SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 for the quarterly period
ended June 27, 1998
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 for the transition period
from to
Commission File No. 1-4663
Crompton & Knowles Corporation
(exact name of registrant as specified in its charter)
Massachusetts 04-1218720
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Station Place, Metro Center
Stamford, Connecticut 06902
(address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (203)353-5400
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date.
Class Outstanding at July 15, 1998
Common Stock, $.10 par value 74,442,064 shares
CROMPTON & KNOWLES CORPORATION
FORM 10-Q
FOR QUARTER ENDED JUNE 27, 1998
INDEX
PART I. FINANCIAL INFORMATION:
Item 1. Condensed Financial Statements and
Accompanying Notes
. Consolidated Statements of Earnings
(unaudited) - Quarters and six months ended
June 27, 1998 and June 28, 1997
. Consolidated Balance Sheets - June 27, 1998
(unaudited) and December 27, 1997
. Consolidated Statements of Cash Flows
(unaudited) - Six months ended
June 27, 1998 and June 28, 1997
. Notes to Consolidated Financial
Statements - Quarter ended June 27, 1998
(unaudited)
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
PART II. OTHER INFORMATION:
Item 1. Legal proceedings
Item 6. Exhibits and Reports on Form 8-K
Signatures
*Exhibit 4 $600,000,000 Third Amended and Restated
Credit Agreement
*Exhibit 4.1 Amendment of 1988 Rights Agreement
Exhibit 11 Statement Re Computation of Per Share Earnings
*Exhibit 27 Financial Data Schedules
* Copies of these Exhibits are annexed to this report on Form
10-Q provided to the Securities and Exchange Commission and the
New York Stock Exchange.
UNAUDITED
CROMPTON & KNOWLES CORPORATION AND SUBSIDIARIES
Consolidated Statements of Earnings
Quarters and six months ended June 27, 1998 and June 28, 1997
(In thousands, except per share data)
Quarters ended Six months ended
June 27, June 28, June 27, June 28,
1998 1997 1998 1997
Net sales $ 474,337 $ 494,142 $ 951,556 $ 968,015
Cost of products sold 292,091 312,638 594,556 617,010
Selling, general
and administrative 66,074 69,767 133,347 136,439
Depreciation and amortization 20,394 20,300 40,487 40,153
Research and development 13,200 13,054 26,363 25,938
Operating profit 82,578 78,383 156,803 148,475
Interest expense 20,505 26,581 44,118 53,534
Other (income) expense (1,258) 583 (1,547) 781
Earnings before income
taxes and extraordinary loss 63,331 51,219 114,232 94,160
Provision for income taxes 23,536 19,451 42,494 35,781
Earnings before
extraordinary loss 39,795 31,768 71,738 58,379
Extraordinary loss on early
extinguishment of debt (13,843) (1,227) (15,794) (1,227)
Net earnings $ 25,952 $ 30,541 $ 55,944 $ 57,152
Basic Earnings per common share:
Earnings before
extraordinary loss $ .53 $ .44 $ .96 $ .80
Extraordinary loss (.18) (.02) (.21) (.02)
Net earnings $ .35 $ .42 $ .75 $ .78
Diluted Earnings per common share:
Earnings before
extraordinary loss $ .52 $ .43 $ .94 $ .78
Extraordinary loss (.18) (.02) (.21) (.02)
Net earnings $ .34 $ .41 $ .73 $ .76
Dividends per common share $ .05 $ .05 $ .05 $ .05
See accompanying notes to consolidated financial statements.
