Excluding charges of $4.7 million for
temporary supplemental retirement benefits that were offered in
connection with restructuring actions, Milacron recorded pension
income of $9.4 million related to this plan in 2002. In
2003, however, pension income decreased to $.6 million,
once again excluding charges for supplemental benefits of
$3.2 million. Moreover, we currently expect to record
pension expense related to this plan of $7 to $8 million in
2004. Pension expense for 2005 and beyond is dependent on a
number of factors including returns on plan assets and changes
in the plans discount rate and therefore cannot be
predicted with certainty at this time. The following paragraphs
discuss the significant factors that affect the amount of
recorded pension income or expense and the reasons for the
reductions in income identified above.

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 began using a rate
of return of 9% beginning in 2003 and will continue to do so in
2004. We develop the long-term rate of return assumption 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 adjusted to reflect current
expectations of future returns. In evaluating future returns on
equity securities, the existing portfolio is stratified to
separately consider large and small capitalization investments,
as well as international securities. The change from the
9 1/2% rate of return assumption to the lower 9% rate had
the effect of reducing the amount of pension income that would
otherwise be reportable in 2003 by more than $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, 2003, the market value of
Milacrons pension assets was $371 million whereas the
calculated value of these assets was $389 million. The
difference arises because the latter amount includes two-thirds
of the asset-related loss incurred in 2002 but only one-third of
the gain realized in 2003. If significant asset-related losses
are incurred in 2004, it will have the effect of increasing the
amount of pension expense to be recognized in future years
beginning in 2005.

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

19



---



##### Table of Contents



greater of 10% of total liabilities or the
calculated value of plan 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 and to 6 1/4% at December 31,
2003. The combined effects of these changes and the variances in
relation to the long-term rate of return assumption discussed
above have resulted in cumulative losses in excess of the 10%
corridor. Amortization of these losses adversely affected
pension expense in 2003 by almost $3 million. Expense for
amortization of previously unrecognized losses is expected to be
in excess of $6 million in 2004.


Additional changes in the key assumptions
discussed above would affect the amount of pension expense
currently expected to be recorded for years subsequent to 2004.
Specifically, a one-half percent increase in the rate of return
on assets assumption would have the effect of decreasing pension
expense by approximately $2 million. A comparable decrease
in this assumption would have the opposite effect. In addition,
a one-quarter percent increase or decrease in the discount rate
would decrease or increase expense by approximately
$.8 million.

Because of the significant decrease in the value
of the assets of the funded plan for U.S. employees during
2001 and 2002 and decreases in the plans discount rate,
Milacron recorded a minimum pension liability adjustment of
$118 million effective December 31, 2002 and
significantly reduced the carrying value of the pension asset
related to the plan. This resulted in a $95 million
after-tax reduction in shareholders equity. At
December 31, 2003, shareholders equity was increased
by $15 million (with no tax effect) due to an increase in
plan assets in 2003 that was partially offset by an increase in
liabilities that resulted from a lower discount rate. These
adjustments were recorded as a component of accumulated other
comprehensive loss and therefore did not affect reported
earnings or loss. However, they resulted in $81 and
$95 million after-tax reductions of shareholders
equity at December 31, 2003 and December 31, 2002,
respectively.

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. Accordingly, those discussions should be read in
connection with (i) the tables on pages 30 and 31 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 40 through 80.



| |                        
| | -----------------------
| | 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. The round metalcutting
tools business was sold in two separate transactions in the
third quarter of 2003 and the grinding wheels business is
expected to be sold early in 2004. 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
Milacrons continuing operations unless otherwise indicated.



| |                           
| | --------------------------
| | Pension Income and Expense

In 2002 and prior years, Milacron recorded
significant amounts of income related to its defined benefit
pension plan for certain U.S. employees. For all of 2002,
results of continuing operations included income of
$7.6 million related to this plan. However, because of a
significant decrease in the value of the plans assets and
changes in the rate-of-return on assets and discount rate
assumptions (see Significant Accounting Policies and
Judgments  Pensions), pension income related to
continuing operations decreased to $.5 million in 2003. As
discussed further below, the fluctuation between years has
negatively affected margins, selling and administrative expense
and earnings.

20



---



##### Table of Contents



2003 Compared to 2002



| |                    
| | -------------------
| | New Order and Sales

Consolidated new orders totaled $747 million
in 2003 compared to $703 million in 2002. Currency
translation effects resulting principally from the strength of
the euro in relation to the U.S. dollar contributed
substantially all of the $44 million increase. Consolidated
sales increased from $693 million in 2002 to
$740 million in 2003. As was the case with new orders,
translation effects contributed most of the increase. Order and
shipment levels showed improvement in the fourth quarter but
continued to be penalized by low levels of industrial production
in the U.S. and capital spending in the plastics processing
industry.

Export orders totaled $73 million in 2003,
an increase of $7 million from $66 million in 2002.
Export sales increased from $71 million in 2002 to
$73 million in 2003. Both increases related principally to
higher export sales of U.S.-built blow molding systems. Total
sales of all segments to non-U.S. markets, including
exports, were $338 million, or 46% of consolidated sales,
in 2003 compared to $296 million, or 43% of sales, in 2002.
Sales of goods manufactured outside the U.S. totaled 41% in
2003 compared to 38% in 2002. The strength of the euro in
relation to the dollar was a significant factor in both
increases.

Our backlog of unfilled orders was
$92 million at December 31, 2003 compared to
$76 million at December 31, 2002. The increase
reflects higher order levels for blow molding systems in the
U.S. and injection molding machinery in Europe.



| |                            
| | ---------------------------
| | Margins, Costs and Expenses

Including $3.3 million of restructuring
costs related to product line discontinuation, the consolidated
manufacturing margin was 17.7% in 2003. Excluding restructuring
costs, the consolidated margin was 18.2%. In 2002, the
consolidated manufacturing margin, including $1.9 million
of restructuring costs, was 17.3%. Excluding restructuring
costs, the 2002 margin was 17.5%. Margins remained low in
relation to pre-recession historical levels due to reduced sales
volume and the related underabsorption of manufacturing costs.
Margins were also penalized by increased pricing pressure for
plastics processing machinery in both North America and Europe
and a $5.0 million decrease from 2002 in the amount of
pension income included in the cost of products sold. However,
margins benefited from the effects of our process improvement
initiatives and our recent restructuring actions.

Total selling and administrative expense was
$129 million in 2003 compared to $121 million in 2002.
Selling expense increased from $93 million, or 13.4% of
sales, in 2002 to $104 million, or 14.0% of sales, in 2003
due principally to variable selling costs associated with higher
sales volume, increased bad debt expense and a $2.0 million
reduction in pension income. Costs associated with the triennial
National Plastics Exposition that was held in June of 2003 and
currency effects also contributed to the increase in selling
expense. Conversely, administrative expense decreased by more
than $2 million due principally to the effects of our
restructuring actions and cost containment efforts despite
almost $2 million in adverse currency effects.

Other expense-net increased from income of
$1.0 million in 2002 to expense of $1.5 million in
2003. The amount for 2003 includes income of $3.5 million
from the settlement of warranty claims against a supplier and
$.9 million of income from the licensing of patented
technology. The 2002 amount includes income of $4.5 million
from technology licensing.

Restructuring Costs

As discussed more fully in the notes to the
Consolidated Financial Statements, in 2002 and 2003 we announced
additional restructuring initiatives intended to further reduce
our cost structure as well as to improve operating efficiency
and customer service. In the aggregate, these actions will
ultimately result in the elimination of approximately 500
positions worldwide. Cost savings related to these actions were
in excess of $15 million in 2003. On an annualized basis,
the savings are expected to be in excess of $35 million in
2004

21



---



##### Table of Contents



and beyond. This is in addition to the savings we
realized from the restructuring actions that were initiated in
2001.


In the fourth quarter of 2002, we initiated the
transfer of all manufacture of container blow molding machines
and structural foam systems from the plant in Manchester,
Michigan to our facility near Cincinnati, Ohio. The mold making
operation in Manchester will also be moved to a smaller, more
cost-effective location near the present facility early in 2004.
In another action, the manufacture of special mold bases for
injection molding at the Monterey Park, California plant was
discontinued and transferred to other facilities in North
America.

Early in 2003, we initiated a plan for the
further restructuring of our European blow molding machinery
operations, including the discontinuation of the manufacture of
certain product lines at the Magenta, Italy plant. In the
second quarter of 2003, we initiated a plan to close the special
mold base machining operation in Mahlberg, Germany and relocate
a portion of its manufacturing to another facility. Certain
other production is being outsourced. In the third quarter of
2003, we began to implement additional restructuring initiatives
that focus on further overhead cost reductions in each of
Milacrons plastics technologies segments and at the
corporate office. These actions involve the relocation of
production, closure of sales offices, voluntary early retirement
programs and general overhead reductions.

In 2003 and 2002, restructuring costs also
include amounts for the integration of EOC and Reform, two
businesses acquired in 2001, with Milacrons existing mold
base and components business in Europe and costs associated with
initiatives announced in 2001 and 2002 to consolidate
manufacturing operations and reduce Milacrons cost
structure.

22



---



##### Table of Contents



The costs and related cash effects of the actions
described above are summarized in the table that follows.

Restructuring Actions

|                                           |                                                                                              |                |  |                     |  |            |      |      |  |      |      |      |   |      |      |     |  |   |      |     |   |   |      |     |  |   |     |     | 
|------------------------------------------ | -------------------------------------------------------------------------------------------- | -------------- |  | ------------------- |  | ---------- | ---- | ---- |  | ---- | ---- | ---- | - | ---- | ---- | --- |  | - | ---- | --- | - | - | ---- | --- |  | - | --- | --- | 
|                                           |                                                                                              |                |  |                     |  |           
|                                           |                                                                                              |                |  | Restructuring Costs |  | Cash Costs
|                                           |                                                                                              |                |  |                     |  |           
|                                           |                                                                                              | Year Initiated |  | 2003                |  | 2002       |      | 2001 |  | 2003 |      | 2002 |   | 2001
|                                           |                                                                                              |                |  |                     |  |            |      |      |  |      |      |      |   |     
|                                           |                                                                                              |                |  |                    
|                                           |                                                                                              |                |  | (In millions)      
|Machinery technologies  North
    America |                                                                                              |                |  |                     |  |            |      |      |  |      |      |      |   |      |      |     |  |   |      |     |   |   |      |     |  |   |     |    
|                                           | Injection molding and blow molding employment
    reductions                                 |                |  | 2003                |  |            | $    | 3.8  |  |      | $    |     |   |      | $    |    |  |   | $    | .7  |   |   | $    |    |  |   | $   |    | 
|                                           | Blow molding machinery and mold making relocations                                           |                |  | 2002                |  |            |      | 3.9  |  |      |      | 3.4  |   |      |      |    |  |   |      | 3.4 |   |   |      | .4  |  |   |     |    | 
|                                           | Southwest Ohio reorganization                                                                |                |  | 2002                |  |            |      |     |  |      |      | .6   |   |      |      |    |  |   |      |    |   |   |      | .1  |  |   |     |    | 
|                                           | Injection molding and extrusion early retirement
    program and general overhead reductions |                |  | 2001                |  |            |      |     |  |      |      | 2.3  |   |      |      | .8  |  |   |      |    |   |   |      | .6  |  |   |     | .4  | 
|                                           | Injection molding and blow molding facilities and
    product line rationalization           |                |  | 2001                |  |            |      |     |  |      |      | .4   |   |      |      | 4.8 |  |   |      |    |   |   |      | .2  |  |   |     | 3.6 | 
|                                           | Other 2001 actions                                                                           |                |  | 2001                |  |            |      |     |  |      |      |     |   |      |      | 1.2 |  |   |      |    |   |   |      | .2  |  |   |     | 1.0 | 
|                                           |                                                                                              |                |  |                     |  |            |      |      |  |      |      |      |   |      |      |     |  |   |      |     |   |   |      |     |  |   |     |    
|                                           |                                                                                              |                |  |                     |  |            | 7.7  |      |  |      | 6.7  |      |   |      | 6.8  |     |  |   | 4.1  |     |   |   | 1.5  |     |  |   | 5.0 |    
|Machinery technologies 
    Europe        |                                                                                              |                |  |                     |  |            |      |      |  |      |      |      |   |      |      |     |  |   |      |     |   |   |      |     |  |   |     |    
|                                           | Blow molding product line rationalization and
    employment reductions                      |                |  | 2003                |  |            |      | 4.5  |  |      |      |     |   |      |      |    |  |   |      | .7  |   |   |      |    |  |   |     |    | 
|                                           | Injection molding sales office and employment
    reductions                                 |                |  | 2003                |  |            |      | 2.0  |  |      |      |     |   |      |      |    |  |   |      | .5  |   |   |      |    |  |   |     |    | 
|                                           | Injection molding and blow molding overhead
    reductions                                   |                |  | 2001                |  |            |      |     |  |      |      | (.4  | ) |      |      | 6.9 |  |   |      | 1.3 |   |   |      | 4.0 |  |   |     | .6  | 
|                                           |                                                                                              |                |  |                     |  |            |      |      |  |      |      |      |   |      |      |     |  |   |      |     |   |   |      |     |  |   |     |    
|                                           |                                                                                              |                |  |                     |  |            | 6.5  |      |  |      | (.4  | )    |   |      | 6.9  |     |  |   | 2.5  |     |   |   | 4.0  |     |  |   | .6  |    
|Mold technologies                          |                                                                                              |                |  |                     |  |            |      |      |  |      |      |      |   |      |      |     |  |   |      |     |   |   |      |     |  |   |     |    
|                                           | Mahlberg plant closure                                                                       |                |  | 2003                |  |            |      | 5.7  |  |      |      |     |   |      |      |    |  |   |      | 2.8 |   |   |      |    |  |   |     |    | 
|                                           | North American employment reductions                                                         |                |  | 2003                |  |            |      | 1.0  |  |      |      |     |   |      |      |    |  |   |      | .6  |   |   |      |    |  |   |     |    | 
|                                           | European sales reorganization                                                                |                |  | 2003                |  |            |      | 3.6  |  |      |      |     |   |      |      |    |  |   |      | 1.3 |   |   |      |    |  |   |     |    | 
|                                           | Monterey Park plant closure                                                                  |                |  | 2002                |  |            |      | .5   |  |      |      | .9   |   |      |      |    |  |   |      | (.2 | ) |   |      |    |  |   |     |    | 
|                                           | EOC and Reform integration                                                                   |                |  | 2001                |  |            |      | 1.8  |  |      |      | 4.6  |   |      |      | 3.4 |  |   |      | .2  |   |   |      | 7.8 |  |   |     | 1.0 | 
|                                           | North American overhead and general employment
    reductions                                |                |  | 2001 & 2002         |  |            |      |     |  |      |      | .9   |   |      |      | .1  |  |   |      |    |   |   |      | .3  |  |   |     |    | 
|                                           |                                                                                              |                |  |                     |  |            |      |      |  |      |      |      |   |      |      |     |  |   |      |     |   |   |      |     |  |   |     |    
|                                           |                                                                                              |                |  |                     |  |            | 12.6 |      |  |      | 6.4  |      |   |      | 3.5  |     |  |   | 4.7  |     |   |   | 8.1  |     |  |   | 1.0 |    
|Industrial fluids and corporate            |                                                                                              |                |  |                     |  |            |      |      |  |      |      |      |   |      |      |     |  |   |      |     |   |   |      |     |  |   |     |    
|                                           | Early retirement program and general overhead
    reductions                                 |                |  | 2003                |  |            |      | .3   |  |      |      |     |   |      |      |    |  |   |      | .1  |   |   |      |    |  |   |     |    | 
|                                           | Early retirement program and general overhead
    reductions                                 |                |  | 2001 & 2002         |  |            |      |     |  |      |      | 1.2  |   |      |      | .3  |  |   |      | .2  |   |   |      | .3  |  |   |     |    | 
|                                           |                                                                                              |                |  |                     |  |            |      |      |  |      |      |      |   |      |      |     |  |   |      |     |   |   |      |     |  |   |     |    
|                                           |                                                                                              |                |  |                     |  |            | .3   |      |  |      | 1.2  |      |   |      | .3   |     |  |   | .3   |     |   |   | .3   |     |  |   |    |    
|                                           |                                                                                              |                |  |                     |  |            |      |      |  |      |      |      |   |      |      |     |  |   |      |     |   |   |      |     |  |   |     |    
|                                           |                                                                                              |                |  |                     |  | $          | 27.1 |      |  | $    | 13.9 |      |   | $    | 17.5 |     |  | $ | 11.6 |     |   | $ | 13.9 |     |  | $ | 6.6 |    
|                                           |                                                                                              |                |  |                     |  |            |      |      |  |      |      |      |   |      |      |     |  |   |      |     |   |   |      |     |  |   |     |    

23



---



##### Table of Contents



The table that follows depicts the cost savings
realized in 2002 and 2003 from the restructuring actions
discussed above and the incremental savings of approximately
$20 million that are expected to be realized in 2004.

Restructuring Actions

|                                           |                                                                                              |                |  |               |  |              |       |             |  |       |      |      |  |   |      |      |  |   |      |     |  |   |      |      | 
|------------------------------------------ | -------------------------------------------------------------------------------------------- | -------------- |  | ------------- |  | ------------ | ----- | ----------- |  | ----- | ---- | ---- |  | - | ---- | ---- |  | - | ---- | --- |  | - | ---- | ---- | 
|                                           |                                                                                              |                |  |               |  |             
|                                           |                                                                                              |                |  |               |  | Cost Savings
|                                           |                                                                                              |                |  |               |  |             
|                                           |                                                                                              |                |  | Headcount     |  |              |       | Incremental |  | Total
|                                           |                                                                                              | Year Initiated |  | Reductions    |  | 2002         |       | 2003        |  | 2004  |      | 2004
|                                           |                                                                                              |                |  |               |  |              |       |             |  |       |      |     
|                                           |                                                                                              |                |  |               |  |             
|                                           |                                                                                              |                |  | (In millions) |  |             
|Machinery technologies  North
    America |                                                                                              |                |  |               |  |              |       |             |  |       |      |      |  |   |      |      |  |   |      |     |  |   |      |     
|                                           | Injection molding and blow molding employment
    reductions                                 |                |  | 2003          |  |              |       | 102         |  |       | $    |     |  |   | $    | 2.1  |  |   | $    | 4.4 |  |   | $    | 6.5  | 
|                                           | Blow molding machinery and mold making relocations                                           |                |  | 2002          |  |              |       | 42          |  |       |      |     |  |   |      | 3.7  |  |   |      | 1.0 |  |   |      | 4.7  | 
|                                           | Southwest Ohio reorganization                                                                |                |  | 2002          |  |              |       | 24          |  |       |      | .8   |  |   |      | 2.7  |  |   |      |    |  |   |      | 2.7  | 
|                                           | Injection molding and extrusion early retirement
    program and general overhead reductions |                |  | 2001          |  |              |       | 165         |  |       |      | 9.9  |  |   |      | 10.7 |  |   |      |    |  |   |      | 10.7 | 
|                                           | Injection molding and blow molding facilities and
    product line rationalization           |                |  | 2001          |  |              |       | 64          |  |       |      | 4.4  |  |   |      | 4.2  |  |   |      |    |  |   |      | 4.2  | 
|                                           | Other 2001 actions                                                                           |                |  | 2001          |  |              |       | 52          |  |       |      | 5.0  |  |   |      | 5.0  |  |   |      |    |  |   |      | 5.0  | 
|                                           |                                                                                              |                |  |               |  |              |       |             |  |       |      |      |  |   |      |      |  |   |      |     |  |   |      |     
|                                           |                                                                                              |                |  |               |  |              | 449   |             |  |       | 20.1 |      |  |   | 28.4 |      |  |   | 5.4  |     |  |   | 33.8 |     
|Machinery technologies 
    Europe        |                                                                                              |                |  |               |  |              |       |             |  |       |      |      |  |   |      |      |  |   |      |     |  |   |      |     
|                                           | Blow molding product line rationalization and
    employment reductions                      |                |  | 2003          |  |              |       | 47          |  |       |      |     |  |   |      | 1.0  |  |   |      | 1.8 |  |   |      | 2.8  | 
|                                           | Injection molding sales office and employment
    reductions                                 |                |  | 2003          |  |              |       | 70          |  |       |      |     |  |   |      | .4   |  |   |      | 3.8 |  |   |      | 4.2  | 
|                                           | Injection molding and blow molding overhead
    reductions                                   |                |  | 2001          |  |              |       | 133         |  |       |      | 5.0  |  |   |      | 6.8  |  |   |      |    |  |   |      | 6.8  | 
|                                           |                                                                                              |                |  |               |  |              |       |             |  |       |      |      |  |   |      |      |  |   |      |     |  |   |      |     
|                                           |                                                                                              |                |  |               |  |              | 250   |             |  |       | 5.0  |      |  |   | 8.2  |      |  |   | 5.6  |     |  |   | 13.8 |     
|Mold technologies                          |                                                                                              |                |  |               |  |              |       |             |  |       |      |      |  |   |      |      |  |   |      |     |  |   |      |     
|                                           | Mahlberg plant closure                                                                       |                |  | 2003          |  |              |       | 67          |  |       |      |     |  |   |      | 2.1  |  |   |      | 1.8 |  |   |      | 3.9  | 
|                                           | North American employment reductions                                                         |                |  | 2003          |  |              |       | 37          |  |       |      |     |  |   |      | 1.0  |  |   |      | 1.9 |  |   |      | 2.9  | 
|                                           | European sales reorganization                                                                |                |  | 2003          |  |              |       | 75          |  |       |      |     |  |   |      | .1   |  |   |      | 4.3 |  |   |      | 4.4  | 
|                                           | Monterey Park plant closure                                                                  |                |  | 2002          |  |              |       | 12          |  |       |      |     |  |   |      | .6   |  |   |      | .2  |  |   |      | .8   | 
|                                           | EOC and Reform integration                                                                   |                |  | 2001          |  |              |       | 233         |  |       |      | 3.0  |  |   |      | 5.2  |  |   |      |    |  |   |      | 5.2  | 
|                                           | North American overhead and general employment
    reductions                                |                |  | 2001 & 2002   |  |              |       | 47          |  |       |      | 1.9  |  |   |      | 2.0  |  |   |      |    |  |   |      | 2.0  | 
|                                           |                                                                                              |                |  |               |  |              |       |             |  |       |      |      |  |   |      |      |  |   |      |     |  |   |      |     
|                                           |                                                                                              |                |  |               |  |              | 471   |             |  |       | 4.9  |      |  |   | 11.0 |      |  |   | 8.2  |     |  |   | 19.2 |     
|Industrial fluids and corporate            |                                                                                              |                |  |               |  |              |       |             |  |       |      |      |  |   |      |      |  |   |      |     |  |   |      |     
|                                           | Early retirement program and general overhead
    reductions                                 |                |  | 2003          |  |              |       | 11          |  |       |      |     |  |   |      | .5   |  |   |      | .9  |  |   |      | 1.4  | 
|                                           | Early retirement program and general overhead
    reductions                                 |                |  | 2001 & 2002   |  |              |       | 16          |  |       |      | .5   |  |   |      | 1.0  |  |   |      |    |  |   |      | 1.0  | 
|                                           |                                                                                              |                |  |               |  |              |       |             |  |       |      |      |  |   |      |      |  |   |      |     |  |   |      |     
|                                           |                                                                                              |                |  |               |  |              | 27    |             |  |       | .5   |      |  |   | 1.5  |      |  |   | .9   |     |  |   | 2.4  |     
|                                           |                                                                                              |                |  |               |  |              |       |             |  |       |      |      |  |   |      |      |  |   |      |     |  |   |      |     
|                                           |                                                                                              |                |  |               |  |              | 1,197 |             |  | $     | 30.5 |      |  | $ | 49.1 |      |  | $ | 20.1 |     |  | $ | 69.2 |     
|                                           |                                                                                              |                |  |               |  |              |       |             |  |       |      |      |  |   |      |      |  |   |      |     |  |   |      |     

24



---



##### Table of Contents





| |                           
| | --------------------------
| | Goodwill Impairment Charge

In 2003, Milacron recorded a goodwill impairment
charge of $65.6 million (with no tax benefit) to adjust the
carrying value of the goodwill of two businesses included in the
mold technologies segment. The charge was calculated by
discounting estimated future cash flows and resulted from a
downward adjustment of the cash flows expected to be generated
by these businesses due to the delay in the general economic
recovery in both North America and Europe. The largest decrease
in cash flow expectations related to our European mold base and
components business due to continued weakness in the markets it
serves.



| |                   
| | ------------------
| | Results By Segment

The following sections discuss the operating
results of our business segments which are presented in tabular
form on pages 74 though 76 of this Form 10-K. As
presented therein, segment operating profit or loss excludes
restructuring costs and goodwill impairment charges.

Machinery technologies  North
America New orders in the
machinery technologies  North America segment were
$325 million compared to $321 million in 2002. The
segments sales also increased modestly from
$314 million in 2002 to $321 million in 2003. Despite
signs of increased capacity utilization in U.S. plastics
processing industries in the fourth quarter, orders and
shipments remained at low levels for the third consecutive year
due to depressed capital spending by our customers. In addition,
the segments results were penalized by weaker price
realization and reduced pension income but benefited from our
restructuring and cost reduction initiatives. Excluding
restructuring costs, the segment had operating earnings of
$6.7 million in 2003 compared to $8.0 million in 2002.
The decrease was due entirely to a $6.1 million reduction
in pension income and the absence of $4.5 million of
royalty income from the licensing of patented technology that
was received in 2002. Restructuring costs for the segment were
$7.7 million in 2003 and $6.7 million in 2002. In both
years, most of these costs related to the relocation of the
North American blow molding systems business and to supplemental
retirement benefits offered for the purpose of reducing the cost
structure of the segments injection molding and extrusion
machinery businesses. The restructuring actions initiated in
2002 and 2003 resulted in cost savings in excess of
$8 million in 2003 and are expected to produce savings of
almost $14 million in 2004. Including the actions that
began in 2001, the segments savings in 2004 are expected
to be almost $34 million.

Machinery technologies 
Europe The machinery
technologies  Europe segment had new orders of
$154 million and sales of $151 million in 2003
compared to orders of $122 million and sales of
$117 million in 2002. Currency translation effects related
to the strength of the euro in relation to the dollar
contributed about two-thirds of both increases. Sales of blow
molding systems were flat in relation to 2002 but orders and
shipments of European-built injection molding machines increased
as measured in local currency despite weaker price realization.
The segments operating results improved significantly as a
result of our recent restructuring of its blow molding systems
business as its loss excluding restructuring costs decreased
from $8.1 million in 2002 to $1.4 million in 2003.
Restructuring costs totaled $6.5 million in 2003 and
related principally to the restructuring of the blow molding
business and the discontinuation of certain of its product lines
and to overhead reductions in the segments injection
molding machinery business. To date, these 2003 actions have
resulted in savings in excess of $1 million but are
expected to result in savings in excess of $6 million in
2004. Including the benefits of additional actions that began in
2001, the segments total savings in 2004 are expected to
be approximately $14 million.

Mold
technologies In 2003, the
mold technologies segment had new orders and sales of
$169 million compared to $175 million of orders and
sales in 2002. The decreases occurred despite favorable currency
effects of approximately $10 million. The segments
profitability was adversely affected by low levels of industrial
production and capacity utilization in both North America and
Europe. Inefficiencies associated with the consolidation of the
segments European operations continued into 2003 and
adversely affected its results as did reduced profitability in
North America. Excluding restructuring costs, the segment had
operating earnings of $1.8 million in 2003 compared to
earnings of $5.3 million in 2002. Restructuring costs
totaled $12.6 million in 2003 and related principally to
overhead reductions in North America and to the further
consolidation of the segments European operations. The
actions in Europe included the closure of two

25



---



##### Table of Contents



manufacturing plants and the reorganization and
consolidation of the European marketing and sales structure.
Restructuring costs of $6.4 million in 2002 related
principally to the closure of a manufacturing plant in the U.S.
and to costs to integrate two businesses acquired in 2001 with
the segments existing European operations. The actions
initiated in 2002 and 2003 resulted in savings in excess of
$4 million and are expected to produce savings in excess of
$12 million in 2004. Including the effects of actions that
began in 2001, the segments 2004 savings will be
approximately $19 million.


