SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 28, 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 (I.R.S. Employer
jurisdiction Identification No.)
of incorporation
or organization)
One Station Place, Metro Center
Stamford, Connecticut 06902
(address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code:
(203) 353-5400
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Common Stock, $0.10 par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: NONE
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 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. [ ]
The aggregate market value of the voting stock held by non-affiliates of
the registrant, computed as of February 28, 1997, was $1,341,609,190.
The number of shares of Common Stock of the registrant
outstanding as of February 28, 1997 was 72,961,866.
DOCUMENTS INCORPORATED BY REFERENCE
Annual Report to Stockholders for
fiscal year ended December 28, 1996 ........ Parts I, II and IV
Proxy Statement for Annual Meeting
of Stockholders on April 29, 1997 ........ Part III
CROMPTON & KNOWLES CORPORATION
PART I
ITEM 1. BUSINESS
General
Crompton & Knowles Corporation (together with its
consolidated subsidiaries, the "Corporation"), was incorporated
in Massachusetts in 1900. The Corporation has engaged in the
manufacture and sale of specialty chemicals since 1954 and, since
1961, in the manufacture and sale of specialty process equipment
and controls.
The Corporation expanded its specialty chemical business in
1988 with the acquisitions of Ingredient Technology Corporation,
a leading supplier of ingredients for the food and pharmaceutical
industries, and Townley Dyestuffs Auxiliaries Company, Ltd., one
of the largest independent suppliers of dyes for Great Britain's
textile and paper industries. The Corporation made two
acquisitions in calendar year 1990, acquiring the business and
certain assets and liabilities of Atlantic Industries, Inc., a
domestic dye manufacturer, and APV Chemical Machinery, Inc.,
which manufactured the Sterling line of extruders, extrusion
systems and industrial blow molding equipment for the plastics
industry. In 1991, the Corporation acquired a wire and cable
equipment business from Clipper Machines, Inc. In 1992, the
Corporation acquired a pre-metallized dyes business and facility
located in Oissel, France. The Corporation made two acquisitions
in 1994, the Egan Machinery plastics extrusion, precision coating
and cast and blown film equipment business and the plastics and
rubber extrusion machinery and parts and after-market services
business of McNeil & NRM, Inc. Since January 1995, the
Corporation's textile dyes and chemicals business and its
specialty process equipment and controls business have been
conducted by Crompton & Knowles Colors Incorporated and Davis-Standard
Corporation, respectively, wholly owned subsidiaries of
the Corporation. In 1995, the Corporation acquired the plastics
and rubber extrusion business of McNeil Akron Repiquet SARL,
including a manufacturing facility located in Dannemarie, France,
and Killion Extruders, Inc., a producer of precision laboratory
and small scale extrusion systems in Cedar Grove, New Jersey. In
January 1996, the Corporation acquired Klockner ER-WE-PA GmbH, a
manufacturer of extrusion coating, cast film and plastic
extrusion equipment located in Erkrath, Germany. In April 1996,
the Corporation acquired the Hartig line of plastic blow molding
machines from Battenfeld Gloucester Engineering Co.
In August 1996, Uniroyal Chemical Corporation ("UCC") was
merged into and became a wholly owned subsidiary of the
Corporation. UCC has no operations, and its sole material asset
is the capital stock of Uniroyal Chemical Company, Inc.
("Uniroyal"). Uniroyal is a multinational manufacturer of
specialty chemical products, including specialty elastomers,
rubber chemicals, crop protection chemicals and additives for the
plastics and lubricants industries. Uniroyal's products are
currently marketed in approximately 120 countries and serve a
wide variety of end use markets including agriculture,
petrochemical, automotive, tires, hoses, plastics, appliances,
lubricants, construction, recreation and mining.
Information as to the sales, operating profit, and
identifiable assets attributable to each of the Corporation's
business segments during each of its last three fiscal years is
set forth in the Notes to Consolidated Financial Statements on
page 34 of the Corporation's 1996 Annual Report to Stockholders,
and such information is incorporated herein by reference.
Products and Services
The principal products and services offered by the Corporation
are described below.
SPECIALTY CHEMICALS
Chemicals & Polymers
Chemicals & Polymers, the Corporation's largest business
with net sales for fiscal 1996 of $493.7 million, has three
principal product lines: rubber chemicals, Royalene(R) EPDM
rubber and Paracril(R) Nitrile Rubber.
The rubber chemicals product line contains over 100
different chemicals for use in processing rubber. Those products
include accelerators, antioxidants, antiozonants, chemical
foaming agents and waxes. Accelerators are used for curing
natural and synthetic rubber, and have a wide range of activation
temperatures, curing ranges and use forms. Antiozonants protect
rubber compounds from flex cracking and ozone, oxygen and heat
degradation. Antioxidants provide rubber compounds with
protection against oxygen, light and heat. Blowing agents
produce gas by thermal decomposition or via a chemical reaction
with other components of a polymer system and are mixed with
rubber to produce sponge rubber products. Waxes inhibit static
atmospheric ozone cracking in rubber. Tire manufacturers
accounted for approximately 60% of the Corporation's rubber
chemical sales in fiscal 1996 with the balance of the sales to
numerous manufacturers of hoses, belting, sponge and a wide
variety of other engineered rubber products.
Uniroyal produces and markets approximately 30 different
ethylene-propylene-diene rubber ("EPDM") polymer variations.
EPDM is popularly known as "crackless rubber" because of its
ability to withstand sunlight and ozone without cracking. EPDM's
applications include single ply roofing, automobile, garden and
radiator hoses, electrical insulation, tire sidewalls, mechanical
seals and gaskets, sponge rubber seals for automobile doors, oil
additives, and plastic modifiers.
Nitrile rubber polymers, produced and marketed by Uniroyal
under the Paracril(R) trademark, are resistant to most types of
oils. Paracril(R) nitrile rubber is produced in 22 different
variations to meet specific end use requirements in automotive
hoses, seals, rings, printing rolls, insulation and many other
products exposed to oil.
Net sales of rubber chemicals during fiscal 1996, 1995 and
1994 were 16.8%, 16.2% and 17.2% of the Corporation's net sales,
respectively. The Corporation believes it is the second largest
supplier of rubber chemicals in the world, the third largest
supplier of EPDM polymers in the world, and the largest supplier
of EPDM polymers in North America. Uniroyal's success in this
business has been due to several factors, including product
performance, effective technical assistance and outstanding
customer service which have earned Uniroyal a reputation for
excellence and strong customer loyalty.
The Chemicals & Polymers business' products are
predominantly sold by a direct common sales force to a generally
overlapping customer base. The sales force is supported by a
highly qualified staff of technical service specialists with
extensive field and operational experience. Strong customer
relations and market knowledge result from this direct sales
effort. In certain geographic areas outside the United States,
the Chemicals and Polymers business' products are sold through
distributors.
Crop Protection
The Crop Protection business manufactures and markets
a wide variety of agricultural chemicals for many major food
crops, including grains, fruits, nuts and vegetables, and many
non-food crops, such as tobacco, cotton, turf, flax and
ornamental plants. The business focuses its efforts mainly on
products used on high value cash crops, such as vegetables, nuts,
citrus and tree and vine fruits as opposed to commodity crops
such as soybeans and corn. The Crop Protection business had net
sales for fiscal 1996 of $353.3 million.
The Crop Protection business offers four major crop
protection chemical product lines: fungicides;
miticides/insecticides; growth regulants and herbicides. Each
product line is composed of numerous formulations for specific
crops and geographic regions.