- 2 -
June 27, 1998 UNAUDITED
CROMPTON & KNOWLES CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
June 27, 1998 and December 27, 1997
(In thousands of dollars)
June 27, December 27,
1998 1997
ASSETS
CURRENT ASSETS
Cash $ 14,831 $ 10,607
Accounts receivable 268,786 262,412
Inventories 359,307 356,716
Other current assets 74,844 85,314
Total current assets 717,768 715,049
NON-CURRENT ASSETS
Property, plant and equipment 467,457 474,892
Cost in excess of acquired net assets 179,700 181,025
Other assets 166,358 177,854
$ 1,531,283 $ 1,548,820
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $ 2,944 $ 1,770
Accounts payable 134,528 145,405
Accrued expenses 153,535 149,910
Income taxes payable 47,461 38,909
Other current liabilities 26,333 27,094
Total current liabilities 364,801 363,088
NON-CURRENT LIABILITIES
Long-term debt 832,578 896,291
Postretirement health care liability 148,560 149,344
Other liabilities 144,585 160,187
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock 7,733 7,733
Additional paid-in capital 237,874 232,213
Accumulated deficit (121,796) (174,019)
Accumulated translation adjustment (46,584) (42,045)
Treasury stock at cost (32,874) (40,228)
Deferred compensation (834) (984)
Pension liability adjustment (2,760) (2,760)
Total stockholders' equity (deficit) 40,759 (20,090)
$ 1,531,283 $ 1,548,820
See accompanying notes to consolidated financial statements.
- 3 -
UNAUDITED
CROMPTON & KNOWLES CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Six months ended June 27, 1998 and June 28, 1997
(In thousands of dollars)
June 27, June 28,
Increase (decrease) to cash 1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 55,944 $ 57,152
Adjustments to reconcile net earnings
to net cash provided by operations:
Extraordinary loss on early
extinguishment of debt 15,794 1,227
Depreciation and amortization 40,487 40,153
Noncash interest 5,068 6,946
Deferred taxes 6,762 12,009
Changes in assets and liabilities, net (9,653) (21,926)
Net cash provided by operations 114,402 95,561
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions (5,927) -
Capital expenditures (21,341) (17,040)
Other investing activities 235 2,535
Net cash used by investing activities (27,033) (14,505)
CASH FLOWS FROM FINANCING ACTIVITIES
Redemption of 11% and 12% notes (352,802) -
Proceeds (payments) on long-term borrowings 279,313 (65,777)
Proceeds (payments) on short-term borrowings 1,174 (5,157)
Premium paid on early extinguishment of debt (15,289) (1,464)
Dividends paid (3,721) (3,663)
Other financing activities 9,343 3,053
Net cash used by financing activities (81,982) (73,008)
CASH
Effect of exchange rates on cash (1,163) (531)
Change in cash 4,224 7,517
Cash at beginning of period 10,607 21,120
Cash at end of period $ 14,831 $ 28,637
See accompanying notes to consolidated financial statements.
-4-
CROMPTON & KNOWLES CORPORATION AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements
Quarter ended June 27, 1998
PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS
The information included in the foregoing consolidated financial
statements is unaudited but reflects all adjustments which are,
in the opinion of management, necessary for a fair statement of
the results for the interim periods presented.
Included in accounts receivable are allowances for doubtful
accounts of $9.6 million in 1998 and $8.7 million at December 27,
1997.
Accumulated depreciation amounted to $442.2 million in 1998 and
$416.6 million at December 27, 1997.
Accumulated amortization of cost in excess of acquired net assets
amounted to $45.1 million in 1998 and $42.2 million at December
27, 1997.
Accumulated amortization of patents, unpatented technology,
trademarks and other intangibles included in other assets
amounted to $130.6 million in 1998 and $123.3 million at December
27, 1997.
Cash payments during the six months ended June 27, 1998 and June
28, 1997 included interest of $40.7 million and $46.9 million,
respectively, and income taxes of $9.6 million and $16.2 million,
respectively.
It is suggested that the interim consolidated financial
statements be read in conjunction with the consolidated financial
statements and notes included in the Company's 1997 Annual Report
on Form 10-K.
CAPITAL STOCK
As of June 27, 1998, there were 77,332,751 common shares issued
at $.10 par value, of which 2,890,787 shares were held in the
treasury.
