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 27, 1997
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 (I.R.S. Employer
of 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
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 27, 1998,
was $ 2,180,278,709.
The number of shares of Common Stock of the registrant
outstanding as of February 27, 1998, was 74,369,397.
DOCUMENTS INCORPORATED BY REFERENCE
Annual Report to Stockholders for fiscal year
ended December 27, 1997 ........ Parts I, II and IV
Proxy Statement for Annual Meeting of Stockholders
on April 28, 1998 ........ 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 1990, acquiring the business and certain assets and
liabilities of Atlantic Industries, Inc., a domestic dye manufacturer, and of
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 domestic 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 is the parent of
Uniroyal Chemical Company, Inc. ("Uniroyal"), a multinational manufacturer of
elastomers, rubber chemicals, crop protection chemicals, specialty chemicals
and urethane prepolymers.
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 30 of the Corporation's 1997 Annual Report to
Stockholders, and such information is incorporated herein by reference.
Products and Services
The Corporation's products are currently marketed in approximately 120
countries and serve a wide variety of end use markets including tires,
agriculture, automobiles, textiles, food, plastics, lubricants,
petrochemicals, leather, construction, recreation, mining, paper, packaging,
home furnishings, and appliances. 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 1997 of $496.4 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 1997, with the balance of
such sales to the industrial rubber market which includes numerous
manufacturers of hoses, belting, sponge and a wide variety of other engineered
rubber products.
The Corporation 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 the Corporation 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 1997, 1996 and 1995 were
15.6%, 16.8% and 16.2% of the Corporation's net sales, respectively. The
Corporation believes it is one of the three largest suppliers of rubber
chemicals and EPDM polymers in the world, and the largest supplier of EPDM
polymers in North America. The Corporation's success in this business has
been due to several factors, including product performance, effective
technical assistance and outstanding customer service which have earned the
Corporation 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, the Chemicals & 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 1997 of $370.1 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.
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.
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. Gustafson
received regulatory approval from the United States Environmental Protection
Agency ("EPA") 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.
Specialties
The Specialties business consists of Adiprene(R)/ Vibrathane(R) urethane
prepolymers and a number of specialty chemicals used in the plastics and
petroleum industries. The Specialties business had net sales for fiscal 1997
of $315.2 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. 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 it 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. The Corporation effectively competes in
this business by providing efficient customer service and technical assistance
through a highly regarded technical service staff and a proven ability to
develop new products and technologies for its customers. Over 150 grades of
urethane prepolymers are commercially available from Uniroyal.
Adiprene(R)/Vibrathane(R) urethane prepolymers are 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.
Colors
The Colors business had net sales in fiscal 1997 of $257.6 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, wool,
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 European dyes industry.
Sales of color and color chemical products accounted for 13.9%, 15.0% and
16.3% of the total revenues of the Corporation in 1997, 1996, and 1995,
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 are made
through third party distribution channels.
Ingredient Technology
The Ingredient Technology business had fiscal 1997 net sales of $100.2
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 supplier of edible molasses and malt extracts
in North America, and a significant supplier of sugar-based specialty
products. As a supplier of flavors and seasonings, the Corporation has many
competitors in the United States and abroad. As a supplier of pharmaceutical
excipients, the Corporation has a major position in sugar spheres used to
control dosage in time-released formulas.
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 1997 fiscal
year of $311.7 million.
Integrated extrusion systems, which include extruders in combination with
controls and other 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 produces electrical and electronic controls primarily for
use with extrusion systems and 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 16.8%,
15.8% and 16.0% of the total revenues of the Corporation in 1997, 1996 and
1995, 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. The Corporation also uses large amounts of
petrochemical feedstocks in its chemical manufacturing processes. Large
increases in the cost of these petrochemical feedstocks could adversely affect
the Corporation'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 which has
approximately 16% of its annual sales occurring 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 1997, totalled approximately $106 million compared with $92 million
at the end of 1996. It is expected that most of the 1997 backlog will be
shipped during 1998. Orders for specialty chemicals are generally filled 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 65% of sales within the United
States and approximately 55% 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 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 $53.6 million for the year 1997,
$52.4 million for the year 1996 and $50.1 million for the year 1995.
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 $8.3
million of costs for capital projects and $29.0 million for operating and
maintenance costs related to environmental compliance at its facilities during
fiscal 1997. In fiscal 1998, the Corporation expects to incur approximately
$16.3 million of costs for capital projects and $30.5 million for operating
and maintenance costs related to environmental compliance at its facilities.
