-----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, P64kp70H5ejwV2Z8OOiEHMSOqFhA1aCePGhmCQrIXGCXrl+hy4M0jRxlaq+TVN7x kxYhwSJbin/lAqXfTdJCuQ== 0000025757-99-000037.txt : 19990701 0000025757-99-000037.hdr.sgml : 19990701 ACCESSION NUMBER: 0000025757-99-000037 CONFORMED SUBMISSION TYPE: 11-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990630 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: 11-K SEC ACT: SEC FILE NUMBER: 001-04663 FILM NUMBER: 99656579 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 11-K 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 __________________________________ FORM 11-K (Mark One) [X] Annual Report pursuant to Section 15 (d) of the Securities Exchange Act of 1934 For the fiscal year ended December 31, 1998 OR [ ] Transition report pursuant to Section 15 (d) of the Securities Exchange Act of 1934 For the transition period from ________ to _________ Commission file number 1-4663 A. Full title of the Plan and the address of the Plan, if different from that of the issuer named below: CROMPTON & KNOWLES CORPORATION EMPLOYEE STOCK OWNERSHIP PLAN B. Name of issuer of the securities held pursuant to the Plan and the address of its principal executive office: Crompton & Knowles Corporation One Station Place - Metro Center Stamford, Connecticut 06902 CROMPTON & KNOWLES CORPORATION EMPLOYEE STOCK OWNERSHIP PLAN Index to Financial Statements and Exhibit Independent Auditors' Report Statement of Net Assets Available for Plan Benefits as of December 31, 1998 and 1997 Statements of Changes in Net Assets Available for Plan Benefits as of December 31, 1998 and 1997 Notes to Financial Statements Item 27(a) Schedule of Assets Held for Investment Purposes as of December 31, 1998 Item 27(d) Schedule of 5% Reportable Transactions for the Year Ended December 31, 1998 Signature Exhibit 23 - Consent of KPMG LLP, Independent Auditors CROMPTON & KNOWLES CORPORATION EMPLOYEE STOCK OWNERSHIP PLAN Financial Statements and Schedules December 31, 1998 and 1997 (With Independent Auditors' Report Thereon) CROMPTON & KNOWLES CORPORATION EMPLOYEE STOCK OWNERSHIP PLAN Index Independent Auditors' Report Statements of Net Assets Available for Plan Benefits as of December 31, 1998 and 1997 Statements of Changes in Net Assets Available for Plan Benefits for the Years Ended December 31, 1998 and 1997 Notes to Financial Statements Schedule Line 27(a) Schedule of Assets Held for Investment Purposes as of December 31, 1998...................................... 1 Line 27(d) Schedule of 5% Reportable Transactions for the Year Ended December 31, 1998................................. 2 Independent Auditors' Report The Board of Directors Crompton & Knowles Corporation: We have audited the accompanying statements of net assets available for plan benefits of Crompton & Knowles Corporation Employee Stock Ownership Plan (the "Plan") as of December 31, 1998 and 1997, and the related statements of changes in net assets available for plan benefits for the years then ended. These financial statements are the responsibility of the Plan's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for plan benefits as of December 31, 1998 and 1997, and the changes in net assets available for plan benefits for the years then ended, in conformity with generally accepted accounting principles. Our audits were performed for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedules of Assets Held for Investment Purposes and Reportable (5%) Transactions are presented for the purpose of additional analysis and are not a required part of the basic financial statements but are supplementary information required by the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. These supplemental schedules are the responsibility of the Plan's management. The fund information in the statements of net assets available for plan benefits and the statements of changes in net assets available for plan benefits is presented for purposes of additional analysis rather than to present the net assets available for plan benefits and changes in net assets available for plan benefits of each fund. The supplemental schedules and fund information have