INVENTORIES
Components of inventories are as follows:
June 27, Dec. 27,
(In thousands) 1998 1997
Finished goods $243,936 $226,730
Work in process 43,718 47,029
Raw materials and supplies 71,653 82,957
$359,307 $356,716
EARNINGS(LOSS)PER COMMON SHARE
The computation of basic earnings per common share is based on
the weighted average number of common shares outstanding. The
computation of diluted earnings per common share is based on the
weighted average number of common and common equivalent shares
outstanding. The following is a reconciliation of the shares used
in both computations:
(In thousands) Second Quarter Six Months
1998 1997 1998 1997
Weighted average common
shares outstanding 74,430 73,341 74,267 73,210
Stock options, warrants
and other equivalents 2,383 1,834 2,346 1,738
Weighted average common
and common equivalent
shares outstanding 76,813 75,175 76,613 74,948
BUSINESS SEGMENT DATA
Second Quarter Ended
June 27, June 28,
(In thousands) 1998 1997
SALES
Specialty Chemicals $ 393,185 $ 418,303
Specialty Equipment and Controls 81,152 75,839
Total net sales $ 474,337 $ 494,142
OPERATING PROFIT
Specialty Chemicals $ 77,899 $ 76,074
Specialty Equipment and Controls 9,832 8,122
General corporate expense ( 5,153) ( 5,813)
Total operating profit $ 82,578 $ 78,383
Six Months Ended
June 27, June 28,
(In thousands) 1998 1997
SALES
Specialty Chemicals $ 786,795 $ 817,009
Specialty Equipment and Controls 164,761 151,006
Total net sales $ 951,556 $ 968,015
OPERATING PROFIT
Specialty Chemicals $ 148,117 $ 144,632
Specialty Equipment and Controls 20,198 15,748
General corporate expense ( 11,512) ( 11,905)
Total operating profit $ 156,803 $ 148,475
COMPREHENSIVE INCOME
Effective in the first quarter of 1998, the Company adopted
Financial Accounting Standards Board Statement No. 130 "Reporting
Comprehensive Income". The statement establishes standards for
reporting "comprehensive income" and its components in financial
statements and notes thereto. An analysis of the Company's
comprehensive income follows:
Second Quarter Six Months
Ended Ended
June 27, June 28, June 27, June 28,
(In thousands) 1998 1997 1998 1997
Net earnings $ 25,952 $ 30,541 $ 55,944 $ 57,152
Other comprehensive
(income)expense:
Foreign currency
translation adjustments 1,343 4,300 4,539 11,239
Minimum pension liability
adjustments, net - - - ( 953)
1,343 4,300 4,539 10,286
Comprehensive income $ 24,609 $ 26,241 $ 51,405 $ 46,866
LONG-TERM DEBT
On March 31, 1998, the Company amended its $600 million revolving
credit agreement with a syndicate of banks. The termination date
was extended to September 2003 from August 2001. Borrowings
under the credit agreement were amended as follows: Tranche I
provides a maximum of $375 million (up from $300 million)
available to the Company for working capital and general
corporate purposes. Tranche II provides a maximum of $75 million
(down from $150 million) available to Uniroyal Chemical Company,
Inc. for working capital and general corporate purposes. Tranche
III continues to provide up to $150 million available to the
European and Canadian subsidiaries of the Company.
On May 8, 1998 the Company redeemed the outstanding 11% Senior
Subordinated Notes at a price of 105.5% of the principal amount
thereof plus accrued and unpaid interest and the 12% Subordinated
Discount Notes at a price of 100% of the principal amount thereof
plus accrued and unpaid interest. The payment for the redemption
including premium and accrued interest amounted to $366.2 million
and was funded by drawing on the Company's $600 million revolving
credit agreement. Borrowings under the revolving credit
agreement totaled $389.1 million at June 27, 1998.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SECOND QUARTER RESULTS
Overview
Consolidated net sales of $474.3 million for the second quarter
of 1998 decreased 4% from the comparable 1997 period. The
decrease was primarily attributable to lower unit volume.
Improved pricing of 1% offset lower foreign currency
translation. International sales, including US exports, were
40% of total sales compared to 39% in the second quarter of
1997.
Net earnings before extraordinary losses on early extinguishment
of debt increased 25% to $39.8 million, or $.53 cents per share
basic and $.52 cents per share diluted, compared to $31.8
million, or $.44 cents per share basic and $.43 per share
diluted, in last year's second quarter. The extraordinary loss
of $.18 cents per share in the second quarter of 1998 reflects
the redemption of the 11% and 12% Notes on May 8, 1998. Net
earnings were $26.0 million, or $.35 cents per share basic and
$.34 cents per share diluted, compared to $30.5 million, or $.42
cents per share basic and $.41 cents per share diluted, in the
prior year's second quarter.