The Corporation has a substantial presence in its targeted
segments of the agrichemicals market due to its strategy of
focusing research, product development, and sales and marketing
on highly profitable market niches which are less sensitive to
competitive pricing pressures than commodity segments of the
market. While the products of the Crop Protection business
represent a relatively small percentage of the grower's overall
costs, these products are often critical to the success or
failure of the crops being treated. In addition, product line
extensions, attention to application effectiveness and customer
service are important factors in developing strong customer
loyalty.
The Corporation is also a leading producer and marketer of
seed treatment chemicals and, through Gustafson, Inc.
("Gustafson"), a wholly owned subsidiary, is a leading producer
of seed treatment formulations and equipment. Gustafson has the
leading share of the North American commercial seed treatment
formulation market and is recognized as a technological leader in
this market. Gustafson is engaged directly and through
cooperative ventures in developing and formulating seed treatment
systems, offering a broad line of chemical formulations which
contain fungicides, insecticides and seed conditioning aids in
addition to commercial seed treating equipment. These
formulations include crop protection chemicals purchased from
Uniroyal and other major agricultural chemical producers.
Gustafson's expertise enables it to develop and produce
formulations consisting of multiple components to obtain optimum
efficacy against seed and soil disease pathogens and insects.
Gustafson's products are primarily used to treat cotton, cereals,
corn, sorghum, soybeans, rapeseed, peanuts and vegetables.
Gustafson's equipment line includes numerous models that
treat different volumes and types of seed at various dosage rates
using many commercial chemical formulations. Gustafson equipment
can apply two or more chemicals simultaneously, regardless of the
types of formulations.
For the last several years, Gustafson has maintained a major
developmental program in the field of naturally occurring
biological control agents targeted for disease. Gustafson has
focused its efforts on naturally occurring organisms as opposed
to genetically engineered organisms. The United States
Environmental Protection Agency ("EPA") approval and registration
process is generally shorter and less costly for novel
agricultural products of this type. Gustafson received
regulatory approval in 1992 for the first of a series of new
biological formulations.
In Australia, the Corporation's subsidiary, Hannaford
Seedmaster Services Pty. Ltd., provides seed treatment chemicals
and treating services to the local market. The Crop Protection
business, under the Uniroyal name, promotes seed treatment
chemicals in all regions of the world other than North America
and Australia and enjoys a substantial position in the
international seed treatment market. The Corporation anticipates
continuing growth in seed treatment, which is environmentally
attractive because it involves very localized use of agricultural
chemicals and very low use rates compared to broad foliar or soil
treatment.
The Crop Protection business markets its products in North
America through a direct sales force selling to a distribution
network consisting of more than one hundred distributors and
direct customers. In the international market, the Crop
Protection business' direct sales force services over 300
distributors, dealers and agents.
Colors
The Colors business had net sales in fiscal 1996 of $271.1
million. Textile dyes manufactured and sold by the Colors
business are used on both synthetic and natural fibers for knit
and woven garments, home furnishings such as carpets, draperies,
and upholstery, and automotive furnishings including carpeting,
seat belts, and upholstery. Industrial dyes and chemicals are
marketed to the paper, leather, and ink industries for use on
stationery, tissue, towels, shoes, apparel, luggage, and other
products and for transfer printing inks.
The Corporation also markets organic chemical intermediates
and a line of chemical auxiliaries for the textile industry,
including leveling agents, dye fixatives, and scouring agents.
The Corporation is among the largest suppliers of dyes in
the United States and is a leading domestic producer of specialty
dyes for nylon, polyester, acrylics, and cotton. The Corporation
is recognized domestically as a leader in products and dyeing
process technology for the broadloom carpet industry. In
addition, the Corporation supplies unique dyes for can coating
applications and ink-jet computer printers. In Europe, the
primary dyes offerings of the Corporation have been acid and
pre-metallized dyes for wool and nylon fibers. The Corporation is
less of a factor in other segments of the dyes industry and in
the European market.
Sales of this class of products accounted for 15.0%, 16.3%
and 19.3% of the total revenues of the Corporation in 1996, 1995,
and 1994, respectively.
Domestically, the Corporation sells dyes and chemical
auxiliaries predominantly through its own dedicated sales force.
The Corporation's position as a leading dyes supplier in the
United States has been maintained by satisfying the market's
needs with quick customer response, efficient production, quality
products and strong technical service. Outside the United States,
as much as one-half of the Corporation's sales of dyes and
chemical auxiliaries are made through distributors.
Specialties
The Specialties business consists of two principal product
lines: specialty chemicals and Adiprene(R)/ Vibrathane(R)
urethane prepolymers. The Specialties business had net sales for
fiscal 1996 of $296.6 million.
The Corporation offers its customers one of the broadest
lines of additives for plastics and lubricants in the specialty
chemical industry, including antioxidants, petroleum additives,
chemical foaming agents, synthetic fluids, chemical
intermediates, polymerization inhibitors, curatives, dispersants
and polymer modifiers. These products are used in the
manufacture of numerous plastic and petroleum related products
which in turn have diverse end uses, including plastic products,
adhesives, aerospace, athletic equipment, automotive components,
construction, electronics, food packaging, vinyl flooring, wire
and cable and automotive and industrial oils and lubricants.
These chemicals are often specially developed for a customer's
specific manufacturing requirements. Although niche markets
within these product categories are highly profitable, the
Corporation believes that the relatively small size of these
markets combined with their customer specific nature make them
unattractive to larger chemical companies. Future growth is
expected to result from continued penetration in existing niche
markets and expansion into worldwide markets, particularly Europe
and Asia, and through the further development of a new series of
polymerization inhibitors and high performance antioxidants.
Specialty chemicals are sold through a specialized sales
force, including technical service professionals who address
customer inquiries and problems. The technical service
professionals generally have degrees in chemistry and/or chemical
engineering and are knowledgeable in specific product application
fields. The sales and technical service professionals identify
and focus on customers' growth opportunities, working not only
with the customers' headquarters staff, but also with their
research and development and manufacturing personnel on a
worldwide basis.
The Corporation believes that Uniroyal is the leading
manufacturer of high performance liquid castable urethane
prepolymers in the world. Among the most common products using
these prepolymers are solid industrial tires, printing rollers,
industrial rolls, abrasion-resistant mining products such as
chutes, hoppers and slurry transport systems, mechanical goods
and a variety of sports equipment and other consumer items.
Uniroyal effectively competes in this business by providing
efficient customer service and technical assistance through
Uniroyal's highly regarded technical service staff. Uniroyal's
proven ability to develop new products and new technologies for
its customers provides significant competitive advantages. Over
150 grades of urethane prepolymers are commercially available
from Uniroyal.
Adiprene(R)/Vibrathane(R) is sold directly by a dedicated
sales force in the United States, Canada and Australia and by
direct sales and through distributorships in Europe, Latin
America and the Far East. Adiprene(R)/Vibrathane(R) customers are
serviced worldwide by a dedicated technical and research and
development staff, because the technology and service needs
related to liquid casting is unique. Technical service personnel
support field sales worldwide, while a research and development
staff is dedicated to support rapidly changing customer needs.
Ingredient Technology
The Ingredient Technology business had fiscal 1996 net sales
of $104.4 million. The Corporation manufactures and sells
reaction and compounded flavor ingredients for the food
processing, bakery, beverage and pharmaceutical industries;
colors certified by the Food & Drug Administration for sale to
domestic producers of food and pharmaceuticals; and inactive
ingredients for the pharmaceutical industry. The Corporation is
also a leading supplier of specialty sweeteners, including edible
molasses, molasses blends, malt extracts, and syrups for the
bakery, confectionery and food processing industries and a
supplier of seasonings and seasoning blends for the food
processing industry.