Industrial
Fluids The industrial
fluids segment had new orders and sales of $104 million
compared to orders and sales of $96 million in 2002. Both
increases were due principally to currency effects related to
the segments operations in Europe. The segments
operating profit increased from $14.4 million in 2002 to
$15.7 million in 2003. The improvement occurred despite a
$.9 million reduction in pension income.



| |                         
| | ------------------------
| | Loss Before Income Taxes

Our pretax loss was $111.8 million in 2003
compared to a loss of $36.6 million in 2002. The amount for
2003 includes restructuring costs of $27.1 million and the
$65.6 million goodwill impairment charge. In 2002,
restructuring costs were $13.9 million. The comparison
between years was also adversely affected by a $7.1 million
reduction in the amount of pension income related to continuing
operations and the absence in 2003 of the previously discussed
$4.5 million of royalty income.



| |             
| | ------------
| | Income Taxes

As was previously discussed (see Significant
Accounting Policies and Judgments  Deferred Tax
Assets and Valuation Allowances), we recorded a $71 million
charge in the second quarter tax provision to establish
valuation allowances against a portion of the companys
U.S. deferred tax assets. Additional deferred tax assets
and valuation allowances were recorded in the second half of the
year. Due to the geographic mix of earnings and losses, the tax
provision for 2003 also includes income tax expense related to
profitable operations in non-U.S. jurisdictions. These
factors resulted in a 2003 provision for income taxes of
$72.7 million despite a pretax loss of $111.8 million.

In 2002, we recorded tax benefits related to
losses in the U.S. at the federal statutory rate. We also
had a favorable tax rate for non-U.S. operations due in
part to permanent deductions in The Netherlands, the benefits of
which were partially offset by increases in valuation allowances
in Germany and Italy. The 2002 consolidated effective rate of
almost 50% also benefited from the favorable resolution of tax
contingencies in the U.S. and other jurisdictions.



| |                                    
| | -----------------------------------
| | Loss From Continuing
    Operations

Our 2003 loss from continuing operations was
$184.5 million, or $5.49 per share, which includes
after-tax restructuring costs of $25.5 million, the
goodwill impairment charge of $65.6 million (with no tax
benefit) and the $71 million tax adjustment to record
U.S. valuation allowances. In 2002, our loss from
continuing operations was $18.4 million, or $.56 per
share. The loss for 2002 includes after-tax restructuring costs
and royalty income of $8.8 million and $2.8 million,
respectively. After-tax pension income was $.5 million in
2003 compared to $4.9 million in 2002.



| |                        
| | -----------------------
| | Discontinued Operations

In 2003 and 2002, the loss from discontinued
operations includes our round metalcutting tools and grinding
wheels businesses. The former was sold in two separate
transactions in September 2003 and the grinding wheels business
is expected to be sold early in 2004. In 2002, discontinued
operations also includes the Valenite and Widia and Werkö
metalcutting tools businesses that were sold in August of that
year. The losses that were incurred in both years resulted from
depressed levels of industrial production in North America
and  in 2002  Europe and India and from
inefficiencies associated with managing businesses in the
process of being sold.

26



---



##### Table of Contents



As discussed more fully in the notes to the
Consolidated Financial Statements, in 2002 we recorded a net
gain of $8.4 million related to the divestitures of
discontinued operations. In 2003, we recorded expense of
$.8 million to adjust sale-related accruals and reserves to
reflect current expectations.



| |                                                        
| | -------------------------------------------------------
| | 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 container blow molding and round metalcutting
tools businesses, the latter of which was sold in 2003.



| |         
| | --------
| | Net Loss

Our net loss for 2003 was $191.7 million, or
$5.70 per share, compared to a loss of $222.9 million,
or $6.67 per share, in 2002. The amount for 2003 includes
the previously discussed restructuring costs, goodwill
impairment charge, tax adjustment for valuation allowances and
the losses from discontinued operations. The loss for 2002
includes restructuring costs, the net loss from discontinued
operations and the cumulative effect adjustment.

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 $265 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 income of $1.0 million 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.

27



---



##### Table of Contents





| |                    
| | -------------------
| | 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 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 our existing
mold base and components business in Europe. The total cost of
completing the integration was originally expected to be
$9.2 million but was ultimately increased to
$11.0 million due to unanticipated costs related to the
integration and lower than expected realizable values for
surplus assets. Of the total cost, $1.2 million 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 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 involved 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 was phased out and transferred to various
other facilities in North America. These additional actions were
expected to result in incremental restructuring costs of $7 to
$8 million, of which $4.3 million was charged to
expense in 2002 with a majority of the remainder to be recorded
in 2003. The total cash cost of these initiatives was expected
to be approximately $6 million, most of which was to be
spent in 2003. The pretax annualized cost savings were expected
to exceed $4 million, most of which was realized in 2003.



| |                   
| | ------------------
| | Results By Segment

The following sections discuss the operating
results of our business segments which are presented in tabular
form on pages 74 through 76 of this Form 10-K. As
presented therein, segment operating profit or loss excludes
restructuring costs and goodwill impairment charges.

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. Excluding restructuring
costs of $6.7 million, the segment had operating earnings
of $8.0 million in 2002 compared to a 2001 operating loss
of $13.5 million which excludes $6.8 million of
restructuring costs. The amount for 2002 includes the previously
discussed $4.5 million of royalty income. Goodwill
amortization expense included in the 2001 amount 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

28



---



##### Table of Contents



$123 million to $117 million despite
favorable currency effects. Manufacturing margins also decreased
slightly in 2002 and the segments results 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. The segment had an operating loss of
$8.1 million in 2002 compared to a loss of
$9.1 million in 2001. The amount for 2002 excludes a credit
of $.4 million related to the reversal of excess
restructuring reserves that had been accrued in 2001 while the
loss for 2001 excludes restructuring expense of
$6.9 million. Goodwill amortization expense in 2001 was
$1.4 million.


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. Excluding restructuring
costs of $6.4 million, the segment had operating earnings
of $5.3 million in 2002 compared to earnings of
$12.1 million in 2001 which excludes restructuring costs of
$3.5 million. 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 amount for 2002 includes 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 $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
$18.1 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.



| |             
| | ------------
| | 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. The amount for 2002 includes after-tax
restructuring costs of

29



---



##### Table of Contents



$8.8 million and after-tax royalty income of
$2.8 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.




| |                        
| | -----------------------
| | 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 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 were 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 container blow molding and round metalcutting
tools businesses, the latter of which is now reported as a
discontinued operation.



| |         
| | --------
| | 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. The amount for 2002 includes the previously
discussed restructuring costs and royalty income as well as
losses from discontinued operations of $16.8 million and
the $187.7 million cumulative effect adjustment. The net
loss for 2001 includes the restructuring and goodwill
amortization costs that are discussed above as well as
$7.0 million of losses from discontinued operations.

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) including these amounts.

|                                              |  |               |      |      |  |      |      |   |  |   |       |  
|--------------------------------------------- |  | ------------- | ---- | ---- |  | ---- | ---- | - |  | - | ----- | -
|                                              |  | 2003          |      | 2002 |  | 2001
|                                              |  |               |      |      |  |     
|                                              |  |              
|                                              |  | (In millions)
|Machinery Technologies  North
    America    |  |               |      |      |  |      |      |   |  |   |       |  
|Segment operating earnings (loss) as reported |  | $             | 6.7  |      |  | $    | 8.0  |   |  | $ | (13.5 | )
|Restructuring costs                           |  |               | (7.7 | )    |  |      | (6.7 | ) |  |   | (6.8  | )
|                                              |  |               |      |      |  |      |      |   |  |   |       |  
|Adjusted operating earnings (loss)            |  | $             | (1.0 | )    |  | $    | 1.3  |   |  | $ | (20.3 | )
|                                              |  |               |      |      |  |      |      |   |  |   |       |  

30



---



##### Table of Contents



|                                    |  |               |      |      |  |      |      |   |  |   |       |  
|----------------------------------- |  | ------------- | ---- | ---- |  | ---- | ---- | - |  | - | ----- | -
|                                    |  | 2003          |      | 2002 |  | 2001
|                                    |  |               |      |      |  |     
|                                    |  |              
|                                    |  | (In millions)
|Machinery Technologies 
    Europe |  |               |      |      |  |      |      |   |  |   |       |  
|Segment operating loss as reported  |  | $             | (1.4 | )    |  | $    | (8.1 | ) |  | $ | (9.1  | )
|Restructuring costs                 |  |               | (6.5 | )    |  |      | .4   |   |  |   | (6.9  | )
|                                    |  |               |      |      |  |      |      |   |  |   |       |  
|Adjusted operating loss             |  | $             | (7.9 | )    |  | $    | (7.7 | ) |  | $ | (16.0 | )
|                                    |  |               |      |      |  |      |      |   |  |   |       |  

|                                       |  |               |       |      |  |      |      |   |  |   |      |  
|-------------------------------------- |  | ------------- | ----- | ---- |  | ---- | ---- | - |  | - | ---- | -
|                                       |  | 2003          |       | 2002 |  | 2001
|                                       |  |               |       |      |  |     
|                                       |  |              
|                                       |  | (In millions)
|Mold Technologies                      |  |               |       |      |  |      |      |   |  |   |      |  
|Segment operating earnings as reported |  | $             | 1.8   |      |  | $    | 5.3  |   |  | $ | 12.1 |  
|Restructuring costs                    |  |               | (12.6 | )    |  |      | (6.4 | ) |  |   | (3.5 | )
|                                       |  |               |       |      |  |      |      |   |  |   |      |  
|Adjusted operating earnings (loss)     |  | $             | (10.8 | )    |  | $    | (1.1 | ) |  | $ | 8.6  |  
|                                       |  |               |       |      |  |      |      |   |  |   |      |  

|                                       |  |               |      |      |  |      |      |  |  |   |      |  
|-------------------------------------- |  | ------------- | ---- | ---- |  | ---- | ---- |  |  | - | ---- | -
|                                       |  | 2003          |      | 2002 |  | 2001
|                                       |  |               |      |      |  |     
|                                       |  |              
|                                       |  | (In millions)
|Industrial Fluids                      |  |               |      |      |  |      |      |  |  |   |      |  
|Segment operating earnings as reported |  | $             | 15.7 |      |  | $    | 14.4 |  |  | $ | 18.1 |  
|Restructuring costs                    |  |               |     |      |  |      |     |  |  |   | (.3  | )
|                                       |  |               |      |      |  |      |      |  |  |   |      |  
|Adjusted operating earnings            |  | $             | 15.7 |      |  | $    | 14.4 |  |  | $ | 17.8 |  
|                                       |  |               |      |      |  |      |      |  |  |   |      |  

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, 2003, Milacron had outstanding forward
contracts totaling $4.7 million compared to
$5.0 million at December 31, 2002. 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, 2003, Milacrons
continuing operations had fixed interest rate debt of
$270 million, including $115 million of
8 3/8% Notes due March 15, 2004,
and 115 million
($143 million) of 7 5/8% Eurobonds due April 6,
2005. We also had floating rate debt totaling $53 million,
with interest fluctuating based primarily on changes in LIBOR.
At December 31, 2002, fixed rate debt related to continuing
operations totaled $246 million, and floating rate debt
totaled $55 million. We also had the ability to sell up to
$40 million of accounts receivable under our receivables
purchase agreement which resulted in financing fees that
fluctuated based on changes in commercial paper rates. As a
result, annual interest expense and financing fees fluctuated
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
$.3 million at December 31, 2003, and $.4 million
at December 31, 2002 under the arrangements in effect at
those dates.

On March 12, 2004, we entered into two new
financing agreements to repay our 8 3/8% Notes due
March 15, 2004, the outstanding debt under our revolving
credit facility which was terminated on March 12, 2004, and
our obligations under our receivables purchase agreement which
was terminated on March 12, 2004. Effective as of
March 12, 2004, our interest rate risk, including our
exposure to floating interest rates, is based on the new
financing arrangements. (See Liquidity and Sources of
Capital  Refinancing Actions on page 35).

31



---



##### Table of Contents



Off-Balance Sheet Arrangements



| |                             
| | ----------------------------
| | Sales of Accounts Receivable

As discussed more fully in the notes to the
Consolidated Financial Statements, Milacron has maintained a
receivables purchase agreement with a third party financial
institution for the last several years. Under this arrangement
we sold, on a revolving basis, an undivided percentage ownership
interest in designated pools of accounts receivable. As existing
receivables were collected, undivided interests in new eligible
receivables were sold. Accounts that became 60 days past
due were no longer eligible to be sold and Milacron was at risk
for any related credit losses. Credit losses have not been
significant in the past and we maintained an allowance for
doubtful accounts sufficient to cover our estimated exposures.
At December 31, 2003, approximately $36 million of
accounts receivable had been sold under this arrangement which
expired on March 12, 2004. The average amount sold during
2003 was also approximately $36 million. On March 12,
2004 this facility was repaid (see Liquidity and Sources of
Capital  Refinancing Actions on page 35).

Certain of Milacrons
non-U.S. subsidiaries also sell accounts receivable on an
ongoing basis for purposes of improving liquidity and cash
flows. Some of these sales are made with recourse, in which case
appropriate reserves for potential losses are provided. At
December 31, 2003, the gross amount of receivables sold
totaled $3.8 million. The average amount sold during the
year was approximately $5 million. Financing fees related
to these arrangements were not material.



| |                              
| | -----------------------------
| | Sales of Notes and Guarantees

In years prior to 2003, our U.S. operations
sold with recourse notes from its customers for the purchase of
plastics processing machinery. In certain other cases, Milacron
guaranteed the repayment of all or a portion of notes payable
from its customers to third party lenders. These arrangements
were entered into for the purpose of facilitating sales of
machinery. New sales of notes and guarantees were not
significant in 2003 but Milacron retains potential obligations
under earlier arrangements. In the event a customer fails to
repay a note, we generally regain title to the machinery. At
December 31, 2003, our maximum exposure under these
U.S. guarantees, as well as certain guarantees by certain
of the companys non-U.S. subsidiaries, totaled
$11.6 million. Losses related to sales of notes and
guarantees have not been material in the past.

Contractual Obligations

Milacrons contractual obligations for 2004
and beyond are shown as of December 31, 2003 in the table
that follows.

|                                  |                                 |               |       |      |  |       |       |       |  |        |       |     |  |   |      |      |  |   |       |      | 
|--------------------------------- | ------------------------------- | ------------- | ----- | ---- |  | ----- | ----- | ----- |  | ------ | ----- | --- |  | - | ---- | ---- |  | - | ----- | ---- | 
|                                  |                                 |               |       |      |  | 2005- |       | 2007- |  | Beyond
|                                  |                                 | Total         |       | 2004 |  | 2006  |       | 2008  |  | 2008  
|                                  |                                 |               |       |      |  |       |       |       |  |       
|                                  |                                 |              
|                                  |                                 | (In millions)
|Contractual Obligations           |                                 |               |       |      |  |       |       |       |  |        |       |     |  |   |      |      |  |   |       |     
|Long-term debt                    |                                 | $             | 263.7 |      |  | $     | 115.6 |       |  | $      | 147.2 |     |  | $ | .5   |      |  | $ | .4    |     
|Capital lease obligations         |                                 |               | 17.1  |      |  |       | 1.7   |       |  |        | 3.7   |     |  |   | 4.2  |      |  |   | 7.5   |     
|Operating leases                  |                                 |               | 34.6  |      |  |       | 11.8  |       |  |        | 14.2  |     |  |   | 6.2  |      |  |   | 2.4   |     
|Revolving credit facility(a)      |                                 |               | 42.0  |      |  |       | 42.0  |       |  |        |      |     |  |   |     |      |  |   |      |     
|Receivables purchase agreement(a) |                                 |               | 35.9  |      |  |       | 35.9  |       |  |        |      |     |  |   |     |      |  |   |      |     
|Purchase obligations(b)           |                                 |               |      |      |  |       |      |       |  |        |      |     |  |   |     |      |  |   |      |     
|Other long-term liabilities(c)    |                                 |               |       |      |  |       |       |       |  |        |       |     |  |   |      |      |  |   |       |     
|                                  | Pension plan contributions      |               |       | 41.8 |  |       |       | 3.1   |  |        |       | 5.4 |  |   |      | 30.2 |  |   |       | 3.1  | 
|                                  | Unfunded pension benefits(d)    |               |       | 78.5 |  |       |       | 2.8   |  |        |       | 5.8 |  |   |      | 6.2  |  |   |       | 63.7 | 
|                                  | Postretirement medical benefits |               |       | 48.7 |  |       |       | 3.1   |  |        |       | 5.2 |  |   |      | 4.7  |  |   |       | 35.7 | 
|                                  | Insurance reserves              |               |       | 22.9 |  |       |       | 4.4   |  |        |       | 4.7 |  |   |      | 3.6  |  |   |       | 10.2 | 
|                                  |                                 |               |       |      |  |       |       |       |  |        |       |     |  |   |      |      |  |   |       |     
|Total                             |                                 | $             | 585.2 |      |  | $     | 220.4 |       |  | $      | 186.2 |     |  | $ | 55.6 |      |  | $ | 123.0 |     
|                                  |                                 |               |       |      |  |       |       |       |  |        |       |     |  |   |      |      |  |   |       |     

32



---



##### Table of Contents





---



|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | The revolving credit facility was repaid on
    March 12, 2004. Amounts received under the receivables
    purchase agreement were also repaid on March 12, 2004.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   
|(b) |  | Milacron did not have any significant purchase
    obligations as of December 31, 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   
|(c) |  | Milacron will be required to make contributions
    to its defined benefit pension plan for certain
    U.S. employees beginning in 2004. The amounts shown above
    are estimates based on the current funded status of the plan.
    The amounts of actual contributions can be expected to vary
    based on factors such as returns on plan assets, changes in the
    plans discount rate and actuarial gains and losses. The
    amounts presented for unfunded pension benefits, other
    postretirement benefits and insurance reserves are also
    estimates and actual annual payments related to these
    obligations can be expected to differ from the amounts shown.
|   
|(d) |  | Represents liabilities related to unfunded
    pension plans in the U.S. and Germany.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

The above table excludes the contingent
liabilities of up to $15.4 million related to sales of
receivables and loan guarantees that are discussed above. The
above table also excludes contractual obligations arising from
the refinancing arrangements entered into on March 12, 2004
discussed below on page 35 under Liquidity and
Sources of Capital  Refinancing Actions.

Liquidity and Sources of Capital

At December 31, 2003, Milacron had cash and
cash equivalents of $93 million, a decrease of
$29 million from December 31, 2002. Approximately
$24 million of the decrease resulted from the payment in
2003 of post-closing adjustments related to the divestitures for
Valenite and Widia and Werkö which were sold in 2002. Of
the $93 million of cash at December 31, 2003,
approximately $3 million was used to collateralize sales of
certain non-U.S. receivables. A substantial amount of the
cash was held in foreign accounts in support of our
non-U.S. operations. Were this non-U.S. cash to be
repatriated, it could result in withholding taxes in foreign
jurisdictions.

Operating activities provided $10 million of
cash in 2003 due to reductions in inventories and trade
receivables that resulted from our aggressive working capital
management initiatives. Cash flows for 2003 also benefited from
the receipt of $21 million of refunds of income taxes paid
in prior years. These benefits were partially offset by
reductions of certain current liabilities. In 2002, operating
activities provided $36 million cash due principally to the
results of our working capital management programs.

Investing activities used $31 million of
cash in 2003, principally for post-closing adjustments related
to the 2002 divestitures and for acquisitions and capital
additions. In 2002, investing activities provided
$301 million of cash due to the divestiture proceeds which
were offset to some degree by capital expenditures and
acquisition-related costs.

In 2003, financing activities used
$6 million of cash, principally for debt repayments. In
2002, financing activities used $303 million of cash due to
debt repayments using a portion of the divestiture proceeds.

Milacrons current ratio related to
continuing operations was 1.0 at December 31, 2003 compared
to 1.6 at December 31, 2002. The change is due principally
to the reclassification of $115 million of
8 3/8% Notes due March 15, 2004 from noncurrent
liabilities at December 31, 2002 to current liabilities at
December 31, 2003.

Total shareholders equity was a deficit of
$34 million at December 31, 2003 a decrease of
$168 million from December 31, 2002. The decrease
resulted from the net loss incurred for the year which includes
the effects of the $66 million goodwill impairment charge
and the $71 million tax provision to establish
U.S. valuation allowances.

Total debt was $323 million at
December 31, 2003 compared to $302 million at
December 31, 2002. The increase resulted entirely from
currency effects and occurred despite $5 million of debt
repayments during the year.

33



---



##### Table of Contents



At December 31, 2003, Milacron had lines of
credit with various U.S. and non-U.S. banks totaling
approximately $94 million, including a $65 million
committed revolving credit facility. At December 31, 2003,
$54 million of the revolving credit facility was utilized,
including outstanding letters of credit of $12 million. The
facility matured on March 15, 2004.

The revolving credit facility included a number
of financial and other covenants, the most significant of which
required Milacron to achieve specified minimum levels of four
quarter trailing cumulative consolidated EBITDA (earnings before
interest, taxes, depreciation and amortization). At
December 31, 2003, Milacron was in compliance with all
covenants.

On March 12, 2004, all amounts borrowed
under the revolving credit facility were repaid (see Liquidity
and Sources of Capital  Refinancing Actions on
page 35).

In addition to the revolving credit facility, as
of December 31, 2003, we had a number of other credit lines
totaling $29 million, of which approximately
$15 million was available for use under various conditions.
Under the terms of the revolving credit facility, 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 February 12, 2004,
S&P announced it had lowered Milacrons corporate
credit rating to CCC and its senior unsecured rating to CCC-, in
both cases with a CreditWatch Developing outlook. At
the same time, the companys senior secured bank facility
was lowered to CCC. S&Ps ratings were reaffirmed on
March 11, 2004 and the outlook was changed to Credit
Watch Negative. On February 24, 2004, Moodys
announced that it had lowered Milacrons senior unsecured
rating to Caa2 and its senior implied rating to Caa1. The senior
secured rating was affirmed at B3 and all ratings were placed on
review for possible further downgrade. We believe the current
ratings of Moodys and S&P reflect uncertainty about
our ability to refinance the financial obligations that were due
on March 12 and March 15, 2004 (see Liquidity and
Sources of Capital  Refinancing Actions on
page 34) and expect that the ratings will be reconsidered
in the near future.

None of the companys debt instruments
include rating triggers that would accelerate maturity or
increase interest rates in the event of a ratings downgrade.
Accordingly, any future rating downgrades would 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.

Our accounts receivable purchase program with a
third party financial institution has been another important
source of liquidity for the last several years. During the
fourth quarter of 2003, the liquidity facility that supports the
program was extended from the scheduled expiration date of
December 31, 2003 to February 27, 2004. The
receivables purchase agreement was also amended to mature at
February 27, 2004. On February 27, 2004, the
expiration of the liquidity facility and the maturity of the
receivables purchase agreement were both extended to
March 12, 2004. Including $2.9 million related to
discontinued operations, $35.9 million of the
$40.0 million facility was utilized at December 31,
2003.

On March 12, 2004, this facility was repaid
(see Liquidity and Sources of Capital  Refinancing
Actions on page 35).

Milacron expects to generate positive cash flow
from operating activities during 2004, which will be partially
offset by up to $15 to $17 million for capital
expenditures. Assuming that we obtain the shareholder approval
described below under Liquidity and Sources of
Capital  Refinancing Actions, we believe that
Milacrons current cash position, cash flow from
operations, available credit lines, including the new credit
facility entered into on March 12, 2004 described below,
will be sufficient to meet the companys operating and
capital requirements in 2004. If we do not obtain the required
shareholder approval on or before July 29, 2004, our
liquidity will be materially impaired as described more fully
below.

34



---



##### Table of Contents





| |                    
| | -------------------
| | Refinancing Actions

On March 12, 2004, we entered into a
definitive agreement whereby Glencore Finance AG and Mizuho
International plc purchased $100 million in aggregate
principal amount of Milacrons new exchangeable debt
securities. The proceeds from this transaction, together with
existing cash balances, were used to repay the
8 3/8% Notes due March 15, 2004. The securities
we issued were $30 million of 20% Secured Step-Up
Series A Notes due 2007 and $70 million of 20% Secured
Step-Up Series B Notes due 2007. The $30 million of
Series A Notes are convertible into shares of our common
stock at a conversion price of $2.00 per share and
initially bear a combination of cash and pay-in-kind interest at
a total rate of 20% per annum. The $70 million of
Series B Notes initially bear a combination of cash and
pay-in-kind interest at a total rate of 20% per annum. Both
the Series A Notes and the Series B Notes are
exchangeable for a new series of Milacrons convertible
preferred stock with a cumulative dividend rate of 6%. Upon
receipt of shareholder approval of both (i) the
authorization of additional shares of our common stock and
(ii) the issuance of the new series of convertible
preferred stock convertible into such common stock and for which
the Series A Notes and the Series B Notes may be
exchanged, the interest rate applicable to both the
Series A Notes and the Series B Notes will be
retroactively reset to 6% per annum from the date of
issuance, payable in cash. Following receipt of shareholder
approval, as soon as a condition requiring the execution of a
refinancing of the
115 million
of 7 5/8% Eurobonds due in April 2005 is satisfied or
waived, all Series A Notes and Series B Notes (and any
common stock into which any Series A Notes had been
converted) will be exchanged for shares of the new series of
convertible preferred stock. If shareholder approval is not
obtained on or before July 29, 2004, the Series A
Notes and Series B Notes will be in default and will remain
outstanding until March 15, 2007 with an initial interest
rate of 20% from the date of issuance, increasing to 24% over
time, and any common stock into which any Series A Notes
had previously been converted will be exchanged for shares of
the companys currently authorized, but unissued, serial
preference stock with a 24% cumulative dividend rate.

Following exchange of the Series A Notes and
the Series B Notes for convertible preferred stock, the
holders of the convertible preferred stock would collectively
own approximately between 40% and 60% of Milacrons fully
diluted equity (on an as-converted basis), depending on whether
Milacron exercises an option to redeem a portion of the
convertible preferred stock with the proceeds from a rights
offering to its existing shareholders. After seven years, the
convertible preferred stock would automatically be converted
into common stock at a conversion price of $2.00 per share
but may be converted prior to that time at the option of the
holders. The conversion price would be subject to reset to
$1.75 per share at the end of the second quarter of 2005 if
a test based on Milacrons financial performance for 2004
is not satisfied. In addition, as part of the transaction we
have agreed to issue to holders of the convertible preferred
stock contingent warrants to purchase an aggregate of
one million shares of our common stock, subject to
receiving shareholder approval to increase our authorized common
stock, which contingent warrants will be exercisable only if a
test based on Milacrons financial performance for 2005 is
not satisfied. Assuming that Milacron does not conduct a rights
offering to its existing shareholders, and both the conversion
price of the convertible preferred stock is reset to $1.75 and
the contingent warrants are exercised, the holders of the
convertible preferred stock would own approximately 62.5% of
Milacrons fully diluted equity (on an as-converted basis).

The events contemplated by the agreement with
Glencore Finance AG and Mizuho International plc could
result in an ownership change of Milacron for tax
purposes. Were this to occur, the timing of our utilization of
tax loss carryforwards and other tax attributes could be
substantially delayed. Accordingly, this could affect income tax
expense and cash income taxes in future years.

If we do not obtain shareholder approval of both
the authorization of additional shares of our common stock and
the issuance of the new series of convertible preferred stock
convertible into such common stock on or before July 29,
2004, our liquidity will be materially impaired as the
Series A Notes and the Series B Notes will go into
default and the interest rates thereon will become significantly
higher. If shareholder approval has not been obtained on or
before July 29, 2004, the interest payable on the
Series A Notes and the Series B Notes will no longer
be eligible for retroactive reset to 6%. Instead, interest on
the Series A Notes and the Series B Notes will be
payable in arrears (a) on September 15, 2004 in cash
at a rate of 12% per annum and in additional Series A
Notes or Series B Notes, as applicable, at a rate of
8% per annum, (b) on March 15, 2005

35



---



##### Table of Contents



in cash at a rate of 16% per annum and in
additional Series A Notes or Series B Notes, as
applicable, at a rate of 8% per annum, (c) on
September 15, 2005 in cash at a rate of 20% per annum
and in additional Series A Notes or Series B Notes, as
applicable, at a rate of 4% per annum, and (d) on
March 15, 2006, and through to maturity on March 15,
2007, in cash at a rate of 24% per annum.


Pursuant to the definitive agreement with
Glencore Finance AG and Mizuho International plc, Milacron has
agreed to use its commercially reasonable efforts to cause a
number of persons selected by holders of the Series A
Notes, acting together, to be appointed or elected to a number
of directorships on Milacrons board of directors in
proportion to the percentage of Milacrons fully diluted
equity represented by the number of shares of common stock into
which the Series A Notes may be converted, rounded up to
the nearest whole number.

On March 12, 2004, Milacron also reached a
separate agreement with Credit Suisse First Boston for a
$140 million credit facility having a term of approximately
one year. At close, extensions of credit under the facility in
an aggregate amount of $84 million were utilized to repay
and terminate Milacrons existing revolving credit facility
and its existing receivables purchase program.

