CROMPTON & KNOWLES CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements Quarter ended April 1, 1995 (Unaudited) (In thousands) PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS The information included in the foregoing consolidated financial statements is unaudited but reflects all adjustments (consisting only of normal recurring adjustments) which are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. Included in accounts receivable are allowances for doubtful accounts of $2,869 in 1995 and $3,829 at December 31, 1994. Accumulated depreciation amounted to $90,523 in 1995 and $85,691 at December 31, 1994. Accumulated amortization of cost in excess of acquired net assets amounted to $7,050 in 1995 and $6,622 at December 31, 1994. Other current liabilities primarily include customer deposits. It is suggested that the interim consolidated financial statements be read in conjunction with the consolidated financial statements and notes included in the Company's 1994 Annual Report on Form 10-K. CAPITAL STOCK There are 53,361,072 common shares issued at $.10 par value, of which 4,906,483 shares and 4,703,891 shares were held in the treasury at April 1, 1995 and December 31, 1994, respectively. INVENTORIES Components of inventories are as follows: April 1, Dec. 31, 1995 1994 Finished goods $ 99,224 $ 90,386 Work in process 32,987 32,640 Raw materials and supplies 37,309 34,330 $169,520 $157,356 EARNINGS PER COMMON SHARE The computation of earnings per common share is based on the weighted average number of common and common equivalent shares outstanding. A dual presentation of earnings per common share has not been made since there is no significant difference in earnings per share calculated on a primary or fully diluted basis. ACQUISITIONS In January 1995, the Company acquired the business and certain assets of McNeil Akron Repiquet S.a.r.l. in France at a cost of $4,638. In March 1995, the Company acquired Killion Extruders, Inc. at a cost of $3,995. The acquisitions have been accounted for using the purchase method and, accordingly, the acquired assets and liabilities have been recorded at their fair values at the dates of acquisition. The excess cost of purchase price over fair value of net assets acquired in the amount of $6,896 is being amortized over forty years. The operating results of each acquisition are included in the Consolidated Statements of Earnings since the dates of acquisition. BUSINESS SEGMENT DATA Quarter Ended April 1, March 26, 1995 1994 SALES Specialty chemicals $102,542 $ 95,586 Specialty process equipment and controls 65,651 38,008 $168,193 $133,594 OPERATING PROFIT Specialty chemicals $ 15,591 $ 16,078 Specialty process equipment and controls 10,057 6,858 General corporate expense ( 3,161) ( 3,282) 22,487 19,654 Interest expense ( 1,568) ( 182) Other income 228 544 Earnings before income taxes $ 21,147 $ 20,016