The Corporation is a major United States and Canadian
supplier of edible molasses, a major United States supplier of
malt extracts, and a significant supplier of other sugar-based
specialty products. As a supplier of flavors and seasonings, the
Corporation has many competitors in the United States and abroad.
The products of the Ingredient Technology business are sold
predominantly through the Corporation's own sales force.
SPECIALTY PROCESS EQUIPMENT AND CONTROLS
The Corporation's wholly owned subsidiary, Davis-Standard
Corporation, manufactures and sells plastics and rubber
extrusion equipment, industrial blow molding equipment,
electronic controls, and integrated extrusion systems and offers
specialized service and modernization programs for in-place
extrusion systems. This business segment had net sales in the
1996 fiscal year of $284.9 million.
Integrated extrusion systems, which include extruders in
combination with controls and other accessory equipment, are used
to process plastic resins and rubber into various products such
as plastic sheet used in appliances, automobiles, home
construction, sports equipment, and furniture; cast and blown
film used to package many consumer products; and extruded shapes
used as house siding, furniture trim, and substitutes for wood
molding. Integrated extrusion systems are also used to compound
engineered plastics, to recycle and reclaim plastics, to coat
paper, cardboard and other materials used as packaging, and to
apply plastic or rubber insulation to high voltage power cable
for electrical utilities and to wire for the communications,
construction, automotive, and appliance industries.
Industrial blow molding equipment produced by the
Corporation is sold to manufacturers of non-disposable plastic
items such as tool cases and beverage coolers.
The Corporation's HES unit produces electrical and
electronic controls primarily for use with extrusion systems.
Davis-Standard Corporation is a major user of such controls.
The Corporation is a leading producer of extrusion machinery
for the plastics industry and a leading domestic producer of
industrial blow molding equipment and competes with domestic and
foreign producers of such products. The Corporation is one of a
number of producers of other types of plastics processing
machinery. Sales of this class of products accounted for 15.8%,
16.0%, and 12.8% of the total revenues of the Corporation in
1996, 1995 and 1994, respectively.
In the United States, most of the Corporation's sales of
specialty process equipment and controls are made by its own
dedicated sales force. In other parts of the world, and for
export sales from the United States, the Corporation's sales of
such equipment and controls are made largely through agents.
Sources of Raw Materials
Chemicals, steel, castings, parts, machine components,
edible molasses, spices, and other raw materials required in the
manufacture of the Corporation's products are generally available
from a number of sources, some of which are foreign. Uniroyal
uses large amounts of petrochemical feedstocks in its chemical
manufacturing processes. Large increases in the cost of these
petrochemical feedstocks could adversely affect Uniroyal's
operating margins. Significant sales of the colors business
consist of dyes manufactured from intermediates purchased from
foreign sources.
The Corporation holds a 50% interest in Rubicon Inc.
("Rubicon"), a manufacturing joint venture between Uniroyal and
ICI American Holdings, Inc. ("ICI") located in Geismar,
Louisiana, which supplies both ICI and Uniroyal with aniline, and
Uniroyal with diphenylamine ("DPA"). The Corporation believes
that its aniline and DPA needs in the foreseeable future will be
met by production from Rubicon and Uniroyal's DPA facility
located in Huddersfield, England.
Patents and Licenses
The Corporation has over 1,800 United States and foreign
patents and pending applications and has trademark protection for
approximately 500 product names. Patents, trade names,
trademarks, know-how, trade secrets, formulae, and manufacturing
techniques assist in maintaining the competitive position of
certain of the Corporation's products. Patents, formulae, and
know-how are of particular importance in the manufacture of a
number of specialty chemicals manufactured and sold by the
Corporation, and patents and know-how are also significant in the
manufacture of certain wire insulating and plastics processing
machinery product lines. The Corporation is licensed to use
certain patents and technology owned by other companies,
including some foreign companies, to manufacture products
complementary to its own products, for which it pays royalties in
amounts not considered material to the consolidated results of
the enterprise. Products to which the Corporation has such
rights include certain crop protection chemicals, dyes, plastics
machinery and flavored ingredients.
While the existence of a patent is prima facie evidence of
its validity, the Corporation cannot assure that any of its
patents will not be challenged nor can it predict the outcome of
any such challenge. The Corporation believes that no single
patent, trademark, or other individual right is of such
importance, however, that expiration or termination thereof would
materially affect its business.
Seasonal Business
With the exception of the Crop Protection business,
approximately 14% of the annual sales of which occur in the
fourth calendar quarter, no material portion of any segment of
the business of the Corporation is seasonal.
Customers
The Corporation does not consider any segment of its
business dependent on a single customer or a few customers, the
loss of any one or more of whom would have a material adverse
effect on the segment. No one customer's business accounts for
more than ten percent of the Corporation's gross revenues nor
more than ten percent of its earnings before taxes.
Backlog
Because machinery production schedules range from about 60
days to 10 months, backlog is important to the Corporation's
specialty process equipment and controls business. Firm backlog
of customers' orders for this business at the end of 1996,
totalled approximately $92 million (including $21 million from
1996 acquisitions) compared with $72 million in 1995. It is
expected that most of the 1996, backlog will be shipped during
1997. Orders for specialty chemicals and equipment repair parts
are filled primarily from inventory stocks and thus are excluded
from backlog.
Competitive Conditions
The Corporation is a major manufacturer of specialty
chemicals and specialty process equipment and controls. No
single competitor currently competes across the Corporation's
full product line in either of its business segments.
Competition varies by product and by geographic region, except
that in rubber chemicals the market is fairly concentrated. In
that market, Uniroyal and its two principal competitors account
for approximately 50% of total worldwide sales. In addition, the
EPDM and nitrile rubber markets are fairly concentrated.
Uniroyal and its two principal competitors in each of these two
products account for approximately 69% of sales within the United
States and approximately 51% worldwide.
Two new EPDM technologies are being developed and
commercialized by competitors. The first technology, which is
based on a new metallocene catalyst system and which may expand
the application areas of EPDM, is also being developed by the
Corporation. The second technology is a gas phase process that
has not been fully commercialized by any company and cannot be
fully assessed at this time.
Product performance, service, and competitive prices are all
important factors in competing in the specialty chemicals and
specialty process equipment and controls businesses.
Research and Development
The Corporation conducts research and development on a
worldwide basis at a number of facilities, including field
stations that are used for crop protection research and
development activities. Research and development expenditures
by the Corporation totalled $52.4 million for the year 1996,
$50.1 million for the year 1995 and $44.7 million for the year
1994.
Environmental Matters
Chemical companies are subject to extensive environmental
laws and regulations concerning, among other things, emissions to
the air, discharges to land, surface, subsurface strata and water
and the generation, handling, storage, transportation, treatment
and disposal of waste and other materials and are also subject to
other federal, state and local laws and regulations regarding
health and safety matters.