This new credit facility consists of a
$65 million revolving A facility, with a $25 million
subfacility for letters of credit, and a $75 million term
loan B facility. Milacron and certain of its wholly-owned
domestic subsidiaries are joint and several borrowers under the
new credit facility and the entire new credit facility is
secured by first priority liens on substantially all assets of
Milacron and its domestic subsidiaries and includes pledges of
stock of various wholly-owned domestic subsidiaries and certain
foreign subsidiaries.

Availability under the revolving A facility is
limited by a borrowing base calculated based upon specified
percentages of eligible receivables and eligible inventory, a
$10 million minimum availability covenant (resulting in
aggregate availability of no more than $55 million) and
other reserve requirements. In addition, the borrowing base is
subject to the customary ability of the administrative agent for
the lenders to reduce advance rates, impose or change collateral
value limitations, establish reserves and declare certain
collateral ineligible from time to time in its reasonable
discretion, any of which could reduce our borrowing availability
under the revolving A facility at any time. At March 12,
2004, additional availability under the revolving A facility was
approximately $20 million, after taking into account the
minimum availability and existing reserve requirements.

With the exception of $4 million of domestic
cash that may be held by Milacron outside the control of the
administrative agent, all proceeds of Milacrons domestic
accounts receivable and other domestic collateral are subject to
a daily cash sweep. Under the terms of the new
credit facility, these proceeds are deposited in lockbox
accounts under the control of the administrative agent and then
transferred to blocked accounts under the control of the
administrative agent. Each business day, the funds in the
blocked accounts will be applied to pay down any outstanding
borrowings under the revolving A facility. As a result,
Milacrons liquidity is likely to be dependent on its
ability to continue to make borrowings under the new credit
facility. If Milacron is unable to satisfy the conditions to
borrowing under the new credit facility, which include, among
other things, conditions related to the continued accuracy of
our representations and warranties and the absence of any
unmatured or matured defaults, or any material adverse change in
our business or financial condition, without a waiver we would
lose access to this important source of liquidity and our
financial condition would be materially impaired.

Milacron has the ability to prepay the revolving
A facility, in whole or in part, at any time without penalty.
Milacron has the option to prepay the term loan B facility
at any time, subject to a 2% prepayment fee on the principal
amount prepaid, as follows: (i) in whole, to the extent
concurrently therewith or prior thereto all revolving A loans
have been repaid in full and all commitments under the revolving
A facility have been terminated, or (ii) in whole or in
part, if availability under the revolving A facility exceeds
$10 million and no event of default exists. Prepayments of
term loan B loans permanently reduce Milacrons
availability under the new credit facility. Milacron is also
required to make prepayments in connection with, among other
things, asset sales and casualty events and in connection with
the issuance of debt or equity, tax refunds, proceeds from other
corporate events and other extraordinary receipts.
Additionally, there are limitations placed on the amounts that
can be paid to the holders of the 7 5/8% Eurobonds due
April 2005 without causing a prepayment event.

36



---



##### Table of Contents



The new credit facility includes a number of
affirmative and negative covenants, including, but not limited
to, negative covenants limiting the ability of Milacron and its
subsidiaries to incur additional debt, incur liens, make capital
expenditures, issue or sell capital stock and make restricted
payments (including a prohibition on the ability to make cash
interest or dividend payments on debt or equity securities
issued pursuant to the terms of the definitive agreement entered
into on March 12, 2004 among Milacron, Mizuho
International plc and Glencore Finance AG, unless
availability under the revolving A facility exceeds
$25 million before taking into account minimum availability
requirements). The new credit facility also includes a financial
covenant that requires the company to achieve specified minimum
levels of monthly cumulative EBITDA (earnings before interest,
taxes, depreciation and amortization) adjusted to exclude
certain restructuring costs and certain other items, each as
specified in the financing agreement.

The new credit facility is subject to various
events of default, including an event of default if the company
does not obtain shareholder approval of both the authorization
of additional shares of its common stock and the issuance of a
new series of convertible preferred stock convertible into such
common stock on or before July 29, 2004.

Borrowings under the new credit facility will
bear interest, at Milacrons option, based upon either
(i) a LIBOR rate plus the applicable margin (as defined
below) or (ii) a reference rate plus the applicable margin
(as defined below). The applicable margin, with
respect to revolver A LIBOR loans, is 3.25% per annum, and
with respect to revolver A reference rate loans, is
1.5% per annum. The applicable margin, with
respect to term loan B LIBOR loans, is 10.5% per
annum, and with respect to term loan B reference rate
loans, is 8.00% per annum. In no event will the interest
rate of (a) revolver A LIBOR loans be less than 4.75% and
(b) revolver A reference rate loans be less than 5.5%. In no
event will the interest rate of term loan B LIBOR loans or
term loan B reference rate loans be less than 12%.

After giving effect to the repayment and
termination of the existing revolving credit facility and the
accounts receivable liquidity facility and repayment of the
senior U.S. notes, Milacrons current cash balance was
approximately $60 million at March 15, 2004.

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 2004 and beyond
and cause them to differ materially from those expressed in any
of our forward-looking statements:



| |   |                                                                                                                                                                                                                                                                                      
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | obtaining shareholder approval of both the
    authorization of additional shares of common stock and the
    issuance of preferred stock convertible into such common stock
    in connection with the refinancing arrangements entered into on
    March 12, 2004;                 
|
| |  | global and regional economic conditions, consumer
    spending, capital spending levels and industrial production,
    particularly in segments related to the level of automotive
    production and spending in the plastics and construction
    industries;                      
|
| |  | 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;                    
|
| |  | fluctuations in interest rates which affect the
    cost of borrowing;                                                                                                                                                                                                               
|
| |  | 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;

37



---



##### Table of Contents





| |   |                                                                                                                                                                                                                                                                                                                                  
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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 2003 and products expected to be introduced in 2004;                                                                                                                                                                                                                   
|
| |  | 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 increased pension
    expense and reduced shareholders equity and require us to
    make significant cash contributions in the future.                                                                                                  






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

The Information required by Item 7A is
included in Item 7 on page 31 of this Form 10-K.






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

Beginning on page 40 and continuing through
page 80 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.

38



---



##### 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, 2003 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, 2003, 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
    Chairman, President and
    Chief Executive Officer |  | Robert P. Lienesch
    Vice President  Finance
    and Chief Financial Officer

February 10, 2004

39



---



##### Table of Contents



MILACRON INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF
OPERATIONS

Years ended December 31, 2003, 2002 and
2001


|                                                                                                                    |                                                         |                                |                       |       |       |       |        |       |       |       |       |       |       |       | 
|------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------- | ------------------------------ | --------------------- | ----- | ----- | ----- | ------ | ----- | ----- | ----- | ----- | ----- | ----- | ----- | 
|                                                                                                                    |                                                         | 2003                           |                       | 2002  |       | 2001 
|                                                                                                                    |                                                         |                                |                       |       |       |      
|                                                                                                                    |                                                         |                               
|                                                                                                                    |                                                         | (In millions, except          
|                                                                                                                    |                                                         | per-share amounts)            
|Sales                                                                                                               |                                                         | $                              | 739.7                 |       |       | $     | 693.2  |       |       | $     | 755.2 |      
|                                                                                                                    | Cost of products sold                                   |                                |                       | 605.3 |       |       |        | 571.6 |       |       |       | 623.7 |      
|                                                                                                                    | Cost of products sold related to restructuring          |                                |                       | 3.3   |       |       |        | 1.9   |       |       |       | 3.1   |      
|                                                                                                                    |                                                         |                                |                       |       |       |       |        |       |       |       |       |      
|                                                                                                                    |                                                         | Total cost of products sold    |                       |       | 608.6 |       |        |       | 573.5 |       |       |       | 626.8 |      
|                                                                                                                    |                                                         |                                |                       |       |       |       |        |       |       |       |       |      
|                                                                                                                    |                                                         |                                | Manufacturing margins |       |       | 131.1 |        |       |       | 119.7 |       |       |       | 128.4 | 
|Other costs and expenses                                                                                            |                                                         |                                |                       |       |       |       |        |       |       |       |       |      
|                                                                                                                    | Selling and administrative                              |                                |                       | 129.0 |       |       |        | 121.0 |       |       |       | 129.6 |      
|                                                                                                                    | Goodwill impairment charge                              |                                |                       | 65.6  |       |       |        | 1.0   |       |       |       |      |      
|                                                                                                                    | Restructuring costs                                     |                                |                       | 23.8  |       |       |        | 12.0  |       |       |       | 14.4  |      
|                                                                                                                    | Other expense-net                                       |                                |                       | 1.5   |       |       |        | (1.0  | )     |       |       | 12.9  |      
|                                                                                                                    |                                                         |                                |                       |       |       |       |        |       |       |       |       |      
|                                                                                                                    |                                                         | Total other costs and expenses |                       |       | 219.9 |       |        |       | 133.0 |       |       |       | 156.9 |      
|                                                                                                                    |                                                         |                                |                       |       |       |       |        |       |       |       |       |      
|Operating loss                                                                                                      |                                                         |                                | (88.8                 | )     |       |       | (13.3  | )     |       |       | (28.5 | )    
|Interest                                                                                                            |                                                         |                                |                       |       |       |       |        |       |       |       |       |      
|                                                                                                                    | Income                                                  |                                |                       | 1.9   |       |       |        | 2.2   |       |       |       | 1.7   |      
|                                                                                                                    | Expense                                                 |                                |                       | (24.9 | )     |       |        | (25.5 | )     |       |       | (24.2 | )    
|                                                                                                                    |                                                         |                                |                       |       |       |       |        |       |       |       |       |      
|                                                                                                                    |                                                         | Interest-net                   |                       |       | (23.0 | )     |        |       | (23.3 | )     |       |       | (22.5 | )    
|                                                                                                                    |                                                         |                                |                       |       |       |       |        |       |       |       |       |      
|Loss from continuing operations before income
    taxes and cumulative effect of change in method of
    accounting |                                                         |                                | (111.8                | )     |       |       | (36.6  | )     |       |       | (51.0 | )    
|Provision (benefit) for income taxes                                                                                |                                                         |                                | 72.7                  |       |       |       | (18.2  | )     |       |       | (22.3 | )    
|                                                                                                                    |                                                         |                                |                       |       |       |       |        |       |       |       |       |      
|Loss from continuing operations before
    cumulative effect of change in method of accounting                      |                                                         |                                | (184.5                | )     |       |       | (18.4  | )     |       |       | (28.7 | )    
|Discontinued operations net of income taxes                                                                         |                                                         |                                |                       |       |       |       |        |       |       |       |       |      
|                                                                                                                    | Loss from operations                                    |                                |                       | (6.4  | )     |       |        | (25.2 | )     |       |       | (7.0  | )    
|                                                                                                                    | Net gain (loss) on divestitures                         |                                |                       | (.8   | )     |       |        | 8.4   |       |       |       |      |      
|                                                                                                                    |                                                         |                                |                       |       |       |       |        |       |       |       |       |      
|                                                                                                                    |                                                         | Total discontinued operations  |                       |       | (7.2  | )     |        |       | (16.8 | )     |       |       | (7.0  | )    
|Cumulative effect of change in method of
    accounting                                                             |                                                         |                                |                      |       |       |       | (187.7 | )     |       |       |      |      
|                                                                                                                    |                                                         |                                |                       |       |       |       |        |       |       |       |       |      
|Net loss                                                                                                            |                                                         | $                              | (191.7                | )     |       | $     | (222.9 | )     |       | $     | (35.7 | )    
|                                                                                                                    |                                                         |                                |                       |       |       |       |        |       |       |       |       |      
|Loss per common share  basic and
    diluted                                                                       |                                                         |                                |                       |       |       |       |        |       |       |       |       |      
|                                                                                                                    | Continuing operations                                   |                                | $                     | (5.49 | )     |       | $      | (.56  | )     |       | $     | (.87  | )    
|                                                                                                                    | Discontinued operations                                 |                                |                       | (.21  | )     |       |        | (.50  | )     |       |       | (.21  | )    
|                                                                                                                    | Cumulative effect of change in method of
    accounting |                                |                       |      |       |       |        | (5.61 | )     |       |       |      |      
|                                                                                                                    |                                                         |                                |                       |       |       |       |        |       |       |       |       |      
|                                                                                                                    | Net loss                                                |                                | $                     | (5.70 | )     |       | $      | (6.67 | )     |       | $     | (1.08 | )    
|                                                                                                                    |                                                         |                                |                       |       |       |       |        |       |       |       |       |      

See notes to consolidated financial statements.

40



---



##### Table of Contents



MILACRON INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

December 31, 2003 and 2002


|                                                         |                                                                                       |                                              |                   |        |       |       |       |        |       |       | 
|-------------------------------------------------------- | ------------------------------------------------------------------------------------- | -------------------------------------------- | ----------------- | ------ | ----- | ----- | ----- | ------ | ----- | ----- | 
|                                                         |                                                                                       | 2003                                         |                   | 2002  
|                                                         |                                                                                       |                                              |                   |       
|                                                         |                                                                                       |                                             
|                                                         |                                                                                       | (In millions, except                        
|                                                         |                                                                                       | par value)                                  
|ASSETS                                                  
|Current assets                                           |                                                                                       |                                              |                   |        |       |       |       |       
|                                                         | Cash and cash equivalents                                                             |                                              | $                 | 92.8   |       |       | $     | 122.3  |      
|                                                         | Notes and accounts receivable, less allowances of
    $15.1 in 2003 and $12.4 in 2002 |                                              |                   | 93.8   |       |       |       | 89.3   |      
|                                                         | Inventories                                                                           |                                              |                   |        |       |       |       |        |      
|                                                         | Raw materials                                                                         |                                              |                   | 8.1    |       |       |       | 7.1    |      
|                                                         | Work-in-process and finished parts                                                    |                                              |                   | 57.1   |       |       |       | 65.5   |      
|                                                         | Finished products                                                                     |                                              |                   | 67.1   |       |       |       | 75.0   |      
|                                                         |                                                                                       |                                              |                   |        |       |       |       |       
|                                                         |                                                                                       |                                              | Total inventories |        |       | 132.3 |       |        |       | 147.6 | 
|                                                         | Other current assets                                                                  |                                              |                   | 45.2   |       |       |       | 69.6   |      
|                                                         |                                                                                       |                                              |                   |        |       |       |       |       
|                                                         |                                                                                       | Current assets of continuing operations      |                   |        | 364.1 |       |       |        | 428.8 |      
|                                                         | Assets of discontinued operations                                                     |                                              |                   | 7.2    |       |       |       | 16.0   |      
|                                                         |                                                                                       |                                              |                   |        |       |       |       |       
|                                                         |                                                                                       | Total current assets                         |                   |        | 371.3 |       |       |        | 444.8 |      
|Property, plant and equipment  net                      |                                                                                       |                                              | 140.8             |        |       |       | 149.8 |       
|Goodwill                                                 |                                                                                       |                                              | 83.8              |        |       |       | 143.3 |       
|Other noncurrent assets                                  |                                                                                       |                                              | 115.6             |        |       |       | 177.8 |       
|                                                         |                                                                                       |                                              |                   |        |       |       |       |       
|Total assets                                             |                                                                                       | $                                            | 711.5             |        |       | $     | 915.7 |       
|                                                         |                                                                                       |                                              |                   |        |       |       |       |       
|                                                        
|LIABILITIES AND SHAREHOLDERS EQUITY
    (DEFICIT)      
|Current liabilities                                      |                                                                                       |                                              |                   |        |       |       |       |       
|                                                         | Borrowings under lines of credit                                                      |                                              | $                 | 42.6   |       |       | $     | 45.0   |      
|                                                         | Long-term debt and capital lease obligations due
    within one year                  |                                              |                   | 117.3  |       |       |       | 1.1    |      
|                                                         | Trade accounts payable                                                                |                                              |                   | 67.9   |       |       |       | 68.8   |      
|                                                         | Advance billings and deposits                                                         |                                              |                   | 15.2   |       |       |       | 17.5   |      
|                                                         | Accrued and other current liabilities                                                 |                                              |                   | 109.3  |       |       |       | 138.9  |      
|                                                         |                                                                                       |                                              |                   |        |       |       |       |       
|                                                         |                                                                                       | Current liabilities of continuing operations |                   |        | 352.3 |       |       |        | 271.3 |      
|                                                         | Liabilities of discontinued operations                                                |                                              |                   | 1.8    |       |       |       | 10.9   |      
|                                                         |                                                                                       |                                              |                   |        |       |       |       |       
|                                                         |                                                                                       | Total current liabilities                    |                   |        | 354.1 |       |       |        | 282.2 |      
|Long-term accrued liabilities                            |                                                                                       |                                              | 227.8             |        |       |       | 244.1 |       
|Long-term debt                                           |                                                                                       |                                              | 163.5             |        |       |       | 255.4 |       
|                                                         |                                                                                       |                                              |                   |        |       |       |       |       
|                                                         |                                                                                       | Total liabilities                            |                   |        | 745.4 |       |       |        | 781.7 |      
|Commitments and contingencies                            |                                                                                       |                                              |                  |        |       |       |      |       
|Shareholders equity (deficit)                           |                                                                                       |                                              |                   |        |       |       |       |       
|                                                         | 4% Cumulative Preferred shares                                                        |                                              |                   | 6.0    |       |       |       | 6.0    |      
|                                                         | Common shares, $1 par value (outstanding:
    34.8 in 2003 and 33.8 in 2002)          |                                              |                   | 34.8   |       |       |       | 33.8   |      
|                                                         | Capital in excess of par value                                                        |                                              |                   | 284.0  |       |       |       | 283.5  |      
|                                                         | Accumulated deficit                                                                   |                                              |                   | (252.0 | )     |       |       | (59.5  | )    
|                                                         | Accumulated other comprehensive loss                                                  |                                              |                   | (106.7 | )     |       |       | (129.8 | )    
|                                                         |                                                                                       |                                              |                   |        |       |       |       |       
|                                                         |                                                                                       | Total shareholders equity
    (deficit)     |                   |        | (33.9 | )     |       |        | 134.0 |      
|                                                         |                                                                                       |                                              |                   |        |       |       |       |       
|Total liabilities and shareholders
    equity (deficit) |                                                                                       | $                                            | 711.5             |        |       | $     | 915.7 |       
|                                                         |                                                                                       |                                              |                   |        |       |       |       |       

See notes to consolidated financial statements.

41



---



##### Table of Contents



MILACRON INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE
INCOME AND SHAREHOLDERS EQUITY (DEFICIT)

Years ended December 31, 2003, 2002 and
2001


|                                                              |                                    |                                         |        |               |  |               |        |        |  |            |     |            |  |               |      |   |  |   |       |   |  |   |        |       |   |   |        |       |  
|------------------------------------------------------------- | ---------------------------------- | --------------------------------------- | ------ | ------------- |  | ------------- | ------ | ------ |  | ---------- | --- | ---------- |  | ------------- | ---- | - |  | - | ----- | - |  | - | ------ | ----- | - | - | ------ | ----- | -
|                                                              |                                    |                                         |        | Other         |  |               |        | Common |  |            |     |            |  | Total        
|                                                              |                                    | Comprehensive                           |        | Comprehensive |  | 4% Cumulative |        | Shares |  | Capital in |     | Reinvested |  | Shareholders
|                                                              |                                    | Income                                  |        | Income        |  | Preferred     |        | $1 Par |  | Excess of  |     | Earnings   |  | Equity       
|                                                              |                                    | (Loss)                                  |        | (Loss)        |  | Shares        |        | Value  |  | Par Value  |     | (Deficit)  |  | (Deficit)    
|                                                              |                                    |                                         |        |               |  |               |        |        |  |            |     |            |  |              
|                                                              |                                    |                                        
|                                                              |                                    | (In millions, except per-share amounts)
|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  |      
|Net restricted stock activity                                 |                                    |                                         |        |               |  |               |        |        |  |            |     |            |  |               | .8   |   |  |   | (.6   | ) |  |   |        |       |   |   | .2     |      
|Reissuance of treasury shares                                 |                                    |                                         |        |               |  |               |        |        |  |            |     |            |  |               | .2   |   |  |   | 1.1   |   |  |   |        |       |   |   | 1.3    |      
|Net loss for the year                                         |                                    | $                                       | (191.7 | )             |  |               |        |        |  |            |     |            |  |               |      |   |  |   |       |   |  |   | (191.7 | )     |   |   | (191.7 | )    
|Other comprehensive income                                    |                                    |                                         | 23.1   |               |  |               | 23.1   |        |  |            |     |            |  |               |      |   |  |   |       |   |  |   |        |       |   |   | 23.1   |      
|                                                              |                                    |                                         |        |               |  |               |        |        |  |            |     |            |  |               |      |   |  |   |       |   |  |   |        |       |   |   |        |      
|Total comprehensive loss                                      |                                    | $                                       | (168.6 | )             |  |               |        |        |  |            |     |            |  |               |      |   |  |   |       |   |  |   |        |       |   |   |        |      
|                                                              |                                    |                                         |        |               |  |               |        |        |  |            |     |            |  |               |      |   |  |   |       |   |  |   |        |       |   |   |        |      
|Cash dividends                                                |                                    |                                         |        |               |  |               |        |        |  |            |     |            |  |               |      |   |  |   |       |   |  |   |        |       |   |   |        |      
|                                                              | Preferred shares ($2.00 per share) |                                         |        |               |  |               |        |        |  |            |     |            |  |               |      |   |  |   |       |   |  |   |        | (.1   | ) |   |        | (.1   | )
|                                                              | Common shares ($.02 per share)     |                                         |        |               |  |               |        |        |  |            |     |            |  |               |      |   |  |   |       |   |  |   |        | (.7   | ) |   |        | (.7   | )
|                                                              |                                    |                                         |        |               |  |               |        |        |  |            |     |            |  |               |      |   |  |   |       |   |  |   |        |       |   |   |        |      
|Balance at year-end 2003                                      |                                    |                                         |        |               |  | $             | (106.7 | )      |  | $          | 6.0 |            |  | $             | 34.8 |   |  | $ | 284.0 |   |  | $ | (252.0 | )     |   | $ | (33.9  | )    
|                                                              |                                    |                                         |        |               |  |               |        |        |  |            |     |            |  |               |      |   |  |   |       |   |  |   |        |       |   |   |        |      

See notes to consolidated financial statements.

42



---



##### Table of Contents



MILACRON INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH
FLOWS

Years ended December 31, 2003, 2002 and
2001


|                                                                      |                                 |                                                             |                                                         |                                                      |        |       |       |   |        |        |       |   |       |       |       |  
|--------------------------------------------------------------------- | ------------------------------- | ----------------------------------------------------------- | ------------------------------------------------------- | ---------------------------------------------------- | ------ | ----- | ----- | - | ------ | ------ | ----- | - | ----- | ----- | ----- | -
|                                                                      |                                 | 2003                                                        |                                                         | 2002                                                 |        | 2001 
|                                                                      |                                 |                                                             |                                                         |                                                      |        |      
|                                                                      |                                 |                                                            
|                                                                      |                                 | (In millions)                                              
|Increase (decrease) in cash and cash
    equivalents                  |                                 |                                                             |                                                         |                                                      |        |       |       |   |        |        |       |  
|                                                                      | Operating activities cash flows |                                                             |                                                         |                                                      |        |       |       |   |        |        |       |   |      
|                                                                      |                                 | Net loss                                                    |                                                         | $                                                    | (191.7 | )     |       | $ | (222.9 | )      |       | $ | (35.7 | )    
|                                                                      |                                 | Operating activities providing (using) cash                 |                                                         |                                                      |        |       |       |   |        |        |       |   |       |      
|                                                                      |                                 |                                                             | Loss from discontinued operations                       |                                                      |        | 6.4   |       |   |        | 25.2   |       |   |       | 7.0   |      
|                                                                      |                                 |                                                             | Net (gain) loss on divestitures                         |                                                      |        | .8    |       |   |        | (8.4   | )     |   |       |      |      
|                                                                      |                                 |                                                             | Cumulative effect of change in method of
    accounting |                                                      |        |      |       |   |        | 187.7  |       |   |       |      |      
|                                                                      |                                 |                                                             | Depreciation                                            |                                                      |        | 20.3  |       |   |        | 22.0   |       |   |       | 23.7  |      
|                                                                      |                                 |                                                             | Amortization of goodwill and other intangibles          |                                                      |        | 1.4   |       |   |        | 1.0    |       |   |       | 11.2  |      
|                                                                      |                                 |                                                             | Restructuring costs                                     |                                                      |        | 27.1  |       |   |        | 13.9   |       |   |       | 17.5  |      
|                                                                      |                                 |                                                             | Goodwill impairment charge                              |                                                      |        | 65.6  |       |   |        | 1.0    |       |   |       |      |      
|                                                                      |                                 |                                                             | Deferred income taxes                                   |                                                      |        | 73.3  |       |   |        | (16.7  | )     |   |       | (15.6 | )    
|                                                                      |                                 |                                                             | Working capital changes                                 |                                                      |        |       |       |   |        |        |       |   |       |       |      
|                                                                      |                                 |                                                             |                                                         | Notes and accounts receivable                        |        |       | 6.6   |   |        |        | 9.7   |   |       |       | 41.2  |  
|                                                                      |                                 |                                                             |                                                         | Inventories                                          |        |       | 23.7  |   |        |        | 36.0  |   |       |       | 44.9  |  
|                                                                      |                                 |                                                             |                                                         | Other current assets                                 |        |       | 13.9  |   |        |        | 2.4   |   |       |       | (.3   | )
|                                                                      |                                 |                                                             |                                                         | Trade accounts payable                               |        |       | (6.1  | ) |        |        | 6.9   |   |       |       | (36.9 | )
|                                                                      |                                 |                                                             |                                                         | Other current liabilities                            |        |       | (31.3 | ) |        |        | (11.0 | ) |       |       | (43.2 | )
|                                                                      |                                 |                                                             | Decrease (increase) in other noncurrent assets          |                                                      |        | 1.2   |       |   |        | (7.0   | )     |   |       | (19.3 | )    
|                                                                      |                                 |                                                             | Decrease in long-term accrued liabilities               |                                                      |        | (2.7  | )     |   |        | (4.2   | )     |   |       | (3.2  | )    
|                                                                      |                                 |                                                             | Other-net                                               |                                                      |        | 1.5   |       |   |        | .3     |       |   |       | 3.4   |      
|                                                                      |                                 |                                                             |                                                         |                                                      |        |       |       |   |        |        |       |  
|                                                                      |                                 |                                                             |                                                         | Net cash provided (used) by operating
    activities |        |       | 10.0  |   |        |        | 35.9  |   |       |       | (5.3  | )
|                                                                      | Investing activities cash flows |                                                             |                                                         |                                                      |        |       |       |   |        |        |       |   |      
|                                                                      |                                 | Capital expenditures                                        |                                                         |                                                      | (6.5   | )     |       |   | (6.2   | )      |       |   | (13.5 | )    
|                                                                      |                                 | Net disposals of property, plant and equipment              |                                                         |                                                      | 2.5    |       |       |   | 7.5    |        |       |   | 5.1   |      
|                                                                      |                                 | Divestitures                                                |                                                         |                                                      | (20.3  | )     |       |   | 303.9  |        |       |   |      |      
|                                                                      |                                 | Acquisitions                                                |                                                         |                                                      | (6.5   | )     |       |   | (4.3   | )      |       |   | (28.6 | )    
|                                                                      |                                 |                                                             |                                                         |                                                      |        |       |       |   |        |        |       |  
|                                                                      |                                 |                                                             | Net cash provided (used) by investing
    activities    |                                                      |        | (30.8 | )     |   |        | 300.9  |       |   |       | (37.0 | )    
|                                                                      | Financing activities cash flows |                                                             |                                                         |                                                      |        |       |       |   |        |        |       |   |      
|                                                                      |                                 | Dividends paid                                              |                                                         |                                                      | (.8    | )     |       |   | (1.6   | )      |       |   | (12.6 | )    
|                                                                      |                                 | Issuance of long-term debt                                  |                                                         |                                                      |       |       |       |   | 11.5   |        |       |   | 5.4   |      
|                                                                      |                                 | Repayments of long-term debt                                |                                                         |                                                      | (2.2   | )     |       |   | (1.3   | )      |       |   | (5.5  | )    
|                                                                      |                                 | Increase (decrease) in borrowings under lines of
    credit |                                                         |                                                      | (2.6   | )     |       |   | (311.6 | )      |       |   | 118.7 |      
|                                                                      |                                 | Issuance of common shares                                   |                                                         |                                                      |       |       |       |   | .4     |        |       |   | 4.1   |      
|                                                                      |                                 | Purchase of treasury and other common shares                |                                                         |                                                      |       |       |       |   |       |        |       |   | (7.7  | )    
|                                                                      |                                 |                                                             |                                                         |                                                      |        |       |       |   |        |        |       |  
|                                                                      |                                 |                                                             | Net cash provided (used) by financing
    activities    |                                                      |        | (5.6  | )     |   |        | (302.6 | )     |   |       | 102.4 |      
|Effect of exchange rate fluctuations on cash
    and cash equivalents |                                 |                                                             | 8.8                                                     |                                                      |        |       | 5.6   |   |        |        | (.7   | )
|Cash flows related to discontinued
    operations                     |                                 |                                                             | (11.9                                                   | )                                                    |        |       | (7.6  | ) |        |        | (3.1  | )
|                                                                      |                                 |                                                             |                                                         |                                                      |        |       |       |   |        |        |       |  
|Increase (decrease) in cash and cash
    equivalents                  |                                 |                                                             | (29.5                                                   | )                                                    |        |       | 32.2  |   |        |        | 56.3  |  
|Cash and cash equivalents at beginning of year                        |                                 |                                                             | 122.3                                                   |                                                      |        |       | 90.1  |   |        |        | 33.8  |  
|                                                                      |                                 |                                                             |                                                         |                                                      |        |       |       |   |        |        |       |  
|Cash and cash equivalents at end of
    year                          |                                 | $                                                           | 92.8                                                    |                                                      |        | $     | 122.3 |   |        | $      | 90.1  |  
|                                                                      |                                 |                                                             |                                                         |                                                      |        |       |       |   |        |        |       |  

See notes to consolidated financial statements.

