SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 for the quarterly period
ended March 30, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 for the transition period
from to
Commission File No. 1-4663
Crompton & Knowles Corporation
(exact name of registrant as specified in its charter)
Massachusetts 04-1218720
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Station Place, Metro Center
Stamford, Connecticut 06902
(address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (203)353-5400
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date.
Class Outstanding at April 17, 1995
Common Stock, $.10 par value 48,026,751 shares
CROMPTON & KNOWLES CORPORATION
FORM 10-Q/A
FOR QUARTER ENDED MARCH 30, 1996
INDEX
PART I. FINANCIAL INFORMATION:
Item 1. Condensed Financial Statements and
Accompanying Notes
. Consolidated Statements of Earnings
(unaudited) - Quarters ended March 30, 1996
and April 1, 1995
. Consolidated Balance Sheets - March 30, 1996
(unaudited) and December 30, 1995
. Consolidated Statements of Cash Flows
(unaudited) - Quarters ended March 30, 1996
and April 1, 1995
. Notes to the Consolidated Financial
Statements - Quarter ended March 30, 1996
(unaudited)
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
PART II. OTHER INFORMATION:
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signatures
Exhibit 11 Statement Re Computation of Per Share Earnings
UNAUDITED
CROMPTON & KNOWLES CORPORATION AND SUBSIDIARIES
Consolidated Statements of Earnings
Quarters ended March 30, 1996 and April 1, 1995
(In thousands, except per share data)
March 30, April 1,
1996 1995
Net sales $ 164,840 $ 168,193
Cost of products sold 116,948 116,559
Selling, general and administrative 27,094 25,422
Depreciation and amortization 4,009 3,725
Interest 2,037 1,568
Other income (252) (228)
Total costs and expenses 149,836 147,046
Earnings before income taxes 15,004 21,147
Income taxes 5,536 7,951
Net earnings $ 9,468 $ 13,196
Net earnings per common share $ .20 $ .27
Dividends per common share $ .135 $ .12
Average shares outstanding 48,318 48,921
See accompanying notes to consolidated financial statements.
March 30, 1996 UNAUDITED
CROMPTON & KNOWLES CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
March 30, 1996 and December 30, 1995
(In thousands of dollars)
March 30, December 30,
1996 1995
ASSETS
CURRENT ASSETS
Cash $ 2,599 $ 918
Accounts receivable 123,779 112,693
Inventories 163,210 154,846
Other current assets 25,589 23,038
Total current assets 315,177 291,495
NON-CURRENT ASSETS
Property, plant and equipment 135,051 129,991
Cost in excess of acquired net assets 60,525 51,922
Other assets 10,765 10,730
$ 521,518 $ 484,138
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $ 57,886 $ 60,439
Accounts payable 60,991 49,415
Accrued expenses 41,916 35,136
Income taxes payable 8,141 3,747
Other current liabilities 21,894 16,578
Total current liabilities 190,828 165,315
NON-CURRENT LIABILITIES
Long-term debt 74,000 64,000
Accrued postretirement liability 7,635 7,559
Deferred income taxes 7,197 7,217
STOCKHOLDERS' EQUITY
Common stock 5,336 5,336
Additional paid-in capital 59,557 59,440
Retained earnings 237,098 234,113
Accumulated translation adjustment 4,797 6,320
Treasury stock at cost (62,890) (62,972)
Deferred compensation (2,040) (2,190)
Total stockholders' equity 241,858 240,047
$ 521,518 $ 484,138
See accompanying notes to consolidated financial statements.
UNAUDITED
CROMPTON & KNOWLES CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Quarters ended March 30, 1996 and April 1, 1995
(In thousands of dollars)
March 30, April 1,
Increase (decrease) to cash 1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 9,468 $ 13,196
Adjustments to reconcile net earnings
to net cash provided by operations:
Depreciation and amortization 4,009 3,726
Deferred compensation 150 473
Changes in assets and liabilities, net 663 (12,979)
Net cash provided by operations 14,290 4,416
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions (10,025) (8,633)
Capital expenditures (2,967) (5,733)
Other investing activities (635) 457
Net cash used by investing activities (13,627) (13,909)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term borrowings 10,000 -
Change in notes payable (2,510) 19,851
Net treasury stock activity 35 (3,607)
Dividends paid (6,483) (5,814)
Net cash provided by financing activities 1,042 10,430
CASH
Effect of exchange rates on cash (24) 34
Change in cash 1,681 971
Cash at beginning of period 918 1,832
Cash at end of period $ 2,599 $ 2,803
See accompanying notes to consolidated financial statements.