Environmental Regulation. The Corporation believes that its
business, operations and facilities have been and are being
operated in substantial compliance in all material respects with
applicable environmental and health and safety laws and
regulations, many of which provide for substantial fines and
criminal sanctions for violations. However, the ongoing
operations of chemical manufacturing plants entail risks in these
areas and there can be no assurance that material costs or
liabilities will not be incurred. In addition, future
developments, such as increasingly strict requirements of
environmental and health and safety laws and regulations and
enforcement policies thereunder, could bring into question the
handling, manufacture, use, emission or disposal of substances or
pollutants at facilities owned, used or controlled by the
Corporation or the manufacture, use or disposal of certain
products or wastes by the Corporation and could involve
potentially significant expenditures. To meet changing
permitting and regulatory standards, the Corporation may be
required to make significant site or operational modifications,
potentially involving substantial expenditures and reduction or
suspension of certain operations. The Corporation incurred $8.8
million of costs for capital projects and $29.8 million for
operating and maintenance costs related to environmental
compliance at its facilities during fiscal 1996. In fiscal 1997,
the Corporation expects to incur approximately $14.5 million of
costs for capital projects and $29.9 million for operating and
maintenance costs related to environmental compliance at its
facilities. During fiscal 1996, the Corporation incurred costs
of $12.3 million to clean up previously utilized waste disposal
sites and to remediate current and past facilities, and, during
the third quarter of the year, recorded a special provision in
the amount of $30 million for environmental remediation
activities. The Corporation expects to incur costs of
approximately $4.1 million during fiscal 1997 to clean up such
waste disposal sites.
Pesticide Regulation. The Corporation's Crop Protection
business is subject to regulation under various federal, state,
and foreign laws and regulations relating to the manufacture,
sales and use of pesticide products.
In August, 1996, Congress enacted significant changes to the
Federal Insecticide, Fungicide, and Rodenticide Act ("FIFRA"),
governing U.S. sale and use of pesticide products, and the
Federal Food, Drug, and Cosmetic Act ("FFDCA"), which limits
pesticide residues on food with the Food Quality Protection Act
of 1996 ("FQPA"). Under FIFRA, the new law will facilitate
registrations and reregistrations of pesticides for special (so
called minor) uses and authorize collection of maintenance fees
to support pesticide reregistrations. Coordination of
regulations implementing FIFRA and FFDCA will be required. Food
safety provisions will establish a single standard of safety for
pesticide residue on raw and processed foods; provide
information through large food retail stores to consumers about
the health risks of pesticide residues and how to avoid them;
preempt state and local food safety laws if they are based on
concentrations of pesticide residues below recently established
federal residue limits (called "tolerances"); and ensure that
tolerances protect the health of infants and children.
FFDCA, as amended by FQPA, authorizes EPA to set a tolerance
for a pesticide in or on food at a level which poses "a
reasonable certainty of no harm" to consumers. The EPA is
required to review all tolerances for all pesticide products
within 10 years. It is not known when the Corporation's products
will be reviewed under this standard. However, the Corporation
does not anticipate any significant restrictions to our product
uses based on this EPA review.
In April, 1996, UCC announced that it had voluntarily
canceled registered uses of its propargite miticide on certain
crops in the United States. The action was taken to reduce
dietary exposure as requested by the EPA, using the EPA's current
risk assessment model. Tests to confirm that propargite does not
pose a dietary risk are continuing under EPA approved protocols.
Impact of this voluntary action on fiscal 1996 annual pretax
earnings was approximately $5.0 million. Propargite will be
reviewed under the new FQPA standard; however, no further
reduction in use is anticipated.
The European Commission ("EC") has established procedures
whereby all existing active ingredient pesticides will be
reviewed. This EC regulation became effective in 1993 and will
result in a review of all commercial products during the next few
years. The initial round of reviews covered ninety products,
four of which are Corporation's products. It is anticipated that
other of the Corporation's products will be reviewed in
subsequent years. The process may lead to full re-registration
in member states of the EC or may lead to some restrictions, if
adverse data is discovered.
Employees
The Corporation had approximately 5,665 employees on
December 28, 1996.
Financial Information Concerning Foreign Operations and Export
Sales
The information with respect to sales, operating profit, and
identifiable assets attributable to each of the major geographic
areas served by the Corporation and export sales, for each of the
Corporation's last three fiscal years, set forth in the Notes to
Consolidated Financial Statements on page 34 of the Corporation's
1996 Annual Report to Stockholders, is incorporated herein by
reference.
The Corporation considers that the risks relating to
operations of its foreign subsidiaries are comparable to those of
other U.S. companies which operate subsidiaries in developed
countries. All of the Corporation's international operations are
subject to fluctuations in the relative values of the currencies
in the various countries in which its activities are conducted.
ITEM 2. PROPERTIES
The following table sets forth information as to the
principal operating properties of the Corporation and its
subsidiaries:
Location Facility Products/Businesses
UNITED STATES
Alabama
Bay Minette Plant* Specialties
Connecticut
Bethany Research Center* Crop Protection
Middlebury Office and Crop Protection,
Research Center** Chemicals & Polymers
and Specialties
Naugatuck Plant, Research
Center* Crop Protection,
Chemicals & Polymers
and Specialties
Pawcatuck Office and Plastics and Rubber
Machine Shop* Extrusion and
Electronic
Control Equipment and
Systems
Stamford Office** Corporate
Headquarters
Idaho
Marsing Plant Crop Protection
Lease Land;
Own Building
Illinois
Des Plaines Office and Plant* Flavors
Pekin Plant** Crop Protection
Iowa
Des Moines Plant** Crop Protection
Louisiana
Geismar Plant* Crop Protection,
Chemicals & Polymers
and Specialties
Minnesota
Eden Prairie Plant** Crop Protection
New Jersey
Cedar Grove Office and Precision Laboratory
Machine Shop** Extrusion Equipment
& Extrusion Systems
Edison Office and Blow Molding and
Machine Shop** Extrusion Equipment
Mahwah Office, Laboratory Flavors and
and Plant** Seasonings
Newark Plant* Textile Dyes and
Organic Chemicals
Nutley Office, Laboratory Textile and Other
and Plant* Dyes
Somerville Office and Extrusion Systems
Machine Shop*
Vineland Office and Plant* Food & Pharmaceutical
Ingredients and
Colors
North Carolina
Charlotte Office and Dyes
Laboratory*
Gastonia Plant* Crop Protection and
Specialties
Lowell Plant* Textile Dyes, Organic
Chemicals
Ohio
Elyria Office and Plant** Seasonings
Painesville Plant* Chemicals & Polymers
Pennsylvania
Gibraltar Office, Laboratory Textile and Other
and Plant* Dyes
Reading Plant* Textile Dyes, Organic
Chemicals and Food
Colors
Texas
Carollton Office and Plant** Seasonings
Frisco Research Center* Crop Protection
INTERNATIONAL
Bahamas
Freeport Plant* Specialties
Belgium
Brussels Office** Dyes
Tertre Office, Laboratory Textile and Other
and Plant* Dyes
Brazil
Rio Claro Plant* Crop Protection,
Chemicals & Polymers
and Specialties
Canada
Ontario
Elmira Plant* Crop Protection,
Chemicals & Polymers
and Specialties
Guelph Research Center* Crop Protection,
Chemicals & Polymers
and Specialties
France
Dannemarie Office and Extrusion Systems
Machine Shop*
Oissel Office, Laboratory Textile and Other
and Plant* Dyes
Germany
Erkrath Office and Extrusion Systems
Machine Shop*
Italy
Latina Plant* Crop Protection,
Chemicals & Polymers
and Specialties
Mexico
Tampico Plant* Chemicals & Polymers
and Specialties
The Netherlands
Amsterdam Plant* Crop Protection
United Kingdom
Langley Office** Chemicals & Polymers,
Specialties, Dyes and
Crop Protection
_______________
* Facility Owned by the Corporation
**Facility Leased by the Corporation
Uniroyal Chemical holds a 50% interest in Rubicon, which operates
a chemical production facility located in Geismar, Louisiana that
in part is dedicated to producing certain intermediates for
Uniroyal Chemical.