43



---



##### Table of Contents



MILACRON INC. AND SUBSIDIARIES

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 Operations 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 Summary
of Significant Accounting Policies  Warranty
Reserves). Appropriate provisions are also made for returns for
credit and uncollectible accounts.



| |                  
| | -----------------
| | Advertising Costs

Advertising costs are charged to expense as
incurred. Excluding amounts related to participation in trade
shows, advertising costs totaled $5.4 million in 2003,
$4.8 million in 2002 and $6.9 million in 2001.



| |             
| | ------------
| | 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.

44



---



##### Table of Contents



MILACRON INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)



| |                    
| | -------------------
| | 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
$20.3 million, $22.0 million and $23.7 million
for 2003, 2002 and 2001, 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.
For assets expected to be sold at a gain, carrying costs are
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.
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 Summary of Significant Accounting
Policies  Change in Method of Accounting and
Goodwill Impairment Charge).



| |                  
| | -----------------
| | Long-Lived Assets

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



| |                  
| | -----------------
| | 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

45



---



##### Table of Contents



MILACRON INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

accordance with applicable laws and regulations.
The company also sponsors a defined benefit postretirement
health care plan under which such benefits are provided to
certain U.S. employees.

The benefit obligations related to defined
benefit pension plans and the postretirement health care plan
are actuarially valued as of January 1 of each year. The
amounts so determined are then progressed to year end based on
known or expected changes. The assets of the funded defined
benefit pension plan for certain U.S. employees are valued
as of December 31 of each year.



| |                         
| | ------------------------
| | 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 loss and loss per common share if the stock options granted
from 1995 through 2003 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 Loss

|                                                                          |             |                      |        |       |   |      |        |       |   |   |       |       |  
|------------------------------------------------------------------------- | ----------- | -------------------- | ------ | ----- | - | ---- | ------ | ----- | - | - | ----- | ----- | -
|                                                                          |             | 2003                 |        | 2002  |   | 2001
|                                                                          |             |                      |        |       |   |     
|                                                                          |             |                     
|                                                                          |             | (In millions, except
|                                                                          |             | per-share amounts)  
|Net loss as reported                                                      |             | $                    | (191.7 | )     |   | $    | (222.9 | )     |   | $ | (35.7 | )    
|Effect on reported loss of accounting for stock
    options at fair value |             |                      | (1.1   | )     |   |      | (2.2   | )     |   |   | (2.0  | )    
|                                                                          |             |                      |        |       |   |      |        |       |   |   |       |      
|Pro forma net loss                                                        |             | $                    | (192.8 | )     |   | $    | (225.1 | )     |   | $ | (37.7 | )    
|                                                                          |             |                      |        |       |   |      |        |       |   |   |       |      
|Loss per common share  basic and
    diluted                             |             |                      |        |       |   |      |        |       |   |   |       |      
|                                                                          | As reported |                      | $      | (5.70 | ) |      | $      | (6.67 | ) |   | $     | (1.08 | )
|                                                                          |             |                      |        |       |   |      |        |       |   |   |       |      
|                                                                          | Pro forma   |                      | $      | (5.73 | ) |      | $      | (6.73 | ) |   | $     | (1.14 | )
|                                                                          |             |                      |        |       |   |      |        |       |   |   |       |      

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.



| |                                   
| | ----------------------------------
| | 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 million after tax or $5.61 per share) that was
recorded as the cumulative effect of a change in method of
accounting as of January 1, 2002.

46



---



##### Table of Contents



MILACRON INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

Approximately 75% of the pretax charge related to
the companys Uniloy and round metalcutting tools
businesses, the latter of which was sold in 2003.

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 were 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 were paid in the first quarter of 2003,
transaction costs and the cost to increase the companys
ownership interest in Widia India, the ultimate net cash
proceeds from the sale were approximately $135 million,
most of which was used to repay bank borrowings. The sale
resulted in a 2002 after-tax loss of $14.9 million that was
subsequently adjusted to $14.0 million in 2003.
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 were paid in the first quarter of 2003,
transaction costs and sale-related expenses, the net cash
proceeds from the sale were approximately $145 million, a
majority of which was used to repay bank borrowings. The company
recorded an after-tax gain on the sale of $31.3 million in
2002. The amount of the gain was adjusted to $31.7 million
in 2003.

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. The
disposition of the round metalcutting tools business was
completed in the third quarter of 2003 in two separate
transactions. In the fourth quarter of 2002, the company had
recorded an estimated loss on the sale of this business of
$4.7 million which was increased to $6.9 million in
2003 based on the actual sales proceeds and transaction-related
expenses. The sale of the grinding wheels business is expected
to be completed early in 2004. In the fourth quarter of 2002,
the company recorded an estimated loss on the sale of this
business of $5.2 million. Based on revised expectations
regarding the value of the assets to be sold and the
sale-related costs and expenses, the estimated loss was reduced
to $4.2 million in the fourth quarter of 2003.

47



---



##### Table of Contents



MILACRON INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

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.



| |                                      
| | -------------------------------------
| | Loss From Discontinued
    Operations

|                                                                  |  |               |      |      |  |      |       |   |  |   |       |  
|----------------------------------------------------------------- |  | ------------- | ---- | ---- |  | ---- | ----- | - |  | - | ----- | -
|                                                                  |  | 2003          |      | 2002 |  | 2001
|                                                                  |  |               |      |      |  |     
|                                                                  |  |              
|                                                                  |  | (In millions)
|Sales                                                             |  | $             | 51.6 |      |  | $    | 325.0 |   |  | $ | 507.5 |  
|                                                                  |  |               |      |      |  |      |       |   |  |   |       |  
|Operating loss including restructuring costs                      |  |               | (5.1 | )    |  |      | (26.8 | ) |  |   | (13.1 | )
|Allocated interest expense                                        |  |               | (1.3 | )    |  |      | (10.9 | ) |  |   | (16.7 | )
|                                                                  |  |               |      |      |  |      |       |   |  |   |       |  
|Loss before income taxes and minority
    shareholders interests |  |               | (6.4 | )    |  |      | (37.7 | ) |  |   | (29.8 | )
|Benefit for income taxes                                          |  |               |     |      |  |      | (10.4 | ) |  |   | (23.6 | )
|                                                                  |  |               |      |      |  |      |       |   |  |   |       |  
|Loss before minority shareholders interests                      |  |               | (6.4 | )    |  |      | (27.3 | ) |  |   | (6.2  | )
|Minority shareholders interests                                  |  |               |     |      |  |      | (2.1  | ) |  |   | .8    |  
|                                                                  |  |               |      |      |  |      |       |   |  |   |       |  
|Loss from discontinued operations                                 |  | $             | (6.4 | )    |  | $    | (25.2 | ) |  | $ | (7.0  | )
|                                                                  |  |               |      |      |  |      |       |   |  |   |       |  

As reflected in the preceding table, allocated
interest expense includes interest on debt 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, interest on
borrowings secured by assets of the businesses sold 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 Statements of
Operations for 2003 and 2002, the line captioned Net gain
(loss) on divestitures includes the following components.



| |                                                          
| | ---------------------------------------------------------
| | Gain (Loss) on Divestiture of Discontinued
    Operations

|                                                                                 |  |               |      |      |  |   |       |  
|-------------------------------------------------------------------------------- |  | ------------- | ---- | ---- |  | - | ----- | -
|                                                                                 |  | 2003          |      | 2002
|                                                                                 |  |               |      |     
|                                                                                 |  |              
|                                                                                 |  | (In millions)
|Gain on sale of Valenite                                                         |  | $             | .4   |      |  | $ | 31.3  |  
|Loss on sale of Widia and Werkö                                                  |  |               | .9   |      |  |   | (14.9 | )
|Loss on sale of round metalcutting tools business                                |  |               | (2.2 | )    |  |   | (4.7  | )
|Estimated loss on sale of grinding wheels business                               |  |               | 1.0  |      |  |   | (5.2  | )
|Adjustment of reserves for the 1998 divestiture
    of the machine tools segment |  |               | (.9  | )    |  |   | 1.9   |  
|                                                                                 |  |               |      |      |  |   |       |  
|Net gain (loss) on divestitures                                                  |  | $             | (.8  | )    |  | $ | 8.4   |  
|                                                                                 |  |               |      |      |  |   |       |  

48



---



##### Table of Contents



MILACRON INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

The major classes of assets and liabilities of
discontinued operations in the Consolidated Balance Sheets as of
December 31, 2003 and December 31, 2002 are as follows:

Assets and
Liabilities of Discontinued Operations

|                                                                   |                   |               |     |      |  |   |     |      | 
|------------------------------------------------------------------ | ----------------- | ------------- | --- | ---- |  | - | --- | ---- | 
|                                                                   |                   | 2003          |     | 2002
|                                                                   |                   |               |     |     
|                                                                   |                   |              
|                                                                   |                   | (In millions)
|Notes and accounts receivable                                      |                   | $             | .4  |      |  | $ | 1.4 |     
|Inventories                                                        |                   |               | 4.1 |      |  |   | 7.9 |     
|Other current assets                                               |                   |               | .2  |      |  |   | .1  |     
|Property, plant and equipment-net                                  |                   |               | 2.5 |      |  |   | 6.6 |     
|                                                                   |                   |               |     |      |  |   |     |     
|                                                                   | Total assets      |               |     | 7.2  |  |   |     | 16.0 | 
|Amounts payable to banks and current portion of
    long-term debt |                   |               |    |      |  |   | .4  |     
|Trade accounts payable                                             |                   |               | 1.1 |      |  |   | 4.4 |     
|Other current liabilities                                          |                   |               | .5  |      |  |   | 1.4 |     
|Long-term debt                                                     |                   |               |    |      |  |   | 2.7 |     
|Long-term accrued liabilities                                      |                   |               | .2  |      |  |   | 2.0 |     
|                                                                   |                   |               |     |      |  |   |     |     
|                                                                   | Total liabilities |               |     | 1.8  |  |   |     | 10.9 | 
|                                                                   |                   |               |     |      |  |   |     |     
|Net assets                                                         |                   | $             | 5.4 |      |  | $ | 5.1 |     
|                                                                   |                   |               |     |      |  |   |     |     

Goodwill Impairment Charge

In 2003, the company recorded a goodwill
impairment charge of $65.6 million (with no tax benefit) to
adjust the carrying value of the goodwill of two businesses
included in the mold technologies segment. The charge resulted
from a downward adjustment of the future cash flows expected to
be generated by these businesses due to the delay in the general
economic recovery both in North America and Europe. The largest
decrease in cash flow expectations related to the companys
European mold base and components business due to continued
weakness in the markets it serves.

In 2002, the company recorded an impairment
charge of $1.0 million (with no tax benefit) related to a
small business that is also included in the mold technologies
segment.

The amounts of the charges recorded in 2003 and
2002 were determined based on a comparison of the present value
of expected future cash flows to the historical carrying values
of the businesses assets (including goodwill) and
liabilities.

Restructuring Costs

In 2001, the companys management formally
approved plans to consolidate certain manufacturing operations
and reduce its cost structure. Implementation of these plans
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. 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
$12.5 million. Of the total cash cost, $5.8 million
was spent in 2001, $5.4 million in 2002 and
$1.3 million in 2003.

49



---



##### Table of Contents



MILACRON INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

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 $11.0 million, of which $1.2 million
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 2001,
$4.6 million in 2002 and $1.8 million in 2003. 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
was $9.0 million, of which $1.0 million was spent in
2001, $7.8 million in 2002 and $.2 million in 2003.

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 2002 restructuring expense of $1.3 million and
cash costs of $.3 million in 2002 and $.2 million in
2003.

In November 2002, the company announced
additional restructuring initiatives intended to improve
operating efficiency and customer service. The first action
involved 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 early in 2004. In the second
initiative, the manufacture of special mold bases for injection
molding at the Monterey Park, California plant was phased out
and transferred to various other facilities in North America.
These additional actions are expected to result in incremental
restructuring costs of approximately $9.8 million. Of the
total cost of the actions, $4.3 million and
$4.4 million was charged to expense in 2002 and 2003,
respectively. An additional $1.1 million of expense is
expected to be recorded in 2004, principally to complete the
relocation of the mold making operation. The total cash cost of
these initiatives is expected to be approximately
$4.1 million, a majority of which was spent in 2003. The
pretax annualized cost savings are expected to exceed
$5 million, most of which was 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 $4.0 million. The restructuring
involved the discontinuation of the manufacture of certain
product lines at the plant in Magenta, Italy and the
elimination of approximately 35 positions. The cash cost of the
restructuring  the majority of which was spent in
2003  will be approximately $.9 million. The
annualized pretax savings are expected to be approximately
$2 million, which began to be realized in the first quarter
of 2003.

In the second quarter of 2003, the company
initiated a plan to close its special mold base machining
operation in Mahlberg, Germany and relocate a portion of its
manufacturing to another location. Certain other production was
outsourced. The closure resulted in restructuring costs of
$5.7 million and the elimination of approximately 65
positions. Cash costs were $2.8 million and the annual cost
savings are expected to be almost $4 million.

In the third quarter of 2003, the company
announced additional restructuring initiatives that focus on
further overhead cost reductions in each of its plastics
technologies segments and at the corporate office. These
actions, which involve the relocation of production, closure of
sales offices, voluntary early retirement programs and general
overhead reductions, are expected to result in the elimination
of more than 300 positions worldwide at a cost of
$11.2 million, all of which was recorded in 2003. Cash
costs related to these initiatives will be approximately $7 to
$8 million, of which $3.4 million was spent in 2003.
The annual cost savings are expected to be approximately
$20 million.

50



---



##### Table of Contents



MILACRON INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

The following table presents the components of
the line captioned Restructuring costs in the
Consolidated Statements of Operations for the years 2003, 2002
and 2001.

Restructuring
Costs

|                                                              |                                      |               |      |      |   |      |      |     |   |   |      |     |  
|------------------------------------------------------------- | ------------------------------------ | ------------- | ---- | ---- | - | ---- | ---- | --- | - | - | ---- | --- | -
|                                                              |                                      | 2003          |      | 2002 |   | 2001
|                                                              |                                      |               |      |      |   |     
|                                                              |                                      |              
|                                                              |                                      | (In millions)
|Accruals for termination benefits and facility
    exit costs |                                      | $             | 9.1  |      |   | $    | 2.9  |     |   | $ | 9.9  |    
|Supplemental retirement benefits                              |                                      |               | 3.2  |      |   |      | 2.9  |     |   |   | .5   |    
|Other restructuring costs                                     |                                      |               |      |      |   |      |      |     |   |   |      |    
|                                                              | Costs charged to expense as incurred |               |      | 14.8 |   |      |      | 4.0 |   |   |      | 3.8 |  
|                                                              | Reserve adjustments                  |               |      | (1.8 | ) |      |      | (.5 | ) |   |      | (.1 | )
|                                                              |                                      |               |      |      |   |      |      |     |   |   |      |    
|                                                              |                                      |               | 25.3 |      |   |      | 9.3  |     |   |   | 14.1 |    
|Costs related to the EOC and Reform integration               |                                      |               | 1.8  |      |   |      | 4.6  |     |   |   | 3.4  |    
|                                                              |                                      |               |      |      |   |      |      |     |   |   |      |    
|Total restructuring costs                                     |                                      | $             | 27.1 |      |   | $    | 13.9 |     |   | $ | 17.5 |    
|                                                              |                                      |               |      |      |   |      |      |     |   |   |      |    

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 integrations, those amounts will be
applied as reductions of the goodwill arising from the
respective acquisitions.

Restructuring
Reserves

|                                                |                      |               |     |           |  |           |     |         |  |   |      |      |   |   |     |     | 
|----------------------------------------------- | -------------------- | ------------- | --- | --------- |  | --------- | --- | ------- |  | - | ---- | ---- | - | - | --- | --- | 
|                                                |                      |              
|                                                |                      | 2003         
|                                                |                      |              
|                                                |                      | Beginning     |     |           |  | Usage and |     | Ending 
|                                                |                      | Balance       |     | Additions |  | Other     |     | Balance
|                                                |                      |               |     |           |  |           |     |        
|                                                |                      |              
|                                                |                      | (In millions)
|EOC and Reform integration                      |                      |               |     |           |  |           |     |         |  |   |      |      |   |   |     |    
|                                                | Termination benefits |               | $   | 1.7       |  |           | $   |        |  |   | $    | (.4  | ) |   | $   | 1.3 | 
|                                                | Facility exit costs  |               |     |          |  |           |     | .3      |  |   |      |     |   |   |     | .3  | 
|                                                |                      |               |     |           |  |           |     |         |  |   |      |      |   |   |     |    
|                                                |                      |               | 1.7 |           |  |           | .3  |         |  |   | (.4  | )    |   |   | 1.6 |    
|Restructuring costs                             |                      |               |     |           |  |           |     |         |  |   |      |      |   |   |     |    
|                                                | Termination benefits |               |     | 3.1       |  |           |     | 8.7     |  |   |      | (7.3 | ) |   |     | 4.5 | 
|                                                | Facility exit costs  |               |     | .6        |  |           |     | .4      |  |   |      | (.6  | ) |   |     | .4  | 
|                                                |                      |               |     |           |  |           |     |         |  |   |      |      |   |   |     |    
|                                                |                      |               | 3.7 |           |  |           | 9.1 |         |  |   | (7.9 | )    |   |   | 4.9 |    
|                                                |                      |               |     |           |  |           |     |         |  |   |      |      |   |   |     |    
|Total reserves related to continuing operations |                      | $             | 5.4 |           |  | $         | 9.4 |         |  | $ | (8.3 | )    |   | $ | 6.5 |    
|                                                |                      |               |     |           |  |           |     |         |  |   |      |      |   |   |     |    

51



---



##### Table of Contents



MILACRON INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

|                                                |                      |               |      |           |  |           |     |         |  |   |       |      |   |   |     |     | 
|----------------------------------------------- | -------------------- | ------------- | ---- | --------- |  | --------- | --- | ------- |  | - | ----- | ---- | - | - | --- | --- | 
|                                                |                      |              
|                                                |                      | 2002         
|                                                |                      |              
|                                                |                      | Beginning     |      |           |  | Usage and |     | Ending 
|                                                |                      | Balance       |      | Additions |  | Other     |     | Balance
|                                                |                      |               |      |           |  |           |     |        
|                                                |                      |              
|                                                |                      | (In millions)
|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 |    
|                                                |                      |               |      |           |  |           |     |         |  |   |       |      |   |   |     |    

Acquisitions

In the second quarter of 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 annual 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.

In the first quarter of 2003, the company
purchased the remaining 51% of the shares of Klockner Ferromatik
AG, a Ferromatik sales office in Switzerland with annual sales
of approximately $6 million. In addition, the company
acquired the remaining 25% of 450500 Ontario Limited, a
consolidated subsidiary that manufactures components for molds
used in injection molding.

Progress Precision is included in the machinery
technologies  North America segment while Reform, EOC
and 450500 Ontario Limited are included in the mold technologies
segment. Ferromatik Milacron A/ S and Klockner Ferromatik AG are
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 $1.1 million in 2003, $.9 million in
2002 and $32.1 million in 2001. The allocation of the
aggregate cost of the acquisitions to the assets acquired and
liabilities assumed is presented in the table that follows. The
amounts for 2003 relate solely to Klockner Ferromatik AG.

52



---



##### Table of Contents



MILACRON INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

Allocation of
Acquisition Cost

|                              |                   |               |     |      |  |      |    |     |  |   |      |      | 
|----------------------------- | ----------------- | ------------- | --- | ---- |  | ---- | -- | --- |  | - | ---- | ---- | 
|                              |                   | 2003          |     | 2002 |  | 2001
|                              |                   |               |     |      |  |     
|                              |                   |              
|                              |                   | (In millions)
|Cash and cash equivalents     |                   | $             | .4  |      |  | $    |   |     |  | $ |     |     
|Accounts receivable           |                   |               | 1.5 |      |  |      | .4 |     |  |   | 6.4  |     
|Inventories                   |                   |               | .3  |      |  |      | .7 |     |  |   | 8.3  |     
|Other current assets          |                   |               | .1  |      |  |      |   |     |  |   | .1   |     
|Property, plant and equipment |                   |               | .2  |      |  |      | .3 |     |  |   | 11.1 |     
|Goodwill                      |                   |               |    |      |  |      | .4 |     |  |   | 13.8 |     
|                              |                   |               |     |      |  |      |    |     |  |   |      |     
|                              | Total assets      |               |     | 2.5  |  |      |    | 1.8 |  |   |      | 39.7 | 
|Current liabilities           |                   |               | 1.4 |      |  |      | .8 |     |  |   | 7.6  |     
|Long-term debt                |                   |               |    |      |  |      | .1 |     |  |   |     |     
|                              |                   |               |     |      |  |      |    |     |  |   |      |     
|                              | Total liabilities |               |     | 1.4  |  |      |    | .9  |  |   |      | 7.6  | 
|                              |                   |               |     |      |  |      |    |     |  |   |      |     
|Total acquisition cost        |                   | $             | 1.1 |      |  | $    | .9 |     |  | $ | 32.1 |     
|                              |                   |               |     |      |  |      |    |     |  |   |      |     

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 Operations
for any year.

Research and Development

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

Research and
Development

|                         |  |               |      |      |  |      |      |  |  |   |      | 
|------------------------ |  | ------------- | ---- | ---- |  | ---- | ---- |  |  | - | ---- | 
|                         |  | 2003          |      | 2002 |  | 2001
|                         |  |               |      |      |  |     
|                         |  |              
|                         |  | (In millions)
|Research and development |  | $             | 17.8 |      |  | $    | 15.8 |  |  | $ | 21.1 | 
|                         |  |               |      |      |  |      |      |  |  |   |      | 

53



---



##### Table of Contents



MILACRON INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

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
Expense (Income)

|                                                 |  |               |       |      |  |      |       |   |  |   |       |  
|------------------------------------------------ |  | ------------- | ----- | ---- |  | ---- | ----- | - |  | - | ----- | -
|                                                 |  | 2003          |       | 2002 |  | 2001
|                                                 |  |               |       |      |  |     
|                                                 |  |              
|                                                 |  | (In millions)
|Service cost (benefits earned during the period) |  | $             | 4.5   |      |  | $    | 4.6   |   |  | $ | 4.4   |  
|Interest cost on projected benefit obligation    |  |               | 33.4  |      |  |      | 34.5  |   |  |   | 34.2  |  
|Expected return on plan assets                   |  |               | (38.8 | )    |  |      | (45.9 | ) |  |   | (45.1 | )
|Supplemental retirement benefits(a)              |  |               | 3.2   |      |  |      | 4.7   |   |  |   | .8    |  
|Amortization of unrecognized prior service cost  |  |               | .8    |      |  |      | .8    |   |  |   | .5    |  
|Amortization of unrecognized gains and losses    |  |               | 3.1   |      |  |      | .5    |   |  |   | (.2   | )
|                                                 |  |               |       |      |  |      |       |   |  |   |       |  
|Pension expense (income)                         |  | $             | 6.2   |      |  | $    | (.8   | ) |  | $ | (5.4  | )
|                                                 |  |               |       |      |  |      |       |   |  |   |       |  



---



|    |  |                                                                                                                                                                                                                                                                                                                                                            
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | In 2003, the entire amount is included in the
    line captioned Restructuring costs in the
    Consolidated Statement of Operations for that year. In 2002,
    $2.9 million is included in restructuring costs 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

|                                         |  |               |        |      |  |   |        |  
|---------------------------------------- |  | ------------- | ------ | ---- |  | - | ------ | -
|                                         |  | 2003          |        | 2002
|                                         |  |               |        |     
|                                         |  |              
|                                         |  | (In millions)
|Balance at beginning of year             |  | $             | (527.2 | )    |  | $ | (472.5 | )
|Service cost                             |  |               | (4.5   | )    |  |   | (4.6   | )
|Interest cost                            |  |               | (33.4  | )    |  |   | (34.5  | )
|Benefits paid                            |  |               | 39.3   |      |  |   | 38.3   |  
|Actuarial gain (loss)                    |  |               | 12.6   |      |  |   | (5.5   | )
|Merger of subsidiary plan                |  |               | (4.0   | )    |  |   | (1.7   | )
|Supplemental retirement benefits         |  |               | (3.2   | )    |  |   | (4.7   | )
|Changes in discount rates                |  |               | (14.6  | )    |  |   | (40.7  | )
|Foreign currency translation adjustments |  |               | (2.3   | )    |  |   | (1.3   | )
|                                         |  |               |        |      |  |   |        |  
|Balance at end of year                   |  | $             | (537.3 | )    |  | $ | (527.2 | )
|                                         |  |               |        |      |  |   |        |  

54



---



##### Table of Contents



MILACRON INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

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

|                              |  |               |       |      |  |   |       |  
|----------------------------- |  | ------------- | ----- | ---- |  | - | ----- | -
|                              |  | 2003          |       | 2002
|                              |  |               |       |     
|                              |  |              
|                              |  | (In millions)
|Balance at beginning of year  |  | $             | 342.7 |      |  | $ | 432.0 |  
|Actual investment gain (loss) |  |               | 61.4  |      |  |   | (55.2 | )
|Benefits paid                 |  |               | (37.0 | )    |  |   | (36.1 | )
|Merger of subsidiary plan     |  |               | 3.8   |      |  |   | 2.0   |  
|                              |  |               |       |      |  |   |       |  
|Balance at end of year        |  | $             | 370.9 |      |  | $ | 342.7 |  
|                              |  |               |       |      |  |   |       |  

The weighted allocations of plan assets at
December 31, 2003 and 2002 are shown in the following table.



| |                          
| | -------------------------
| | Allocation of Plan Assets

|                          |  |               |     |      |  |  |     |  
|------------------------- |  | ------------- | --- | ---- |  |  | --- | -
|                          |  | 2003          |     | 2002
|                          |  |               |     |     
|                          |  |              
|                          |  | (In millions)
|Equity securities         |  |               | 65  | %    |  |  | 58  | %
|Debt securities           |  |               | 34  | %    |  |  | 42  | %
|Cash and cash equivalents |  |               | 1   | %    |  |  |    |  
|                          |  |               |     |      |  |  |     |  
|                          |  |               | 100 | %    |  |  | 100 | %
|                          |  |               |     |      |  |  |     |  

At December 31, 2003 and 2002, common shares
of the company represented 4% and 6% of the plans equity
securities. These common shares had a market value of
$9.2 million at December 31, 2003 and
$12.0 million at December 31, 2002.

At December 31, 2003, the companys
target allocation percentages for plan assets were approximately
60% to 65% equity securities and 35% to 40% debt securities. The
targets may be adjusted periodically to reflect current market
conditions and trends as well as inflation levels, interest
rates and the trend thereof, and economic and monetary policy.
The objective underlying this allocation is to achieve a
long-term rate of return of inflation plus 6%. Under the current
policy, the investment in equity securities may not be less than
35% or more than 80% of total assets. Investments in debt
securities may not be less than 20% or more than 65% of total
assets.

