-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Kx6Mqv6o/BogI9V+ttwm1JOf+0wOOwBdRHdFjTT8bWlBKXwyt7J/g8QtsGdQZl2E TXXbvpqykKMxo8gC0ey/pQ== 0000025757-97-000017.txt : 19970513 0000025757-97-000017.hdr.sgml : 19970513 ACCESSION NUMBER: 0000025757-97-000017 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970329 FILED AS OF DATE: 19970512 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: 97600862 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 10Q 1ST QTR 1997 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 March 29, 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 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 April 16, 1997 Common Stock, $.10 par value 73,199,672 shares CROMPTON & KNOWLES CORPORATION FORM 10-Q FOR QUARTER ENDED MARCH 29, 1997 INDEX PART I. FINANCIAL INFORMATION: Item 1. Condensed Financial Statements and Accompanying Notes . Consolidated Statements of Earnings (unaudited) - Quarters ended March 29, 1997 and March 30, 1996 . Consolidated Balance Sheets - March 29, 1997 (unaudited) and December 28, 1996 . Consolidated Statements of Cash Flows (unaudited) - Quarters ended March 29, 1997 and March 30, 1996 . Notes to Consolidated Financial Statements - Quarter ended March 29, 1997 (unaudited) Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations PART II. OTHER INFORMATION: Item 4. Submission of Matter to a Vote of Security Holders Item 6. Exhibits and Reports on Form 8-K Signatures Exhibit 11 Statement Re Computation of Per Share Earnings *Exhibit 27 Financial Data Schedule * A copy of this Exhibit is 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 ended March 29, 1997 and March 30, 1996 (In thousands, except per share data) March 29, March 30, 1997 1996 Net sales $ 473,873 $ 460,468 Cost of products sold 304,372 294,539 Selling, general and administrative 66,672 68,613 Depreciation and amortization 19,853 20,591 Research and development 12,884 12,933 Operating profit 70,092 63,792 Interest 26,953 28,991 Other expense 198 320 Earnings before income taxes 42,941 34,481 Income taxes 16,330 13,327 Net earnings $ 26,611 $ 21,154 Net earnings per common share $ .35 $ .29 Dividends per common share $ - $ .135 Average shares outstanding 75,870 72,118 See accompanying notes to consolidated financial statements. CROMPTON & KNOWLES CORPORATION AND SUBSIDIARIES Consolidated Balance Sheets March 29, 1997 and December 28, 1996 (In thousands of dollars) (UNAUDITED) March 29, December 28 1997 1996 ASSETS CURRENT ASSETS Cash $ 18,236 $ 21,120 Accounts receivable 290,501 267,871 Inventories 373,822 362,349 Other current assets 89,181 90,897 Total current assets 771,740 742,237 NON-CURRENT ASSETS Property, plant and equipment 483,773 497,979 Cost in excess of acquired net assets 186,063 189,012 Other assets 219,763 227,962 $ 1,661,339 $ 1,657,190 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Current installments of long-term debt $ 87 $ 731 Notes payable 9,270 8,595 Accounts payable 150,565 151,270 Accrued expenses 152,913 143,133 Income taxes payable 41,384 33,214 Other current liabilities 22,366 20,536 Total current liabilities 376,585 357,479 NON-CURRENT LIABILITIES Long-term debt 1,025,650 1,054,982 Accrued postretirement liability 181,625 181,980 Other liabilities 151,431 159,167 STOCKHOLDERS' EQUITY (DEFICIT) Common stock 7,733 7,724 Additional paid-in capital 231,524 232,010 Accumulated deficit (230,566) (257,177) Accumulated translation adjustment (32,531) (25,592) Treasury stock at cost (45,916) (48,083) Deferred compensation (1,436) (1,587) Pension liability adjustment (2,760) (3,713) Total stockholders' deficit (73,952) (96,418) $ 1,661,339 $ 1,657,190 See accompanying notes to consolidated financial statements. UNAUDITED CROMPTON & KNOWLES CORPORATION AND SUBSIDIARIES Consolidated Statements of Cash Flows Quarters ended March 29, 1997 and March 30, 1996 (In thousands of dollars) March 29, March 30, Increase (decrease) to cash 1997 1996 CASH FLOWS FROM OPERATING ACTIVITIES Net earnings $ 26,611 $ 21,154 Adjustments to reconcile net earnings to net cash provided by operations: Depreciation and amortization 19,853 20,591 Noncash interest 3,424 3,874 Deferred taxes 4,220 731 Changes in assets and liabilities, net (21,348) (19,361) Net cash provided by operations 32,760 26,989 CASH FLOWS FROM INVESTING ACTIVITIES Acquisitions 0 (10,025) Capital expenditures (6,176) (9,680) Other investing activities 33 (2,487) Net cash used by investing activities (6,143) (22,192) CASH FLOWS FROM FINANCING ACTIVITIES Payments on long-term borrowings (33,164) (8,782) Proceeds on short-term borrowings 1,140 18,005 Dividends paid 0 (6,483) Other financing activities 1,489 83 Net cash provided (used) by financing activities (30,535) 2,823 CASH Effect of exchange rates on cash 1,034 (235) Change in cash (2,884) 7,385 Cash at beginning of period 21,120 16,961 Cash at end of period $ 18,236 $ 24,346 See accompanying notes to consolidated financial statements. CROMPTON & KNOWLES CORPORATION AND SUBSIDIARIES Notes to Unaudited Consolidated Financial Statements Quarter