been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, are fairly stated in all material respects in relation to the basic financial statements taken as a whole. /s/KPMG LLP June 4, 1999 CROMPTON & KNOWLES CORPORATION EMPLOYEE STOCK OWNERSHIP PLAN Statements of Net Assets Available for Plan Benefits December 31, 1998 C&K Fixed Stable Galaxy Stock Income Asset Asset Alloc. Fund Fund Fund Fund Investments: Common stock of Crompton & Knowles Corporation - 2,073,848 shares at market value (cost $21,273,887)$ 43,291,577 $ - $ - $ - Hartford Life Insurance Co. group annuity contract - 9,176,919 - - Fleet Stable Asset Fund - - 5,598,455 - Galaxy Asset Allocation Fund - - - 2,172,425 Galaxy Growth & Income Fund - - - - Fidelity Advisor Government Investment Fund - - - - George Putnam Fund of Boston - - - - Putnam Voyager Fund - - - - Putnam Inter- national Fund - - - - Ivesco Industrial Income Fund - - - - Galaxy Large Company Index Fund - - - - Galaxy Small Cap Value Fund - - - - Cash and short-term investments at cost, which approximates market 5,669 - - - Contributions receivable from participants 130,555 - 27,679 14,839 Contribution receivable from Crompton & Knowles Corporation 215,684 - - - Accrued income 165 84,579 52,479 - Plan assets available for plan benefits $ 43,643,650 $ 9,261,498 $ 5,678,613 $ 2,187,264 Galaxy Fidelity Putnam Putnam Growth & Advisors of Boston Voyager Income Fund Fund Fund Fund Investments: Common stock of Crompton & Knowles Corporation - 2,073,848 shares at market value (cost $21,273,887)$ - $ - $ - $ - Hartford Life Insurance Co. group annuity contract - - - - Fleet Stable Asset Fund - - - - Galaxy Asset Allocation Fund - - - - Galaxy Growth & Income Fund 8,004,789 - - - Fidelity Advisor Government Investment Fund - 902,208 - - George Putnam Fund of Boston - - 379,024 - Putnam Voyager Fund - - - 830,665 Putnam Inter- national Fund - - - - Ivesco Industrial Income Fund - - - - Galaxy Large Company Index Fund - - - - Galaxy Small Cap Value Fund - - - - Cash and short-term investments at cost, which approximates market - - - - Contributions receivable from participants 34,010 6,912 12,241 27,264 Contribution receivable from Crompton & Knowles Corporation - - - - Accrued income - 6,510 - - Plan assets available for plan benefits $ 8,038,799 $ 915,630 $ 391,265 $ 857,929 Putnam Invesco Galaxy Galaxy International Industrial Large Co. Small Cap Fund Income Fund Index Fund Value Fund Investments: Common stock of Crompton & Knowles Corporation - 2,073,848 shares at market value (cost $21,273,887)$ - $ - $ - $ - Hartford Life Insurance Co. group annuity contract - - - - Fleet Stable Asset Fund - - - - Galaxy Asset Allocation Fund - - - - Galaxy Growth & Income Fund - - - - Fidelity Advisor Government Investment Fund - - - - George Putnam Fund of Boston - - - - Putnam Voyager Fund - - - - Putnam Inter- national Fund 525,025 - - - Ivesco Industrial Income Fund - 442,359 - - Galaxy Large Company Index Fund - - 1,421,496 - Galaxy Small Cap Value Fund - - - 565,416 Cash and short-term investments at cost, which approximates market - - - - Contributions receivable from participants 15,583 13,016 37,402 33,428 Contribution receivable from Crompton & Knowles Corporation - - - - Accrued income - - - - Plan assets available for plan benefits $ 540,608 $ 455,375 $ 1,458,898 $ 598,844 Total Investments: Common stock of Crompton & Knowles Corporation - 2,073,848 shares at market value (cost $21,273,887)$ 43,291,577 Hartford Life Insurance Co. group annuity contract 9,176,919 Fleet Stable Asset Fund 5,598,455 Galaxy Asset Allocation Fund 2,172,425 Galaxy Growth & Income Fund 8,004,789 Fidelity Advisor Government Investment Fund 902,208 George Putnam Fund of Boston 379,024 Putnam Voyager Fund 830,665 Putnam Inter- national Fund 525,025 Ivesco Industrial Income Fund 442,359 Galaxy Large Company Index Fund 1,421,496 Galaxy Small Cap Value Fund 565,416 Cash and short-term investments at cost, which approximates market 5,669 Contributions receivable from participants 352,929 Contribution receivable from Crompton & Knowles Corporation 215,684 Accrued income 143,733 Plan assets available for plan benefits $ 74,028,373 See accompanying notes to