The expected long-term rates of return on plan
assets for purposes of determining pension expense were 9.0% in
2003 and 9.5% in 2002 and 2001. The company will continue to use
a 9.0% rate in 2004. Expected rates of return are developed
based on the target allocation of debt and equity securities and
on the historical returns on these types of investments
judgmentally adjusted to reflect current expectations of future
returns and value-added expectations based on historical
experience of the plans investment managers. In evaluating
future returns on equity securities, the existing portfolio is
stratified to separately consider large and small capitalization
investments as well as international and other types of
securities.

The company currently expects to make a cash
contribution to the plan of approximately $3 to $4 million
in 2004.

55



---



##### Table of Contents



MILACRON INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

The following table sets forth the funded status
of the plans for U.S. employees at year-end 2003 and 2002.



| |                          
| | -------------------------
| | Funded Status at Year-End

|                                                                          |  |               |        |      |  |   |        |  
|------------------------------------------------------------------------- |  | ------------- | ------ | ---- |  | - | ------ | -
|                                                                          |  | 2003          |        | 2002
|                                                                          |  |               |        |     
|                                                                          |  |              
|                                                                          |  | (In millions)
|Vested benefit obligation                                                 |  | $             | (487.1 | )    |  | $ | (471.0 | )
|                                                                          |  |               |        |      |  |   |        |  
|Accumulated benefit obligation                                            |  | $             | (500.6 | )    |  | $ | (485.0 | )
|                                                                          |  |               |        |      |  |   |        |  
|Projected benefit obligation                                              |  | $             | (523.3 | )    |  | $ | (516.6 | )
|Plan assets at fair value                                                 |  |               | 370.9  |      |  |   | 342.7  |  
|                                                                          |  |               |        |      |  |   |        |  
|Deficiency of plan assets in relation to
    projected benefit obligation |  |               | (152.4 | )    |  |   | (173.9 | )
|Unrecognized net loss                                                     |  |               | 164.4  |      |  |   | 187.4  |  
|Unrecognized prior service cost                                           |  |               | 4.1    |      |  |   | 4.9    |  
|                                                                          |  |               |        |      |  |   |        |  
|Prepaid pension cost                                                      |  | $             | 16.1   |      |  | $ | 18.4   |  
|                                                                          |  |               |        |      |  |   |        |  

The presentation of the amounts reflected in the
previous table in the Consolidated Balance Sheets at
December 31, 2003 and December 31, 2002 is reflected
in the following table.



| |                           
| | --------------------------
| | Balance Sheet Presentation

|                                        |  |               |        |      |  |   |        |  
|--------------------------------------- |  | ------------- | ------ | ---- |  | - | ------ | -
|                                        |  | 2003          |        | 2002
|                                        |  |               |        |     
|                                        |  |              
|                                        |  | (In millions)
|Intangible asset                        |  | $             | 3.5    |      |  | $ | 4.1    |  
|Accrued pension cost                    |  |               | (119.6 | )    |  |   | (132.5 | )
|Accumulated other comprehensive loss(a) |  |               | 132.2  |      |  |   | 146.8  |  
|                                        |  |               |        |      |  |   |        |  
|                                        |  | $             | 16.1   |      |  | $ | 18.4   |  
|                                        |  |               |        |      |  |   |        |  



---



|    |  |                                                                                                                                                        
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Represents the pretax amount of an after-tax
    charge to accumulated other comprehensive loss of
    $80.8 million in 2003 and $95.4 million in 2002.

The intangible asset is included in other
noncurrent assets in the Consolidated 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

|                               |  |               |       |      |  |   |       |  
|------------------------------ |  | ------------- | ----- | ---- |  | - | ----- | -
|                               |  | 2003          |       | 2002
|                               |  |               |       |     
|                               |  |              
|                               |  | (In millions)
|Vested benefit obligation      |  | $             | (10.4 | )    |  | $ | (7.5  | )
|                               |  |               |       |      |  |   |       |  
|Accumulated benefit obligation |  | $             | (12.1 | )    |  | $ | (8.8  | )
|                               |  |               |       |      |  |   |       |  
|Projected benefit obligation   |  | $             | (14.0 | )    |  | $ | (10.6 | )
|Unrecognized net (gain) loss   |  |               | .3    |      |  |   | .1    |  
|                               |  |               |       |      |  |   |       |  
|Accrued pension cost           |  | $             | (13.7 | )    |  | $ | (10.5 | )
|                               |  |               |       |      |  |   |       |  

56



---



##### Table of Contents



MILACRON INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

The following table presents the weighted-average
actuarial assumptions used to determine pension income or
expense for all defined benefit plans in 2003, 2002 and 2001.



| |                      
| | ---------------------
| | Actuarial Assumptions

|                                                 |  |      |       |      |  |      |       |  |  |  |       | 
|------------------------------------------------ |  | ---- | ----- | ---- |  | ---- | ----- |  |  |  | ----- | 
|                                                 |  | 2003 |       | 2002 |  | 2001
|                                                 |  |      |       |      |  |     
|Discount rate                                    |  |      | 6.49% |      |  |      | 7.23% |  |  |  | 7.72% | 
|Expected long-term rate of return on plan assets |  |      | 9.00% |      |  |      | 9.50% |  |  |  | 9.50% | 
|Rate of increase in future compensation levels   |  |      | 2.41% |      |  |      | .73%  |  |  |  | 4.19% | 

The following table presents the weighted-average
actuarial assumptions used to determine the projected benefit
obligation for all defined benefit plans at December 31,
2003 and December 31, 2002.



| |                      
| | ---------------------
| | Actuarial Assumptions

|                                               |  |      |       |      |  |  |       | 
|---------------------------------------------- |  | ---- | ----- | ---- |  |  | ----- | 
|                                               |  | 2003 |       | 2002
|                                               |  |      |       |     
|Discount rate                                  |  |      | 6.24% |      |  |  | 6.49% | 
|Rate of increase on future compensation levels |  |      | 3.69% |      |  |  | 2.41% | 

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,
$1.6 million and $2.6 million in 2003, 2002 and 2001,
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, 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

|                                                                   |  |               |     |      |  |      |     |   |  |   |     |  
|------------------------------------------------------------------ |  | ------------- | --- | ---- |  | ---- | --- | - |  | - | --- | -
|                                                                   |  | 2003          |     | 2002 |  | 2001
|                                                                   |  |               |     |      |  |     
|                                                                   |  |              
|                                                                   |  | (In millions)
|Service cost (benefits earned during the period)                   |  | $             | .1  |      |  | $    | .1  |   |  | $ | .1  |  
|Interest cost on accumulated postretirement
    benefit obligation |  |               | 1.5 |      |  |      | 1.7 |   |  |   | 1.9 |  
|Amortization of unrecognized gains                                 |  |               | (.3 | )    |  |      | (.4 | ) |  |   | (.5 | )
|                                                                   |  |               |     |      |  |      |     |   |  |   |     |  
|Postretirement health care cost                                    |  | $             | 1.3 |      |  | $    | 1.4 |   |  | $ | 1.5 |  
|                                                                   |  |               |     |      |  |      |     |   |  |   |     |  

57



---



##### Table of Contents



MILACRON INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

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



| |                                                  
| | -------------------------------------------------
| | Accumulated Postretirement Benefit
    Obligation

|                             |  |               |       |      |  |   |       |  
|---------------------------- |  | ------------- | ----- | ---- |  | - | ----- | -
|                             |  | 2003          |       | 2002
|                             |  |               |       |     
|                             |  |              
|                             |  | (In millions)
|Balance at beginning of year |  | $             | (24.9 | )    |  | $ | (26.5 | )
|Service cost                 |  |               | (.1   | )    |  |   | (.1   | )
|Interest cost                |  |               | (1.5  | )    |  |   | (1.7  | )
|Participant contributions    |  |               | (5.0  | )    |  |   | (4.3  | )
|Benefits paid                |  |               | 7.9   |      |  |   | 7.3   |  
|Actuarial gain               |  |               | .8    |      |  |   | 1.7   |  
|Change in discount rate      |  |               | (.4   | )    |  |   | (1.3  | )
|                             |  |               |       |      |  |   |       |  
|Balance at end of year       |  | $             | (23.2 | )    |  | $ | (24.9 | )
|                             |  |               |       |      |  |   |       |  

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

|                                              |                                    |               |       |       |   |   |       |       |  
|--------------------------------------------- | ---------------------------------- | ------------- | ----- | ----- | - | - | ----- | ----- | -
|                                              |                                    | 2003          |       | 2002 
|                                              |                                    |               |       |      
|                                              |                                    |              
|                                              |                                    | (In millions)
|Accumulated postretirement benefit obligation |                                    |               |       |       |   |   |       |      
|                                              | Retirees                           |               | $     | (17.3 | ) |   | $     | (18.7 | )
|                                              | Fully eligible active participants |               |       | (1.7  | ) |   |       | (2.3  | )
|                                              | Other active participants          |               |       | (4.2  | ) |   |       | (3.9  | )
|                                              |                                    |               |       |       |   |   |       |      
|                                              |                                    |               | (23.2 | )     |   |   | (24.9 | )    
|Unrecognized net gain                         |                                    |               | (5.5  | )     |   |   | (5.5  | )    
|                                              |                                    |               |       |       |   |   |       |      
|Accrued postretirement health care benefits   |                                    | $             | (28.7 | )     |   | $ | (30.4 | )    
|                                              |                                    |               |       |       |   |   |       |      

The following table presents the discount rates
used to calculate the accumulated postretirement benefit
obligation at December 31, 2003, December 31, 2002 and
December 31, 2001 and the rates used to calculate
postretirement health care cost for the years then ended.



| |                      
| | ---------------------
| | Actuarial Assumptions

|                                              |  |      |       |      |  |      |       |  |  |  |       | 
|--------------------------------------------- |  | ---- | ----- | ---- |  | ---- | ----- |  |  |  | ----- | 
|                                              |  | 2003 |       | 2002 |  | 2001
|                                              |  |      |       |      |  |     
|Accumulated postretirement benefit obligation |  |      | 6.25% |      |  |      | 6.50% |  |  |  | 7.25% | 
|Postretirement health care cost               |  |      | 6.50% |      |  |      | 7.25% |  |  |  | 7.75% | 

For 2004, the assumed rate of increase in health
care costs used to calculate the accumulated postretirement
benefit obligation is 8.5%. 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 significantly change
the accumulated postretirement benefit obligation or the total
cost of the plan.

On December 8, 2003, the Medicare
Prescription Drug, Improvement and Modernization Act of
2003 (the Act) was enacted. Among other things, the Act created
new federal subsidies for employers that provide

58



---



##### Table of Contents



MILACRON INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

prescription drug coverage for their retirees
beginning in 2006. Because the principal postretirement health
care plan for certain U.S. employees provides such
coverage, the company is currently evaluating the potential
effects of the Act. However, the company has concluded that it
is impossible at this time to estimate the extent to which the
subsidies will reduce the plans accumulated postretirement
benefit obligation. In addition, the Financial Accounting
Standards Board (FASB) has not yet completed its evaluation
of the accounting implications of the Act. Accordingly, no
adjustment to the recorded obligation has been made at
December 31, 2003 as permitted by FASB Staff Position 106-1.

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 2003 and 2002 are as follows:



| |                                                      
| | -----------------------------------------------------
| | Components of Deferred Tax Assets and
    Liabilities

|                         |                                                                                                             |                                |                                                 |      |        |      |       |      |       |       | 
|------------------------ | ----------------------------------------------------------------------------------------------------------- | ------------------------------ | ----------------------------------------------- | ---- | ------ | ---- | ----- | ---- | ----- | ----- | 
|                         |                                                                                                             | 2003                           |                                                 | 2002
|                         |                                                                                                             |                                |                                                 |     
|                         |                                                                                                             |                               
|                         |                                                                                                             | (In millions)                 
|Deferred tax assets      |                                                                                                             |                                |                                                 |      |        |      |       |     
|                         | Net operating loss carryforwards                                                                            |                                | $                                               | 95.2 |        |      | $     | 67.3 |      
|                         | Tax credit carryforwards                                                                                    |                                |                                                 | 12.4 |        |      |       | 10.7 |      
|                         | Accrued postretirement health care benefits                                                                 |                                |                                                 | 9.3  |        |      |       | 10.0 |      
|                         | Inventories, due principally to obsolescence
    reserves and additional costs inventoried for tax purposes |                                |                                                 | 6.3  |        |      |       | 7.3  |      
|                         | Accrued employee benefits other than pensions and
    retiree health care benefits                          |                                |                                                 | 3.4  |        |      |       | 4.0  |      
|                         | Accrued pension cost                                                                                        |                                |                                                 | 8.5  |        |      |       | 8.4  |      
|                         | Accrued warranty cost                                                                                       |                                |                                                 | 1.8  |        |      |       | 1.4  |      
|                         | Accrued taxes                                                                                               |                                |                                                 | 3.0  |        |      |       | 2.8  |      
|                         | Accounts receivable, due principally to
    allowances for doubtful accounts                                |                                |                                                 | 1.8  |        |      |       | 1.1  |      
|                         | Goodwill                                                                                                    |                                |                                                 | 46.0 |        |      |       | 31.3 |      
|                         | Deferred pension costs                                                                                      |                                |                                                 | 35.7 |        |      |       | 39.9 |      
|                         | Accrued liabilities and other                                                                               |                                |                                                 | 15.2 |        |      |       | 24.9 |      
|                         |                                                                                                             |                                |                                                 |      |        |      |       |     
|                         |                                                                                                             | Total deferred tax assets      |                                                 |      | 238.6  |      |       |      | 209.1 |      
|                         |                                                                                                             | Less valuation allowances      |                                                 |      | (139.8 | )    |       |      | (36.1 | )    
|                         |                                                                                                             |                                |                                                 |      |        |      |       |     
|                         |                                                                                                             |                                | Deferred tax assets net of valuation allowances |      |        | 98.8 |       |      |       | 173.0 | 
|Deferred tax liabilities |                                                                                                             |                                |                                                 |      |        |      |       |     
|                         | Property, plant and equipment, due principally to
    differences in depreciation methods                   |                                |                                                 | 8.2  |        |      |       | 9.4  |      
|                         | Inventories                                                                                                 |                                |                                                 | 6.8  |        |      |       | 6.5  |      
|                         |                                                                                                             |                                |                                                 |      |        |      |       |     
|                         |                                                                                                             | Total deferred tax liabilities |                                                 |      | 15.0   |      |       |      | 15.9  |      
|                         |                                                                                                             |                                |                                                 |      |        |      |       |     
|Net deferred tax assets  |                                                                                                             | $                              | 83.8                                            |      |        | $    | 157.1 |     
|                         |                                                                                                             |                                |                                                 |      |        |      |       |     

59



---



##### Table of Contents



MILACRON INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

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.



| |                         
| | ------------------------
| | Loss Before Income Taxes

|              |  |               |        |      |  |      |       |   |  |   |       |  
|------------- |  | ------------- | ------ | ---- |  | ---- | ----- | - |  | - | ----- | -
|              |  | 2003          |        | 2002 |  | 2001
|              |  |               |        |      |  |     
|              |  |              
|              |  | (In millions)
|United States |  | $             | (98.1  | )    |  | $    | (25.6 | ) |  | $ | (39.9 | )
|Non-U.S.      |  |               | (13.7  | )    |  |      | (11.0 | ) |  |   | (11.1 | )
|              |  |               |        |      |  |      |       |   |  |   |       |  
|              |  | $             | (111.8 | )    |  | $    | (36.6 | ) |  | $ | (51.0 | )
|              |  |               |        |      |  |      |       |   |  |   |       |  

As presented in the above table, loss from
U.S. operations in 2003 includes restructuring costs of
$9.7 million while loss from non-U.S. operations
includes $17.4 million of such costs. Losses from U.S. and
non-U.S. operations in 2002 include restructuring costs of
$9.8 million and $4.1 million, respectively. In 2001,
losses from U.S. operations and non-U.S. operations
include restructuring costs of $6.7 million and
$10.8 million, respectively. Loss from U.S. operations
also includes goodwill impairment charges of $65.6 million
in 2003 and $1.0 million in 2002.



| |                                         
| | ----------------------------------------
| | Provision (Benefit) for Income
    Taxes

|                             |                 |               |      |      |   |      |       |       |   |   |       |       |  
|---------------------------- | --------------- | ------------- | ---- | ---- | - | ---- | ----- | ----- | - | - | ----- | ----- | -
|                             |                 | 2003          |      | 2002 |   | 2001
|                             |                 |               |      |      |   |     
|                             |                 |              
|                             |                 | (In millions)
|Current provision (benefit)  |                 |               |      |      |   |      |       |       |   |   |       |      
|                             | United States   |               | $    | (1.8 | ) |      | $     | (4.4  | ) |   | $     | (10.5 | )
|                             | State and local |               |      |     |   |      |       | .2    |   |   |       | (.6   | )
|                             | Non-U.S.        |               |      | 1.2  |   |      |       | 2.7   |   |   |       | 4.4   |  
|                             |                 |               |      |      |   |      |       |       |   |   |       |      
|                             |                 |               | (.6  | )    |   |      | (1.5  | )     |   |   | (6.7  | )    
|Deferred provision (benefit) |                 |               |      |      |   |      |       |       |   |   |       |      
|                             | United States   |               |      | 68.1 |   |      |       | (12.3 | ) |   |       | (10.4 | )
|                             | Non-U.S.        |               |      | 5.2  |   |      |       | (4.4  | ) |   |       | (5.2  | )
|                             |                 |               |      |      |   |      |       |       |   |   |       |      
|                             |                 |               | 73.3 |      |   |      | (16.7 | )     |   |   | (15.6 | )    
|                             |                 |               |      |      |   |      |       |       |   |   |       |      
|                             |                 | $             | 72.7 |      |   | $    | (18.2 | )     |   | $ | (22.3 | )    
|                             |                 |               |      |      |   |      |       |       |   |   |       |      



| |                                                                    
| | -------------------------------------------------------------------
| | Components of the Provision (Benefit) for
    Deferred Income Taxes

|                                                                                    |  |               |       |      |  |      |       |   |  |   |       |  
|----------------------------------------------------------------------------------- |  | ------------- | ----- | ---- |  | ---- | ----- | - |  | - | ----- | -
|                                                                                    |  | 2003          |       | 2002 |  | 2001
|                                                                                    |  |               |       |      |  |     
|                                                                                    |  |              
|                                                                                    |  | (In millions)
|Change in valuation allowances                                                      |  | $             | 104.6 |      |  | $    | 19.2  |   |  | $ | 6.4   |  
|Change in deferred taxes related to operating
    loss and tax credit carryforwards |  |               | (30.5 | )    |  |      | (31.7 | ) |  |   | (27.6 | )
|Depreciation and amortization                                                       |  |               | 6.0   |      |  |      | 6.3   |   |  |   | 6.8   |  
|Inventories and accounts receivable                                                 |  |               | .6    |      |  |      | (4.4  | ) |  |   | (5.2  | )
|Accrued pension and other employee costs                                            |  |               | 4.7   |      |  |      | 3.1   |   |  |   | 4.4   |  
|Other                                                                               |  |               | (12.1 | )    |  |      | (9.2  | ) |  |   | (.4   | )
|                                                                                    |  |               |       |      |  |      |       |   |  |   |       |  
|                                                                                    |  | $             | 73.3  |      |  | $    | (16.7 | ) |  | $ | (15.6 | )
|                                                                                    |  |               |       |      |  |      |       |   |  |   |       |  

60



---



##### Table of Contents



MILACRON INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

The change in valuation allowances in 2003, as
presented in the above table, represents $35.4 million
related to 2003 activities and $69.2 million due to a
change in circumstances and judgment related to deferred tax
balances at December 31, 2002.



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

|                                   |                                                          |      |       |      |  |      |       |       |   |  |       |       |  
|---------------------------------- | -------------------------------------------------------- | ---- | ----- | ---- |  | ---- | ----- | ----- | - |  | ----- | ----- | -
|                                   |                                                          | 2003 |       | 2002 |  | 2001
|                                   |                                                          |      |       |      |  |     
|U.S. statutory tax rate            |                                                          |      | (35.0 | )%   |  |      | (35.0 | )%    |   |  | (35.0 | )%   
|Increase (decrease) resulting from |                                                          |      |       |      |  |      |       |       |   |  |       |      
|                                   | Effect of changes in valuation allowances                |      |       | 93.6 |  |      |       | 31.8  |   |  |       | 12.5  |  
|                                   | Losses without current tax benefits                      |      |       |     |  |      |       | (.2   | ) |  |       | (.1   | )
|                                   | Adjustment of tax reserves                               |      |       |     |  |      |       | (4.7  | ) |  |       | (17.4 | )
|                                   | Statutory tax rate changes                               |      |       |     |  |      |       |      |   |  |       | 1.9   |  
|                                   | Effect of operations outside the U.S.                    |      |       |     |  |      |       | (38.1 | ) |  |       | (2.1  | )
|                                   | State and local income taxes, net of federal
    benefit |      |       |     |  |      |       | (2.1  | ) |  |       | (3.4  | )
|                                   | Other                                                    |      |       | 6.4  |  |      |       | (1.4  | ) |  |       | (.1   | )
|                                   |                                                          |      |       |      |  |      |       |       |   |  |       |      
|                                   |                                                          |      | 65.0  | %    |  |      | (49.7 | )%    |   |  | (43.7 | )%   
|                                   |                                                          |      |       |      |  |      |       |       |   |  |       |      

At year-end 2003 the company had a U.S. net
operating loss carryforward of approximately $63 million
that expires in 2023. The transaction entered into with Glencore
Finance AG and Mizuho International plc on March 12, 2004
could substantially delay the timing of the utilization of these
net operating loss carryforwards and other tax attributes in
future years (see Subsequent Events). In addition, certain of
the companys non-U.S. subsidiaries had net operating
loss carryforwards aggregating approximately $190 million,
substantially all of which have no expiration dates.

Undistributed earnings of foreign subsidiaries
which are intended to be indefinitely reinvested aggregated
$95.5 million at the end of 2003. No deferred income taxes
have been recorded with respect to this amount. The unrecorded
deferred tax liability related to undistributed
non-U.S. earnings was $33.4 million at
December 31, 2003.

The company received net tax refunds of
$17.0 million in 2003 and $14.2 million in 2002.
Income taxes of $4.1 million were paid in 2001.

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

|                                       |  |               |        |      |  |      |        |   |  |   |       |  
|-------------------------------------- |  | ------------- | ------ | ---- |  | ---- | ------ | - |  | - | ----- | -
|                                       |  | 2003          |        | 2002 |  | 2001
|                                       |  |               |        |      |  |     
|                                       |  |              
|                                       |  | (In millions)
|Net loss                               |  | $             | (191.7 | )    |  | $    | (222.9 | ) |  | $ | (35.7 | )
|Dividends on Preferred shares          |  |               | (.2    | )    |  |      | (.2    | ) |  |   | (.2   | )
|                                       |  |               |        |      |  |      |        |   |  |   |       |  
|Loss applicable to common shareholders |  | $             | (191.9 | )    |  | $    | (223.1 | ) |  | $ | (35.9 | )
|                                       |  |               |        |      |  |      |        |   |  |   |       |  

61



---



##### Table of Contents



MILACRON INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)



| |                         
| | ------------------------
| | Reconciliation of Shares

|                                                           |  |                |        |      |  |      |        |  |  |  |        | 
|---------------------------------------------------------- |  | -------------- | ------ | ---- |  | ---- | ------ |  |  |  | ------ | 
|                                                           |  | 2003           |        | 2002 |  | 2001
|                                                           |  |                |        |      |  |     
|                                                           |  |               
|                                                           |  | (In thousands)
|Weighted-average common shares outstanding                 |  |                | 33,660 |      |  |      | 33,482 |  |  |  | 33,222 | 
|Effect of dilutive stock options and restricted
    shares |  |                |       |      |  |      |       |  |  |  |       | 
|                                                           |  |                |        |      |  |      |        |  |  |  |        | 
|Weighted-average common shares assuming dilution           |  |                | 33,660 |      |  |      | 33,482 |  |  |  | 33,222 | 
|                                                           |  |                |        |      |  |      |        |  |  |  |        | 

For all years, 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 33,678 thousand in 2003, 33,513 thousand in 2002 and 33,340
thousand in 2001.

Receivables

At December 31, 2003 and during several
preceding years, the company maintained a receivables purchase
agreement with a third party financial institution. As accounts
receivable were generated from customer sales made by certain of
the companys consolidated U.S. subsidiaries, those
receivables were sold to Milacron Commercial Corp (MCC), a
wholly-owned consolidated subsidiary. MCC then sold, on a
revolving basis, an undivided percentage interest in designated
pools of accounts receivable to the financial institution. As
existing receivables were collected, MCC sold undivided
percentage interests in new eligible receivables. Accounts that
became 60 days past due were no longer eligible to be sold
and the company was at risk for credit losses for which it
maintained an allowance for doubtful accounts.

As of December 31, 2003, the company could
receive up to $40.0 million at a cost of funds linked to
commercial paper rates. During the fourth quarter of 2003, the
liquidity facility that supported the program was extended from
its scheduled expiration date of December 31, 2003 to
February 27, 2004. The receivables purchase agreement was
also amended to mature on that date. However, on
February 27, 2004, the expiration of the liquidity facility
and the maturity of the receivables purchase agreement were both
extended to March 12, 2004.

At December 31, 2003, December 31, 2002
and December 31, 2001, the undivided interest in the
companys gross accounts receivable from continuing
operations that had been sold to the purchaser aggregated
$33.0 million, $34.6 million and $36.3 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 $1.5 in 2003,
$1.2 million in 2002 and $2.2 million in 2001. These
amounts are included in other expense-net in the Consolidated
Statements of Operations.

On March 12, 2004, all amounts received
under this facility were repaid (see Subsequent Events).

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, 2003 and December 31, 2002, the gross
amounts of accounts receivable that had been sold under these
arrangements totaled $3.8 million and $5.0 million,
respectively. At December 31, 2003, certain of these
amounts were partially collateralized with approximately
$3 million of cash deposits that are included in cash and
cash equivalents in the Consolidated Balance Sheet at that date.

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 payable by
its customers to third party lenders. At December 31, 2003
and December 31, 2002, the companys maximum exposure
under these arrangements totaled $11.6 million and
$12.4 million, respectively.

62



---



##### Table of Contents



MILACRON INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

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 $51.5 million in
2003 and $57.9 million in 2002 are stated at LIFO cost. If
stated at FIFO cost, such inventories would be greater by
approximately $17.2 million in 2003 and $15.7 million
in 2002.

As presented in the Consolidated Balance Sheets,
inventories are net of reserves for obsolescence of
$27.0 million and $24.2 million in 2003 and 2002,
respectively.

Goodwill and Other Intangible Assets

The carrying value of goodwill totaled
$83.8 million and $143.3 million at December 31,
2003 and December 31, 2002, respectively. The decrease
resulted principally from a goodwill impairment charge related
to two businesses that are included in the mold technologies
segment (see Goodwill Impairment Charge). The companys
other intangible assets, all of which are subject to
amortization, are included in other noncurrent assets in the
Consolidated Balance Sheets and totaled $6.5 million at
December 31, 2003 and $7.8 million at
December 31, 2002. Amortization expense related to these
assets was $1.4 million in 2003, $1.0 million in 2002
and $.5 million in 2001.

