-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, BFOiWoaXJC/33th+0wTswnkHqfDIPr9LapMYOMNF5NBQgAlnfBihgoZRjE3qrWk+ HbF9DQyYvIlhkKrt+FsibA== 0000025757-95-000016.txt : 19950814 0000025757-95-000016.hdr.sgml : 19950814 ACCESSION NUMBER: 0000025757-95-000016 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 19950701 FILED AS OF DATE: 19950811 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CROMPTON & KNOWLES CORP CENTRAL INDEX KEY: 0000025757 STANDARD INDUSTRIAL CLASSIFICATION: INDUSTRIAL ORGANIC CHEMICALS [2860] IRS NUMBER: 041218720 STATE OF INCORPORATION: MA FISCAL YEAR END: 1225 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-04663 FILM NUMBER: 95561710 BUSINESS ADDRESS: STREET 1: ONE STATION PL STREET 2: METRO CTR CITY: STAMFORD STATE: CT ZIP: 06902 BUSINESS PHONE: 2033535400 MAIL ADDRESS: STREET 1: ONE STATION PLACE STREET 2: METRO CENTER CITY: STAMFORD STATE: CT ZIP: 06902 10-Q 1 COVER 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 July 1, 1995 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 19, 1995 Common Stock, $.10 par value 48,046,609 shares EX-1 2 INDEX CROMPTON & KNOWLES CORPORATION FORM 10-Q FOR QUARTER ENDED July 1, 1995 INDEX PART I. FINANCIAL INFORMATION: Item 1. Condensed Financial Statements and Accompanying Notes . Consolidated Statements of Earnings (unaudited) - Quarters and six months ended July 1, 1995 and June 25, 1994 . Consolidated Balance Sheets - July 1, 1995 (unaudited) and December 31, 1994 . Consolidated Statements of Cash Flows (unaudited) - Quarters and six months ended July 1, 1995 and June 25, 1994 . Notes to the Consolidated Financial Statements - Quarter ended July 1, 1995 (unaudited) Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations PART II. OTHER INFORMATION: Item 6. Exhibits and Reports on Form 8-K Signatures Exhibit 11 Statement Re Computation of Per Share Earnings Exhibit 27 Financial Data Schedule -1- EX-2 3 EARNINGS UNAUDITED CROMPTON & KNOWLES CORPORATION AND SUBSIDIARIES Consolidated Statements of Earnings Quarters and six months ended July 1, 1995 and June 25, 1994 (In thousands, except per share data) Quarters ended Six months ended July 1, June 25, July 1, June 25, 1995 1994 1995 1994 Net sales $ 175,617 $ 154,452 $ 343,810 $ 288,046 Cost of products sold 123,799 103,500 240,358 194,410 Selling, general and administrative 26,736 22,362 52,158 42,166 Depreciation and amortization 3,769 3,173 7,494 6,399 Interest 2,034 202 3,602 384 Other income (13) (91) (241) (635) Total costs and expenses 156,325 129,146 303,371 242,724 Earnings before income taxes 19,292 25,306 40,439 45,322 Income taxes 7,234 9,199 15,185 16,457 Net earnings $ 12,058 $ 16,107 $ 25,254 $ 28,865 Net earnings per common share $ .25 $ .31 $ .52 $ .56 Dividends per common share $ .135 $ .12 $ .255 $ .22 Average shares outstanding 48,577 51,791 48,569 51,935 See accompanying notes to the consolidated financial statements. - 2 - EX-3 4 BALANCE SHEET July 1, 1995 UNAUDITED CROMPTON & KNOWLES CORPORATION AND SUBSIDIARIES Consolidated Balance Sheets July 1, 1995 and December 31, 1994 (In thousands) July 1, December 31, 1995 1994 ASSETS CURRENT ASSETS Cash $ 3,547 $ 1,832 Accounts receivable 106,722 81,859 Inventories 168,863 157,356 Other current assets 26,245 19,610 Total current assets 305,377 260,657 NON-CURRENT ASSETS Property, plant and equipment 124,816 117,105 Cost in excess of acquired net assets 50,040 43,429 Other assets 11,330 11,137 $ 491,563 $ 432,328 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Notes payable $ 73,212 $ 39,670 Accounts payable 51,280 47,000 Accrued expenses 34,146 33,369 Income taxes payable 4,757 4,138 Other current liabilities 18,732 14,865 Total current liabilities 182,127 139,042 NON-CURRENT LIABILITIES Long-term debt 54,000 54,000 Accrued postretirement liability 8,493 8,698 Deferred income taxes 7,061 6,681 STOCKHOLDERS' EQUITY Common stock 5,336 5,336 Additional paid-in capital 60,022 62,241 Retained earnings 231,730 218,837 Accumulated translation adjustment 7,777 1,858 Treasury stock at cost (62,408) (54,213) Deferred compensation (2,575) (10,152) Total stockholders' equity 239,882 223,907 $ 491,563 $ 432,328 See accompanying notes to the consolidated financial statements. - 3 - EX-4 5 CASH UNAUDITED CROMPTON & KNOWLES CORPORATION AND SUBSIDIARIES Consolidated Statements of Cash Flows Six months ended