During fiscal 1997, the Corporation spent $12.7 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 $15 million for environmental remediation activities. The
Corporation expects to spend approximately $17.9 million during fiscal 1998 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 and to what extent
the Corporation's products will be reviewed and/or restricted under this
standard.
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.
Propargite will be reviewed under the new FQPA standard discussed above.
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 the 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 reregistration in member
states of the EC or may lead to some restrictions, if adverse data is
discovered.
Employees
The Corporation had approximately 5,519 employees on December 27, 1997.
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 30
of the Corporation's 1997 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 Crop Protection,
Center* Chemicals &
Polymers and
Specialties
Location Facility Products/Businesses
Pawcatuck Office and Plastics and Rubber
Machine Shop* Extrusion and
Electronic Control
Equipment and Systems
Stamford Office** Corporate Headquarters
Idaho
Marsing Plant **** Crop Protection
Illinois
Calumet Plant* Food Ingredients
Pekin Plant** Crop Protection
Iowa
Des Moines Plant** Crop Protection
Louisiana
Geismar Plant* Crop Protection,
Chemicals & Polymers
and Specialties
Gretna Plant* Food Ingredients
Massachusetts
South Boston Plant* Food Ingredients
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, Flavors and Seasonings
Laboratory
and Plant**
Newark Plant* Textile and Other Dyes
Nutley Office, Textile and Other Dyes
Laboratory
and Plant*
Somerville Office and Extrusion Systems
Machine Shop*
Vineland Office and Plant* Food & Pharmaceutical
Ingredients and Colors
Location Facility Products/Businesses
North Carolina
Charlotte Office and Dyes
Laboratory*
Gastonia Plant* Crop Protection and
Specialties
Lowell Plant* Textile and Other Dyes, Organic
Chemicals
Ohio
Elyria Office and Seasonings
Plant**
Painesville Plant* Chemicals & Polymers
Pennsylvania
Gibraltar Office, Textile and Other Dyes, Organic
Laboratory and Chemicals
Plant*
Reading Plant* Textile Dyes
and Food Colors
South Carolina
Greenville Plant, Laboratory Textile and Other Dyes
and Warehouse*
Texas
Frisco Research Center* Crop Protection
Plano Office** Crop Protection
INTERNATIONAL
Australia
South Australia
Regency Park, S.A. Office and Crop Protection
Machine Shop**
Bahamas
Freeport Plant* Specialties
Belgium
Tertre Office, Textile and Other
Laboratory Dyes
And Plant*
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
Location Facility Products/Businesses
France
Dannemarie Office and Extrusion Systems
Machine Shop*
Oissel Office, Laboratory Textile and Other Dyes
and Plant*
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 Plant* Crop Protection
Amsterdam
Republic of China
(Taiwan)
Kaohsiung Plant*** Chemicals & Polymers and
Specialities
United Kingdom
Evesham Research Center* Crop Protection
Huddersfield Plant **** Specialties
Langley Office** Chemicals & Polymers,
Specialties, Dyes and
Crop Protection
_______________
* Facility Owned by the Corporation
**Facility Leased by the Corporation
***Facility Owned by Uniroyal Chemical Taiwan Ltd., which is 80% owned by
Uniroyal
****Land Leased by and Facility Owned by 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 $15 million during the third quarter of 1997
for environmental remediation activities. The total amount accrued for such
environmental liabilities at December 27, 1997, was $102.6 million. The
Corporation estimates the potential liabilities to range from $ 74 million to
$133 million at December 27, 1997. It is reasonably possible that the
Corporation's estimates for environmental remediation liabilities may change
in the future 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 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 has been remanded and
the remaining claims are currently the subject of further proceedings before a
Special Master appointed by the Court.
. 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
Co./Cie. (formerly known as Uniroyal Chemical Ltd./Ltee) 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 May 21, 1997, the Court entered an order finding that
Uniroyal Chemical Co./Cie. is jointly and severally liable to the United
States, and finding that Hercules and Uniroyal Chemical Co./Cie. are liable to
each other in contribution. The allocation phase of the proceeding has begun
with discovery ongoing and trial scheduled to begin in 1998. No ultimate
determination of the amount of Uniroyal Chemical Co./Cie.'s liability, if any,
is expected prior to the middle of 1999. In addition, the natural resource
damage case filed by several individuals in state court which named Uniroyal
Chemical Co./Cie. has been withdrawn without prejudice. These individuals
have refiled their case in Federal court against some of the parties but have
not as yet named Uniroyal Chemical Co./Cie as a defendant. Uniroyal Chemical
Co./Cie. received a notice from the United States Department of the Interior
of its intent to perform a Natural Resource Damage Assessment at the site. In
addition, the State of Arkansas has commenced an action for natural resource
damages which is currently pending in the State court, but Uniroyal Chemical
Co./Cie. has not been named a party in that action.