Uniroyal Chemical leases the land and owns the facilities at its
Huddersfield, England site which is operated by a third party
under contract to manufacture DPA for Uniroyal Chemical.
All facilities are considered to be in good operating condition,
well maintained, and suitable for the Corporation's requirements.
ITEM 3. LEGAL PROCEEDINGS
The Corporation is involved in claims, litigation,
administrative proceedings and investigations of various types in
several jurisdictions. A number of such matters involve claims
for a material amount of damages and relate to or allege
environmental liabilities, including clean-up costs associated
with hazardous waste disposal sites, natural resource damages,
property damage and personal injury.
Environmental Liabilities. Each quarter, the Corporation
evaluates and reviews estimates for future remediation and other
costs to determine appropriate environmental reserve amounts.
For each site, a determination is made of the specific measures
that are believed to be required to remediate the site, the
estimated total cost to carry out the remediation plan, the
portion of the total remediation costs to be borne by the
Corporation and the anticipated time frame over which payments
toward the remediation plan will occur. As a result of current
information and analysis, the Corporation recorded a special
provision of $30 million during the third quarter of 1996 for
environmental remediation activities. The total amount accrued
for such environmental liabilities at December 28, 1996, was
$96.2 million. The Corporation estimates the potential
liabilities to range from $68 million to $130 million at December
28, 1996. It is reasonably possible that the Corporation's
estimates for environmental remediation liabilities may
subsequently change should additional sites be identified,
further remediation measures be required or undertaken, the
interpretation of current laws and regulations be modified or
additional environmental laws and regulations be enacted.
The Corporation generally assesses the possibility for toxic
tort claims. Such liabilities are dependent upon complex
factors. Five facilities have been identified where the
possibility for toxic tort claims may be significant, i.e. as
situations where chemicals are believed to have migrated
off-site, thus posing risk of exposure. There are no lawsuits
pending involving any of these five facilities. Virtually all,
if not all, of the off-site disposal sites to which the
Corporation may have sent toxic materials pose a possibility for
toxic tort claims. There are currently pending five toxic tort
claims against Uniroyal Chemical and others arising from these
off-site disposal sites.
The Corporation has been identified by federal, state or
local governmental agencies, and by other potentially responsible
parties (a "PRP") under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, or comparable
state statutes, as a PRP with respect to costs associated with
waste disposal sites at various locations in the United States.
Because these regulations have been construed to authorize joint
and several liability, the EPA could seek to recover all costs
involving a waste disposal site from any one of the PRP's for
such site, including the Corporation, despite the involvement of
other PRPs. In many cases, the Corporation is one of several
hundred PRPs so identified. In a few instances, the Corporation
is one of only a handful of PRPs. In certain instances, a
number of other financially responsible PRPs are also involved,
and the Corporation expects that any ultimate liability resulting
from such matters will be apportioned between the Corporation and
such other parties. In addition, the Corporation is involved
with environmental remediation and compliance activities at some
of its current and former sites in the United States and abroad.
The more significant of these matters are described below.
. Beacon Heights and Laurel Park - Uniroyal is a member of
the Beacon Heights Coalition, a group of entities engaged in
remedial work at the Beacon Heights site in the State of
Connecticut pursuant to a Consent Decree entered in 1987. The
actions required by this Consent Decree have been essentially
completed. There is a continuing requirement for operation and
maintenance at the site.
Over many years, Uniroyal has entered into and performed
activities pursuant to a series of Administrative Orders with
respect to the Laurel Park site located in the State of
Connecticut. The EPA, the State of Connecticut, and the Laurel
Park Coalition (consisting of Uniroyal and a number of other
parties) have entered into a Consent Decree governing the design
and implementation of the selected remedy. Remedial construction
began at the Laurel Park site in July 1996, and is anticipated to
be completed in 1998.
Consolidated litigation brought by the Beacon Heights and
Laurel Park Coalitions seeking contribution to the costs from the
owner/operators of the site and later from other identified
generator parties has resulted in substantial recoveries from a
number of parties. In November 1996, the United States Court of
Appeals for the Second Circuit reversed judgments granted to
other defendants in that litigation and the litigation will be
remanded for further proceedings.
. Cleve Reber - Uniroyal and three other corporations named in
an Administrative Order issued by the EPA have complied with such
Order which governs remediation of the site located in the State
of Louisiana. The cooperating parties are negotiating a consent
agreement with the EPA for operation and maintenance of the site
and to resolve all of the EPA's past cost claims.
. Petro Processors - This matter relating to a site in the
State of Louisiana was initiated in 1981. Litigation was
instituted by the EPA against a number of parties, including
Uniroyal, Inc. (which Uniroyal has agreed to indemnify), seeking
cleanup of the Petro Processors site. A Consent Decree was
entered to settle the case in February 1984, which required the
defendants to clean up the site to the satisfaction of the EPA
under supervision of the court. A settlement among the ten
defendants, dated December 16, 1983, defines the percentage to be
borne by each defendant of the currently estimated future cost of
$100 million to complete remediation of the site. Although the
allocations are subject to a confidentiality order, Uniroyal
believes that the amount it will pay will not be material to its
financial condition or results of operations.
. Vertac - Uniroyal and its Canadian subsidiary, Uniroyal
Chemical Ltd., were joined with others as defendants in
consolidated civil actions brought in the United States District
Court, Eastern District of Arkansas, Western Division by the
United States of America, the State of Arkansas and Hercules
Incorporated ("Hercules") relating to a Vertac Chemical
Corporation site in Jacksonville, Arkansas allegedly contaminated
by dioxins. Uniroyal has been dismissed from the litigation. On
November 18, 1993, the liability phase of trial in this matter,
as to Uniroyal Chemical Ltd., concluded with the issuance of a
jury verdict holding that Uniroyal Chemical Ltd. is liable under
CERCLA Section 107 to the United States of America, the State of
Arkansas and Hercules; that there is a reasonable basis for
divisibility in this matter so that Uniroyal Chemical Ltd.'s
liability is not joint and several; that Uniroyal Chemical Ltd.
is not liable in contribution to Hercules; and that Hercules is
liable in contribution to Uniroyal Chemical Ltd. The Court has
received full briefs on the issues of which, if any, portions of
the jury verdict are binding and which are advisory only, but has
yet to rule on such issues or enter judgment in the matter. If
interlocutory appeals from judgment once entered are not allowed,
the allocation phase of the proceedings will begin. No ultimate
determination of the amount of Uniroyal Chemical Ltd.'s
liability, if any, is expected prior to the end of 1997. In
addition, a new case was filed by several individuals seeking
natural resource damages. Uniroyal Chemical Ltd. filed a Motion
to Dismiss and the plaintiffs voluntarily withdrew the action,
without prejudice. Recently, Uniroyal and Uniroyal Chemical Ltd.
received a notice from the U.S. Department of Interior of its
intent to perform a Natural Resource Damage Assessment at the
site.
Other Environmental Matters
. Sundor Canada Inc. - On July 13, 1990, Sundor Canada Inc.