financial statements CROMPTON & KNOWLES CORPORATION EMPLOYEE STOCK OWNERSHIP PLAN Statements of Net Assets Available for Plan Benefits December 31, 1997 C&K Fixed Stable Galaxy Stock Income Asset Asset Alloc. Fund Fund Fund Fund Investments: Common stock of Crompton & Knowles Corporation - 1,979,063 shares at market value (cost $17,239,682)$ 52,445,170 $ - $ - $ - Hartford Life Insurance Co. group annuity contract - 11,165,578 - - Fleet Stable Asset Fund - - 5,745,651 - Galaxy Asset Allocation Fund - - - 2,013,379 Galaxy Growth & Income Fund - - - - Fidelity Advisor Government Investment Fund - - - - Cash and short-term investments at cost, which approximates market 284,031 - 23,733 11,472 Contributions receivable from participants 142,413 - 30,856 15,444 Contribution receivable from Crompton & Knowles Corporation 233,579 - - - Accrued income - 53,967 30,117 - Plan assets available for plan benefits $ 53,105,193 $ 11,219,545 $ 5,830,357 $ 2,040,295 Galaxy Fidelity Putnam Putnam Growth & Advisors of Boston Voyager Income Fund Fund Fund Fund Investments: Common stock of Crompton & Knowles Corporation - 1,979,063 shares at market value (cost $17,239,682)$ - $ - $ - $ - Hartford Life Insurance Co. group annuity contract - - - - Fleet Stable Asset Fund - - - - Galaxy Asset Allocation Fund - - - - Galaxy Growth & Income Fund 9,863,013 - - - Fidelity Advisor Government Investment Fund - 392,421 - - Cash and short-term investments at cost, which approximates market 31,883 4,707 9,846 21,219 Contributions receivable from participants 42,262 5,725 13,005 28,881 Contribution receivable from Crompton & Knowles Corporation - - - - Accrued income - - - - Plan assets available for plan benefits $ 9,937,158 $ 402,853 $ 22,851 $ 50,100 Putnam Invesco Galaxy Galaxy International Industrial Large Co. Small Cap Fund Income Fund Index Fund Value Fund Investments: Common stock of Crompton & Knowles Corporation - 1,979,063 shares at market value (cost $17,239,682)$ - $ - $ - $ - Hartford Life Insurance Co. group annuity contract - - - - Fleet Stable Asset Fund - - - - Galaxy Asset Allocation Fund - - - - Galaxy Growth & Income Fund - - - - Fidelity Advisor Government Investment Fund - - - - Cash and short-term investments at cost, which approximates market 13,704 11,558 27,677 31,354 Contributions receivable from participants 18,340 15,077 36,866 42,166 Contribution receivable from Crompton & Knowles Corporation - - - - Accrued income - - - - Plan assets available for plan benefits $ 32,044 $ 26,635 $ 64,543 $ 73,520 Total Investments: Common stock of Crompton & Knowles Corporation - 1,979,063 shares at market value (cost $17,239,682)$ 52,445,170 Hartford Life Insurance Co. group annuity contract 11,165,578 Fleet Stable Asset Fund 5,745,651 Galaxy Asset Allocation Fund 2,013,379 Galaxy Growth & Income Fund 9,863,013 Fidelity Advisor Government Investment Fund 392,421 Cash and short-term investments at cost, which approximates market 471,184 Contributions receivable from participants 391,035 Contribution receivable from Crompton & Knowles Corporation 233,579 Accrued income 84,084 Plan assets available for plan benefits $ 82,805,094 See accompanying notes to financial statements CROMPTON & KNOWLES CORPORATION EMPLOYEE STOCK OWNERSHIP PLAN Statements of Changes in Net Assets Available for Plan Benefits For the Years Ended December 31, 1998 C&K Fixed Stable Galaxy Stock Income Asset Asset Alloc Fund Fund Fund Fund Investment income: Cash dividends on investment in common stock of Crompton & Knowles Corporation and interest on short-term investments $ 130,589 $ - $ - $ - Realized gain (loss) on sale of investments and withdrawals 2,795,621 - - 17,807 Interest and dividends earned - - 415,040 104,152 Interest earned - Hartford Life Insurance Company group annuity contract - 678,216 - - Net investment income 2,926,210 678,216 415,040 121,959 Increase (decrease) in unrealized appreciation of investments (13,187,797) - - 222,078 Contributions: Employee Rollovers - - - - Employee 1,335,752 - 312,618 145,163 Employer - Net of forfeitures 2,106,708 - - - Withdrawals and Distributions (3,025,304) - (3,299,105) (138,629) Employee interfund transfers 382,888 (2,636,263) 