Other Environmental Matters
. Sundor Canada Inc. - On July 13, 1990, Sundor Canada Inc. ("Sundor")
instituted suit against Uniroyal Chemical Co./Cie. 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 Co./Cie. 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 Co./Cie. A tentative settlement has been reached with
Sundor by which the defendants, including Uniroyal Chemical Co./Cie., and
Uniroyal's insurer will pay CD$3,500,000 in the aggregate to Sundor.
. Painesville - Reference is made to Item 1(i) of Part II of the
Registrant's Quarterly Report on Form 10-Q for the quarterly period ended June
28, 1997, for information relating to (a) Uniroyal's Painesville Lake County,
Ohio facility which manufactures nitrile rubber and the discharge of
Painesville's wastewater to the Lake County sanitary sewer system for
treatment at Lake County's Greater Mentor Wastewater Treatment Plant
("GMWTP"); and (b) a proposed Local Limit aimed at regulating the amount of
substances which absorb at 230 nanometers that are discharged in wastewater to
the GMWTP. From July 1996 through December 31, 1997, Lake County has assessed
against the Painesville facility a total of $487,000 in administrative fines
and has ordered Uniroyal to reimburse it for $106,295 in fines Lake County has
paid to the State of Ohio for the GMWTP's violations of its NPDES permit. The
Painesville facility appealed Lake County's Reimbursement Order and its
initial assessment of administrative fines to the Lake County Court of Common
Pleas. Since the parties commenced settlement negotiations in December 1996,
all legal proceedings concerning the above-described matters have been stayed
voluntarily by agreement of the parties. Uniroyal anticipates that any fines
and/or reimbursements paid to Lake County in connection with the resolution of
this matter will not substantially exceed $100,000 in the aggregate.
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 31 of the Corporation's 1997 Annual
Report to Stockholders, is incorporated herein by reference.
The number of registered holders of Common Stock of the Corporation on
December 27, 1997, was 4,091.
ITEM 6. SELECTED FINANCIAL DATA
The selected financial data for the Corporation for each of its last six
fiscal years, set forth under the heading "Six Year Selected Financial Data"
on page 33 of the Corporation's 1997 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 16 through 18 of the Corporation's 1997 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 19 through 32 of the Corporation's 1997
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 28, 1998,
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 55, 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 56, 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 54, has served as Vice President-Finance of the Registrant
since 1996 and served as Treasurer of the Registrant from 1980 to 1996 and
Principal Accounting Officer of the Registrant since 1986.
James J. Conway, age 54, has served as President of Crompton & Knowles Colors
Incorporated since 1997. Prior to joining the Registrant, Mr. Conway was
Senior Vice President and General Manager of International Specialty Products,
Inc. from 1992 to 1997.
Joseph B. Eisenberg, Ph.D., age 55, has served as Executive Vice President,
Chemicals & 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 51, has served as Vice President of the Registrant
since 1996, and General Counsel and Secretary of the Registrant since 1989.
Marvin H. Happel, age 58, has served as Vice President -Organization and
Administration of the Registrant since 1996 and Vice President-Organization
from 1986 to 1996.
Alfred F. Ingulli, age 56, 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 to 1994.
Charles J. Marsden, age 57, 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 56, has served as President of Ingredient Technology
Corporation since January, 1996 and served as Vice President of Ingredient
Technology Corporation from 1992 to 1995.
William A. Stephenson, age 50, has served as Executive Vice President,
Specialties of Uniroyal since 1994; and served as Vice President and General
Manager, Specialties Division, Uniroyal from 1990 to 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 28, 1998, 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 28, 1998, 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 28, 1998, 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 19 through 32 of the
Corporation's 1997 Annual Report to Stockholders and are
incorporated herein by reference:
(i) Consolidated Statements of Operations for the fiscal years
ended 1997, 1996, and 1995;
(ii) Consolidated Balance Sheets for the fiscal years ended 1997
and 1996;
(iii) Consolidated Statements of Cash Flows for the fiscal years
ended 1997, 1996, and 1995;
(iv) Consolidated Statements of Stockholders' Equity [Deficit]
for the fiscal years ended 1997, 1996 and 1995;
(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.)