Ended March 29, 1997 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 $7.8 million in 1997 and $7.3 million at December 28, 1996. Accumulated depreciation amounted to $386.3 million in 1997 and $375.7 million at December 28, 1996. Accumulated amortization of cost in excess of acquired net assets amounted to $37.9 million in 1997 and $36.6 million at December 28, 1996. Accumulated amortization of patents, unpatented technology and other intangibles amounted to $111.8 million in 1997 and $108.2 million at December 28, 1996. Cash payments during the quarters ended March 29, 1997 and March 30, 1996 included interest of $16.3 million and $19.9 million and income taxes of $5.6 million and $4.2 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 1996 Annual Report on Form 10-K. CAPITAL STOCK As of March 29, 1997, there were 77,332,751 common shares issued at $.10 par value, of which 4,133,160 shares were held in the treasury. INVENTORIES Components of inventories are as follows: March 29, Dec. 28, (In thousands) 1997 1996 Finished goods $249,110 $242,587 Work in process 48,580 44,445 Raw materials and supplies 76,132 75,317 $373,822 $362,349 EARNINGS PER COMMON SHARE The computations of earnings per common share for the quarters ended March 29, 1997 and March 30, 1996 are based on the weighted average number of common shares outstanding and common stock equivalents. 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. BUSINESS SEGMENT DATA Quarter Ended March 29, March 30, (In thousands) 1997 1996 SALES Specialty Chemicals $ 398,706 $ 391,711 Specialty Equipment and Controls 75,167 68,757 Total net sales $ 473,873 $ 460,468 OPERATING PROFIT Specialty Chemicals $ 68,558 $ 62,570 Specialty Equipment and Controls 7,626 7,106 General corporate expense ( 6,092) ( 5,884) Total operating profit $ 70,092 $ 63,792 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FIRST QUARTER RESULTS Overview Consolidated net sales of $473.9 million for the first quarter of 1997 increased 3% from the comparable 1996 period. The increase was primarily attributable to higher unit volume of 5% offset equally by lower pricing and the impact of foreign currency translation. International sales, including U.S. exports, decreased as a percentage of total sales to 38% from 40% in the first quarter of 1996. Net earnings of $26.6 million increased 26% versus the first quarter of 1996. Net earnings per common share of $.35 were 21% higher than the first quarter of 1996. Gross margin as a percentage of net sales decreased slightly to 35.8% from 36.0% in the first quarter of 1996. Consolidated operating profit increased 10% to $70.1 million as the specialty chemicals segment rose 10% and the specialty process equipment and controls segment increased 7%. Specialty Chemicals The Company's specialty chemicals segment reported sales of $398.7 million representing a 2% increase from the first quarter of 1996. The increase resulted from improved unit volume of 4% offset equally by lower pricing and the impact of foreign currency translation. An analysis of sales by major product class within the specialty chemicals segment follows. Chemicals and polymers sales of $127.8 million rose 2% from the 1996 first quarter. Sales of rubber chemicals, EPDM and nitrile rubber increased as higher unit volume of 5% was partially offset by lower selling prices and the impact of foreign currency translation. Crop protection sales of $104.6 million were 7% higher versus the first quarter of 1996 primarily attributable to higher unit volume. Improved sales in Europe and increased seed treatment business contributed to the improvement. Specialty sales of $75.4 million increased 5% from the 1996 first quarter primarily due to increased unit volume for urethane prepolymers and additives for plastics and lubricants. Colors sales of $64.7 million decreased 8% from the comparable 1996 quarter due primarily to lower unit volume of approximately 3%, lower selling prices of 3% and foreign currency translation of 2%. Specialty ingredients sales of $26.2 million were slightly higher than the first quarter of 1996. Operating profit of $68.6 million for the first quarter of 1997 increased 10% versus the first quarter of 1996. The improvement in operating profit resulted primarily from an increase in unit volume and lower operating costs. Specialty Process Equipment and Controls The Company's specialty process equipment and controls segment reported sales of $75.2 million, representing a 9% increase from the first quarter of 1996. Approximately 8% was attributable to higher unit volume and 4% to the incremental impact from acquisitions, partially offset by the impact of foreign currency translation of 2% and lower pricing of 1%. Sales growth was achieved in most product lines, especially in wire and cable and profile applications. Operating profit for the first quarter of 1997 of $7.6 million increased 7%, primarily attributable to higher unit volume in the domestic business. The order backlog for extruders and related equipment at the end of the first quarter of 1997 