2,419,703 (203,602) Net increase/(decrease)(9,461,543) (1,958,047) (151,744) 146,969 Net assets available for plan benefits at the beginning of the year 53,105,193 11,219,545 5,830,357 2,040,295 Net assets available for plan benefits at the end of the year $43,643,650 $ 9,261,498 $ 5,678,613 $ 2,187,264 Galaxy Fidelity Putnam Putnam Growth & Advisors of Boston Voyager Income Fund Fund Fund Fund Investment income: Cash dividends on investment in common stock of Crompton & Knowles Corporation and interest on short-term investments $ - $ - $ - $ - Realized gain (loss) on sale of investments and withdrawals (122,381) 9,947 (10,273) (8,581) Interest and dividends earned 522,516 31,492 27,846 57,284 Interest earned - Hartford Life Insurance Company group annuity contract - - - - Net investment income 400,135 41,439 17,573 48,703 Increase (decrease) in unrealized appreciation of investments 1,029,536 (2,414) (13,370) 22,111 Contributions: Employee Rollovers - - - 7,120 Employee 405,738 62,208 136,593 267,141 Employer - Net of forfeitures - - - - Withdrawals and Distributions (570,154) (46,852) (68,355) (38,584) Employee interfund transfers (3,163,614) 458,396 295,973 501,338 Net increase/(decrease)(1,898,359) 512,777 368,414 807,829 Net assets available for plan benefits at the beginning of the year 9,937,158 402,853 22,851 50,100 Net assets available for plan benefits at the end of the year $ 8,038,799 $ 915,630 $ 391,265 $ 857,929 Putnam Invesco Galaxy Galaxy International Industrial Large Co. Small Cap Fund Income Fund Index Fund Value Fund Investment income: Cash dividends on investment in common stock of Crompton & Knowles Corporation and interest on short-term investments $ - $ - $ - $ - Realized gain (loss) on sale of investments and withdrawals (3,885) (2,541) 2,829 (17,198) Interest and dividends earned 12,445 28,588 22,498 50,916 Interest earned - Hartford Life Insurance Company group annuity contract - - - - Net investment income 8,560 26,047 25,327 33,718 Increase (decrease) in unrealized appreciation of investments (7,485) (8,895) 97,844 (87,399) Contributions: Employee Rollovers - - 14,239 7,120 Employee 169,575 145,921 403,459 387,147 Employer - Net of forfeitures - - - - Withdrawals and Distributions (83,617) (12,378) (147,656) (59,725) Employee interfund transfers 421,531 278,045 1,001,142 244,463 Net increase/(decrease) 508,564 428,740 1,394,355 525,324 Net assets available for plan benefits at the beginning of the year 32,044 26,635 64,543 73,520 Net assets available for plan benefits at the end of the year $ 540,608 $ 455,375 $ 1,458,898 $ 598,844 Total Investment income: Cash dividends on investment in common stock of Crompton & Knowles Corporation and interest on short-term investments $ 130,589 Realized gain (loss) on sale of investments and withdrawals 2,661,345 Interest and dividends earned 1,272,777 Interest earned - Hartford Life Insurance Company group annuity contract 678,216 Net investment income 4,742,927 Increase (decrease) in unrealized appreciation of investments (11,935,791) Contributions: Employee Rollovers 28,479 Employee 3,771,315 Employer - Net of forfeitures 2,106,708 Withdrawals and Distributions (7,490,359) Employee interfund transfers - Net increase/(decrease)(8,776,721) Net assets available for plan benefits at the beginning of the year 82,805,094 Net assets available for plan benefits at the end of the year $74,028,373 See accompanying notes to financial statements CROMPTON & KNOWLES CORPORATION EMPLOYEE STOCK OWNERSHIP PLAN Statements of Changes in Net Assets Available for Plan Benefits For the Years Ended December 31, 1997 C&K Fixed Stock Income Equity Advisers Fund Fund Fund Fund Investment income: Cash dividends on investment in common stock of Crompton & Knowles Corporation and interest on short-term investments $ 106,846 $ 16,710 $ 9,715 $ 1,265 Realized gain on sale of investments and withdrawals 2,169,766 4,885 - - Interest and dividends earned - 83,649 - - Interest earned - Hartford Life Insurance Company group annuity contract - 668,839 - - Net investment income 2,276,612 774,083 9,715 1,265 Increase (decrease) in unrealized appreciation of investments 12,408,062 (8,246) 1,954,918 