July 1, 1995 and June 25, 1994 (In thousands) July 1, June 25, Increase (decrease) to cash 1995 1994 CASH FLOWS FROM OPERATING ACTIVITIES Net earnings $ 25,254 $ 28,865 Adjustments to reconcile net earnings to net cash provided by operations: Depreciation and amortization 7,494 6,399 Deferred compensation 383 655 Changes in assets and liabilities, net (29,845) (26,306) Net cash provided by operations 3,286 9,613 CASH FLOWS FROM INVESTING ACTIVITIES Acquisition (8,633) (10,718) Capital expenditures (10,037) (7,388) Other investing activities (584) 106 Net cash used by investing activities (19,254) (18,000) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from long-term borrowings - 10,000 Payments of long-term debt - (10,000) Change in notes payable 33,329 18,903 Net treasury stock activity (3,395) (6,206) Dividends paid (12,361) (11,287) Net cash provided by financing activities 17,573 1,410 CASH Effect of exchange rates on cash 110 52 Change in cash 1,715 (6,925) Cash at beginning of period 1,832 9,284 Cash at end of period $ 3,547 $ 2,359 See accompanying notes to the consolidated financial statements. -4- EX-5 6 NOTES CROMPTON & KNOWLES CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements Quarter ended July 1, 1995 (Unaudited) (In thousands) PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS The information included in the foregoing consolidated financial statements is unaudited but reflects all adjustments (consisting only of normal recurring adjustments) which are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. Included in accounts receivable are allowances for doubtful accounts of $2,941 in 1995 and $3,829 at December 31, 1994. Accumulated depreciation amounted to $93,658 in 1995 and $85,691 at December 31, 1994. Accumulated amortization of cost in excess of acquired net assets amounted to $7,444 in 1995 and $6,622 at December 31, 1994. Other current liabilities consist primarily of customer deposits. It is suggested that the interim consolidated financial statements be read in conjunction with the consolidated financial statements and notes thereto included in the Company's 1994 Annual Report on Form 10-K. CAPITAL STOCK There are 53,361,072 common shares issued at $.10 par value, of which 5,314,463 shares and 4,703,891 shares were held in the treasury at July 1, 1995 and December 31, 1994, respectively. INVENTORIES Components of inventories are as follows: July 1, Dec. 31, 1995 1994 Finished goods $98,450 $ 90,386 Work in process 33,228 32,640 Raw materials and supplies 37,185 34,330 $168,863 $157,356 EARNINGS PER COMMON SHARE The computation of earnings per common share is based on the weighted average number of common and common equivalent shares outstanding. A dual presentation of earnings per common share has not been made since there is no significant difference in earnings per share calculated on a primary or fully diluted basis. ACQUISITIONS In January 1995, the Company acquired the business and certain assets of McNeil Akron Repiquet S.a.r.l. in France at a cost of $4,638. In March 1995, the Company acquired Killion Extruders, Inc. at an estimated cost of $3,995. The acquisitions have been accounted for using the purchase method and, accordingly, the acquired assets and liabilities have been recorded at their fair values at the dates of acquisition. The excess cost of purchase price over fair value of net assets acquired in the amount of $6,896 is being amortized over forty years. The operating results of each acquisition are included in the Consolidated Statements of Earnings since the dates of acquisition. DEBT In June 1995, the Company amended its credit agreement with a group of five banks whereby the revolving credit loans available to the Company were increased from $70,000 to $125,000 through September 28, 1998. Borrowings under the revolving credit agreement amounted to $50,000 at July 1, 1995. STOCK INCENTIVE PLANS In December 1994, the Company transferred 448,000 shares to an independent trustee to administer long-term performance awards for the 1995 to 1997 incentive period under the 1988 Long Term Incentive Plan. In June 1995, such shares were returned to the Company and, in the future, will be issued to the trustee at the end of each incentive period, as earned. Compensation expense is being accrued annually based upon the expected level of incentive