Exhibit 29
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________________
FORM 11-K
(Mark One)
X Annual Report pursuant to Section 15 (d) of the
Securities Exchange Act of 1934 (Fee Required)
For the fiscal year ended December 31, 1996
OR
Transition report pursuant to Section 15 (d) of the
Securities Exchange Act of 1934 (No Fee Required)
For the transition period from ________ to __________
Commission file number 1-4663
A. Full title of the Plan and the address of the Plan, if
different from that of the issuer named below:
CROMPTON & KNOWLES CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN
B. Name of issuer of the securities held pursuant to the
Plan and the address of its principal executive office:
Crompton & Knowles Corporation
One Station Place - Metro Center
Stamford, Connecticut 06902
Exhibit 29
CROMPTON & KNOWLES CORPORATION
Employee Stock Ownership Plan
EXHIBIT INDEX
Form 11-K for the Fiscal Year Ended December 31, 1996
Exhibit Description
No. of Exhibit
1. Consent of KPMG Peat Marwick LLP independent certified
public accountants.
CROMPTON & KNOWLES CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN
STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, 1996 AND 1995
PLAN ASSETS AND EQUITY
1996
Fixed C&K Equity Advisers Mortgage
Income Fund Stock Fund Fund Fund Fund Total
Investments:
Common stock of Crompton
& Knowles Corporation -
2,034,175 shares at market
value (cost $16,360,444)
in 1996
$ - $39,157,869 $ - $ - $ - $39,157,869
Hartford Life Insurance
Company group annuity
contract
14,481,933 - 7,595,484 1,304,476 353,485 23,735,378
U S Treasury Note - 5.75%
due 9/30/97 at market value
(cost $1,949,115)
1,957,361 - - - - 1,957,361
Cash and short-term
investments at cost,
which approximates
market
688 25,266 510 210 26 26,700
Contribution receivable
from Crompton & Knowles
Corporation
62,986 266,818 47,978 17,223 5,413 400,418
Accrued income
28,706 - - - - 28,706
Plan Assets and Equity
including $429,560 payable
to participants
at 12/31/96
$16,531,674 $39,449,953 $ 7,643,972 $ 1,321,909 $ 358,924 $65,306,432
1995
Fixed C&K Equity Advisers Mortgage
Income Fund Stock Fund Fund Fund Fund Total
Investments:
Common stock of Crompton
& Knowles Corporation -
2,110,683 shares at market value
(cost $15,647,527)
in 1995
$ - $27,966,550 $ - $ - $ - $27,966,550
Hartford Life Insurance
Company group annuity
contract
17,882,428 - 3,196,868 647,252 309,648 22,036,196
Cash and short-term
investments at cost,
which approximates
market
- 26,164 - - - 26,164
Contribution receivable
from Crompton & Knowles
Corporation
67,233 297,111 34,216 15,525 7,501 421,586
Accrued income
- - - - - -
Plan Assets and Equity
$17,949,661 $28,289,825 $ 3,231,084 $ 662,777 $ 317,149 $50,450,496
See accompanying notes to financial statements
CROMPTON & KNOWLES CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN
STATEMENTS OF INCOME AND CHANGES IN PLAN EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1996
Fixed C&K Equity Advisers Mortgage
Income Fund Stock Fund Fund Fund Fund Total
Investment income:
Cash dividends on
investment in common
stock of Crompton &
Knowles Corporation and
interest on short-term
investments
$ 1,800 $ 578,701 $ 1,882 $ 572 $ 74 $ 583,029
Realized gain on sale
of investments and
withdrawals
- 1,978,007 - - - 1,978,007
Interest earned - US Treasury notes
34,539 - - - - 34,539
Interest earned - Hartford
Life Insurance Company
group annuity contract
1,026,153 - - - - 1,026,153
Net investment income
1,062,492 2,556,708 1,882 572 74 3,621,728
Increase (decrease) in unrealized
appreciation of investments
8,246 10,478,402 1,263,104 150,395 15,469 11,915,616
Contributions:
Em - - - - - -
Employees
842,652 1,522,889 529,652 202,809 73,913 3,171,915
Employer - Net of
forfeitures
- 2,018,734 - - - 2,018,734
Withdrawals and
Distributions
(2,469,946) (2,829,299) (409,757) (124,901) (38,154) (5,872,057)
Employee interfund
transfers
(861,431) (2,587,306) 3,028,007 430,257 (9,527) -
Net increase/(decrease) in Plan
Equity for the Year
(1,417,987) 11,160,128 4,412,888 659,132 41,775 14,855,936