("Sundor") instituted suit against Uniroyal Chemical Ltd. and
others including the Ontario Ministry of the Environment and the
Regional Municipality of Waterloo in the Ontario Court of Justice
(General Division) at Toronto claiming that Uniroyal Chemical
Ltd. and others are responsible for losses resulting from
Sundor's recall of packaged juices and fruit due to Sundor's use
of the public water derived from Elmira groundwater which was
allegedly contaminated by Uniroyal Chemical Ltd. Uniroyal
Chemical Ltd. has asserted, inter alia, that such recall was
completely voluntary and in any event unnecessary to protect
health and was not caused or justified by any activities of
Uniroyal Chemical Ltd. Uniroyal Chemical Ltd. has instituted
third-party claims against its co-defendants in the action.
Co-defendants in the action have instituted third-party claims
against Uniroyal Chemical Ltd. Examinations for discovery,
restricted to the issue of damages suffered by the plaintiff,
were held in March 1995. The plaintiff has provided additional
information requested by defendants relating to plaintiff's
damages. Mediation of this claim commenced in March 1997.
The Corporation intends to assert all meritorious legal
defenses and all other equitable factors which are available to
it with respect to the above matters. The Corporation believes
that the resolution of these environmental matters will not have
a material adverse effect on its consolidated financial position.
While the Corporation believes it is unlikely, the resolution of
these environmental matters could have a material adverse effect
on its consolidated results of operations in any given year if a
significant number of these matters are resolved unfavorably.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders
during the fourth quarter of the fiscal year covered by this
report.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The information concerning the range of market prices for
the Corporation's Common Stock on the New York Stock Exchange and
the amount of dividends paid thereon during the past two years,
set forth in the Notes to Consolidated Financial Statements on
page 35 of the Corporation's 1996 Annual Report to Stockholders,
is incorporated herein by reference.
The number of registered holders of Common Stock of the
Corporation on December 28, 1996, was 4,588.
ITEM 6. SELECTED FINANCIAL DATA
The selected financial data for the Corporation for each of
its last five fiscal years, set forth under the heading "Five
Year Selected Financial Data" on page 37 of the Corporation's
1996 Annual Report to Stockholders, is incorporated herein by
reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Management's discussion and analysis of the Corporation's
financial condition and results of operations, set forth under
the heading "Management's Discussion and Analysis of Financial
Condition and Results of Operations" on pages 18 through 21 of
the Corporation's 1996 Annual Report to Stockholders, is
incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements of the Corporation, notes thereto,
and supplementary data, appearing on pages 22 through 36 of the
Corporation's 1996 Annual Report to Stockholders, are
incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information called for by this item concerning directors of
the Corporation is included in the definitive proxy statement for
the Corporation's Annual Meeting of Stockholders to be held on
April 29, 1997, which has been filed with the Commission pursuant
to Regulation 14A of the Securities Exchange Act of 1934, and
such information is incorporated herein by reference.
The executive officers of the Corporation are as follows:
Vincent A. Calarco, age 54, has served as President and Chief
Executive Officer of the Registrant since 1985 and Chairman of
the Board since 1986. Mr. Calarco has been a member of the Board
of Directors of the Registrant since 1985.
Robert W. Ackley, age 55, has served as a Vice President of the
Registrant since 1986 and as President of Davis-Standard
Corporation (prior to 1995, Davis-Standard Division) since 1983.
Peter Barna, age 53, has served as Vice President-Finance of the
Registrant since 1996 and served as Treasurer of the Registrant
from 1980 to 1996 and Chief Accounting Officer of the Registrant
from 1986 to 1996.
Joseph B. Eisenberg, age 55, has served as Executive Vice
President, Chemical & Polymers, of Uniroyal since 1994; and
served as Vice President and General Manager of the Chemicals and
Polymers Division of Uniroyal from 1991-1994.
John T. Ferguson II, age 50, has served as Vice President of the
Registrant since 1996, and General Counsel and Secretary of the
Registrant since 1989.
Gerald H. Fickenscher, Ph.D., age 53, has served as Vice
President European Region of Uniroyal since 1997, and served as
President, Dyes and Chemicals - Europe, for the Registrant and as
Managing Director of Crompton & Knowles Europe, S.A. from 1994-1997.
Edmund H. Fording, Jr., age 60, has served as Vice President of
the Registrant since 1991 and as President of Crompton & Knowles
Colors Incorporated (prior to 1995, the Dyes and Chemicals
Division) since 1989.
Marvin H. Happel, age 57, has served as Vice President -Organization and
Administration of the Registrant since 1996 and Vice President-Organization
from 1986-1996.
Alfred F. Ingulli, age 55, has served as Executive Vice
President, Crop Protection of Uniroyal since 1994; and served as
Vice President and General Manager, Crop Protection Division of
Uniroyal from 1989-1994.
Eric W. Johnson, age 57, has served as Vice President, Chemical
Operations, Uniroyal Chemical since 1985.
Charles J. Marsden, age 56, has served as Senior Vice President
and Chief Financial Officer of the Registrant since 1996 and as
Vice President-Finance and Chief Financial Officer and as a
member of the Board of Directors of the Registrant since 1985.
Rudy M. Phillips, age 55, has served as President of Ingredient
Technology Corporation since January, 1996.
William A. Stephenson, age 49, has served as Executive Vice
President, Specialty Chemicals of Uniroyal since 1994; and served
as Vice President and General Manager, Specialties Division,
Uniroyal from 1990-1994.
The term of office of each of the above-named executive
officers is until the first meeting of the Board of Directors
following the next annual meeting of stockholders and until the
election and qualification of his successor.
There is no family relationship between any of such
officers, and there is no arrangement or understanding between
any of them and any other person pursuant to which any such
officer was selected as an officer.
ITEM 11. EXECUTIVE COMPENSATION
Information called for by this item is included in the
definitive proxy statement for the Corporation's Annual Meeting
of Stockholders to be held on April 29, 1997, which has been
filed with the Commission pursuant to Regulation 14A, and such
information is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Information called for by this item is included on pages 1
and 5 of the definitive proxy statement for the Corporation's
Annual Meeting of Stockholders to be held on April 29, 1997, and
such information is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information called for by this item is included in the
definitive proxy statement for the Corporation's Annual Meeting
of Stockholders to be held on April 29, 1997, and such
information is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
(a) The following documents are filed as part of this report:
1. Financial statements and Independent Auditors'
Report, as required by Item 8 of this form, which
appear on pages 22 through 36 of the Corporation's
1996 Annual Report to Stockholders and are
incorporated herein by reference:
(i) Consolidated Statements of Operations for the
fiscal years ended 1996, 1995, and 1994;
(ii) Consolidated Balance Sheets for the fiscal
years ended 1996 and 1995;
(iii) Consolidated Statements of Cash Flows for the
fiscal years ended 1996, 1995, and 1994;
(iv) Consolidated Statements of Stockholders' Equity
[Deficit] for the fiscal years ended 1996, 1995
and 1994;
(v) Notes to Consolidated Financial Statements;
and
(vi) Independent Auditors' Report of KPMG Peat
Marwick LLP
2. Independent Auditors' Report and Consent, and
Financial Statement Schedule II, Valuation and
Qualifying Accounts, required by Regulation S-X.
Pages S-1 and S-2 hereof.
3. The following exhibits are either filed herewith or
incorporated herein by reference to the respective
reports and registration statements identified in the
parenthetical clause following the description of the
exhibit:
Exhibit No. Description
2 Agreement and Plan of Merger dated April 30, 1996, by
and among Crompton & Knowles Corporation, Tiger Merger
Corp. and UCC. (Exhibit 2 to Form 10-Q for the period
ended March 31, 1996.)
