CROMPTON & KNOWLES CORPORATION AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
Quarter ended March 30, 1996 (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 $3,640 in 1996 and $3,269 at December 30, 1995.
Accumulated depreciation amounted to $102,385 in 1996 and $99,292
at December 30, 1995.
Accumulated amortization of cost in excess of acquired net assets
amounted to $8,665 in 1996 and $8,281 at December 30, 1995.
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 1995 Annual Report
on Form 10-K.
CAPITAL STOCK
There are 53,361,072 common shares issued at $.10 par value, of
which 5,334,321 shares and 5,351,962 shares were held in the
treasury at March 30, 1996 and December 30, 1995, respectively.
INVENTORIES
Components of inventories are as follows:
March 30, Dec. 30,
1996 1995
Finished goods $ 95,816 $ 89,177
Work in process 31,030 30,316
Raw materials and supplies 36,364 35,353
$163,210 $154,846
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 1996, the Company acquired ER-WE-PA, GMBH at a cost of
$10,025 subject to audit adjustment. The acquisition has 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
$8,392 is being amortized over forty years. The operating
results are included in the consolidated statements of earnings
since the date of acquisition.
BUSINESS SEGMENT DATA
Quarter Ended
March 30, April 1,
1996 1995
SALES
Specialty chemicals $ 96,083 $102,542
Specialty process equipment
and controls 68,757 65,651
$164,840 $168,193
OPERATING PROFIT
Specialty chemicals $ 12,791 $ 15,591
Specialty process equipment
and controls 7,106 10,057
General corporate expense ( 3,108) ( 3,161)
16,789 22,487
Interest expense ( 2,037) ( 1,568)
Other income 252 228
Earnings before income taxes $ 15,004 $ 21,147
Subsequent Event
On April 30, 1996 the Company entered into an agreement and plan
of merger with Uniroyal Chemical Corporation ("Uniroyal"), a $1.1
billion manufacturer of chemicals and polymers including rubber
chemicals, crop protection chemicals and chemicals and additives
for the plastics and lubricants industries. Under the terms of
the agreement and subject to the conditions contained therein,
among other things, each share of Uniroyal common stock will be
exchanged for common stock of the Company valued at $15 based on
the average price of the Company's stock over a period of twenty
trading days ending with the third trading day preceding the date
of the mailing of proxy materials. However, the Company will
issue no more than 1.1111 shares, nor less than .9091 shares, for
each share of Uniroyal common stock. Each share of Uniroyal's
Series A Cumulative Redeemable Preferred Stock and Series B
Preferred Stock issued and outstanding immediately prior to the
consummation of the merger will be converted into and represent a
number of shares of the Company's common stock equal to the
exchange ratio multiplied by 6.667.
The merger agreement provides that Uniroyal would be required to
pay the Company a termination fee of $50 million if the merger
agreement is terminated (i) under certain circumstances following
receipt of a proposal for a competing transaction and a competing
transaction is consummated within one year following such
termination or (ii) after Uniroyal's determination to terminate
the merger agreement to pursue a competing transaction that would
be more favorable to Uniroyal stockholders than the proposed
merger with the Company.
The merger is subject to the satisfaction or waiver of various
conditions, including approval by the stockholders of both
Uniroyal and the Company, Hart-Scott-Rodino and other regulatory
approvals and availability of tax-free status and pooling of
interests accounting treatment. The anticipated closing date of
the merger is during the Company's third calendar quarter.