Plan Equity at the beginning
of year
17,949,661 28,289,825 3,231,084 662,777 317,149 50,450,496
Plan Equity at the end of year
$ 16,531,674 $ 39,449,953 $ 7,643,972 $ 1,321,909 $ 358,924 $ 65,306,432
1995
Fixed C&K Equity Advisers Mortgage
Income Fund Stock Fund Fund Fund Fund Total
Investment income:
Cash dividends on
investment in common
stock of Crompton &
Knowles Corporation and
interest on short-term
investments
$ 2,885 $ 1,072,287 $ 2,371 $ 1,257 $ 190 $ 1,078,990
Realized gain on sale
of investments and
withdrawals
- 1,297,120 - - - 1,297,120
Interest earned - US Treasury notes
- - - - - -
Interest earned - Hartford
Life Insurance Company
group annuity contract
1,051,264 - - - - 1,051,264
Net investment income
1,054,149 2,369,407 2,371 1,257 190 3,427,374
Increase (decrease) in unrealized
appreciation of investments
- (7,454,185) 824,777 120,815 37,820 (6,470,773)
Contributions:
Em 67,972 1,846 104,571 17,065 - 191,454
Employees
881,159 1,741,948 373,786 158,134 73,737 3,228,764
Employer - Net of
forfeitures
- 2,043,854 - - - 2,043,854
Withdrawals and
Distributions
(936,731) (1,662,650) (159,231) (48,740) (12,506) (2,819,858)
Employee interfund
transfers
1,818,848 (1,226,417) (326,925) (243,879) (21,627) -
Net increase/(decrease) in Plan
Equity for the Year
2,885,397 (4,186,197) 819,349 4,652 77,614 (399,185)
Plan Equity at the beginning
of year
0 0 0 0 0 0
Plan Equity at the end of year
$ 2,885,397 $ (4,186,197)$ 819,349 $ 4,652 $ 77,614 $ (399,185)
1994
Fixed C&K Equity Advisers Mortgage
Income Fund Stock Fund Fund Fund Fund Total
Investment income:
Cash dividends on
investment in common
stock of Crompton &
Knowles Corporation and
interest on short-term
investments
$ 4,357 $ 879,230 $ 4,847 $ 1,583 $ 652 $ 890,669
Realized gain on sale
of investments and
withdrawals
- 1,242,744 - - - 1,242,744
Interest earned - US Treasury notes
- - - - - -
Interest earned - Hartford
Life Insurance Company
group annuity contract
949,787 - - - - 949,787
Net investment income
954,144 2,121,974 4,847 1,583 652 3,083,200
Increase (decrease) in unrealized
appreciation of investments
- (12,033,946) 25,662 (14,931) (4,103) (12,027,318)
Contributions:
Em 1,039 - 221 - - 1,260
Employees
701,355 1,548,111 268,877 94,419 53,431 2,666,193
Employer - Net of
forfeitures
- 1,676,755 - - - 1,676,755
Withdrawals and
Distributions
(972,580) (2,231,903) (122,309) (28,957) (15,192) (3,370,941)
Employee interfund
transfers
750,591 (1,286,569) 416,791 123,419 (4,232) -
Net increase/(decrease) in Plan
Equity for the Year
1,434,549 (10,205,578) 594,089 175,533 30,556 (7,970,851)
Plan Equity at the beginning
of year
13,629,715 42,681,600 1,817,646 482,592 208,979 58,820,532
Plan Equity at the end of year
$ 15,064,264 $ 32,476,022 $ 2,411,735 $ 658,125 $ 239,535 $ 50,849,681
See accompanying notes to financial statements
CROMPTON & KNOWLES CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 and 1995
1. Basis of Presentation
The accompanying financial statements have been prepared on an
accrual basis. Securities transactions are recorded on the
trade date, and dividend income is recorded on the ex-dividend
date.
2. Plan Description
The Employee Stock Purchase and Savings Plan was adopted by the
Board of Directors of Crompton & Knowles Corporation (the
"Corporation") on January 27, 1976. Effective July 1, 1989 the
Board of Directors amended the Plan to convert it into an
Employee Stock Ownership Plan (the "Plan"). The Plan permits
an eligible employee to elect to participate by authorizing a
withholding of an amount equal to 1%, 2%, 3%, 4%, 5% or 6% of
compensation as the basic contribution to the Plan.
Contributions by the Corporation to the Plan were made at an
amount equal to 66 2/3% of each participating employee's basic
employee contribution to the Plan.
Funds contributed under the Plan are held in a trust fund (the
"Trust") and were invested in five investment funds, the
Crompton & Knowles Stock Fund ("C&K Stock Fund"), the Fixed
Income Fund, the Equity Fund, the Advisers Fund, and the
Mortgage Fund.