achievement. BUSINESS SEGMENT DATA Quarter ended July 1, June 25, 1995 1994 SALES Specialty chemicals $101,229 $105,380 Specialty process equipment and controls 74,388 49,072 $175,617 $154,452 OPERATING PROFIT Specialty chemicals $ 13,133 $ 19,554 Specialty process equipment and controls 11,043 8,460 General corporate expense ( 2,863) ( 2,597) 21,313 25,417 Interest expense ( 2,034) ( 202) Other income 13 91 Earnings before income taxes $ 19,292 $ 25,306 Six months ended July 1, June 25, 1995 1994 SALES Specialty chemicals $203,771 $200,966 Specialty process equipment and controls 140,039 87,080 $343,810 $288,046 OPERATING PROFIT Specialty chemicals $ 28,724 $ 35,632 Specialty process equipment and controls 21,100 15,318 General corporate expense ( 6,024) ( 5,879) 43,800 45,071 Interest expense ( 3,602) ( 384) Other income 241 635 Earnings before income taxes $ 40,439 $ 45,322 EX-6 7 MD&A MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS SECOND QUARTER RESULTS Overview Consolidated net sales of $175.6 million for the second quarter of 1995 increased 14% over the comparable 1994 period. Net earnings of $12.1 million were 25% lower than the $16.1 million reported in the second quarter of 1994. Net earnings per common share of $.25 decreased 19% from the $.31 reported last year. Gross margin as a percentage of net sales decreased to 29.5% from 33% in last year's second quarter, primarily as a result of lower margins in the domestic and international dyes businesses. Consolidated operating profit of $21.3 million declined 16% from the second quarter of 1994 as specialty chemicals decreased 33% and specialty process equipment and controls segment increased 31%. Specialty Chemicals The Company's specialty chemicals segment reported sales of $101.2 million representing a decrease of 4% from the comparable period in 1994. The decrease was attributable to the impact of lower selling prices (-4%) and lower unit volume (-2%), offset in part by favorable currency translation (2%). Domestic dyes sales of $49.6 million declined 14% from the 1994 second quarter primarily due to lower unit volume (-10%) and lower selling prices (-4%). International dyes sales of $26.9 million increased 12% versus the second quarter of 1994 primarily as a result of foreign currency translation (9%) and higher unit volume (10%), offset in part by lower selling prices (-7%). Specialty ingredients sales of $24.7 million rose 3% primarily as a result of increased unit volume. The percentage of specialty chemicals sales outside the United States increased to 28% from 24% in the second quarter of 1994. Operating profit of $13.1 million for the second quarter of 1995 decreased 33% from the comparable quarter in 1994 primarily attributable to the impact of lower unit volume and pricing in domestic dyes and lower pricing and exchange rate fluctuations among European currencies in international dyes. The percentage of specialty chemicals operating profit outside the United States decreased to 15% from 19% in the second quarter of 1994. Specialty Process Equipment and Controls The Company's specialty process equipment and controls segment reported sales of $74.4 million representing an increase of 52% from the second quarter of 1994. Approximately 40% was attributable to the incremental impact of acquisitions completed since May of 1994 with the balance of 12% primarily from increased unit volume. International sales of $18.3 million increased 21% from 1994 primarily as a result of acquisitions and accounted for 25% of total segment sales versus 31% for the comparable period in 1994. Operating profit for the second quarter of 1995 increased 31% to $11.1 million. Approximately 14% was attributable to the incremental impact of acquisitions completed since May of 1994 with the balance primarily from increased unit volume. The order backlog for extruders and related equipment at the end of the second quarter amounted to $83 million compared to $66 million at December 31, 1994. Other Selling, general and administrative expenses of $26.7 million increased 20% versus the comparable period in 1994 primarily due to the impact of acquisitions and inflation. Depreciation and amortization of $3.8 million increased 19% versus 1994 primarily as a result of a higher fixed asset base including acquisitions. Interest expense increased $1.8 million