amounted to $98 million compared to $92 million at December 28, 1996. Other Selling, general and administrative expenses of $66.7 million decreased 3% primarily due to planned cost reductions partially offset by inflation and increased spending to support a higher sales level. Depreciation and amortization of $19.9 million decreased 4% from the comparable 1996 period as a result of certain assets becoming fully depreciated and amortized. Research and development cost of $12.9 million approximated the first quarter of 1996. Interest expense of $27.0 million decreased 7% from the comparable 1996 period primarily due to lower levels of indebtedness. Other expense of $198 thousand decreased from $320 thousand in the first quarter of 1996. The effective tax rate of 38% decreased slightly versus 38.7% in the comparable 1996 period. LIQUIDITY AND CAPITAL RESOURCES The March 29, 1997 working capital balance of $395.2 million increased $10.4 million from year-end 1996. The current ratio decreased slightly to 2.0 from 2.1 at the end of 1996. Days sales in receivables averaged 54 days for the first quarter of 1997 versus 55 days for 1996. Inventory turnover averaged 3.2 for the first quarter of 1997 unchanged from 1996. Net cash provided by operations of $32.8 million increased $5.8 million from the first quarter of 1996 primarily as a result of increased net earnings and was used with cash reserves to fund capital expenditures and reduce indebtedness. The annual dividend payout has been reduced to $.05 per share payable in May 1997. The Company's debt to total capital percentage decreased to 108% from 110% at year end 1996. Capital expenditures are expected to approximate $60 million in 1997 primarily for replacement needs and improvement of domestic and foreign facilities. The Company's long-term liquidity needs including such items as capital expenditures and debt repayments are ultimately expected to be financed from future operations. 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 March 29, 1997, the Company's reserves for environmental remediation activities totaled $93.6 million. These estimates may subsequently change should additional sites be identified, circumstances change with respect to any site, 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 all 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. PART II. OTHER INFORMATION: Item 4. Submission of Matter to a Vote of Security Holders (a) The Annual Meeting of the Stockholders was held on April 29, 1997 (b) Proxies for the Annual Meeting were solicited pursuant to Regulation 14A under the Securities Exchange Act of 1934, there was no solicitation in opposition to the nominees for the Board of Directors as listed in the Proxy Statement, and all of such nominees were elected. (c) A brief description of each matter voted upon at the Annual Meeting, and the results of voting, are as follows: 1. Election of three (3) Directors to serve for a term expiring in 2000: FOR WITHHELD Robert A. Fox 62,625,906 shares 965,271 shares Roger L. Headrick 62,625,102 shares 966,075 shares Leo I. Higdon Jr. 62,590,202 shares 1,000,975 shares 2. Approval of the selection by the Board of Directors of an auditor for 1997. FOR AGAINST ABSTAINED 63,289,365 shares 101,242 shares 200,570 shares 3. A proposal to approve the material terms of the performance goals under which annual incentive compensation is determined under the 1997 Management Incentive Plan. FOR AGAINST ABSTAINED 60,281,749 shares 2,683,927 shares 625,501 shares Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Number Description (11) Statement Re Computation of Per Share Earnings (27)* Financial Data Schedule (b) No reports on Form 8-K were filed during the quarter For which this report is filed. * A copy of this Exhibit is 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) May 12, 1997 By:/s/ Charles J. Marsden Charles J. Marsden Senior Vice President & Chief Financial Officer May 12, 1997 By:/s/ John T. Ferguson II John T. Ferguson II Vice President, General Counsel and Secretary CROMPTON & KNOWLES CORPORATION AND SUBSIDIARIES EXHIBIT 11 - STATEMENT RE COMPUTATION OF PER SHARE EARNINGS (In thousands, except per share data) PRIMARY THREE MONTHS ENDED March 29, March 30, 1997 1996 Earnings Net earnings $ 26,611 $ 21,154 Shares Weighted average shares outstanding 73,078 71,537 Common stock equivalents 2,349 462 Average shares outstanding 75,427 71,999 Per share Net earnings $ 0.35 $ 0.29 FULLY DILUTED THREE MONTHS ENDED March 29, March 30, 1997 1996 Earnings Net earnings $ 26,611 $ 21,154 Shares Weighted average shares outstanding 73,078 71,537 Common stock equivalents 2,792 581 Average shares outstanding 75,870 72,118 Per share Net earnings $ 0.35 $ 0.29 EX-27 2
5 0000025757 CROMPTON & KNOWLES CORPORATION 1,000 3-MOS DEC-27-1997 MAR-29-1997 18,236 0 290,501 7,804 373,822 771,740 483,773 386,290 1,661,339 376,585 1,025,650 0 0 7,733 (81,685) 1,661,339 473,873 473,873 304,372 403,781 198 493 26,953 42,941 16,330 26,611 0 0 0 26,611 0.35 0.35
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