3(i) Restated Articles of Organization of the Corporation
filed with the Commonwealth of Massachusetts on
October 27, 1988, as amended on April 10, 1990 and on
April 14, 1992. (Exhibit 3(a) to Form 10-K for the
fiscal year ended December 26, 1992.)
3(ii) By-laws of the Corporation as amended to date.
4.1 Rights Agreement dated as of July 20, 1988, between
the Registrant and The Chase Manhattan Bank, N.A., as
Rights Agent. (Exhibit 1 to Form 8-K dated July 29,
1988.)
4.2 Agreement dated as of March 28, 1991, amending Rights
Agreement dated as of July 20, 1988, between the
Registrant and The Chase Manhattan Bank, N.A., as
Rights Agent. (Exhibit 4(i)(i) to Form 10-K for the
fiscal year ended December 29, 1990.)
4.3 Form of Indenture, dated as of February 8, 1993, among
UCC and State Street Bank and Trust Company, as
Trustee, relating to the 10 1/2% Notes, including form of
securities. (Exhibit 4.1 to the UCC Registration
Statement Nos. 33-45296 and 33-45295 on Form S-1 ["UCC
Form S-1, Registration No. 33-45296/45295"].)
4.4 Form of Indenture, dated as of February 8, 1993, among
UCC and United States Trust Company of New York, as
Trustee, relating to the 11% Notes, including form of
securities. (Exhibit 4.1(a) to UCC Form S-1,
Registration No. 33-45296/45295.)
4.5 Form of Indenture, dated as of February 8, 1993, among
UCC and The Shawmut Bank Connecticut, N.A. as Trustee,
relating to the 12% Notes, including form of
securities. (Exhibit 4.1(b) to UCC Form S-1,
Registration No. 33-45296/45295.)
4.6 Form of Indenture, dated as of September 1, 1993,
among Uniroyal and State Street Bank and Trust
Company, as Trustee, relating to $270 million of 9%
Notes, including the form of securities. (Exhibit 4.2
to UCC Form S-1, Registration No. 33-66740.)
4.7 $530 Million Amended and Restated Credit Agreement
dated as of December 19, 1996, by and among Crompton &
Knowles Corporation and certain of its subsidiaries,
as Borrowers, and various lenders, and Citicorp
Securities, Inc., as Arranger, and Citicorp USA, Inc.,
as Agent and the Chase Manhattan Bank, as Managing
Agent. (Exhibit 10 to the UCC/Uniroyal Form 10-QT
for the transition period ended December 28, 1996.)
4.8 Warrant Agreement, dated as of October 30, 1989,
between UCC and Avery, Inc. (Exhibit 10.2 to UCC Form
S-1, Registration No. 33-32770.)
+10.1 1983 Stock Option Plan of Crompton & Knowles
Corporation, as amended through April 14, 1987.
(Exhibit 10(c) to Form 10-Q for the quarter ended
March 28, 1987.)
+10.2 Amendments to Crompton & Knowles Corporation Stock
Option Plans adopted February 22, 1988. (Exhibit
10(d) to Form 10-K for the fiscal year ended December
26, 1987.)
+10.3 Summary of Management Incentive Bonus Plan for
selected key management personnel. (Exhibit 10(m) to
Form 10-K for the fiscal year ended December 27,
1980.)
+10.4 Supplemental Medical Reimbursement Plan. (Exhibit
10(n) to Form 10-K for the fiscal year ended December
27, 1980.)
+10.5 Supplemental Dental Reimbursement Plan. (Exhibit
10(o) to Form 10-K for the fiscal year ended December
27, 1980.)
+10.6 Employment Agreement dated February 22, 1988, between
the Registrant and Vincent A. Calarco. (Exhibit 10(j)
to the Form 10-K for the fiscal year ended December
26, 1987.)
+10.7 Form of Employment Agreement entered into in 1988,
1989, 1992, 1994 and 1996 between the Registrant or
one of its subsidiaries and nine of the executive
officers of the Registrant. (Exhibit 10(k) to Form
10-K for the fiscal year ended December 26, 1987.)
+10.8 Form of Employment Agreement dated as of August 21,
1996, between a subsidiary of the Registrant and four
executive officers of the Registrant. (Exhibit 10.28
to the UCC/Uniroyal Form 10-K for the fiscal year
ended September 28, 1996.)
+10.9 Amended Supplemental Retirement Agreement dated
October 18, 1995, between the Registrant and Vincent
A. Calarco. (Exhibit 10(i) to Form 10-K for the
fiscal year ended December 30, 1995.)
+10.10 Form of Amended Supplemental Retirement Agreement
dated October 18, 1995, between the Registrant and
three of its executive officers. (Exhibit 10(j) to
Form 10-K for the fiscal year ended December 30,
1995.)
+10.11 Form of Supplemental Retirement Agreement dated
October 18, 1995, between the Registrant and five of
its executive officers. (Exhibit 10(k) to Form 10-K
for the fiscal year ended December 30, 1995.)
+10.12 Form of Supplemental Retirement Agreement dated as of
August 21, 1996, between a subsidiary of the
Registrant and two executive officers of the
Registrant. (Exhibit 10.29 to the UCC/Uniroyal Form
10-K for the fiscal year ended September 28, 1996.)
+10.13 Form of Supplemental Retirement Agreement dated as of
August 21, 1996, between a subsidiary of the
Registrant and two executive officers of the
Registrant. (Exhibit 10.30 to the UCC/Uniroyal Form
10-K for the fiscal year ended September 28, 1996.)
+10.14 Supplemental Retirement Agreement Trust Agreement
dated October 20, 1993, between the Registrant and
Shawmut Bank, N.A. (Exhibit 10(l) to Form 10-K for
the fiscal year ended December 25, 1993.)
+10.15 Amended Benefit Equalization Plan dated October 20,
1993. (Exhibit 10(m) to Form 10-K for the fiscal year
ended December 25, 1993.)
+10.16 Amended Benefit Equalization Plan Trust Agreement
dated October 20, 1993, between the Registrant and
Shawmut Bank, N.A. (Exhibit 10(n) to Form 10-K for
the fiscal year ended December 25, 1993.)
+10.17 Amended 1988 Long Term Incentive Plan. (Exhibit 10(o)
to Form 10-K for the fiscal year ended December 25,
1993.)
*+10.171 Amendment No. 4 to 1988 Long Term Incentive Plan.
10.18 Trust Agreement dated as of May 15, 1989, between the
Registrant and Shawmut Worcester County Bank, N.A. and
First Amendment thereto dated as of February 8, 1990.
(Exhibit 10(w) to Form 10-K for the fiscal year ended
December 30, 1989.)
+10.19 Form of 1992 - 1994 Long Term Performance Award
Agreement. (Exhibit 10(y) to Form 10-K for the fiscal
year ended December 28, 1991.)
+10.20 Crompton & Knowles Corporation Restricted Stock Plan
for Directors approved by the stockholders on April 9,
1991. (Exhibit 10(z) to Form 10-K for the fiscal year
ended December 28, 1991.)
*+10.21 Amended 1993 Stock Option Plan for Non-Employee
Directors.
10.22 Form of Assignment and Assumption of Raw Materials
Agreement, dated as of October 30, 1989, between UCC
and Avery. (Exhibit 10.1 to UCC Form S-1,
Registration No. 33-32770.)
+10.23 UCC Purchase Right Plan, as amended and restated as of
March 16, 1995. (Exhibit 10.1 to the UCC Form 10-Q
for the period ended April 2, 1995 ["UCC April 1995
Form 10-Q"].)