to $2.0 million primarily as a result of increased borrowings. Other income of $13 thousand decreased by $78 thousand versus 1994. The Company's effective tax rate of 37.5% increased versus the 36.4% in the 1994 period. YEAR-TO-DATE RESULTS Overview Consolidated net sales of $343.8 million for the first six months of 1995 increased 19% from the comparable period in 1994. Net earnings of $25.3 million decreased 13% versus the $28.9 million earned in the first half of 1994. Net earnings per common share of $.52 decreased 7% from the $.56 reported last year. Gross margin as a percentage of net sales decreased to 30.1% from 32.5% in the comparable 1994 period primarily as a result of lower margins in the domestic and international dyes businesses. Consolidated operating profit of $43.8 million declined 3% from $45.1 million in the first half of 1994 as specialty chemicals decreased 19% and specialty process equipment and controls increased 38%. Specialty Chemicals The Company's specialty chemicals segment reported sales of $203.8 million representing a 1% increase from $201 million in the first six months of 1994. The increase was primarily attributable to foreign currency translation as unit volume increases were offset by lower selling prices. Domestic dyes sales of $101.9 million were 5% lower than the first six months of 1994 primarily due to lower selling prices. International dyes sales of $51.5 million increased by 11% versus 1994 primarily as a result of foreign currency translation (9%) and unit volume growth (8%), offset by lower selling prices (-6%). Specialty ingredients sales rose 7% to $50.4 million reflecting primarily increased unit volume. The percentage of sales outside the United States increased to 27% from 24% for the comparable period in 1994. Operating profit of $28.7 million for the first six months of 1995 decreased 19% from 1994. The decrease was attributable primarily to the impact of lower pricing in the domestic and international dyes businesses. The percentage of operating profit outside the United States decreased to 16% from 19% in the first half of 1994. Specialty Process Equipment and Controls The Company's specialty process equipment and controls segment reported sales of $140 million representing a 61% increase over the first six months of 1994. Approximately 47% of the sales increase was attributable to the incremental impact of acquisitions completed since May of 1994 and the balance of 14% primarily from increased unit volume. International sales of $30.4 million increased 41% from 1994 primarily as a result of acquisitions and accounted for 22% of total segment sales versus 25% in the first six months of 1994. Operating profit of $21.1 million increased 38% versus the comparable 1994 period. Approximately 21% was attributable to acquisitions with the balance primarily from higher unit volume. Other Selling, general and administrative expenses of $52.2 million increased 24% versus the first six months of 1994 primarily due to the impact of acquisitions and inflation. Depreciation and amortization of $7.5 million increased 17% versus the 1994 period primarily as a result of a higher fixed capital base including acquisitions. Interest expense increased $3.2 million primarily as a result of increased borrowings. Other income of $241 thousand decreased $394 thousand versus 1994 primarily due to lower royalty income and higher miscellaneous expense. The effective tax rate of 37.6% increased versus the 36.3% in the comparable 1994 period. LIQUIDITY AND CAPITAL RESOURCES The July 1, 1995 working capital balance of $123.2 million increased $1.6 million from $121.6 million at year-end 1994. The current ratio declined to 1.7 from 1.9 at the end of 1994 primarily as a result of the increase in notes payable. Average days sales in receivables decreased to 51 days in 1995 from 54 days for all of 1994. Inventory turnover averaged 2.8 for the first half of 1995 compared to 3.0 for all of 1994. Cash flows from operating activities of $3.3 million decreased $6.3 million from the first half of 1994 primarily attributable to lower earnings and increased working capital requirements. Cash provided by operating activities and increased borrowings were used to finance acquisitions, fund capital expenditures, pay cash dividends and repurchase 222,800 shares of the Company's common