4.9 $600 Million Second Amended and Restated Credit Agreement dated as
of July 25, 1997, 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 4
to Form 10-Q for the quarter ended June 28, 1997.)
4.10 Second Amended and Restated Lease Agreement between the Middlebury
Partnership, as Lessor, and the Uniroyal Chemical Company, Inc., as
Lessee, dated as of August 28, 1997. (Exhibit 10 to the
UCC/Uniroyal 10-Q for the quarter ended September 27, 1997.)
+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 three 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. (Exhibit 10.171
to Form 10-K for the fiscal year ended December 28, 1996.)
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.
(Exhibit 10.21 to Form 10-K for the fiscal year ended December 28,
1996.)
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 Amended and Restated 1996 - 1998 Long Term Performance
Award Agreement entered into in 1996 between the Registrant or one
of its subsidiaries and thirteen of the executive officers of the
Registrant.
*11 Statement re computation of per share earnings.
*13 1997 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 27,
1997.
* 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 27, 1998 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 27, 1998 *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 29, 1998, we reported on the consolidated balance sheets
of Crompton & Knowles Corporation and subsidiaries (the Company) as of
December 27, 1997 and December 28, 1996, and the related consolidated
statements of operations, stockholders' equity (deficit) and cash flows for
the two-year period ended December 27, 1997, which are incorporated by
reference in this Form 10-K. Our report includes an explanatory paragraph
regarding our responsibility for the Company's 1995 consolidated financial
statements. In connection with our audits of the aforementioned consolidated
financial statements, we also audited the related consolidated financial
statement schedule included in this Form 10-K for the years ended December 27,
1997 and December 28, 1996. 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 1997 and 1996 information set forth
therein.
We previously audited and reported on the consolidated financial statement
schedule as of and for the year ended December 30, 1995 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". A separate financial statement schedule of the other
company included in the restated consolidated financial statement schedule as
of and for the year ended December 30, 1995 was audited and reported on
separately by other auditors. We also audited the combination of the
financial statement schedule as of and for the year ended December 30, 1995,
after the 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 statements
(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 statements of
operations, stockholders' equity (deficit) and cash flows for the year ended
December 30, 1995, dated January 29, 1998, relating to the consolidated
balance sheets of Crompton & Knowles Corporation and subsidiaries as of
December 27, 1997 and December 28, 1996, and the related consolidated
statements of operations, stockholders' equity (deficit) and cash flows for
the two-year period ended December 27, 1997, which report is incorporated by
reference in the December 27, 1997 Annual Report on Form 10-K of Crompton &
Knowles Corporation.
/s/KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Stamford, Connecticut
March 26, 1998
S-1
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 27, 1997:
Allowance for doubtful accounts
$ 7,299 $ 2,230 $ (821)(1) $ 0 $ 8,708
Accumulated amortization of cost in
excess of acquired net assets
36,616 5,751 (67)(2) (57)(3) 42,243
Accumulated amortization of other
intangible assets
108,163 15,413 (314)(2) 0 123,262
Fiscal Year ended December 28, 1996:
Allowance for doubtful accounts
$ 6,142 $ 2,333 $ (1,525)(1) $ 349 (4) $ 7,299
Accumulated amortization of cost in
excess of acquired net assets
29,562 5,835 140 (2) 1,079 (4) 36,616
Accumulated amortization of other
intangible assets
89,036 15,700 (296)(2) 3,723 (4) 108,163
Fiscal Year ended December 30, 1995:
Allowance for doubtful accounts
$ 6,281 $ 1,415 $ (1,584)(1) $ 30 (5) $ 6,142
Accumulated amortization of cost in
excess of acquired net assets
23,816 5,544 214 (2) (12)(3) 29,562
Accumulated amortization of other
intangible assets
75,486 14,887 (815)(2) (522)(3) 89,036
(1) Represents accounts written off as uncollectible (net of recoveries),
and the translation effect of accounts
denominated in foreign currencies.
(2) Represents the translation effect of intangible assets denominated
in foreign currencies.
(3) Represents intangible asset retirements
(4) Represents adjustment to conform fiscal year of Uniroyal.
(5) Represents allowance related to the acquisition of Killion
Extruders, Inc. in 1995.
S-2