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.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FIRST QUARTER RESULTS
Overview
Consolidated net sales of $164.8 million for the first quarter
of 1996 declined 2% from the comparable 1995 period. Net
earnings of $9.5 million declined 28% versus the first quarter
of 1995. Net earnings per common share of $.20 were 26% lower
than the $.27 reported last year.
Gross margin as a percentage of net sales decreased to 29.1%
from 30.7% in the first quarter of 1995 as a result of lower
margins in both of the Company's segments. Consolidated
operating profit of $16.8 million declined 25% from the first
quarter of 1995 as the specialty chemicals segment decreased 18%
and the specialty process equipment and controls segment
decreased 29%.
Specialty Chemicals
The Company's specialty chemicals segment reported sales of
$96.1 million which represents a decline of 6% from the first
quarter of 1995. The decrease was attributable to the impact of
lower unit volume (4%) and lower selling prices (2%).
Domestic dyes sales of $46.5 million declined 11% from the
comparable 1995 quarter primarily due to lower unit volume (8%)
and lower selling prices (3%). International dyes sales of
$23.5 million declined 4% versus the first quarter of 1995
primarily as a result of lower selling prices. Specialty
ingredients sales of $26.1 million rose 1% primarily as a result
of increased unit volume. The percentage of sales outside the
United States was 26%, versus 25% in the comparable 1995 period.
Operating profit of $12.8 million for the first quarter of 1996
decreased 18% from 1995. The decrease was attributable
primarily to the impact of lower unit volume and pricing. The
percentage of operating profit outside the United States
declined to 11% from 17% in 1995.
Specialty Process Equipment and Controls
The Company's specialty process equipment and controls segment
reported sales of $68.7 million, which represents an increase of
5% from the first quarter of 1995. Approximately 21% was
attributable to the incremental impact of acquisitions offset
partially by lower unit volume in the domestic business. Export
sales shipped from the U.S. accounted for 28% of total segment
sales versus 18% in the comparable period in 1995 as shipments
to the Far East increased significantly. International sales
increased substantially as a result of acquisitions and
accounted for 16% of total segment sales versus 1% in the first
quarter 1995.
Operating profit for the first quarter of 1996 declined 29% to
$7.1 million primarily attributable to lower unit volume in the
domestic business. International operating profit was not
significant in either the first quarter of 1996 or the first
quarter of 1995. The order backlog for extruders and related
equipment at the end of the first quarter of 1996 amounted to
$92 million (including ER-WE-PA backlog of $24 million) compared
to $72 million at December 30, 1995.
Other
Selling, general and administrative expenses of $27.1 million
increased 7% versus the comparable period in 1995 primarily due
to the impact of acquisitions. Depreciation and amortization of
$4.0 million increased 8% versus 1995 primarily as a result of a
higher fixed asset base including acquisitions. Interest
expense increased $469 thousand primarily as a result of
increased borrowings. Other income of $252 thousand
approximated the level for the first quarter of 1995. The
effective tax rate of 36.9% decreased slightly versus the
comparable 1995 period.
LIQUIDITY AND CAPITAL RESOURCES
The March 30, 1996 working capital balance of $124.4 million
decreased $1.8 million from $126.2 million at year-end 1995.
The current ratio declined slightly to 1.7 from 1.8 at the end
of 1995. Days sales in receivables averaged 62 days in the first
quarter of 1996, an increase from 55 days for all of 1995.
Inventory turnover averaged 2.9 for the first quarter of 1996
compared with 2.8 for all of 1995.