stock. The Company's debt to total capital increased to 35% from 29% at year-end 1994. Capital expenditures are expected to approximate $20 million in 1995 primarily for expansion and improvement of operating facilities in the United States and Europe. The Company's long-term liquidity needs including such items as capital expenditures and dividends are expected to be financed from operations. INTERNATIONAL OPERATIONS The lower U.S. dollar exchange rate versus the Belgian Franc and French Franc accounted primarily for the favorable adjustment of $5.9 million in the accumulated translation adjustment account since year-end 1994. Changes in the balance of this account are primarily a function of fluctuations in exchange rates and do not necessarily reflect either enhancement or impairment of the net asset values or the earnings potential of the Company's foreign operations. The Company operates manufacturing facilities in Europe which serve primarily the European market. Exchange rate disruptions between the United States and European currencies, and among European currencies, are not expected to have a material effect on year-to-year comparisons of the Company's earnings. RESEARCH AND DEVELOPMENT The Company employs about 275 engineers, draftsmen, chemists, and technicians responsible for developing new and improved chemical products and process equipment systems for the industries served by the Company. Often, new products are developed in response to specific customer needs. The Company's process of developing and commercializing new products and product improvements is ongoing and involves many products, no one of which is large enough to significantly impact the Company's results of operations from year-to-year. Research and development expenditures totalled $7.2 million for the first half of 1995 compared to $5.6 million in the comparable 1994 period. ENVIRONMENTAL MATTERS The Company's manufacturing facilities are subject to various federal, state and local requirements with respect to the discharge of materials into the environment or otherwise relating to the protection of the environment. The Company has been designated, along with others, as a potentially responsible party under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, or comparable state statutes, at two waste disposal sites; and two inactive subsidiaries have been designated, along with others, as potentially responsible parties at a total of four other sites. While the cost of compliance with existing environmental requirements is expected to increase, based on the facts currently known to the Company, management expects that those costs, including the cost to the Company of remedial actions, will not be material to the results of the Company's operations in any given year. EX-7 8 SIGNATURES SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed, on its behalf by the undersigned thereunto duly authorized. CROMPTON & KNOWLES CORPORATION (Registrant) August 11, 1995 By: /s/ Charles J. Marsden Charles J. Marsden Vice President-Finance and Chief Financial Officer August 11, 1995 By: /s/ John T. Ferguson, II John T. Ferguson, II General Counsel and Secretary -13- EX-8 9 EXHIBIT 11 Exhibit 11 CROMPTON & KNOWLES CORPORATION AND SUBSIDIARIES EXHIBIT 11 - STATEMENT RE COMPUTATION OF PER SHARE EARNINGS (In thousands, except per share data) PRIMARY Quarter Ended Six Months Ended July 1, June 25, July 1, June 25, 1995 1994 1995 1994 Earnings Net earnings $ 12,058 $ 16,107 $ 25,254 $ 28,865 Shares Weighted average shares outstanding 48,034 51,206 48,031 51,255 Common stock equivalents 530 576 504 655 Average shares outstanding 48,564 51,782 48,535 51,910 Per share Net earnings $ 0.25 $ 0.31 $ 0.52 $ 0.56 FULLY DILUTED Quarter Ended Six Months Ended July 1, June 25, July 1, June 25, 1995 1994 1995 1994 Earnings Net earnings $ 12,058 $ 16,107 $ 25,254 $ 28,865 Shares Weighted average shares outstanding 48,034 51,206 48,031 51,255 Common stock equivalents 543 585 538 680 Average shares outstanding 48,577 51,791 48,569 51,935 Per share Net earnings $ 0.25 $ 0.31 $ 0.52 $ 0.56 EX-27 10 FDS
5 3-MOS DEC-30-1995 JUL-01-1995 3547 0 106722 2941 168863 305377 124816 93658 491563 182127 0 5336 0 0 234546 491563 343810 343810 240358 300010 (241) (92) 3602 40439 15185 25254 0 0 0 25254 0.52 0.52
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