275,655 Contributions: Employee Rollovers - - - - Employee 1,437,834 536,628 503,814 190,343 Employer - Net of forfeitures 2,114,899 - - - Withdrawals and Distributions (3,294,729) (1,748,233) (911,604) (140,701) Employee interfund transfers (1,287,438) (4,866,361) (9,200,815) (1,648,471) Net increase/(decrease)13,655,240 (5,312,129) (7,643,972) (1,321,909) Net assets available for plan benefits at the beginning of the year 39,449,953 16,531,674 7,643,972 1,321,909 Net assets available for plan benefits at the end of the year $53,105,193 $11,219,545 $ - $ - Stable Galaxy Galaxy Mortgage Asset Asset Alloc Growth & Fund Fund Fund Income Fun Investment income: Cash dividends on investment in common stock of Crompton & Knowles Corporation and interest on short-term investments $ 250 $ 676 $ - $ - Realized gain on sale of investments and withdrawals - - - - Interest and dividends earned - 55,344 159,953 1,561,371 Interest earned - Hartford Life Insurance Company group annuity contract - - - - Net investment income 250 56,020 159,953 1,561,371 Increase (decrease) in unrealized appreciation of investments 25,782 (126,453) (1,218,262) Contributions: Employee Rollovers - - - - Employee 53,577 177,596 49,126 131,889 Employer - Net of forfeitures - - - - Withdrawals and Distributions (42,258) (825) - - Employee interfund transfers (396,275) 5,597,566 1,957,669 9,462,160 Net increase/(decrease) (358,924) 5,830,357 2,040,295 9,937,158 Net assets available for plan benefits at the beginning of the year 358,924 - - - Net assets available for plan benefits at the end of the year $ - $ 5,830,357 $ 2,040,295 $ 9,937,158 Fidelity Putnam Putnam Putnam Advisors of Boston Voyager Internation Fund Fund Fund Fund Investment income: Cash dividends on investment in common stock of Crompton & Knowles Corporation and interest on short-term investments $ - $ - $ - $ - Realized gain on sale of investments and withdrawals - - - - Interest and dividends earned 1,586 - - - Interest earned - Hartford Life Insurance Company group annuity contract - - - - Net investment income 1,586 - - - Increase (decrease) in unrealized appreciation of investments 2,000 - - - Contributions: Employee Rollovers - - - - Employee 17,302 22,851 50,100 32,044 Employer - Net of forfeitures - - - - Withdrawals and Distributions - - - - Employee interfund transfers 381,965 - - - Net increase/(decrease) 402,853 22,851 50,100 32,044 Net assets available for plan benefits at the beginning of the year - Net assets available for plan benefits at the end of the year $ 402,853 $ 22,851 $ 50,100 $ 32,044 Invesco Galaxy Galaxy Industrial Large Co. Small Cap Income Fund Index Fund Value Fund Total Investment income: Cash dividends on investment in common stock of Crompton & Knowles Corporation and interest on short-term investments $ - $ - $ - $ 135,462 Realized gain on sale of investments and withdrawals - - - 2,174,651 Interest and dividends earned - - - 1,861,903 Interest earned - Hartford Life Insurance Company group annuity contract - - - 668,839 Net investment income - - - 4,840,855 Increase (decrease) in unrealized appreciation of investments - - - 13,313,456 Contributions: Employee Rollovers - - - - Employee 26,635 64,543 73,520 3,367,802 Employer - Net of forfeitures - - - 2,114,899 Withdrawals and Distributions - - - (6,138,350) Employee interfund transfers - - - - Net increase/(decrease) 26,635 64,543 73,520 17,498,662 Net assets available for plan benefits at the beginning of the year - 65,306,432 Net assets available for plan benefits at the end of the year $ 26,635 $ 64,543 $ 73,520 $82,805,094 See accompanying notes to financial statements CROMPTON & KNOWLES CORPORATION EMPLOYEE STOCK OWNERSHIP PLAN NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1998 and 1997 1. Basis of Presentation The accompanying financial statements have been prepared on an accrual basis. Securities transactions are recorded on the trade date, and dividend income is recorded on the ex-dividend date. 2. Plan Description The Employee Stock Purchase and Savings Plan was adopted by the Board of Directors of Crompton & Knowles Corporation (the "Corporation") on January 27, 1976. Effective July 1, 1989 the