Changes in goodwill during the years ended
December 31, 2003 and December 31, 2002 are presented
in the following table.



| |                    
| | -------------------
| | Changes in Goodwill

|                                         |  |               |      |              |  |              |    |            |  |       |       |   |  |   |      |  |  |   |       |  
|---------------------------------------- |  | ------------- | ---- | ------------ |  | ------------ | -- | ---------- |  | ----- | ----- | - |  | - | ---- |  |  | - | ----- | -
|                                         |  |              
|                                         |  | 2003         
|                                         |  |              
|                                         |  | Machinery     |      |             
|                                         |  | Technologies  |      | Machinery    |  |             
|                                         |  | North         |      | Technologies |  | Mold         |    | Industrial |  |      
|                                         |  | America       |      | Europe       |  | Technologies |    | Fluids     |  | Total
|                                         |  |               |      |              |  |              |    |            |  |      
|                                         |  |              
|                                         |  | (In millions)
|Balance at beginning of year             |  | $             | 17.3 |              |  | $            | .5 |            |  | $     | 115.3 |   |  | $ | 10.2 |  |  | $ | 143.3 |  
|Goodwill acquired                        |  |               |     |              |  |              |   |            |  |       | .2    |   |  |   |     |  |  |   | .2    |  
|Impairment charges                       |  |               |     |              |  |              |   |            |  |       | (65.6 | ) |  |   |     |  |  |   | (65.6 | )
|Foreign currency translation adjustments |  |               | .2   |              |  |              | .2 |            |  |       | 5.5   |   |  |   |     |  |  |   | 5.9   |  
|                                         |  |               |      |              |  |              |    |            |  |       |       |   |  |   |      |  |  |   |       |  
|Balance at end of year                   |  | $             | 17.5 |              |  | $            | .7 |            |  | $     | 55.4  |   |  | $ | 10.2 |  |  | $ | 83.8  |  
|                                         |  |               |      |              |  |              |    |            |  |       |       |   |  |   |      |  |  |   |       |  

|                                         |  |               |        |              |  |              |       |            |  |       |       |   |  |   |      |  |  |   |        |  
|---------------------------------------- |  | ------------- | ------ | ------------ |  | ------------ | ----- | ---------- |  | ----- | ----- | - |  | - | ---- |  |  | - | ------ | -
|                                         |  |              
|                                         |  | 2002         
|                                         |  |              
|                                         |  | Machinery     |        |             
|                                         |  | Technologies  |        | Machinery    |  |             
|                                         |  | North         |        | Technologies |  | Mold         |       | Industrial |  |      
|                                         |  | America       |        | Europe       |  | Technologies |       | Fluids     |  | Total
|                                         |  |               |        |              |  |              |       |            |  |      
|                                         |  |              
|                                         |  | (In millions)
|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  |  
|                                         |  |               |        |              |  |              |       |            |  |       |       |   |  |   |      |  |  |   |        |  



---

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

63



---



##### Table of Contents



MILACRON INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

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



| |                      
| | ---------------------
| | Goodwill Amortization

|                                              |                                            |                     |        |       |   |      |        |       |   |   |       |       |  
|--------------------------------------------- | ------------------------------------------ | ------------------- | ------ | ----- | - | ---- | ------ | ----- | - | - | ----- | ----- | -
|                                              |                                            | 2003                |        | 2002  |   | 2001
|                                              |                                            |                     |        |       |   |     
|                                              |                                            |                    
|                                              |                                            | (In millions except
|                                              |                                            | per-share amounts) 
|Net loss as reported                          |                                            | $                   | (191.7 | )     |   | $    | (222.9 | )     |   | $ | (35.7 | )    
|Goodwill amortization, net of income taxes(a) |                                            |                     |       |       |   |      |       |       |   |   | 8.5   |      
|                                              |                                            |                     |        |       |   |      |        |       |   |   |       |      
|Net loss excluding goodwill amortization      |                                            | $                   | (191.7 | )     |   | $    | (222.9 | )     |   | $ | (27.2 | )    
|                                              |                                            |                     |        |       |   |      |        |       |   |   |       |      
|Loss per common share  basic and
    diluted |                                            |                     |        |       |   |      |        |       |   |   |       |      
|                                              | Net loss as reported                       |                     | $      | (5.70 | ) |      | $      | (6.67 | ) |   | $     | (1.08 | )
|                                              | Goodwill amortization, net of income taxes |                     |        |      |   |      |        |      |   |   |       | .26   |  
|                                              |                                            |                     |        |       |   |      |        |       |   |   |       |      
|                                              | Net loss excluding goodwill amortization   |                     | $      | (5.70 | ) |      | $      | (6.67 | ) |   | $     | (.82  | )
|                                              |                                            |                     |        |       |   |      |        |       |   |   |       |      



---



|    |  |                                                                      
|--- |  | ---------------------------------------------------------------------
|(a) |  | In 2001 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

|                              |  |               |        |      |  |   |        |  
|----------------------------- |  | ------------- | ------ | ---- |  | - | ------ | -
|                              |  | 2003          |        | 2002
|                              |  |               |        |     
|                              |  |              
|                              |  | (In millions)
|Land                          |  | $             | 10.7   |      |  | $ | 10.6   |  
|Buildings                     |  |               | 125.2  |      |  |   | 112.6  |  
|Machinery and equipment       |  |               | 211.6  |      |  |   | 210.9  |  
|                              |  |               |        |      |  |   |        |  
|                              |  |               | 347.5  |      |  |   | 334.1  |  
|Less accumulated depreciation |  |               | (206.7 | )    |  |   | (184.3 | )
|                              |  |               |        |      |  |   |        |  
|                              |  | $             | 140.8  |      |  | $ | 149.8  |  
|                              |  |               |        |      |  |   |        |  



| |             
| | ------------
| | Other Assets

The components of other current assets and other
noncurrent assets are shown in the tables that follow.



| |                     
| | --------------------
| | Other Current Assets

|                        |  |               |      |      |  |   |      | 
|----------------------- |  | ------------- | ---- | ---- |  | - | ---- | 
|                        |  | 2003          |      | 2002
|                        |  |               |      |     
|                        |  |              
|                        |  | (In millions)
|Deferred income taxes   |  | $             | 27.9 |      |  | $ | 40.6 | 
|Refundable income taxes |  |               | 2.7  |      |  |   | 15.2 | 
|Other                   |  |               | 14.6 |      |  |   | 13.8 | 
|                        |  |               |      |      |  |   |      | 
|                        |  | $             | 45.2 |      |  | $ | 69.6 | 
|                        |  |               |      |      |  |   |      | 

64



---



##### Table of Contents



MILACRON INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)



| |                        
| | -----------------------
| | Other Noncurrent Assets

|                                                  |  |               |       |      |  |   |       | 
|------------------------------------------------- |  | ------------- | ----- | ---- |  | - | ----- | 
|                                                  |  | 2003          |       | 2002
|                                                  |  |               |       |     
|                                                  |  |              
|                                                  |  | (In millions)
|Deferred income taxes net of valuation allowances |  | $             | 70.9  |      |  | $ | 132.4 | 
|Intangible assets other than goodwill             |  |               | 6.5   |      |  |   | 7.8   | 
|Other                                             |  |               | 38.2  |      |  |   | 37.6  | 
|                                                  |  |               |       |      |  |   |       | 
|                                                  |  | $             | 115.6 |      |  | $ | 177.8 | 
|                                                  |  |               |       |      |  |   |       | 

Liabilities

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



| |                                          
| | -----------------------------------------
| | Accrued and Other Current
    Liabilities

|                                                                |  |               |       |      |  |   |       | 
|--------------------------------------------------------------- |  | ------------- | ----- | ---- |  | - | ----- | 
|                                                                |  | 2003          |       | 2002
|                                                                |  |               |       |     
|                                                                |  |              
|                                                                |  | (In millions)
|Accrued salaries, wages and other compensation                  |  | $             | 20.9  |      |  | $ | 22.6  | 
|Reserves for post-closing adjustments and
    transaction costs |  |               | 11.8  |      |  |   | 43.3  | 
|Accrued and deferred income taxes                               |  |               | 8.0   |      |  |   | 6.7   | 
|Other accrued expenses                                          |  |               | 68.6  |      |  |   | 66.3  | 
|                                                                |  |               |       |      |  |   |       | 
|                                                                |  | $             | 109.3 |      |  | $ | 138.9 | 
|                                                                |  |               |       |      |  |   |       | 

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

|                                         |  |               |      |      |  |   |      |  
|---------------------------------------- |  | ------------- | ---- | ---- |  | - | ---- | -
|                                         |  | 2003          |      | 2002
|                                         |  |               |      |     
|                                         |  |              
|                                         |  | (In millions)
|Balance at beginning of year             |  | $             | 5.9  |      |  | $ | 6.0  |  
|Accruals                                 |  |               | 4.9  |      |  |   | 3.6  |  
|Payments                                 |  |               | (3.0 | )    |  |   | (3.2 | )
|Warranty expirations                     |  |               | (.1  | )    |  |   | (.7  | )
|Foreign currency translation adjustments |  |               | .4   |      |  |   | .2   |  
|                                         |  |               |      |      |  |   |      |  
|Balance at end of year                   |  | $             | 8.1  |      |  | $ | 5.9  |  
|                                         |  |               |      |      |  |   |      |  

65



---



##### Table of Contents



MILACRON INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

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



| |                              
| | -----------------------------
| | Long-Term Accrued Liabilities

|                                            |  |               |       |      |  |   |       | 
|------------------------------------------- |  | ------------- | ----- | ---- |  | - | ----- | 
|                                            |  | 2003          |       | 2002
|                                            |  |               |       |     
|                                            |  |              
|                                            |  | (In millions)
|Accrued pensions and other compensation     |  | $             | 42.5  |      |  | $ | 39.2  | 
|Minimum pension liability                   |  |               | 104.3 |      |  |   | 117.7 | 
|Accrued postretirement health care benefits |  |               | 31.2  |      |  |   | 33.3  | 
|Accrued and deferred income taxes           |  |               | 21.5  |      |  |   | 20.9  | 
|Other                                       |  |               | 28.3  |      |  |   | 33.0  | 
|                                            |  |               |       |      |  |   |       | 
|                                            |  | $             | 227.8 |      |  | $ | 244.1 | 
|                                            |  |               |       |      |  |   |       | 

Long-Term Debt

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



| |               
| | --------------
| | Long-Term Debt

|                          |  |               |        |      |  |   |       |  
|------------------------- |  | ------------- | ------ | ---- |  | - | ----- | -
|                          |  | 2003          |        | 2002
|                          |  |               |        |     
|                          |  |              
|                          |  | (In millions)
|8 3/8% Notes due 2004     |  | $             | 115.0  |      |  | $ | 115.0 |  
|7 5/8% Eurobonds due 2005 |  |               | 142.6  |      |  |   | 118.1 |  
|Capital lease obligations |  |               | 17.1   |      |  |   | 17.5  |  
|Other                     |  |               | 6.1    |      |  |   | 5.9   |  
|                          |  |               |        |      |  |   |       |  
|                          |  |               | 280.8  |      |  |   | 256.5 |  
|Less current maturities   |  |               | (117.3 | )    |  |   | (1.1  | )
|                          |  |               |        |      |  |   |       |  
|                          |  | $             | 163.5  |      |  | $ | 255.4 |  
|                          |  |               |        |      |  |   |       |  

On March 15, 2004, the
8 3/8% Notes due in 2004 were repaid (see Subsequent
Events).

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 2003, the fair value of the 8 3/8% Notes due
2004 was approximately $100 million and the fair value of
the 7 5/8% Eurobonds due 2005 was approximately
$130 million. These amounts are based on quoted prices on
or about December 31, 2003.

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. Except for
obligations under capital leases and certain non-U.S. bank
borrowings, none of the companys indebtedness is secured.

Total interest paid was $23.3 million in
2003, $35.8 million in 2002 and $40.5 million in 2001.
Of these amounts, interest related to continuing operations was
$22.0 million in 2003, $25.1 million in 2002 and
$23.7 million in 2001.

66



---



##### Table of Contents



MILACRON INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

Maturities of long-term debt excluding capital
leases for the five years after 2003 are shown in the following
table.



| |                             
| | ----------------------------
| | Maturities of Long-Term Debt

|     |  |               |       | 
|---- |  | ------------- | ----- | 
|     |  | (In millions)
|2004 |  | $             | 115.6 | 
|2005 |  |               | 146.9 | 
|2006 |  |               | .3    | 
|2007 |  |               | .3    | 
|2008 |  |               | .2    | 

The company leases two manufacturing facilities
under capital leases. The assets related to these leases are
included in property, plant and equipment  net in the
Consolidated Balance Sheets and had net book values of
$16.6 million at December 31, 2003 and
$15.8 million at December 31, 2002. Amortization of
these 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)
|2004                         |  | $             | 2.7  |  
|2005                         |  |               | 2.7  |  
|2006                         |  |               | 2.7  |  
|2007                         |  |               | 2.7  |  
|2008                         |  |               | 2.7  |  
|After 2008                   |  |               | 8.2  |  
|                             |  |               |      |  
|Total capital lease payments |  |               | 21.7 |  
|Less interest component(a)   |  |               | (4.6 | )
|                             |  |               |      |  
|Capital lease obligations    |  | $             | 17.1 |  
|                             |  |               |      |  



---



|    |  |                                          
|--- |  | -----------------------------------------
|(a) |  | Includes $1.0 million applicable to 2004.

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



| |                
| | ---------------
| | Rental Payments

|           |  |               |      | 
|---------- |  | ------------- | ---- | 
|           |  | (In millions)
|2004       |  | $             | 11.8 | 
|2005       |  |               | 8.6  | 
|2006       |  |               | 5.6  | 
|2007       |  |               | 3.6  | 
|2008       |  |               | 2.6  | 
|After 2008 |  |               | 2.4  | 

67



---



##### Table of Contents



MILACRON INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

Rent expense related to continuing operations was
$14.2 million, $13.7 million, and $11.2 million
2003, 2002 and 2001, respectively.

Lines of Credit

At December 31, 2003, the company had lines
of credit with various U.S. and non-U.S. banks totaling
approximately $94 million, including a $65 million
committed revolving credit facility that was due to expire on
March 15, 2004. These credit facilities support the
discounting of receivables, letters of credit, guarantees and
leases in addition to providing borrowings under varying terms.
At December 31, 2003, $54 million of the revolving
credit facility was utilized including outstanding letters of
credit of $12 million.

The company pledged as collateral for borrowings
under the revolving credit 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. The facility
limited the payment of cash dividends and the incurrence of new
debt and imposed certain restrictions on share repurchases,
capital expenditures and cash acquisitions.

The revolving credit facility included a number
of financial and other covenants, the most significant of which
required the company to achieve specified minimum levels of four
quarter trailing cumulative consolidated EBITDA (earnings before
interest, taxes, depreciation and amortization). At
December 31, 2003, Milacron was in compliance with all
covenants.

On March 12, 2004, all amounts borrowed
under the revolving credit facility were repaid with the
proceeds of a new credit facility (see Subsequent Events).

At December 31, 2003, the company had
additional credit lines totaling $29 million, of which
approximately $15 million was available for use under
certain circumstances.

The weighted-average interest rate on borrowings
under lines of credit outstanding was 4.8% as of
December 31, 2003 and 5.2% as of December 31, 2002.

Shareholders Equity

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.

In 2003, a total of 1,168,531 treasury shares
were reissued in connection with grants of restricted shares and
contributions to employee benefit programs. This reduction in
treasury shares was partially offset by the forfeiture of 98,287
restricted shares that were added to the treasury share balance.
The net reduction in treasury shares includes 851,500 restricted
stock awards made to certain key employees, including the chief
executive officer and other corporate officers. These grants
were made in connection with an employee retention program
approved by the companys board of directors after
consideration of advice from independent compensation
consultants.

68



---



##### Table of Contents



MILACRON INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)



| |                                                       
| | ------------------------------------------------------
| | Shareholders Equity 
    Preferred and Common Shares

|                                                                                                                                            |  |                      |      |      |  |   |      | 
|------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------- | ---- | ---- |  | - | ---- | 
|                                                                                                                                            |  | 2003                 |      | 2002
|                                                                                                                                            |  |                      |      |     
|                                                                                                                                            |  |                     
|                                                                                                                                            |  | (In millions, except
|                                                                                                                                            |  | per-share amounts)  
|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, 2003:
    34,824,025 shares; 2002: 33,753,781 shares |  |                      | 34.8 |      |  |   | 33.8 | 

As presented in the previous table, common shares
outstanding are net of treasury shares of 4,783,063 in 2003 and
5,853,307 in 2002.

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

On May 23, 2003, the companys
shareholders adopted an amendment to the companys
certificate of incorporation to eliminate the right of holders
of common shares to ten votes per share upon satisfaction of
certain ownership tenure requirements. In the past, holders of
common shares were entitled to cast ten votes for each share
that had been beneficially owned for at least 36 consecutive
calendar months. As a result of the change, each common share is
now entitled to one vote irrespective of the period of time it
has been owned.

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, 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. On March 11, 2004, the company amended its
stockholder rights plan to exempt the acquisition by Glencore
Finance AG and Mizuho International plc of securities
issued by the company in connection with the financing
arrangements entered into on March 12, 2004 from triggering
the rights under the plan (see Subsequent Events). The rights
plan expires in February 2009.

On March 12, 2004, the company issued
$100 million of exchangeable debt, $30 million of
which is convertible into the companys common stock at the
option of the holders. As soon as certain conditions described
in Subsequent Events are fulfilled, all such
exchangeable debt and any common stock into which any such
exchangeable debt had been previously converted will be
exchanged for a new series of the companys convertible
preferred stock. Following exchange of the exchangeable debt for
convertible preferred stock, the holders of the convertible
preferred stock would collectively own approximately between 40%
and 60% of Milacrons fully diluted equity (on an
as-converted basis) (see Subsequent Events).

69



---



##### Table of Contents



MILACRON INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

Comprehensive 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 loss are shown in the table that follows.



| |                   
| | ------------------
| | Comprehensive Loss

|                                                                                             |  |               |        |      |  |      |        |   |  |   |       |  
|-------------------------------------------------------------------------------------------- |  | ------------- | ------ | ---- |  | ---- | ------ | - |  | - | ----- | -
|                                                                                             |  | 2003          |        | 2002 |  | 2001
|                                                                                             |  |               |        |      |  |     
|                                                                                             |  |              
|                                                                                             |  | (In millions)
|Net loss                                                                                     |  | $             | (191.7 | )    |  | $    | (222.9 | ) |  | $ | (35.7 | )
|Foreign currency translation adjustments                                                     |  |               | 8.5    |      |  |      | 6.2    |   |  |   | (1.3  | )
|Reclassification of foreign currency translation
    adjustments to net gain on divestitures |  |               |       |      |  |      | 10.6   |   |  |   |      |  
|Minimum pension liability adjustment(a)                                                      |  |               | 14.6   |      |  |      | (95.4  | ) |  |   |      |  
|Cumulative effect of change in method of
    accounting                                      |  |               |       |      |  |      |       |   |  |   | (.3   | )
|Change in fair value of foreign currency exchange
    contracts                              |  |               |       |      |  |      | (.2    | ) |  |   | .3    |  
|                                                                                             |  |               |        |      |  |      |        |   |  |   |       |  
|Total comprehensive loss                                                                     |  | $             | (168.6 | )    |  | $    | (301.7 | ) |  | $ | (37.0 | )
|                                                                                             |  |               |        |      |  |      |        |   |  |   |       |  



---



|    |  |                                                                                       
|--- |  | --------------------------------------------------------------------------------------
|(a) |  | In 2003, includes no tax effect. In 2002,
    includes a tax benefit of $51.4 million.

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



| |                                         
| | ----------------------------------------
| | Accumulated Other Comprehensive
    Loss

|                                                  |  |               |        |      |  |   |        |  
|------------------------------------------------- |  | ------------- | ------ | ---- |  | - | ------ | -
|                                                  |  | 2003          |        | 2002
|                                                  |  |               |        |     
|                                                  |  |              
|                                                  |  | (In millions)
|Foreign currency translation adjustments          |  | $             | (26.1  | )    |  | $ | (34.6  | )
|Minimum pension liability adjustment              |  |               | (80.8  | )    |  |   | (95.4  | )
|Fair value of foreign currency exchange contracts |  |               | .2     |      |  |   | .2     |  
|                                                  |  |               |        |      |  |   |        |  
|                                                  |  | $             | (106.7 | )    |  | $ | (129.8 | )
|                                                  |  |               |        |      |  |   |        |  

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

70



---



##### Table of Contents



MILACRON INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

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, 2003, the company had
outstanding forward contracts totaling $4.7 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 3,855,950 stock options
outstanding at December 31, 2003, 246,000 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 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 |      
|                             | Granted   |        |           | 18,000    |   |  |       | 5.43  | 
|                             | Cancelled |        |           | (314,100  | ) |  |       | 18.65 | 
|                             | Waived    |        |           | (465,900  | ) |  |       | 22.75 | 
|                             |           |        |           |           |   |  |       |      
|Outstanding at year-end 2003 |           |        | 3,855,950 |           |   |  | 19.75 |      
|                             |           |        |           |           |   |  |       |      

On April 21, 2003, the companys
executive officers waived all right and all interest to their
options to purchase 465,900 common shares of the company. In all
cases, the option prices were in excess of current market price
of the companys common shares as of the date of the
waivers. These waivers were made without any promise of future
options being offered to these officers. The purpose of the
waivers was to allow the

71



---



##### Table of Contents



MILACRON INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

company to make future grants to participants
under the companys long-term incentive plans without
increasing shareholder dilution.



| |                                          
| | -----------------------------------------
| | Exercisable Stock Options at Year
    End

|     |  |         |           | 
|---- |  | ------- | --------- | 
|     |  | Stock  
|     |  | Options
|     |  |        
|2001 |  |         | 2,261,538 | 
|2002 |  |         | 2,653,163 | 
|2003 |  |         | 2,723,088 | 



| |                                                  
| | -------------------------------------------------
| | Shares Available for Future Grant at Year
    End

|     |  |        |           | 
|---- |  | ------ | --------- | 
|     |  | Shares
|     |  |       
|2001 |  |        | 1,658,721 | 
|2002 |  |        | 969,524   | 
|2003 |  |        | 276,737   | 

The following tables summarize information about
stock options outstanding at December 31, 2003.



| |                                            
| | -------------------------------------------
| | Components of Outstanding Stock
    Options

|                         |  |             |           |           |  |           |     |  |  |   |       | 
|------------------------ |  | ----------- | --------- | --------- |  | --------- | --- |  |  | - | ----- | 
|                         |  |             |           | Average   |  | Weighted-
|                         |  |             |           | Remaining |  | Average  
|                         |  | Number      |           | Contract  |  | Exercise 
|Range of Exercise Prices |  | Outstanding |           | Life      |  | Price    
|                         |  |             |           |           |  |          
|$ 5.43-19.56             |  |             | 1,360,200 |           |  |           | 4.5 |  |  | $ | 13.32 | 
|20.09-27.91              |  |             | 2,495,750 |           |  |           | 3.3 |  |  |   | 23.25 | 
|                         |  |             |           |           |  |           |     |  |  |   |       | 
|5.43-27.91               |  |             | 3,855,950 |           |  |           |     |  |  |   |       | 
|                         |  |             |           |           |  |           |     |  |  |   |       | 



| |                                            
| | -------------------------------------------
| | Components of Exercisable Stock
    Options

|                         |  |             |           |           |  |   |       | 
|------------------------ |  | ----------- | --------- | --------- |  | - | ----- | 
|                         |  |             |           | Weighted-
|                         |  |             |           | Average  
|                         |  | Number      |           | Exercise 
|Range of Exercise Prices |  | Exercisable |           | Price    
|                         |  |             |           |          
|$ 5.43-19.56             |  |             | 497,850   |           |  | $ | 13.59 | 
|20.09-27.91              |  |             | 2,225,238 |           |  |   | 23.63 | 
|                         |  |             |           |           |  |   |       | 
|5.43-27.91               |  |             | 2,723,088 |           |  |   |       | 
|                         |  |             |           |           |  |   |       | 

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 2003, 2002
and 2001 was $2.37, $5.35 and $7.61, respectively. The fair
values of the options

72



---



##### Table of Contents



MILACRON INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

were calculated as of the grant dates using the
Black-Scholes option pricing model and the following assumptions:



| |                       
| | ----------------------
| | Fair Value Assumptions

|                                      |  |      |      |      |  |      |            |   |  |  |            |  
|------------------------------------- |  | ---- | ---- | ---- |  | ---- | ---------- | - |  |  | ---------- | -
|                                      |  | 2003 |      | 2002 |  | 2001
|                                      |  |      |      |      |  |     
|Dividend yield                        |  |      | 1.6  | %    |  |      | .3-.7      | % |  |  | .8-1.2     | %
|Expected volatility                   |  |      | 54   | %    |  |      | 46-50      | % |  |  | 39-50      | %
|Risk free interest rate at grant date |  |      | 2.97 | %    |  |      | 2.98- 4.28 | % |  |  | 4.74- 5.15 | %
|Expected life in years                |  |      | 5    |      |  |      | 2-5        |   |  |  | 2-7        |  

Under the 1997 Plan, performance awards are
granted in the form of shares of restricted stock 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 two or 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 $.6 million in
2003 and $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. Restricted stock award activity is as
follows:



| |                          
| | -------------------------
| | Restricted Stock Activity

|                                               |  |      |         |      |  |      |         |  |  |   |        | 
|---------------------------------------------- |  | ---- | ------- | ---- |  | ---- | ------- |  |  | - | ------ | 
|                                               |  | 2003 |         | 2002 |  | 2001
|                                               |  |      |         |      |  |     
|Restricted stock granted                       |  |      | 924,300 |      |  |      | 192,000 |  |  |   | 90,500 | 
|                                               |  |      |         |      |  |      |         |  |  |   |        | 
|Weighted-average market value on date of grant |  | $    | 2.74    |      |  | $    | 13.09   |  |  | $ | 19.21  | 
|                                               |  |      |         |      |  |      |         |  |  |   |        | 

Restricted shares awarded as performance awards
subject to contingent vesting totaled 38,000 in 2003, 46,000 in
2002 and 51,000 in 2001. Outstanding restricted shares subject
to contingent vesting totaled 104,646, 141,795 and 159,493 at
year-end 2003, 2002 and 2001, respectively. The amount
outstanding at year-end 2003 includes 32,936 shares that
will be cancelled in February 2004 because the basic earnings
per common share objective for 2003 was not attained. In 2002
and 2001 restricted shares subject to contingent vesting of
52,519 and 52,806 respectively, were also cancelled.

Cancellations of restricted stock, including
shares cancelled to pay employee withholding taxes at maturity,
totaled 98,287 in 2003, 82,448 in 2002 and 73,133 in 2001.

Issuances of shares related to performance awards
earned under a prior plan and to deferred directors fees
totaled 19,903 in 2003, 1,003 in 2002, and 18,525 in 2001.

Organization

The company has four business segments: machinery
technologies  North America, machinery
technologies  Europe, mold technologies and
industrial fluids.