The C&K Stock Fund is a fund invested entirely in common stock
of Crompton & Knowles Corporation, and contributions by the
Corporation to the Plan are invested in this fund. The market
value of the common stock is based on quotations from the New
York Stock Exchange.
The Fixed Income Fund is a fund invested under an agreement
with Hartford Life Insurance Company (the "Hartford") pursuant
to which the Hartford guarantees the repayment of principal and
the payment of interest on all amounts on deposit at an
Employee Stock Ownership Plan - Notes To Financial Statements
Page 2
effective annual rate of interest of 6.46% on, and after
January 1, 1996, (6.50% for the period January 1, 1995 through
December 31, 1995, and 6.885% for the period January 1, 1994
through December 31, 1994).
The value of the Fixed Income Fund is based on contributions
invested and reinvested, interest earned, less withdrawals and
distributions.
The Equity Fund is a fund invested under the terms of a group
annuity contract with the Hartford in the Separate Account A,
which is a pooled separate account maintained by the Hartford
with respect to a portion of its assets, in connection with the
contract and other similar contracts issued by the Hartford.
This fund invests primarily in equity securities such as common
stocks and securities convertible into common stock. The
Equity Fund is valued based on a unit value as determined by
the fund manager as follows:
12/31/96 12/31/95
Unit Value $158.091 $126.392
Total Units Held 48,045.124 25,293.156
The related cost of the Equity Fund at December 31, 1996 was
$5,448,269, and $2,245,895 at December 31, 1995.
The Advisers Fund is a fund invested under the terms of a group
annuity contract with the Hartford in the Separate Account V
which is a pooled separate account maintained by the Hartford
with respect to a portion of its assets, in connection with the
contract and other similar contracts issued by the Hartford.
Assets in the Separate Account V are invested in the HVA
Advisers Fund, Inc. The Hartford Investment Management Company
is an investment advisor to the fund, and Wellington Management
is sub-advisor to the fund. This fund invests in common
stocks, debt securities, and money market instruments. The
Advisers Fund is valued based on a unit of value as determined
by the fund manager as follows:
12/31/96 12/31/95
Unit Value $1.982 $1.708
Total Units Held 658,050.649 378,784.471
Employee Stock Ownership Plan - Notes To Financial Statements
Page 3
The related cost of the Advisers Fund at December 31, 1996 was
$1,061,099, and $531,228 at December 31, 1995.
The Mortgage Fund is a fund invested under the terms of a group
annuity contract with the Hartford in the Separate Account G
which is a pooled separate account maintained by the Hartford
with respect to a portion of its assets, in connection with the
contract and other similar contracts issued by the Hartford.
The assets in the Separate Account G are invested solely in the
Hartford GNMA/Mortgage Securities Fund. Inc. The Hartford
Investment Management Company is an investment advisor to the
fund. This fund invests in mortgage related securities,
including securities issued by the Government National Mortgage
Association. The Mortgage Fund is valued based on a unit value
as determined by the fund manager as follows:
12/31/96 12/31/95
Unit Value $32.155 $30.764
Total Units Held 10,993.208 10,065.191
The related cost of the Mortgage Fund at December 31, 1996 was
$304,253, and $269,734 at December 31, 1995.
Assets in any of the five funds may be invested in short term
government or other securities pending permanent investment.
Earnings on each fund will be reinvested in that fund.
Each participant is permitted to elect to have his basic
contribution invested in any of the five funds in 10%
increments. As of December 31, 1996 and 1995 the number of
participants by fund were as follows:
1996 1995
C&K Stock Fund 1,515 1,541
Fixed Income Fund 933 994
Equity Fund 607 503
Advisers Fund 274 225
Mortgage Fund 146 142
As of the first day of any month, but not more frequently than
once in any six-month period, a participant may elect to
Employee Stock Ownership Plan - Notes To Financial Statements
Page 4
transfer any part of the value of his basic employee account or
his supplemental employee account, which is invested in one of
the funds, to any of the other funds except the Fixed Income
Fund and the Mortgage Fund. Any such transfer must be in
increments of 5% of the amount invested in the fund from which
the transfer is being made.
3. Income Taxes
The Internal Revenue Service has issued a determination letter
to the effect that the Plan as amended through 1994 is a
qualified plan under Section 401(a) of the Internal Revenue
Code of 1954 (the Code), as amended.
The Board of Directors of the Corporation amended the Plan,
effective as of July 1, 1989, to convert it to an employee
stock ownership plan. The amendments to the Plan included both
changes to convert the Plan to an employee stock ownership plan
and other changes required or permitted by the Code.
Management and counsel believe that these amendments will not
effect the qualified status of the Plan.