Board of Directors amended the Plan to convert it into an Employee Stock Ownership Plan (the "Plan"). The following description of the Plan provides only general information. For complete information see the Plan document. The Plan is a defined contribution plan and is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA). Fleet Bank (the "Trustee") has been selected by the Company as custodial trustee. The Trustee has custodial responsibility for a trust fund on behalf of the Plan and maintains accounting records for all Plan assets. These assets and changes therein have been reported to the Plan administrator and certified as complete and accurate by the trustee. Eligibility Employees of participating affiliates of the Company are eligible to participate upon attaining the age of 18 and having worked for at least six months. Contributions and Vesting The Plan permits an eligible employee to elect to participate by authorizing a withholding of an amount equal to 1%, 2%, 3%, 4%, 5% or 6% of compensation as the basic contribution to the Plan. Contributions by the Company to the Plan are made at an amount equal to 66 2/3% of each participating employee's basic employee contribution to the Plan. If participants are not eligible for any other defined contribution plan, additional employee contributions in 1% increments up to 10% of compensation can be made as supplemental employee contributions. Supplemental employee contributions are not eligible for matching Company contributions. A participant in the Plan is fully vested in his basic and supplemental contributions. Employer contributions vest 100% over a five year period at a rate of 40% after two years of service and an additional 20% per year thereafter. Forfeitures are accumulated and used to reduce Company contributions. There were $225,000 of forfeitures used for 1998 and none for 1997. Withdrawals/Benefit Payments Upon termination, death, or retiring, a participant's account shall be distributed. However, funds can remain in the Plan after retirement indefinitely with quarterly withdrawals permitted and as long as funds begin to be distributed after the participant reaches the age of 70 1/2. A participant may elect to make one withdrawal of his basic or supplemental contributions in a 12 month period. Withdrawal of basic contributions will cause a suspension of contributions for a three month period. A participant who is fully vested and has withdrawn all of his basic and supplemental contributions may also elect to withdraw all or part of his employer contributions. Withdrawal of employer contributions will result in a suspension of contributions for a six month period. At December 31, 1998 and 1997 benefit payments due employees who terminated prior to year end and requested distribution of their accounts totaled approximately $1,600 and $276,000, respectively. This amount has not been recorded in the financial statements but is included as benefit payments and liabilities in the Plan's Form 5500. Investments Options The Company's contribution to the plan is invested in the Crompton & Knowles Stock Fund (C&K Stock Fund). Prior to November 1, 1997 the Plan provided for investment of employee contributions in the C&K Stock Fund and among four investment funds maintained by The Hartford Life Insurance Company: the Fixed Income Fund, the Equity Fund, the Advisers Fund, and the Mortgage Fund. The C&K Stock Fund is a fund invested entirely in common stock of Crompton & Knowles Corporation. The market value of the common stock is based on quotations from the New York Stock Exchange. The Fixed Income Fund is a fund invested under an agreement with Hartford Life Insurance Company (the "Hartford") pursuant to which the Hartford guarantees the repayment of principal and the payment of interest on all amounts on deposit at an effective annual rate of interest of 5.80% on, and after January 1, 1997. Effective November 1, 1997 the agreement with Hartford was terminated. Payout of the funds will commence in six equal annual installments with the initial payment on November 1, 1997 and with the rate of interest credited on the declining balance of 5.80% The Equity Fund was a pooled separate