The companys segments conform to its
internal management reporting 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 machinery
technologies  Europe segment manufactures

73



---



##### Table of Contents



MILACRON INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

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  which 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 of 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

|                      |                                      |                             |       |       |       |      |       |       |       |   |       |       |       | 
|--------------------- | ------------------------------------ | --------------------------- | ----- | ----- | ----- | ---- | ----- | ----- | ----- | - | ----- | ----- | ----- | 
|                      |                                      | 2003                        |       | 2002  |       | 2001
|                      |                                      |                             |       |       |       |     
|                      |                                      |                            
|                      |                                      | (In millions)              
|Plastics technologies |                                      |                             |       |       |       |      |       |       |       |   |       |      
|                      | Machinery technologies-North America |                             | $     | 321.2 |       |      | $     | 313.6 |       |   | $     | 361.7 |      
|                      | Machinery technologies-Europe        |                             |       | 151.0 |       |      |       | 117.4 |       |   |       | 122.6 |      
|                      | Mold technologies                    |                             |       | 168.7 |       |      |       | 174.7 |       |   |       | 184.6 |      
|                      | Eliminations                         |                             |       | (5.4  | )     |      |       | (8.5  | )     |   |       | (6.5  | )    
|                      |                                      |                             |       |       |       |      |       |       |       |   |       |      
|                      |                                      | Total plastics technologies |       |       | 635.5 |      |       |       | 597.2 |   |       |       | 662.4 | 
|Industrial fluids     |                                      |                             | 104.2 |       |       |      | 96.0  |       |       |   | 92.8  |      
|                      |                                      |                             |       |       |       |      |       |       |       |   |       |      
|Total sales           |                                      | $                           | 739.7 |       |       | $    | 693.2 |       |       | $ | 755.2 |      
|                      |                                      |                             |       |       |       |      |       |       |       |   |       |      



| |                          
| | -------------------------
| | Customer Sales by Segment

|                      |                                      |                             |       |       |       |      |       |       |       |   |       |       |       | 
|--------------------- | ------------------------------------ | --------------------------- | ----- | ----- | ----- | ---- | ----- | ----- | ----- | - | ----- | ----- | ----- | 
|                      |                                      | 2003                        |       | 2002  |       | 2001
|                      |                                      |                             |       |       |       |     
|                      |                                      |                            
|                      |                                      | (In millions)              
|Plastics technologies |                                      |                             |       |       |       |      |       |       |       |   |       |      
|                      | Machinery technologies-North America |                             | $     | 319.6 |       |      | $     | 312.5 |       |   | $     | 359.3 |      
|                      | Machinery technologies-Europe        |                             |       | 147.2 |       |      |       | 110.0 |       |   |       | 118.6 |      
|                      | Mold technologies                    |                             |       | 168.7 |       |      |       | 174.7 |       |   |       | 184.5 |      
|                      |                                      |                             |       |       |       |      |       |       |       |   |       |      
|                      |                                      | Total plastics technologies |       |       | 635.5 |      |       |       | 597.2 |   |       |       | 662.4 | 
|Industrial fluids     |                                      |                             | 104.2 |       |       |      | 96.0  |       |       |   | 92.8  |      
|                      |                                      |                             |       |       |       |      |       |       |       |   |       |      
|Total sales           |                                      | $                           | 739.7 |       |       | $    | 693.2 |       |       | $ | 755.2 |      
|                      |                                      |                             |       |       |       |      |       |       |       |   |       |      

74



---



##### Table of Contents



MILACRON INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)



| |                                     
| | ------------------------------------
| | Operating Information by
    Segment

|                         |                                    |                                      |                             |       |       |       |       |       |       |       |         |       |       |       |  
|------------------------ | ---------------------------------- | ------------------------------------ | --------------------------- | ----- | ----- | ----- | ----- | ----- | ----- | ----- | ------- | ----- | ----- | ----- | -
|                         |                                    | 2003                                 |                             | 2002  |       | 2001 
|                         |                                    |                                      |                             |       |       |      
|                         |                                    |                                     
|                         |                                    | (In millions)                       
|Operating profit (loss)  |                                    |                                      |                             |       |       |       |       |       |       |       |         |      
|                         | Plastics technologies(a)           |                                      |                             |       |       |       |       |       |       |       |         |       |      
|                         |                                    | Machinery technologies-North America |                             | $     | 6.7   |       |       | $     | 8.0   |       |         | $     | (13.5 | )    
|                         |                                    | Machinery technologies-Europe        |                             |       | (1.4  | )     |       |       | (8.1  | )     |         |       | (9.1  | )    
|                         |                                    | Mold technologies                    |                             |       | 1.8   |       |       |       | 5.3   |       |         |       | 12.1  |      
|                         |                                    |                                      |                             |       |       |       |       |       |       |       |         |      
|                         |                                    |                                      | Total plastics technologies |       |       | 7.1   |       |       |       | 5.2   |         |       |       | (10.5 | )
|                         | Industrial fluids                  |                                      |                             | 15.7  |       |       |       | 14.4  |       |       |         | 18.1  |      
|                         | Goodwill impairment charge(b)      |                                      |                             | (65.6 | )     |       |       |      |       |       |         |      |      
|                         | Restructuring costs(c)             |                                      |                             | (27.1 | )     |       |       | (13.9 | )     |       |         | (17.5 | )    
|                         | Corporate expenses(d)              |                                      |                             | (14.3 | )     |       |       | (15.4 | )     |       |         | (14.7 | )    
|                         | Other unallocated expenses(e)      |                                      |                             | (4.6  | )     |       |       | (3.6  | )     |       |         | (3.9  | )    
|                         |                                    |                                      |                             |       |       |       |       |       |       |       |         |      
|Operating loss           |                                    |                                      | (88.8                       | )     |       |       | (13.3 | )     |       |       | (28.5   | )    
|Interest expense-net     |                                    |                                      | (23.0                       | )     |       |       | (23.3 | )     |       |       | (22.5   | )    
|                         |                                    |                                      |                             |       |       |       |       |       |       |       |         |      
|Loss before income taxes |                                    | $                                    | (111.8                      | )     |       | $     | (36.6 | )     |       | $     | (51.0   | )    
|                         |                                    |                                      |                             |       |       |       |       |       |       |       |         |      
|Segment assets(f)        |                                    |                                      |                             |       |       |       |       |       |       |       |         |      
|                         | Plastics technologies              |                                      |                             |       |       |       |       |       |       |       |         |       |      
|                         |                                    | Machinery technologies-North America |                             | $     | 165.5 |       |       | $     | 187.4 |       |         | $     | 220.5 |      
|                         |                                    | Machinery technologies-Europe        |                             |       | 109.5 |       |       |       | 97.4  |       |         |       | 257.9 |      
|                         |                                    | Mold technologies                    |                             |       | 155.8 |       |       |       | 227.4 |       |         |       | 293.6 |      
|                         |                                    | Other                                |                             |       | .7    |       |       |       | 1.0   |       |         |       | 1.9   |      
|                         |                                    |                                      |                             |       |       |       |       |       |       |       |         |      
|                         |                                    |                                      | Total plastics technologies |       |       | 431.5 |       |       |       | 513.2 |         |       |       | 773.9 |  
|                         | Industrial fluids                  |                                      |                             | 50.1  |       |       |       | 48.0  |       |       |         | 46.1  |      
|                         | Cash and cash equivalents          |                                      |                             | 92.8  |       |       |       | 122.3 |       |       |         | 90.1  |      
|                         | Receivables sold                   |                                      |                             | (33.0 | )     |       |       | (34.6 | )     |       |         | (36.3 | )    
|                         | Deferred income taxes              |                                      |                             | 98.8  |       |       |       | 173.0 |       |       |         | 85.7  |      
|                         | Assets of discontinued operations  |                                      |                             | 7.2   |       |       |       | 16.0  |       |       |         | 455.7 |      
|                         | Unallocated corporate and other(g) |                                      |                             | 64.1  |       |       |       | 77.8  |       |       |         | 97.1  |      
|                         |                                    |                                      |                             |       |       |       |       |       |       |       |         |      
|Total assets             |                                    | $                                    | 711.5                       |       |       | $     | 915.7 |       |       | $     | 1,512.3 |      
|                         |                                    |                                      |                             |       |       |       |       |       |       |       |         |      

75



---



##### Table of Contents



MILACRON INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)



| |                                     
| | ------------------------------------
| | Operating Information by
    Segment

|                                       |                       |                                      |                             |      |     |      |      |     |     |      |      |     |      |      | 
|-------------------------------------- | --------------------- | ------------------------------------ | --------------------------- | ---- | --- | ---- | ---- | --- | --- | ---- | ---- | --- | ---- | ---- | 
|                                       |                       | 2003                                 |                             | 2002 |     | 2001
|                                       |                       |                                      |                             |      |     |     
|                                       |                       |                                     
|                                       |                       | (In millions)                       
|Capital expenditures                   |                       |                                      |                             |      |     |      |      |     |     |      |      |    
|                                       | Plastics technologies |                                      |                             |      |     |      |      |     |     |      |      |     |     
|                                       |                       | Machinery technologies-North America |                             | $    | 1.7 |      |      | $   | 2.6 |      |      | $   | 4.3  |     
|                                       |                       | Machinery technologies-Europe        |                             |      | 1.1 |      |      |     | .3  |      |      |     | 5.7  |     
|                                       |                       | Mold technologies                    |                             |      | 1.6 |      |      |     | 1.7 |      |      |     | 2.4  |     
|                                       |                       |                                      |                             |      |     |      |      |     |     |      |      |    
|                                       |                       |                                      | Total plastics technologies |      |     | 4.4  |      |     |     | 4.6  |      |     |      | 12.4 | 
|                                       | Industrial fluids     |                                      |                             | 2.1  |     |      |      | 1.5 |     |      |      | .9  |     
|                                       | Unallocated corporate |                                      |                             |     |     |      |      | .1  |     |      |      | .2  |     
|                                       |                       |                                      |                             |      |     |      |      |     |     |      |      |    
|Total capital expenditures             |                       | $                                    | 6.5                         |      |     | $    | 6.2  |     |     | $    | 13.5 |    
|                                       |                       |                                      |                             |      |     |      |      |     |     |      |      |    
|Depreciation and amortization          |                       |                                      |                             |      |     |      |      |     |     |      |      |    
|                                       | Plastics technologies |                                      |                             |      |     |      |      |     |     |      |      |     |     
|                                       |                       | Machinery technologies-North America |                             | $    | 8.7 |      |      | $   | 9.9 |      |      | $   | 14.0 |     
|                                       |                       | Machinery technologies-Europe        |                             |      | 3.9 |      |      |     | 3.5 |      |      |     | 4.8  |     
|                                       |                       | Mold technologies                    |                             |      | 6.7 |      |      |     | 7.4 |      |      |     | 12.8 |     
|                                       |                       |                                      |                             |      |     |      |      |     |     |      |      |    
|                                       |                       |                                      | Total plastics technologies |      |     | 19.3 |      |     |     | 20.8 |      |     |      | 31.6 | 
|                                       | Industrial fluids     |                                      |                             | 2.0  |     |      |      | 1.5 |     |      |      | 2.6 |     
|                                       | Unallocated corporate |                                      |                             | .4   |     |      |      | .7  |     |      |      | .7  |     
|                                       |                       |                                      |                             |      |     |      |      |     |     |      |      |    
|Total depreciation and amortization(h) |                       | $                                    | 21.7                        |      |     | $    | 23.0 |     |     | $    | 34.9 |    
|                                       |                       |                                      |                             |      |     |      |      |     |     |      |      |    



---



|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | In 2002, operating profit of the machinery
    technologies  North America segment includes
    $4.5 million of royalty income from the licensing of
    patented technology and the operating profit of the mold
    technologies segment includes a $1.0 million goodwill
    impairment charge.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   
|(b) |  | Relates to the mold technologies segment.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   
|(c) |  | In 2003, $7.7 million relates to machinery
    technologies  North America, $6.5 million
    relates to machinery technologies  Europe,
    $12.6 million relates to mold technologies and
    $.3 million relates to corporate expenses. 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 to mold technologies and
    $.3 million relates to industrial fluids. In 2003, 2002 and
    2001, $3.3 million, $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 Operations for those
    years.
|   
|(d) |  | In 2001, includes a gain of $2.6 million on
    the sale of surplus real estate.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   
|(e) |  | Includes financing costs including costs related
    to the sale of accounts receivable.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   
|(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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   
|(h) |  | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

76



---



##### Table of Contents



MILACRON INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)



| |                       
| | ----------------------
| | Geographic Information

|                  |                         |                     |                      |       |       |       |   |       |       |       |   |       |       |       | 
|----------------- | ----------------------- | ------------------- | -------------------- | ----- | ----- | ----- | - | ----- | ----- | ----- | - | ----- | ----- | ----- | 
|                  |                         | 2003                |                      | 2002  |       | 2001 
|                  |                         |                     |                      |       |       |      
|                  |                         |                    
|                  |                         | (In millions)      
|Sales(a)          |                         |                     |                      |       |       |       |   |       |       |       |   |      
|                  |                         | United States       |                      | $     | 450.8 |       |   | $     | 444.4 |       |   | $     | 503.1 |      
|                  |                         | Non-U.S. operations |                      |       |       |       |   |       |       |       |   |       |       |      
|                  |                         |                     | Germany              |       |       | 102.3 |   |       |       | 84.3  |   |       |       | 100.0 | 
|                  |                         |                     | Other Western Europe |       |       | 121.9 |   |       |       | 105.8 |   |       |       | 101.3 | 
|                  |                         |                     | Asia                 |       |       | 31.0  |   |       |       | 31.7  |   |       |       | 25.4  | 
|                  |                         |                     | Other                |       |       | 33.7  |   |       |       | 27.0  |   |       |       | 25.4  | 
|                  |                         |                     |                      |       |       |       |   |       |       |       |   |      
|                  | Total sales             |                     | $                    | 739.7 |       |       | $ | 693.2 |       |       | $ | 755.2 |      
|                  |                         |                     |                      |       |       |       |   |       |       |       |   |      
|Noncurrent assets |                         |                     |                      |       |       |       |   |       |       |       |   |      
|                  |                         | United States       |                      | $     | 150.6 |       |   | $     | 230.3 |       |   | $     | 442.6 |      
|                  |                         | Non-U.S. operations |                      |       |       |       |   |       |       |       |   |       |       |      
|                  |                         |                     | Germany              |       |       | 68.9  |   |       |       | 64.7  |   |       |       | 65.0  | 
|                  |                         |                     | Other Western Europe |       |       | 30.2  |   |       |       | 27.2  |   |       |       | 68.2  | 
|                  |                         |                     | Asia                 |       |       | 5.8   |   |       |       | 6.0   |   |       |       | 5.9   | 
|                  |                         |                     | Other                |       |       | 13.8  |   |       |       | 10.4  |   |       |       | 6.4   | 
|                  |                         |                     |                      |       |       |       |   |       |       |       |   |      
|                  | Total noncurrent assets |                     | $                    | 269.3 |       |       | $ | 338.6 |       |       | $ | 588.1 |      
|                  |                         |                     |                      |       |       |       |   |       |       |       |   |      



---



|    |  |                                                                                                        
|--- |  | -------------------------------------------------------------------------------------------------------
|(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 $73.0 million in 2003, $70.7 million in 2002
and $81.8 million in 2001.

Total sales of the companys U.S. and
non-U.S. operations to unaffiliated customers outside the
U.S. were $338.2 million, $295.7 million and
$306.7 million in 2003, 2002 and 2001, respectively.

Subsequent Events

On March 12, 2004, the company entered into
a definitive agreement whereby Glencore Finance AG and Mizuho
International plc purchased $100 million in aggregate
principal amount of the companys new exchangeable debt
securities. The proceeds from this transaction, together with
existing cash balances, were used to repay the
8 3/8% Notes due March 15, 2004. The securities
the company issued were $30 million of 20% Secured Step-Up
Series A Notes due 2007 and $70 million of 20% Secured
Step-Up Series B Notes due 2007. The $30 million of
Series A Notes are convertible into shares of the
companys common stock at a conversion price of
$2.00 per share and initially bear a combination of cash
and pay-in-kind interest at a total rate of 20% per annum.
The $70 million of Series B Notes initially bear a
combination of cash and pay-in-kind interest at a total rate of
20% per annum. Both the Series A Notes and the
Series B Notes are exchangeable for a new series of the
companys convertible preferred stock with a cumulative
dividend rate of 6%. Upon receipt of shareholder approval of
both (i) the authorization of additional shares of the
companys common stock and (ii) the issuance of the new
series of convertible preferred stock convertible into such
common stock and for which the Series A Notes and the
Series B Notes may be exchanged, the interest rate
applicable to both the Series A Notes and the Series B
Notes will be retroactively reset to 6% per annum from the
date of issuance, payable in cash. Following receipt of
shareholder approval, as soon as a condition requiring the
execution of a refinancing of the
115 million
of 7 5/8% Eurobonds due in April 2005 is satisfied or
waived, all Series A Notes and Series B Notes (and any
common stock into which any Series A Notes had been

77



---



##### Table of Contents



MILACRON INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

converted) will be exchanged for shares of the
new series of convertible preferred stock. If shareholder
approval is not obtained on or before July 29, 2004, the
Series A Notes and Series B Notes will be in default
and will remain outstanding until March 15, 2007 with an
initial interest rate of 20% from the date of issuance,
increasing to 24% over time, and any common stock into which any
Series A Notes had previously been converted will be
exchanged for shares of the companys currently authorized,
but unissued, serial preference stock with a 24% cumulative
dividend rate.

Following exchange of the Series A Notes and
the Series B Notes for convertible preferred stock, the
holders of the convertible preferred stock would collectively
own approximately between 40% and 60% of the companys
fully diluted equity (on an as-converted basis), depending on
whether the company exercises an option to redeem a portion of
the convertible preferred stock with the proceeds from a rights
offering to its existing shareholders. After seven years, the
convertible preferred stock would automatically be converted
into common stock at a conversion price of $2.00 per share
but may be converted prior to that time at the option of the
holders. The conversion price would be subject to reset to
$1.75 per share at the end of the second quarter of 2005 if
a test based on the companys financial performance for
2004 is not satisfied. In addition, as part of the transaction
the company has agreed to issue to holders of the convertible
preferred stock contingent warrants to purchase an aggregate of
one million shares of the companys common stock, subject
to receiving shareholder approval to increase its authorized
common stock, which contingent warrants will be exercisable only
if a test based on the companys financial performance for
2005 is not satisfied. Assuming that the company does not
conduct a rights offering to its existing shareholders, and both
the conversion price of the convertible preferred stock is reset
to $1.75 and the contingent warrants are exercised, the holders
of the convertible preferred stock would own approximately 62.5%
of the companys fully diluted equity (on an as converted
basis).

The events contemplated by the agreement with
Glencore Finance AG and Mizuho International plc could result in
an ownership change of the company for tax purposes.
Were this to occur, the timing of the companys utilization
of tax loss carryforwards and other tax attributes could be
substantially delayed. Accordingly, this could affect income tax
expense and cash income taxes in future years.

If the company does not obtain shareholder
approval of both the authorization of additional shares of its
common stock and the issuance of the new series of convertible
preferred stock convertible into such common stock on or before
July 29, 2004, its liquidity will be materially impaired as
the Series A Notes and the Series B Notes will go into
default and the interest rates thereon will become significantly
higher. If shareholder approval has not been obtained on or
before July 29, 2004, the interest payable on the
Series A Notes and the Series B Notes will no longer
be eligible for retroactive reset to 6%. Instead, interest on
the Series A Notes and the Series B Notes will be
payable in arrears (a) on September 15, 2004 in cash
at a rate of 12% per annum and in additional Series A
Notes or Series B Notes, as applicable, at a rate of
8% per annum, (b) on March 15, 2005 in cash at a
rate of 16% per annum and in additional Series A Notes
or Series B Notes, as applicable, at a rate of 8% per
annum, (c) on September 15, 2005 in cash at a rate of
20% per annum and in additional Series A Notes or
Series B Notes, as applicable, at a rate of 4% per
annum, and (d) on March 15, 2006, and through to
maturity on March 15, 2007, in cash at a rate of
24% per annum.

Pursuant to the definitive agreement with
Glencore Finance AG and Mizuho International plc, the company
has agreed to use its commercially reasonable efforts to cause a
number of persons selected by holders of the Series A
Notes, acting together, to be appointed or elected to a number
of directorships on the companys board of directors in
proportion to the percentage of the companys fully diluted
equity represented by the number of shares of common stock into
which the Series A Notes may be converted, rounded up to
the nearest whole number.

On March 12, 2004, the company also reached
a separate agreement with Credit Suisse First Boston for a
$140 million credit facility having a term of approximately
one year. At close, extensions of credit under the

78



---



##### Table of Contents



MILACRON INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

facility in an aggregate amount of
$84 million were utilized to repay and terminate the
companys existing revolving credit facility and its
existing receivables purchase program.

This new credit facility consists of a
$65 million revolving A facility, with a $25 million
subfacility for letters of credit, and a $75 million term
loan B facility. The company and certain of its
wholly-owned domestic subsidiaries are joint and several
borrowers under the new credit facility and the entire new
credit facility is secured by first priority liens on
substantially all assets of the company and its domestic
subsidiaries and includes pledges of stock of various
wholly-owned domestic subsidiaries and certain foreign
subsidiaries.

Availability under the revolving A facility is
limited by a borrowing base calculated based upon specified
percentages of eligible receivables and eligible inventory, a
$10 million minimum availability covenant (resulting in
aggregate availability of no more than $55 million) and
other reserve requirements. In addition, the borrowing base is
subject to the customary ability of the administrative agent for
the lenders to reduce advance rates, impose or change collateral
value limitations, establish reserves and declare certain
collateral ineligible from time to time in its reasonable
discretion, any of which could reduce the companys
borrowing availability under the revolving A facility at any
time. At March 12, 2004, additional availability under the
revolving A facility was approximately $20 million, after
taking into account the minimum availability and existing
reserve requirements.

With the exception of $4 million of domestic
cash that may be held by the company outside the control of the
administrative agent, all proceeds of the companys
domestic accounts receivable and other domestic collateral are
subject to a daily cash sweep. Under the terms of
the new credit facility, these proceeds are deposited in lockbox
accounts under the control of the administrative agent and then
transferred to blocked accounts under the control of the
administrative agent. Each business day, the funds in the
blocked accounts will be applied to pay down any outstanding
borrowings under the revolving A facility. As a result, the
companys liquidity is likely to be dependent on its
ability to continue to make borrowings under the new credit
facility. If the company is unable to satisfy the conditions to
borrowing under the new credit facility, which include, among
other things, conditions related to the continued accuracy of
its representations and warranties and the absence of any
unmatured or matured defaults, or any material adverse change in
its business or financial condition, without a waiver the
company would lose access to this important source of liquidity
and its financial condition would be materially impaired.

The company has the ability to prepay the
revolving A facility, in whole or in part, at any time without
penalty. The company has the option to prepay the term
loan B facility at any time, subject to a 2% prepayment fee
on the principal amount prepaid, as follows: (i) in whole,
to the extent concurrently therewith or prior thereto all
revolving A loans have been repaid in full and all commitments
under the revolving A facility have been terminated, or
(ii) in whole or in part, if availability under the
revolving A facility exceeds $10 million and no event of
default exists. Prepayments of term loan B loans
permanently reduce the companys availability under the new
credit facility. The company is also required to make
prepayments in connection with, among other things, asset sales
and casualty events and in connection with the issuance of debt
or equity, tax refunds, proceeds from other corporate
events and other extraordinary receipts. Additionally,
there are limitations placed on the amounts that can be paid to
the holders of the 7 5/8% Eurobonds due April 2005 without
causing a prepayment event.

The new credit facility includes a number of
affirmative and negative covenants, including, but not limited
to, negative covenants limiting the ability of the company and
its subsidiaries to incur additional debt, incur liens, make
capital expenditures, issue or sell capital stock and make
restricted payments (including a prohibition on the ability to
make cash interest or dividend payments on debt or equity
securities issued pursuant to the terms of the definitive
agreement entered into on March 12, 2004 among the company,
Mizuho International plc and Glencore Finance AG, unless
availability under the revolving A facility exceeds
$25 million before taking into account minimum availability
requirements). The new credit facility also includes a financial
covenant that requires the company to achieve specified minimum
levels of monthly

79



---



##### Table of Contents



MILACRON INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

cumulative EBITDA (earnings before interest,
taxes, depreciation and amortization) adjusted to exclude
certain restructuring costs and certain other items, each as
specified in the financing agreement.

The new credit facility is subject to various
events of default, including an event of default if the company
does not obtain shareholder approval of both the authorization
of additional shares of its common stock and the issuance of a
new series of convertible preferred stock convertible into such
common stock on or before July 29, 2004.

Borrowings under the new credit facility will
bear interest, at the companys option, based upon either
(i) a LIBOR rate plus the applicable margin (as defined
below) or (ii) a reference rate plus the applicable margin
(as defined below). The applicable margin, with
respect to revolver A LIBOR loans, is 3.25% per annum, and
with respect to revolver A reference rate loans, is
1.5% per annum. The applicable margin, with
respect to term loan B LIBOR loans, is 10.5% per
annum, and with respect to term loan B reference rate
loans, is 8.00% per annum. In no event will the interest
rate of (a) revolver A LIBOR loans be less than 4.75% and
(b) revolver A reference rate loans be less than 5.5%. In
no event will the interest rate of term loan B LIBOR loans
or term loan B reference rate loans be less than 12%.

After giving effect to the repayment and
termination of the existing revolving credit facility and the
accounts receivable liquidity facility and repayment of the
senior U.S. notes, the companys current cash balance
was approximately $60 million at March 15, 2004.

80



---



##### 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, 2003 and 2002, and the related Consolidated
Statements of Operations, Comprehensive Income and
Shareholders Equity (Deficit), and Cash Flows for each of
the three years in the period ended December 31, 2003. 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, 2003 and 2002, and the
consolidated results of their operations and their cash flows
for each of the three years in the period ended
December 31, 2003, 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.

The accompanying financial statements have been
prepared assuming that Milacron will continue as a going
concern. As more fully discussed in the notes to the
consolidated financial statements under the headings
Long-Term Debt, Receivables and
Lines of Credit, at December 31, 2003, the
company had significant amounts of debt and its receivables
purchase agreement due in 2004. As more fully discussed in the
notes to the consolidated financial statements under the heading
Subsequent Events, on March 12, 2004, the company
entered into agreements to refinance these obligations due in
2004. The refinancing agreements contain a condition to obtain
shareholder approval to convert the debt to equity securities of
the company by July 29, 2004. The failure to satisfy this
condition would result in an event of default under the terms of
the debt. Because shareholder approval cannot be assured, there
exists substantial doubt about the companys ability to
continue as a going concern. Managements plans in regard
to this matter are also described under the heading
Subsequent Events in the notes to the consolidated
financial statements. The accompanying financial statements do
not include any adjustments to reflect the effects on the
recoverability and classification of assets or the amounts and
classification of liabilities that may result from the failure
to satisfy this condition.

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, 2004, except for the
Subsequent Events note as to which the date is
March 13, 2004


81



---



##### Table of Contents



SUPPLEMENTARY FINANCIAL INFORMATION



| |                                             
| | --------------------------------------------
| | Operating Results by Quarter
    (Unaudited)

|                                   |                                      |                                         |       |       |   |       |       |       |   |   |       |       |   |   |       |      |  
|---------------------------------- | ------------------------------------ | --------------------------------------- | ----- | ----- | - | ----- | ----- | ----- | - | - | ----- | ----- | - | - | ----- | ---- | -
|                                   |                                      |                                        
|                                   |                                      | 2003                                   
|                                   |                                      |                                        
|                                   |                                      | Qtr 1                                   |       | Qtr 2 |   | Qtr 3 |       | Qtr 4
|                                   |                                      |                                         |       |       |   |       |       |      
|                                   |                                      |                                        
|                                   |                                      | (In millions, except per-share amounts)
|Sales                              |                                      | $                                       | 190.2 |       |   | $     | 181.6 |       |   | $ | 170.2 |       |   | $ | 197.7 |     
|Manufacturing margins              |                                      |                                         | 31.8  |       |   |       | 28.1  |       |   |   | 31.2  |       |   |   | 40.0  |     
|                                   | Percent of sales                     |                                         |       | 16.7  | % |       |       | 15.4  | % |   |       | 18.3  | % |   |       | 20.2 | %
|Loss from continuing operations(a) |                                      |                                         | (7.6  | )     |   |       | (88.3 | )     |   |   | (65.7 | )     |   |   | (22.9 | )   
|                                   | Per common share  basic and diluted |                                         |       | (.23  | ) |       |       | (2.63 | ) |   |       | (1.95 | ) |   |       | (.68 | )
|Discontinued operations            |                                      |                                         | (.7   | )     |   |       | (3.0  | )     |   |   | (2.0  | )     |   |   | (1.5  | )   
|                                   | Per common share  basic and diluted |                                         |       | (.02  | ) |       |       | (.09  | ) |   |       | (.06  | ) |   |       | (.04 | )
|Net loss                           |                                      |                                         | (8.3  | )     |   |       | (91.3 | )     |   |   | (67.7 | )     |   |   | (24.4 | )   
|                                   | Per common share  basic and diluted |                                         |       | (.25  | ) |       |       | (2.72 | ) |   |       | (2.01 | ) |   |       | (.72 | )

|                                                        |                                      |      |        |       |   |   |       |      |   |   |       |      |   |   |       |      |  
|------------------------------------------------------- | ------------------------------------ | ---- | ------ | ----- | - | - | ----- | ---- | - | - | ----- | ---- | - | - | ----- | ---- | -
|                                                        |                                      |     
|                                                        |                                      | 2002
|                                                        |                                      |     
|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(b)           |                                      |      | (7.0   | )     |   |   | (7.9  | )    |   |   | (4.5  | )    |   |   | 1.0   |     
|                                                        | Per common share  basic and diluted |      |        | (.21  | ) |   |       | (.24 | ) |   |       | (.14 | ) |   |       | .03  |  
|Discontinued operations(c)                              |                                      |      | (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 | )



---



|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Includes restructuring costs of $6.0 million
    ($4.8 million after tax) in quarter 1, $6.3 million
    with no tax benefit in quarter 2, $6.4 million
    ($6.3 million after tax) in quarter 3 and $8.4 million
    ($8.1 million after tax) in quarter 4. Also includes
    goodwill impairment charges of $52.3 million in quarter 3
    and $13.3 million in quarter 4, in both cases with no tax
    benefit.                                                                                                                                        
|   
|(b) |  | 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.                                                                                                                                                                                                                                                                                          
|   
|(c) |  | 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.

82



---



##### Table of Contents








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

Not applicable.






|         |                        
|-------- | -----------------------
|Item 9A. | Controls and Procedures

As of the end of the period covered by 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 end of the period covered by this report, 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 Exchange
Commission.

Since the end of the period covered by this
report, there have not been any significant changes in internal
controls or in other factors that could significantly affect the
internal controls.




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 expected to be dated on or before April 29,
2004, (ii) included in Part I Executive Officers
of the Registrant, on page 10 of this Form 10-K
and (iii) presented below.

Audit Committee Financial Literacy and
Financial Experts

The companys Audit Committee is comprised
of Darryl F. Allen, David L. Burner and Harry A. Hammerly, with
Mr. Hammerly serving as Chairperson. All members are
independent under applicable SEC and NYSE rules.
Messrs. Allen, Burner and Hammerly are audit
committee financial experts in accordance with SEC rules.

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
expected to be dated on or before April 29, 2004.

The information required by the third part of
Item 10 is presented below.