Gross margin as a percentage of net sales increased to 38.4%
from 36.7% in the second quarter of 1997. The increase was
attributable primarily to lower raw material costs and improved
pricing. Consolidated operating profit increased 5% to $82.6
million from $78.4 million in the prior year. Both segments
contributed to the increase as specialty chemicals rose 2% and
specialty process equipment and controls increased 21%.
Specialty Chemicals
The Company's specialty chemicals segment sales of $393.2
million decreased 6% from the comparable 1997 period. The
decrease was primarily due to lower unit volume. An analysis of
sales by major product class within the specialty chemicals
segment follows.
Chemicals and polymers sales of $123.5 million decreased 2% from
the second quarter of 1997 primarily attributable to lower unit
volume, as improved pricing of 1% was offset by lower foreign
currency translation. Sales of rubber chemicals were lower than
1997 primarily due to lower pricing, foreign currency
translation and unit volume. EPDM sales increased primarily due
to improved pricing. Nitrile rubber sales decreased as a result
of lower unit volume.
Crop protection sales of $100.5 million decreased 13% from the
comparable 1997 quarter primarily as a result of lower unit
volume due to weather conditions in California which were
unfavorable for its miticide products. This is the reverse of
1997 when second quarter sales were unusually strong and third
quarter sales were weak. Improved pricing of 1% offset lower
foreign currency translation.
Specialty sales of $81.2 million decreased 1% versus the second
quarter of 1997 primarily attributable to lower unit volume as
improved pricing of 1% offset lower foreign currency
translation. The comparison to last year's strong second
quarter was difficult considering the 12% increase over the
comparable 1996 quarter.
Colors sales of $64.6 million decreased 7% from the second
quarter of 1997 primarily due to lower unit volume of 4%,
foreign currency translation of 2% and lower pricing of 1%.
Increased imports of finished apparel into the U.S. negatively
affected the business.
Specialty ingredients sales of $23.4 million were 9% lower than
the second quarter of 1997 primarily attributable to lower unit
volume as a result of product rationalization in the second half
of 1997.
Operating profit of $77.9 million increased 2% versus the second
quarter of 1997 primarily as a result of lower raw materials
costs and improved pricing.
Specialty Process Equipment and Controls
The Company's specialty process equipment and controls segment
sales of $81.1 million increased 7% from the second quarter of
1997 primarily attributable to higher unit volume. Sales were
strong in most of the segment's major markets.
Operating profit of $9.8 million increased 21% from the second
quarter of 1997 primarily as a result of increased unit volume.
The order backlog of extruders and related equipment at the end
of the second quarter of 1998 amounted to $115 million compared
to $109 million at the end of the first quarter.
Other
Selling, general and administrative expenses of $66.1 million
decreased 5% versus the second quarter of 1997, essentially in
line with the lower unit volume of sales. Depreciation and
amortization of $20.4 million increased slightly from the
comparable 1997 period as a result of a higher fixed asset base.
Research and development costs of $13.2 million increased 1%
from the second quarter of 1997, but as a percentage of sales
remained constant at 3%. Interest expense of $20.5 million
decreased 23% from the comparable period of 1997 primarily due
to lower levels of indebtedness and lower interest on borrowings
used to redeem the 11% and 12% Notes in May. Other income of
$1.3 million compared to $583 thousand of other expense in the
second quarter of 1997 primarily due to increased interest
income. The effective tax rate of 37.2% decreased versus 38.0%
in the comparable 1997 quarter.
YEAR-TO-DATE RESULTS
Overview
Consolidated net sales of $951.6 million for the first six
months of 1998 decreased 2% from the comparable period in 1997.
The decrease resulted primarily from the impact of lower foreign
currency translation. International sales, including U.S.
exports, increased as a percentage of total sales to 40% from
38% for the first six months of 1997.
Net earnings before extraordinary losses on early extinguishment
of debt increased 23% to $71.7 million, or $.96 cents per share
basic and $.94 cents per share diluted, compared to $58.4
million, or $.80 cents per share basic and $.78 cents per share
diluted, in the first six months of 1997. Net earnings were
$55.9 million, or $.75 cents per share basic and $.73 cents per
share diluted, versus $57.2 million, or $.78 cents per share
basic and $.76 cents per share diluted, in 1997.