It is believed that, in general, the federal income tax
consequences of participation in the Plan under present law
will be as follows:
Participants are not subject to federal income tax on employer
contributions made under the Plan or on income earned by the
Trust until amounts are withdrawn or distributed. Any
withdrawal from the Plan will be tax free to the extent of the
participant's contributions to the Plan prior to 1987. If the
amount exceeds such pre-1987 contributions of the participant,
the excess will be treated as being in part a tax free return
of the participant's contribution made to the Plan after 1986
and in part as a taxable distribution subject to federal income
tax at ordinary rates based on the ratio at the time of
withdrawal of the participant's total contributions after 1986
to the total value of the participant's accounts. If the
withdrawal or distribution qualifies as a lump sum
distribution, amounts attributable to participation in a
predecessor plan prior to 1974 may qualify for capital gains
treatment (phased out over the years 1987-1991), and the
ordinary income portion attributable to post-1973 participation
Employee Stock Ownership Plan - Notes To Financial Statements
Page 5
may be taxed under a special five-year income averaging
provision if the participant is over age 59 1/2 (or a special
ten-year income averaging provision if the participant turned
50 before January 1, 1986). If a distribution includes shares
of common stock of Crompton & Knowles Corporation, taxation of
any appreciation in the value of such shares over their cost to
the Trust will be deferred until the later sale or exchange of
such shares. Taxable withdrawals or distributions after
January 1, 1987, in addition to being taxed as ordinary income
will be subject to an additional 10% income tax unless the
withdrawal or distribution is on account of the death or
disability of the participant, is made after he turns age 59 1/2
or retires after age 55, or is used for certain deductible
medical expenses. A participant who receives total
distributions from all retirement plans in a single year in
excess of $150,000 ($144,551 in some cases) may be subject to
an excise tax of 15% of the excess amount.
The foregoing is only a brief summary of the tax consequences
of participation in the Plan. Each participant should consult
his own personal advisor to review the tax consequences of
making any elections under the Plan and to determine his own
tax liability.
4. Participant Vesting
A participant in the Plan is fully vested in all of his
accounts under the Plan upon his death, retirement, disability,
or attainment of age 65 or upon change in control of the
Corporation. A participant whose employment terminates for any
reason before his death or retirement is entitled to receive
l00% of his own contributions plus earnings thereon and will
receive his employer contribution account plus earnings thereon
based upon a schedule under which the account is 100% vested
after five years of participation in the Plan, or after
completion of five years of service with the Corporation. The
non-vested portion of the employer contribution account will be
forfeited under certain circumstances and held to reduce future
contributions to be made by the Corporation to the Plan.
Employee Stock Ownership Plan - Notes To Financial Statements
Page 6
5. Investments
A. Unrealized appreciation in Crompton & Knowles
Corporation common stock:
12/31/96 12/31/95 12/31/94
Unrealized
apprec. at the
beginning of
the year $12,319,023 $19,773,208 $31,807,154
Unrealized
apprec. at the
end of the year 22,797,425 12,319,023 19,773,208
Increase/(decrease)
in unrealized
appreciation $10,478,402 $( 7,454,185)$(12,033,946)
B. Net purchases (sales) of shares of Crompton & Knowles
Corporation common stock consist of the following:
Contributions Net
And Sales and Purchases
Purchases Withdrawals (Sales)
1996
No. of shares 165,334 241,842 ( 76,508)
Cost amount $2,569,042 $1,856,125 $( 712,917)
1995
No. of shares 283,757 151,659 132,098
Cost amount $4,307,961 $1,039,233 $3,268,728
1994
No. of shares 145,724 86,429 59,295
Cost amount $2,446,717 $485,144 $1,961,573
Employee Stock Ownership Plan - Notes to Financial Statements
Page 7
C. Gain on sale of investments and withdrawals of Crompton
& Knowles Common Stock:
1996 1995 1994
Aggregate
proceeds $3,834,132 $2,336,353 $1,727,888
Aggregate cost
(FIFO) 1,856,125 1,039,233 485,144
Net gain $1,978,007 $1,297,120 $1,242,744
6. Plan Expenses
Significant costs of Plan administration, which are payable
from the Trust or by the Corporation, are generally paid by the
Corporation.
Independent Auditors' Report
The Board of Directors
Crompton & Knowles Corporation:
We have audited the accompanying statements of financial
condition of Crompton & Knowles Corporation Employee Stock
Ownership Plan (the 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. These financial statements are the responsibility of the
Plan's management. Our responsibility is to express an opinion
on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used
and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial
position of the Plan as of December 31, 1996 and 1995, and the
income and changes in plan equity for each of the years in the
three-year period ended December 31, 1996 in conformity with
generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
Stamford, Connecticut
March 20, 1997