account maintained by Hartford with respect to a portion of its assets, in connection with the contract and other similar contracts issued by the Hartford. This fund invested primarily in equity securities such as common stocks and securities convertible into common stock. The Equity Fund was valued based on a unit value as determined by the fund manager. The Advisers Fund was a pooled separate account maintained by Hartford with respect to a portion of its assets, in connection with the contract and other similar contracts issued by Hartford. This fund invested in common stocks, debt securities, and money market instruments. The Advisers Fund was valued based on a unit of value as determined by the fund manager. The Mortgage Fund was a pooled separate account maintained by Hartford with respect to a portion of its assets, in connection with the contract and other similar contracts issued by Hartford. This fund invested in mortgage related securities, including securities issued by the Government National Mortgage Association. The Mortgage Fund was valued based on a unit value as determined by the fund manager. Effective November 1, 1997 the Hartford Life Insurance Company funds were terminated and replaced with the following separate investment options under a program administered by Fleet Investment Management: Fleet Stable Asset Fund This fund invests primarily in guaranteed investment contracts issued by highly rated life insurance companies. Fidelity Advisor Government Fund This fund invests primarily in obligations issued or guaranteed by the U.S. Government or any of its agencies or instrumentalities. George Putnam Fund of Boston (Class M shares) This fund's primary objective is to provide a diversified portfolio of stocks and bonds that will provide both capital growth and income. Putnam Voyager Fund (Class M shares) This fund's objective is to provide capital appreciation by investing in stocks of companies with above average growth potential. Putnam International Growth Fund Class M shares This fund objective is to invest in equity securities of companies located outside the United States. Invesco Industrial Income Fund This fund's objective is to provide income with secondary consideration to capital appreciation by investing in stocks, bonds and mortgages. Galaxy Growth and Income Fund This fund's objective is to provide high total returns through long-term capital appreciation and income by investing primarily in common stock. Galaxy Asset Allocation Fund This fund's objective is to provide a high total return with a combination of income and long term growth in assets held by investing in equity securities, fixed income securities and cash equivalents. Galaxy Large Company Index Fund This fund's objective is to provide investment results that mirror investment results of U.S. common stocks with large stock market capitalizations as represented by the Standard & Poor's 500 Index. Galaxy Small Cap Value Fund This fund's objective is to provide long-term capital appreciation by investing in companies that have market capitalization of up to $1 billion. At November 1, 1997 amounts invested with Hartford were automatically invested in similar funds provided by Fleet Investment Management. The Fleet system was responsive to employee fund selection in February 1998. Assets in any of the funds may be invested in short term government or other securities pending permanent investment. Earnings on each fund will be reinvested in that fund. Each participant is permitted to elect to have his basic contribution invested in any of the funds in 1% increments (10% prior to November 1, 1997). Prior to November 1, 1997 fund transfers as of the first day of any month, were permitted but not more frequently than once in any six-month period. A participant could elect to transfer any part of the value of his basic employee account or his supplemental employee account to any of the other funds except the Fixed Income Fund to the Mortgage Fund in minimum increments of 5%. Fund transfer after November 1, 1997 (implemented February 1998) can be made on a daily basis in a minimum of 1% increments. 