Gross margin as a percentage of net sales increased to 37.5%
from 36.3% for the first six months of 1997. The increase was
attributable primarily to lower raw material and other
manufacturing costs. Consolidated operating profit increased 6%
to $156.8 million as the specialty chemicals segment rose 2% and
the specialty process equipment and controls segment increased
28%.
Specialty Chemicals
The Company's specialty chemicals segment sales of $786.8
million, decreased 4% from the comparable 1997 period. The
decrease was primarily due to lower foreign currency translation
and lower unit volume of approximately 2% each. An analysis of
sales by major product class within the specialty chemicals
segment follows:
Chemicals and polymers sales of $244.3 million decreased 4% from
the first six months of 1997. The decrease was primarily
attributed to lower foreign currency translation of
approximately 2% and lower pricing and lower unit volume of 1%
each. Sales of rubber chemicals were lower than 1997 primarily
due to lower pricing, foreign currency translation and unit
volume. EPDM sales increased primarily due to improved pricing.
Nitrile rubber sales decreased primarily as a result of lower
unit volume.
Crop protection sales of $208.4 million decreased 5% from the
comparable 1997 period primarily as a result of lower unit
volume due to weather conditions in California which were
unfavorable for its miticide products.
Specialty sales of $160.3 million increased 2% from the six
month period of 1997 primarily due to increased unit volume.
Improved pricing of 1% was offset by the impact of lower foreign
currency translation.
Colors sales of $125.7 million decreased 6% from the first six
months of 1997 primarily due to lower unit volume of 3%, foreign
currency translation of 2% and lower pricing of 1%.
Specialty ingredients sales of $48.1 million were 7% lower than
the comparable period in 1997 primarily attributable to lower
unit volume as a result of product rationalization in the second
half of 1997.
Operating profit of $148.1 million for the first six months of
1998 increased 2% versus the prior year. The improvement in
operating profit resulted primarily from lower raw material and
other manufacturing costs.
Specialty Process Equipment and Controls
The Company's specialty process equipment and controls segment
reported sales of $164.8 million representing a 9% increase from
the 1997 six month period. Essentially all of the increase was
attributable to higher unit volume.
Operating profit of $20.2 million increased 28% versus the
comparable 1997 period primarily due to increased unit volume.
Other
Selling, general and administrative expenses of $133.3 million
decreased 2% versus the comparable period in 1997, essentially
in line with the lower unit volume of sales. Depreciation and
amortization of $40.5 million increased 1% versus the 1997
period primarily as a result of a higher fixed asset base.
Research and development cost of $26.4 million increased 2% from
$25.9 million in 1997, but as a percentage of sales remained
constant at 3%. Interest expense of $44.1 million decreased 18%
from the comparable period in 1997 due to lower levels of
indebtedness and lower interest on borrowings used to redeem the
11% and 12% Notes in May. Other income of $1.5 million compared
to $781 thousand of other expense in 1997 was primarily due to
increased interest income. The effective tax rate of 37.2%
decreased versus 38.0% in the comparable 1997 period.
LIQUIDITY AND CAPITAL RESOURCES
The June 27, 1998 working capital balance of $353.0 million was
comparable to the balance at year-end 1997. The current ratio
of 2.0 remained unchanged from the end of 1997. Days sales in
receivables averaged 54 days for the six month period in 1998,
unchanged from 1997. Inventory turnover averaged 3.2 compared
to 3.3 at year-end 1997.
Net cash flow provided by operations of $114.4 million increased
$18.8 million from the first half of 1997 primarily due to
increased operating earnings and lower working capital needs.
The cash flow was primarily used, together with additional
credit agreement borrowings, to fund capital expenditures,
reduce debt including the 11% and 12% Notes, and pay the annual
cash dividend. The Company's debt to total capital percentage
decreased to 95% from 102% at year-end 1997. The Company's
liquidity needs, including debt servicing, are expected to be
financed from operations.
On May 8, 1998 the Company redeemed the outstanding 11% Senior
Subordinated Notes and the 12% Subordinated Discount Notes. The
payment for the redemption including premium and accrued
interest amounted to $366.2 million and was funded by drawing on
the Company's $600 million revolving credit agreement.