Cash flows from operating activities of $14.3 million increased
$9.9 million from the first quarter of 1995 primarily
attributable to decreases in working capital requirements
partially offset by lower earnings. Cash provided by operating
activities and increased borrowings were used to finance the
acquisition of ER-WE-PA, fund capital expenditures and pay cash
dividends. The Company's debt to total capital ratio increased
to 35% from 34% at year-end 1995. Capital expenditures are
expected to approximate $16 million in 1996 primarily for
expansion and improvement of operating facilities in the United
States and Europe. The Company's long-term liquidity needs
including such items as capital expenditures and dividends are
expected to be financed from operations.
INTERNATIONAL OPERATIONS
The stronger U.S. dollar exchange rate versus the Belgian Franc
and French Franc accounted primarily for the reduction of $1.5
million in the accumulated translation adjustment account since
year-end 1995. Changes in the balance of this account are
primarily a function of fluctuations in exchange rates and do
not necessarily reflect either enhancement or impairment of the
net asset values or the earnings potential of the Company's
foreign operations.
The Company operates manufacturing facilities in Europe which
serve primarily the European market. Exchange rate disruptions
between the United States and European currencies, and among
European currencies, are not expected to have a material effect
on year-to-year comparisons of the Company's earnings.
RESEARCH AND DEVELOPMENT
The Company employs about 285 engineers, draftsmen, chemists,
and technicians responsible for developing new and improved
chemical products and process equipment systems for the
industries served by the Company. Often, new products are
developed in response to specific customer needs. The Company's
process of developing and commercializing new products and
product improvements is ongoing and involves many products, no
one of which is large enough to significantly impact the
Company's results of operations from year-to-year. Research and
development expenditures totaled $3.5 million for the first
quarter of 1996 compared to $3.4 million in the comparable 1995
period.
ENVIRONMENTAL MATTERS
The Company's manufacturing facilities are subject to various
federal, state and local requirements with respect to the
discharge of materials into the environment or otherwise
relating to the protection of the environment. The Company has
been designated, along with others, as a potentially responsible
party under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, or comparable state
statutes, at two waste disposal sites; and an inactive
subsidiary has been designated, along with others, as a
potentially responsible party at two other sites. While the
cost of compliance with existing environmental requirements is
expected to increase, based on the facts currently known to the
Company, management expects that those costs, including the cost
to the Company of remedial actions at the waste disposal sites
where it has been named a potentially responsible party, will
not be material to the results of the Company's operations in
any given year.
PART II. OTHER INFORMATION:
Item 4. Submission of Matter to a Vote of Security Holders
(a) The Annual Meeting of the Stockholders was held
on April 9, 1996
(b) Proxies for the Annual Meeting were solicited
pursuant to Regulation 14A under the Securities
Exchange Act of 1934, there was no solicitation
in opposition to the nominees for the Board of
Directors as listed in the Proxy Statement, and
all of such nominees were elected.
(c) A brief description of each matter voted upon at
the Annual Meeting, and the results of voting,
are as follows:
1. Election of three (3) Directors to serve for a term
expiring in 1999:
FOR AGAINST
Vincent A. Calarco 41,345,447 shares 343,729 shares
Charles J. Marsden 41,362,039 shares 327,137 shares
C. A.(Lance) Piccolo 41,327,025 shares 362,151 shares
2. Approval of the selection by the Board of Directors of
an auditor for 1996
FOR AGAINST ABSTAINED
41,506,547 shares 101,147 shares 81,482 shares
PART II. OTHER INFORMATION:
Item 5. Other Information
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.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Number Description
(2)* Agreement and Plan of Merger
(The Registrant agrees to
supplementally furnish the
commission upon request a copy
of any omitted exhibit or
schedule.)
(11) Statement Re Computation of Per Share
Earnings
(27)* Financial Data Schedule
(b) No reports on Form 8-K were filed during the
quarter for which this report is filed.
* Copies of these Exhibits are annexed to this report on
Form 10-Q provided to the Securities and Exchange Commission
and the New York Stock Exchange.
Pursuant to the requirements 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.
CROMPTON & KNOWLES CORPORATION
(Registrant)
May 13, 1996 By:/s/ Charles J. Marsden
Charles J. Marsden
Vice President-Finance
and Chief Financial Officer
May 13, 1996 By:/s/ John T. Ferguson, II
John T. Ferguson, II
General Counsel and Secretary