Code of Ethics

The company has adopted a Code of Ethics that
applies to its principal executive officer, principal financial
officer and principal accounting officer. A copy of the Code of
Ethics is available on the companys website,
www.milacron.com. A copy can also be obtained by calling the
companys world headquarters at 513.487.5000 or by writing
to the following address:



| |                              
| | -----------------------------
| | Milacron Inc.                
| | Attention: Investor Relations
| | 2090 Florence Avenue         
| | Cincinnati, OH 45206-2425    

83



---



##### Table of Contents



Other Corporate Governance Matters

The companys board of directors has
approved Corporate Governance Guidelines and a Business Code of
Conduct that conform to New York Stock Exchange
requirements. Copies of these documents are available on the
companys website, www.milacron.com. Copies may also be
obtained by calling the companys world headquarters at
513.487.5000 or by writing to the following address:



| |                              
| | -----------------------------
| | Milacron Inc.                
| | Attention: Investor Relations
| | 2090 Florence Avenue         
| | Cincinnati, OH 45206-2425    

Copies of the following documents may also be
obtained on the companys website or as described above.



| |                                                                                                
| | -----------------------------------------------------------------------------------------------
| | Audit Committee Charter                                                                        
| | Personnel and Compensation Committee Charter                                                   
| | Nominating and Corporate Governance Charter and
    the related appendix regarding Criteria for
| | Selecting Board of
    Directors Candidates                                                    






|         |                       
|-------- | ----------------------
|Item 11. | Executive Compensation

The following sections of the companys
proxy statement expected to be dated on or before April 29,
2004 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 expected to be dated on or before
April 29, 2004 are incorporated herein by reference.

Securities Authorized for Issuance Under
Equity Compensation Plans

Equity
Compensation Plan Information

|                                                               |  |                            |           |                               |  |                               |       |  |  |  |         | 
|-------------------------------------------------------------- |  | -------------------------- | --------- | ----------------------------- |  | ----------------------------- | ----- |  |  |  | ------- | 
|                                                               |  |                            |           |                               |  | Number of Securities         
|                                                               |  |                            |           |                               |  | Remaining Available for      
|                                                               |  | Number of Securities to be |           |                               |  | Future Issuance Under        
|                                                               |  | Issued Upon Exercise of    |           | Weighted-Average Exercise     |  | Equity Compensation Plans [c]
|                                                               |  | Outstanding Options,       |           | Price of Outstanding Options, |  | (Excluding Securities        
|Plan Category                                                  |  | Warrants and Rights [a]    |           | Warrants and Rights [b]       |  | Reflected in Column [a])     
|                                                               |  |                            |           |                               |  |                              
|Equity compensation plans not approved by
    security holders |  |                            |          |                               |  |                               |      |  |  |  |        | 
|Equity compensation plans approved by security
    holders     |  |                            | 3,855,950 |                               |  |                               | 19.75 |  |  |  | 276,737 | 
|                                                               |  |                            |           |                               |  |                               |       |  |  |  |         | 
|Total                                                          |  |                            | 3,855,950 |                               |  |                               | 19.75 |  |  |  | 276,737 | 
|                                                               |  |                            |           |                               |  |                               |       |  |  |  |         | 






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

The Certain Transactions section of
the companys proxy statement expected to be dated on or
before April 29, 2004 is incorporated herein by reference.

84



---



##### Table of Contents








|         |                                           
|-------- | ------------------------------------------
|Item 14. | Principal Accountant Fees and
    Services

The following table presents fees for
professional services rendered by Ernst & Young LLP,
the companys independent auditors, for the years ended
December 31, 2003 and 2002.

Principal
Accountant Fees and Services

|                      |  |      |           |      |  |   |           | 
|--------------------- |  | ---- | --------- | ---- |  | - | --------- | 
|                      |  | 2003 |           | 2002
|                      |  |      |           |     
|Audit Fees(a)         |  | $    | 1,408,000 |      |  | $ | 1,306,000 | 
|Audit-related fees(b) |  |      |          |      |  |   | 16,000    | 
|Tax fees(c)           |  |      | 322,000   |      |  |   | 318,000   | 
|All other fees(d)     |  |      | 13,000    |      |  |   | 353,000   | 
|                      |  |      |           |      |  |   |           | 
|Total                 |  | $    | 1,743,000 |      |  | $ | 1,993,000 | 
|                      |  |      |           |      |  |   |           | 



---



|    |  |                                                                                                                                                                                                                                                                                                                                                                         
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | For services related to the annual audit of the
    companys consolidated financial statements (including
    statutory audits of subsidiaries or affiliates of the company),
    quarterly reviews of Forms 10-Q, issuance of consents, issuance
    of comfort letters and assistance with review of documents filed
    with the Securities and Exchange Commission.
|   
|(b) |  | For services related to employee benefit plan
    audits and other audit-related services (2002 only).                                                                                                                                                                                                                                                                  
|   
|(c) |  | For services related to tax compliance, tax
    return preparation and tax planning.                                                                                                                                                                                                                                                                                    
|   
|(d) |  | For miscellaneous performed services in 2003 and
    services related to assistance on bank covenant issues,
    divestitures and officer tax and financial planning in 2002.                                                                                                                                                                                           




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 Operations 
    2003, 2002 and 2001                                                  |  |      | 40 | 
|Consolidated Balance Sheets  2003 and
    2002                                                                  |  |      | 41 | 
|Consolidated Statements of Comprehensive Income
    and Shareholders Equity (Deficit)  2003, 2002
    and 2001 |  |      | 42 | 
|Consolidated Statements of Cash Flows 
    2003, 2002 and 2001                                                  |  |      | 43 | 
|Notes to Consolidated Financial Statements                                                                       |  |      | 44 | 
|Report of Independent Auditors                                                                                   |  |      | 81 | 
|Supplementary Financial Information                                                                              |  |      | 82 | 

The following consolidated financial statement
schedule of Milacron Inc. and subsidiaries for the years ended
2003, 2002 and 2001 is filed herewith pursuant to
Item 15(d):

|                                                                 |  |  |    | 
|---------------------------------------------------------------- |  |  | -- | 
|Schedule II  Valuation and
    Qualifying Accounts and Reserves |  |  | 92 | 

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.

85



---



##### Table of Contents





|        |                              
|------- | -----------------------------
|Item 15 | (a)(3)  List of
    Exhibits

|            |    |    |  |                                                                                                                                                                                                                                                                               |  |  |  | 
|----------- | -- | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  |  |  | 
|Exhibit No. |    |    |  |                                                                                                                                                                                                                                                                              
|            |    |    |  |                                                                                                                                                                                                                                                                              
|            | 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 by reference to the
    companys Registration Statement on Form S-8
    (Registration No. 333-70733)                                                                                                                                                          |  |  |  | 
|            | 3  | .2 |  | By-Laws, as amended                                                                                                                                                                                                                                                           |  |  |  | 
|            |    |    |  |  Incorporated 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 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., Deutsche Bank AG
    London and Deutsche Bank Luxemburg S.A. dated April 6, 2000                                                                                                           |  |  |  | 
|            |    |    |  |  Incorporated by reference
    to the companys Form 10-K for the fiscal year ended
    December 31, 2002                                                                                                                                                                    |  |  |  | 
|            |    |    |  |  Subscription Agreement between ABN
    AMRO Bank N.V., Milacron Holdings B.V., and Milacron Inc. dated
    April 5, 2000                                                                                                                                                    |  |  |  | 
|            |    |    |  |  Incorporated by reference
    to the companys Form 10-K for the fiscal year ended
    December 31, 2002                                                                                                                                                                    |  |  |  | 
|            | 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 by reference to the
    companys Proxy Statement dated March 22, 1991                                                                                                                                                                                         |  |  |  | 
|            | 10 | .2 |  | Milacron 1994 Long-Term Incentive Plan                                                                                                                                                                                                                                        |  |  |  | 
|            |    |    |  |  Incorporated by reference to the
    companys Proxy Statement dated March 24, 1994                                                                                                                                                                                         |  |  |  | 
|            | 10 | .3 |  | Milacron 1997 Long-Term Incentive Plan, as amended                                                                                                                                                                                                                            |  |  |  | 
|            |    |    |  |  Incorporated 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 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                                                                                                                                                                    |  |  |  | 

86



---



##### Table of Contents



|            |    |     |  |                                                                                                                                                                                                                                                                                                                                                         |  |  |  | 
|----------- | -- | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  |  |  | 
|Exhibit No. |    |     |  |                                                                                                                                                                                                                                                                                                                                                        
|            |    |     |  |                                                                                                                                                                                                                                                                                                                                                        
|            | 10 | .9  |  | Milacron Supplemental Executive Retirement Plan,
    as amended                                                                                                                                                                                                                                                                                         |  |  |  | 
|            |    |     |  |  Incorporated by reference to the
    companys Form 10-K for the fiscal year ended
    December 31, 2002                                                                                                                                                                                                                                              |  |  |  | 
|            | 10 | .10 |  | Amended and Restated Revolving Credit Agreement
    dated as of November 30, 1998 among Milacron Inc.,
    Cincinnati Milacron Kunststoffmaschinen Europa 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 ChaseMellon Shareholder
    Services, L.L.C., as Rights Agent                                                                                                                                                                                                              |  |  |  | 
|            |    |     |  |  Incorporated 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 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 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 Europa 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 Europa 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 Europa 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                                                                                                                                                                                                                                                      |  |  |  | 

87



---



##### Table of Contents



|            |    |     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |  |  | 
|----------- | -- | --- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  |  |  | 
|Exhibit No. |    |     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|            |    |     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|            | 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 Europa 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 Europa 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 Europa 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 Europa 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 Europa 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 for
    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 Europa 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 for 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 Europa 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 for
    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                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |  |  | 

88



---



##### Table of Contents



|            |    |     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |  |  | 
|----------- | -- | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  |  |  | 
|Exhibit No. |    |     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|            |    |     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|            | 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 Europa GmbH,
    Milacron B.V., the lenders listed therein and Deutche Bank Trust
    Company, as Agent and PNC Bank as Documentation Agent
     Incorporated by reference to the companys
    Form 10-K for the fiscal year ended December 31, 2002 |  |  |  | 
|            | 10 | .31 |  | Amendment Number Eight dated as of
    February 11, 2003 to the Amended and Restated Revolving
    Credit Agreement dated as of November 30, 1998 among
    Milacron Inc., Milacron Kunststoffmaschinen Europa GmbH,
    Milacron B.V., the lenders listed therein and Deutsche Bank
    Trust Company Americas as Documentation Agent                                                                                                                       |  |  |  | 
|            |    |     |  |  Incorporated by reference to the
    companys Form 8-K dated February 11, 2003                                                                                                                                                                                                                                                                                                                                                                            |  |  |  | 
|            | 10 | .32 |  | Amendment Number Nine dated as of August 13,
    2003 to the Amended and Restated Revolving Credit Agreement
    dated as of November 30, 1998 among Milacron Inc., Milacron
    Kunststoffmaschinen Europa GmbH, Milacron B.V., the lenders
    listed therein and Deutsche Bank Trust Company Americas as
    Documentation Agent                                                                                                                          |  |  |  | 
|            |    |     |  |  Incorporated by reference to the
    companys Form 8-K dated August 13, 2003                                                                                                                                                                                                                                                                                                                                                                              |  |  |  | 
|            | 10 | .33 |  | Tier I Executive Severance Agreement with
    R. D. Brown                                                                                                                                                                                                                                                                                                                                                                                                    |  |  |  | 
|            |    |     |  |  Incorporated by reference to the
    companys Form 10-Q for the quarter ended
    September 30, 2003                                                                                                                                                                                                                                                                                                                                                      |  |  |  | 
|            | 10 | .34 |  | Tier II Executive Severance Agreement with
    R. P. Lienesch and H. C. ODonnell                                                                                                                                                                                                                                                                                                                                                                            |  |  |  | 
|            |    |     |  |  Incorporated by reference to the
    companys Form 10-Q for the quarter ended
    September 30, 2003                                                                                                                                                                                                                                                                                                                                                      |  |  |  | 
|            | 10 | .35 |  | Temporary Enhanced Severance Plan applicable to
    R. D. Brown, R. P. Lienesch
    and H. C. ODonnell                                                                                                                                                                                                                                                                                                                                                      |  |  |  | 
|            |    |     |  |  Incorporated by reference to the
    companys Form 10-Q for the quarter ended
    September 30, 2003                                                                                                                                                                                                                                                                                                                                                      |  |  |  | 
|            | 10 | .36 |  | Award Letter re. Temporary Enhanced Severance
    Plan to R. D. Brown                                                                                                                                                                                                                                                                                                                                                                                        |  |  |  | 
|            |    |     |  |  Incorporated by reference to the
    companys Form 10-Q for the quarter ended
    September 30, 2003                                                                                                                                                                                                                                                                                                                                                      |  |  |  | 
|            | 10 | .37 |  | Award Letter re. Temporary Enhanced Severance
    Plan to R. P. Lienesch                                                                                                                                                                                                                                                                                                                                                                                     |  |  |  | 
|            |    |     |  |  Incorporated by reference to the
    companys Form 10-Q for the quarter ended
    September 30, 2003                                                                                                                                                                                                                                                                                                                                                      |  |  |  | 
|            | 10 | .38 |  | Award Letter re. Temporary Enhanced Severance
    Plan to H. C. ODonnell                                                                                                                                                                                                                                                                                                                                                                                    |  |  |  | 
|            |    |     |  |  Incorporated by reference to the
    companys Form 10-Q for the quarter ended
    September 30, 2003                                                                                                                                                                                                                                                                                                                                                      |  |  |  | 
|            | 10 | .39 |  | Amendment Number Ten dated as of
    November 25, 2003 to the Amended and Restated Revolving
    Credit Agreement dated as of November 30, 1998 among
    Milacron Inc., Milacron Kunststoffmachinen Europa GmbH, Milacron
    B.V., the lenders listed therein and Deutsche Bank Trust Company
    Americas as Agent                                                                                                                                        |  |  |  | 
|            |    |     |  |  Incorporated by reference to the
    companys Form 8-K dated November 25, 2003                                                                                                                                                                                                                                                                                                                                                                            |  |  |  | 
|            | 10 | .40 |  | Third Amended and Restated Receivables Purchase
    Agreement dated as of November 15, 2001 among Milacron
    Inc., Milacron Commercial Corp., Valenite Inc., D-M-E Company,
    Uniloy Milacron Inc., Talbot Holdings, Ltd., Milacron Marketing
    Company, Market Street Funding Corporation and PNC Bank,
    National Association (the Receivables Purchase
    Agreement)                                                                           |  |  |  | 
|            |    |     |  |  Incorporated by reference to the
    companys Form 8-K dated December 22, 2003                                                                                                                                                                                                                                                                                                                                                                            |  |  |  | 
|            | 10 | .41 |  | First Amendment to the Receivables Purchase
    Agreement dated as of June 7, 2002                                                                                                                                                                                                                                                                                                                                                                           |  |  |  | 
|            |    |     |  |  Incorporated by reference to the
    companys Form 8-K dated December 22, 2003                                                                                                                                                                                                                                                                                                                                                                            |  |  |  | 
|            | 10 | .42 |  | Second Amendment to the Receivables Purchase
    Agreement dated as of August 1, 2002                                                                                                                                                                                                                                                                                                                                                                        |  |  |  | 
|            |    |     |  |  Incorporated by reference to the
    companys Form 8-K dated December 22, 2003                                                                                                                                                                                                                                                                                                                                                                            |  |  |  | 
|            | 10 | .43 |  | Third Amendment to the Receivables Purchase
    Agreement dates as of December 31, 2002                                                                                                                                                                                                                                                                                                                                                                      |  |  |  | 
|            |    |     |  |  Incorporated by reference to the
    companys Form 8-K dated December 22, 2003                                                                                                                                                                                                                                                                                                                                                                            |  |  |  | 

89



---



##### Table of Contents



|            |    |     |  |                                                                                                                                                                                                                                                                                                                               |  |  |  | 
|----------- | -- | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  |  |  | 
|Exhibit No. |    |     |  |                                                                                                                                                                                                                                                                                                                              
|            |    |     |  |                                                                                                                                                                                                                                                                                                                              
|            | 10 | .44 |  | Fourth Amendment to the Receivables Purchase
    Agreement dated as of January 31, 2003
     Incorporated by reference to the companys
    Form 8-K dated December 22, 2003                                                                                                                                                 |  |  |  | 
|            | 10 | .45 |  | Fifth Amendment to the Receivables Purchase
    Agreement dated as of September 12, 2003
     Incorporated by reference to the companys
    Form 8-K dated December 22, 2003                                                                                                                                                |  |  |  | 
|            | 10 | .46 |  | Sixth Amendment to the Receivables Purchase
    Agreement dated as of October 30, 2003
     Incorporated by reference to the companys
    Form 8-K dated December 22, 2003                                                                                                                                                  |  |  |  | 
|            | 10 | .47 |  | Seventh Amendment to the Receivables Purchase
    Agreement dated as of December 22, 2003
     Incorporated by reference to the companys
    Form 8-K dated December 22, 2003                                                                                                                                               |  |  |  | 
|            | 10 | .48 |  | Financing Agreement dated as of March 12, 2004
    among Milacron Inc. and certain subsidiaries as Borrowers,
    certain subsidiaries as Guarantors, the Lenders from time to
    time party thereto, and Credit Suisse First Boston, Cayman
    Islands Branch, as Administrative and Collateral Agent
     Filed herewith |  |  |  | 
|            | 10 | .49 |  | Note Purchase Agreement dated as of March 12,
    2004 among Milacron Inc., Glencore Finance AG and Mizuho
    International plc
     Filed herewith                                                                                                                                                                         |  |  |  | 
|            | 10 | .50 |  | Registration Rights Agreement dated as of March
    12, 2004 among Milacron Inc., Glencore Finance AG and Mizuho
    International plc
     Filed herewith                                                                                                                                                                   |  |  |  | 
|            | 10 | .51 |  | Amendment No. 1 to Rights Agreement dated as of
    March 11, 2004 among Milacron Inc. and Mellon Investor Services
    LLC
     Filed herewith                                                                                                                                                                              |  |  |  | 
|            | 10 | .52 |  | Cincinnati Milacron Inc. 1994 Long-Term Incentive
    Plan, as amended February 10, 2004
     Filed herewith                                                                                                                                                                                                                 |  |  |  | 
|            | 10 | .53 |  | Milacron Inc. 1997 Long-Term Incentive Plan, as
    amended February 10, 2004
     Filed herewith                                                                                                                                                                                                                            |  |  |  | 
|            | 10 | .54 |  | Milacron Inc. 2002 Short-Term Incentive Plan, as
    amended February 10, 2004
     Filed herewith                                                                                                                                                                                                                           |  |  |  | 
|            | 10 | .55 |  | Milacron Retirement Plan For Non-Employee
    Directors, as amended February 10, 2004
     Filed herewith                                                                                                                                                                                                                    |  |  |  | 
|            | 10 | .56 |  | Milacron Compensation Deferral Plan, as amended
    February 26, 2004
     Filed herewith                                                                                                                                                                                                                                    |  |  |  | 
|            | 10 | .57 |  | Amendment to Tier 1 Executive Severance
    Agreement with R. D. Brown and Tier II Executive
    Severance Agreements with R. P. Lienesch and
    H. C. ODonnell dated as of February 10,
    2004
     Filed herewith                                                                                                      |  |  |  | 
|            | 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                                                                                                                                                                                                                 |  |  |  | 
|            | 15 | .   |  | Letter regarding Unaudited Interim Financial
    Information  not applicable                                                                                                                                                                                                                                                 |  |  |  | 
|            | 16 | .   |  | Letter regarding Change in Certifying
    Accountant  not applicable                                                                                                                                                                                                                                                         |  |  |  | 
|            | 18 | .   |  | Letter regarding Change in Accounting
    Principles  not applicable                                                                                                                                                                                                                                                         |  |  |  | 
|            | 19 | .   |  | Report Furnished to Security Holders 
    not applicable                                                                                                                                                                                                                                                                     |  |  |  | 
|            | 21 | .   |  | Subsidiaries of the Registrant                                                                                                                                                                                                                                                                                                |  |  |  | 

90



---



##### Table of Contents



|            |    |    |  |                                                                                                                                |  |  |  | 
|----------- | -- | -- |  | ------------------------------------------------------------------------------------------------------------------------------ |  |  |  | 
|Exhibit No. |    |    |  |                                                                                                                               
|            |    |    |  |                                                                                                                               
|            | 22 | .  |  | Published Report Regarding Matters Submitted to
    Vote of Security Holders  not applicable                                  |  |  |  | 
|            | 23 | .  |  | Consent of Experts and Counsel                                                                                                 |  |  |  | 
|            | 24 | .  |  | Power of Attorney  not applicable                                                                                             |  |  |  | 
|            | 31 | .  |  | Certifications pursuant to Section 302 of
    the Sarbanes-Oxley Act of 2002:                                                  |  |  |  | 
|            | 31 | .1 |  | Certification pursuant to Section 302 of the
    Sarbanes-Oxley Act                                                            |  |  |  | 
|            | 31 | .2 |  | Certification pursuant to Section 302 of the
    Sarbanes-Oxley Act                                                            |  |  |  | 
|            | 32 | .  |  | Certification pursuant to 18 U.S.C.
    Section 1350, as adopted pursuant to Section 906 of
    the Sarbanes-Oxley Act of 2002 |  |  |  | 
|            | 99 | .  |  | Additional Exhibits  not applicable                                                                                           |  |  |  | 



|        |                              
|------- | -----------------------------
|Item 15 | (b)  Reports on
    Form 8-K



| |   |                                                                                                                                                                                                              
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The company filed a current report on
    Form 8-K dated October 31, 2003 containing information
    pursuant to Items 7 and 12, concerning the companys
    earnings release for the third quarter of 2003.
|
| |  | The company filed a current report on
    Form 8-K dated November 26, 2003 containing
    information pursuant to Items 7 and 9, concerning
    information provided to a holder of the companys debt.      
|
| |  | The company filed a current report on
    Form 8-K dated November 25, 2003 containing
    information pursuant to Items 5 and 7, concerning an
    amendment to the companys revolving credit facility.     
|
| |  | The company filed a current report on
    Form 8-K dated December 22, 2003 containing
    information pursuant to Items 5 and 7, concerning the
    companys sale of receivables program.                   



|        |                                                                            
|------- | ---------------------------------------------------------------------------
|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.

91



---



##### Table of Contents



MILACRON INC. AND SUBSIDIARIES




SCHEDULE II  VALUATION AND
QUALIFYING ACCOUNTS AND RESERVES


Years Ended 2003, 2002 and 2001


|                |                                          |                |   |            |  |          |   |              |  |           |    |       |     |  |        |         |      |  |   |        | 
|--------------- | ---------------------------------------- | -------------- | - | ---------- |  | -------- | - | ------------ |  | --------- | -- | ----- | --- |  | ------ | ------- | ---- |  | - | ------ | 
|                |                                          |                |   |            |  |          |   |             
|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
|                |                                          |                |   |            |  |          |   |              |  |          
|                |                                          |               
|                |                                          | (In thousands)
|Year ended 2003 |                                          |                |   |            |  |          |   |              |  |           |    |       |     |  |        |         |      |  |   |       
|                | Allowance for doubtful accounts          |                | $ | 12,354     |  |          | $ | 4,610        |  |           | $  | 1,261 | (a) |  | $      | (3,138  | )(b) |  | $ | 15,087 | 
|                | Restructuring and consolidation reserves |                | $ | 5,362      |  |          | $ | 9,387        |  |           | $  | 648   | (a) |  | $      | (7,206  | )(b) |  | $ | 6,505  | 
|                |                                          |                |   |            |  |          |   |              |  |           |    |       |     |  | (1,686 | )(c)    |      |  |   |       
|                | Allowance for inventory obsolescence     |                | $ | 24,169     |  |          | $ | 5,416        |  |           | $  | 2,738 | (a) |  | $      | (5,316  | )(b) |  | $ | 27,007 | 
|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   | )(c)    |      |  |   |       
|                | 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   | (d) |  | $      | (38     | )(a) |  | $ | 10,017 | 
|                |                                          |                |   |            |  |          |   |              |  |           |    |       |     |  | (3,060 | )(a)    |      |  |   |       
|                | Restructuring and consolidation reserves |                | $ | 2,060      |  |          | $ | 12,435       |  |           | $  | 1,133 | (d) |  | $      | (3,252  | )(b) |  | $ | 12,365 | 
|                |                                          |                |   |            |  |          |   |              |  |           | 98 | (a)   |     |  | (109   | )(c)    |      |  |   |       
|                | Allowance for inventory obsolescence     |                | $ | 17,700     |  |          | $ | 10,347       |  |           |    |      |     |  | $      | (9,016  | )(b) |  | $ | 19,031 | 



---



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

92



---



##### 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, President and Chief Executive
    Officer, Director (Chief Executive 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 15, 2004

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/ DARRYL F. ALLENDarryl F. Allen; March 15, 2004(Director)                       |  | /s/ DAVID L. BURNERDavid L. Burner; March 15, 2004(Director)              
|                                                                                  
|/s/ BARBARA HACKMAN FRANKLINBarbara Hackman Franklin; March 15,
    2004(Director) |  | /s/ HARRY A. HAMMERLYHarry A. Hammerly; March 15, 2004(Director)          
|                                                                                  
|/s/ JAMES E. PERRELLAJames E. Perrella; March 15, 2004(Director)                   |  | /s/ JOSEPH A. PICHLERJoseph A. Pichler; March 15, 2004(Director)          
|                                                                                  
|/s/ DR. JOSEPH A. STEGERDr. Joseph A. Steger; March 15,
    2004(Director)         |  | /s/ CHARLES F. C. TURNERCharles F. C. Turner; March 15,
    2004(Director)

93



---



##### Table of Contents






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

|              |  |                                                                                                                                                                                                                                                                                                          |  | 
|------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | 
|             
|Exhibit 10.48 |  | Financing Agreement dated as of March 12,
    2004 among Milacron Inc. and certain subsidiaries as Borrowers,
    certain subsidiaries as Guarantors, the Lenders from time to
    time party thereto, and Credit Suisse First Boston, Cayman
    Islands Branch, as Administrative and Collateral Agent |  | 
|Exhibit 10.49 |  | Note Purchase Agreement dated as of
    March 12, 2004 among Milacron Inc., Glencore Finance AG and
    Mizuho International plc                                                                                                                                                                         |  | 
|Exhibit 10.50 |  | Registration Rights Agreement dated as of
    March 12, 2004 among Milacron Inc., Glencore Finance AG and
    Mizuho International plc                                                                                                                                                                   |  | 
|Exhibit 10.51 |  | Amendment No. 1 Rights Agreement dated as of
    March 11, 2004 among Milacron Inc. and Mellon Investor
    Services LLC                                                                                                                                                                                 |  | 
|Exhibit 10.52 |  | Cincinnati Milacron Inc. 1994 Long-Term Incentive
    Plan, as amended February 10, 2004                                                                                                                                                                                                                 |  | 
|Exhibit 10.53 |  | Milacron Inc. 1997 Long-Term Incentive Plan, as
    amended February 10, 2004                                                                                                                                                                                                                            |  | 
|Exhibit 10.54 |  | Milacron Inc. 2002 Short-Term Incentive Plan, as
    amended February 10, 2004                                                                                                                                                                                                                           |  | 
|Exhibit 10.55 |  | Milacron Retirement Plan For Non-Employee
    Directors, as amended February 10, 2004                                                                                                                                                                                                                    |  | 
|Exhibit 10.56 |  | Milacron Compensation Deferral Plan, as amended
    February 26, 2004                                                                                                                                                                                                                                    |  | 
|Exhibit 10.57 |  | Amendment to Tier I Executive Severance
    Agreement with R. D. Brown and Tier II Executive
    Severance Agreements with R. P. Lienesch and
    H. C. ODonnell dated as of February 10, 2004                                                                                                          |  | 
|Exhibit 11.   |  | Statement Regarding Computation of Per-Share
    Earnings                                                                                                                                                                                                                                                |  | 
|Exhibit 21    |  | Subsidiaries of the Registrant                                                                                                                                                                                                                                                                           |  | 
|Exhibit 23    |  | Consent of Experts and Counsel                                                                                                                                                                                                                                                                           |  | 
|Exhibit 31.1  |  | Certification pursuant to Section 302 of the
    Sarbanes-Oxley Act                                                                                                                                                                                                                                      |  | 
|Exhibit 31.2  |  | Certification pursuant to Section 302 of the
    Sarbanes-Oxley Act                                                                                                                                                                                                                                      |  | 
|Exhibit 32    |  | Certification pursuant to 18 U.S.C.
    Section 1350, as adopted pursuant to Section 906 of
    the Sarbanes-Oxley Act of 2002                                                                                                                                                                           |  | 

94