Borrowings under the revolving credit agreement totaled $389.1
million at June 27, 1998.
Capital expenditures are expected to approximate $60 million in
1998 primarily for replacement needs and improvement of domestic
and foreign facilities.
In 1995 the Company initiated a program to update the current
information technology systems on a worldwide basis. The Company
evaluated its major computer systems and software applications
with the goal of avoiding interruption in the supply of goods,
services and business information at the turn of the century.
Year 2000 compliance remediation costs are not expected to have
a material effect on the Company's results of operation.
ACCOUNTING STANDARD CHANGE
In June 1997 the Financial Accounting Standards Board issued
Statement No. 131 "Disclosures about Segments of an Enterprise
and Related Information", which is effective for years beginning
after 1997. In June 1998, the Financial Accounting Standards
Board issued Statement No. 133 "Accounting for Derivative
Instruments and Hedging Activities", which is effective for
years beginning after 1999. The Company is currently evaluating
the statements and plans to adopt Statement No. 131 in the
fourth quarter of 1998 and Statement No. 133 in the first
quarter of 2000.
ENVIRONMENTAL MATTERS
The Company is involved in claims, litigation, administrative
proceedings and investigations of various types in a number of
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. The Company and some of its subsidiaries
have been identified by federal, state or local governmental
agencies, and by other potentially responsible parties (each 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. In addition, the Company is involved with
environmental remediation and compliance activities at some of
its current and former sites in the United States and abroad.
Each quarter, the Company 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 Company and the anticipated time frame over
which payments toward the remediation plan will occur. As of
June 27, 1998, the Company's reserves for environmental
remediation activities totaled $99.9 million. These estimates
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 Company intends to assert all meritorious legal defenses and
other equitable factors which are available to it with respect
to the above matters. The Company believes that the resolution
of these environmental matters will not have a material adverse
effect on the consolidated financial position of the Company.
While the Company believes it is unlikely, the resolution of
these environmental matters could have a material adverse effect
on the Company's consolidated results of operation in any given
year if a significant number of these matters are resolved
unfavorably.
FORWARD-LOOKING STATEMENTS
The information in this Form 10-Q contains forward-looking
statements and estimates which are based on currently available
information. The Company's actual results may differ
significantly from the results discussed. Investors are
cautioned that there can be no assurance that the actual results
will not differ materially from those suggested in such forward-
looking statements and estimates.
Part II -- OTHER INFORMATION
Item 1. Legal Proceedings.
(i) Reference is made to page 16 (Other Environmental
Matters) of the Registrant's Annual Report on Form 10-K for the
fiscal year ended December 27, 1997, for information pertaining
to a suit brought by Sundor Canada Inc. against Uniroyal Chemical
Co./Cie. and others. In June 1998, final settlement was reached
among the parties in accordance with the terms previously
disclosed and after judicial approval the suit was dismissed with
prejudice.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Number Description
4* $600,000,000 Third Amended and
Restated Credit Agreement dated as
of March 31, 1998, by and among
Crompton & Knowles Corporation and
certain of its subsidiaries, as
Borrowers, and various lenders, and
Citicorp USA, Inc., as Agent and The
Chase Manhattan Bank, Corestates Bank, N.A.
and First Union National Bank as Managing
Agents.
4.1* Amendment dated as of January 20, 1998,
amending the Rights Agreement dated as of
July 20, 1988, as amended March 28, 1991 and
October 1, 1992, between the Registrant and
Mellon Bank N.A. as Rights Agent (Exhibit 1
to Form 8-K dated July 29, 1988.)
11 Statement Re Computation of
Per Share Earnings
27* Financial Data Schedules
(b) No reports on Form 8-K were filed during the quarter
for which this report is filed.
* Copies of these Exhibits are annexed to this report on Form
10-Q provided to the Securities and Exchange Commission
and the New York Stock Exchange.
SIGNATURES
Pursuant to the requirements of the Securities and 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)
August 11, 1998 By:/s/ Charles J. Marsden
Charles J. Marsden
Senior Vice President &
Chief Financial Officer
August 11, 1998 By:/s/ John T. Ferguson II
John T. Ferguson II
Vice President, General
Counsel and Secretary