+10.24 UCC 1993 Stock Option Plan. (Exhibit 28.1 to UCC's
Registration Statement No. 33-62030 on Form S-8, filed
on May 4, 1993.)
+10.25 Form of Amendment No. 2 to the UCC 1993 Stock Option
Plan. (Exhibit 10.2 to the UCC April 1995 Form 10-Q.)
+10.26 Form of Executive Stock Option Agreement, dated as of
November 15, 1993. (Exhibit 10.22 to the UCC 1994 Form
10-K.)
*+10.27 Form of 1996 - 1998 Long Term Performance Award
Agreement entered into in 1996 between the Registrant
or one of its subsidiaries and fourteen of the
executive officers of the Registrant.
*11 Statement re computation of per share earnings.
*13 1996 Annual Report to Stockholders of Crompton &
Knowles Corporation. (Not to be deemed filed with the
Securities and Exchange Commission except those
portions expressly incorporated by reference into this
report on Form 10-K.)
*21 Subsidiaries of the Registrant.
*23 Consent of independent auditors. (See Item 14(a)2
herein.)
*24 Power of attorney from directors and executive
officers of the Registrant authorizing signature of
this report. (Original on file at principal executive
offices of Registrant.)
*27 Financial Data Schedule for the fiscal year ended
December 28, 1996.
*29 Annual Report on Form 11-K of Crompton & Knowles
Corporation Employee Stock Ownership Plan for the
fiscal year ended December 31, 1996.
*99 Independent Auditors' Report of Deloitte & Touche LLP.
* Copies of these Exhibits are annexed to this report on Form
10-K provided to the Securities and Exchange Commission and the
New York Stock Exchange.
+ This Exhibit is a compensatory plan, contract or arrangement
in which one or more directors or executive officers of the
Registrant participate.
(b) There were no reports on Form 8-K filed during the last
quarter of the period covered by this report.
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.
CROMPTON & KNOWLES CORPORATION
(Registrant)
Date: March 28, 1997 By:/s/ Charles J. Marsden
Charles J. Marsden
Senior Vice President
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the Registrant and in the capacities and on
the date indicated.
Name Title
Vincent A. Calarco* Chairman of the Board, President,
and Director (Principal Executive
Officer)
Charles J. Marsden* Senior Vice President and Director
(Chief Financial Officer)
Peter Barna* Vice President - Finance
(Principal Accounting Officer)
James A. Bitonti* Director
Robert A. Fox* Director
Roger L. Headrick* Director
Leo I. Higdon, Jr.* Director
Michael W. Huber* Director
C. A. Piccolo* Director
Patricia K. Woolf* Director
Date: March 28, 1997 *By:/s/ Charles J. Marsden
Charles J. Marsden
as attorney-in-fact
Independent Auditors' Report and Consent
The Board of Directors and Stockholders
Crompton & Knowles Corporation:
Under date of January 30, 1997, we reported on the consolidated
balance sheet of Crompton & Knowles Corporation and subsidiaries
("the Company") as of December 28, 1996, and the related
consolidated statements of operations, stockholders' equity
(deficit) and cash flows for the year then ended, which are
included in this Form 10-K. Our report includes an explanatory
paragraph regarding our responsibility for the Company's 1995 and
1994 consolidated financial statements. In connection with our
audit of the aforementioned consolidated financial statements, we
also audited the related consolidated financial statement
schedule included in this Form 10-K for the year then ended.
This financial statement schedule is the responsibility of the
Company's management. Our responsibility is to express an
opinion on this financial statement schedule based on our audit.
In our opinion, such financial statement schedule, when
considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly, in all material
respects, the 1996 information set forth therein.
We previously audited and reported on the consolidated financial
statement schedule as of and for the years ended December 30,
1995 and December 31, 1994 of Crompton & Knowles Corporation and
subsidiaries prior to the Company's pooling-of-interests with
Uniroyal Chemical Corporation, as more fully described in the
notes to the consolidated financial statements under the heading
"Accounting Policies - Business Combination". We also audited
the combination of the financial statement schedule as of and for
the years ended December 30, 1995 and December 31, 1994, after
restatement for the pooling-of-interests referred to above; in
our opinion, the restated schedule, when considered in relation
to the basic consolidated financial statements taken as a whole,
has been properly combined on the basis described in the
aforementioned note to the consolidated financial statements.
We consent to the incorporation by reference in the registration
statement (Nos. 33-21246, 33-42280 and 33-67600) on Form S-8 of
Crompton & Knowles Corporation of our report, which includes an
explanatory paragraph regarding our responsibility related to the
Company's consolidated balance sheet as of December 30, 1995 and
the related consolidated statements of operations, stockholders'
equity (deficit), and cash flows for each of the years in the
two-year period then ended, dated January 30, 1997, relating to
the consolidated balance sheet of Crompton & Knowles Corporation
and subsidiaries as of December 28, 1996, and the related
consolidated statements of operations, stockholders' equity
(deficit), and cash flows for the year then ended, which report
appears in the December 28, 1996 Annual Report on Form 10-K of
Crompton & Knowles Corporation. We also consent to the
incorporation by reference in the registration statement (No. 33-21246) on
Form S-8 of Crompton & Knowles Corporation of our
report dated March 20, 1997 relating to the statements of
financial condition of Crompton & Knowles Corporation Employee
Stock Ownership Plan as of December 31, 1996 and 1995, and the
related statements of income and changes in plan equity for each
of the years in the three-year period ended December 31, 1996, as
included in Exhibit 29 of said Form 10-K.
/s/ KPMG Peat Marwick LLP
Stamford, Connecticut
March 28, 1997
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Schedule II
CROMPTON & KNOWLES CORPORATION AND SUBSIDIARIES
Valuation and Qualifying Accounts
(In thousands of dollars)
Additions
Balance at charged to Adjustments Balance
beginning costs and at end
of year expenses Recurring Other of year
Fiscal Year ended December 28, 1996:
Allowance for doubtful accounts
$ 6,142 $ 2,333 $ (1,525)(1) $ 349 (6) $ 7,299
Accumulated amortization of cost in
excess of acquired net assets
29,562 5,835 140 (2) 1,079 (6) 36,616
Accumulated amortization of other
intangible assets
89,036 15,700 (296)(2) 3,723 (6) 108,163
Fiscal Year ended December 30, 1995:
Allowance for doubtful accounts
$ 6,281 $ 1,415 $ (1,584)(1) $ 30 (3) $ 6,142
Accumulated amortization of cost in
excess of acquired net assets
23,816 5,544 214 (2) (12)(5) 29,562
Accumulated amortization of other
intangible assets
75,486 14,887 (815)(2) (522)(5) 89,036
Fiscal Year ended December 31, 1994:
Allowance for doubtful accounts
$ 6,018 $ 1,204 $ (963)(1) $ 22 (3) $ 6,281
Accumulated amortization of cost in
excess of acquired net assets
32,608 6,270 76 (2) (15,138)(4)(5) 23,816
Accumulated amortization of other
intangible assets
95,231 20,101 (432)(2) (39,414)(4) 75,486
(1) Represents accounts written off as uncollectible (net of recoveries)
denominated in foreign currencies.
(2) Represents the translation effect of intangible assets denominated i
(3) Represents allowance related to the acquisition of Killion Extruders
(4) Represents write-offs due to the 1994 intangible asset revaluation a
(5) Represents intangible asset retirements.
(6) Represents adjustment to conform fiscal year of Uniroyal.
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