3. Income Taxes The Internal Revenue Service has determined and has informed the Company by a letter dated November 16, 1994 that the Plan and related trust are designed in accordance with applicable sections of the Internal Revenue Code (the "IRC"). The Plan has been amended since receiving the determination letter. However, the Plan administrator and the Plan's tax counsel believe that the Plan is designed and is currently being operated in compliance with the applicable requirements of the IRC. 4. Investments The following presents the fair value of investments at December 31, 1998 and 1997. Investments that represent more than 5% of net assets for either year are separately stated. 1998 1997 Crompton & Knowles Corp. common stock $43,291,577 $52,445,170 Hartford Life Ins. Co. Group Annuity Contract 9,176,919 11,165,578 Fleet Stable Asset Fund 5,598,455 5,745,651 Galaxy Growth and Income Fund 8,004,789 9,863,013 Other 7,244,287 2,405,800 Total Investments $73,316,027 $81,625,212 5. Plan Expenses Significant costs of Plan administration, which are payable from the Trust or by the Corporation, are generally paid by the Corporation. 6. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires the Plan to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported changes in net assets available for plan benefits during the reporting period. Actual results could differ from those estimates 7. Party-in-Interest Transactions The Fleet Bank and Hartford are parties-in-interest as defined in Section 3 (14) of the Employee Retirement Income Security Act of 1974. During the years 1998 and 1997 there were no prohibited party-in-interest transactions. 8. Priorities Upon Termination of the Plan The Board of Directors of the Company shall have the right from time to time to add to, modify or amend the Plan, and the Board of Directors shall have the right to terminate the Plan. The Board of Directors may also authorize the inclusion in any contract entered into by the Company with the union or unions representing employees, or with any group or groups of employees, of a provision or provisions having the effect of limiting or foregoing any such rights. Further, no addition to, modification, amendment or termination of the Plan shall have the effect of reducing the entitlement of any participant's benefit accrued under the Plan or of diverting any part of the assets of the Trust Fund for purposes other than provided in the Plan. Upon any terminations of the Plan, or complete and permanent discontinuance of contributions of all participants, the value of each of the participant's account, if not already vested, shall vest fully and all amounts in all accounts of each participant shall be delivered and paid as soon as practicable in accordance with the Plan Document. Schedule 1 (Form 5500) CROMPTON & KNOWLES CORPORATION EMPLOYEE STOCK OWNERSHIP PLAN LINE 27(a) SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES DECEMBER 31, 1998 IDENTITY OF ISSUE, DESCRIPTION OF INVESTMENT INCLUDING BORROWER, LESSOR MATURITY DATE, RATE OF INTEREST, CURRENT OR SIMILAR PARTY COLLATERAL, PAR OR MATURITY VALUE COST VALUE GALAXY MONEY MARKET TRUST - 5,668.84 UNITS $ 5,669 $ 5,669 CROMPTON & KNOWLES CORPORATION COMMON STOCK - 2,073,848 SHARES 21,273,887 43,291,577 GALAXY GROWTH & INCOME FUND - 513,456.64 UNITS 8,193,515 8,004,789 GALAXY ASSET ALLOCATION FUND - 124,565.65 UNITS 2,076,799 2,172,425 FIDELITY ADVISOR GOVERNMENT INVESTMENT FUND 90,856.79 UNITS 902,621 902,208 FLEET STABLE ASSET FUND - 559,845.46 UNITS 5,598,455 5,598,455 PUTNAM INVESTMENTS PUTNAM VOYAGER FUND - 38,816.1 UNITS 808,554 830,665 PUTNAM INVESTMENTS GEORGE PUTNAM FUND - 21,174.51 UNITS 392,394 379,024 PUTNAM INVESTMENTS PUTNAM INTERNATIONAL GROWTH FUND - 27,473.82 UNITS 532,510 525,025 INVESCO FUNDS INVESCO INDUSTRIAL INCOME GROUP INC. FUND - 29,373.12 451,254 442,359 GALAXY GALAXY LARGE COMPANY INDEX FUND - 40,417.86 1,323,652 1,421,496 GALAXY GALAXY SMALL CAP VALUE FUND - 42,672.88 UNITS 652,517 565,416 HARTFORD LIFE INSURANCE COMPANY GROUP ANNUITY CONTRACT 5.80% 9,176,919 9,176,919 TOTAL INVESTMENTS $51,388,746 $73,316,027 * Party - in- interest - All parties listed above Schedule 2 (Form 5500) CROMPTON & KNOWLES CORPORATION EMPLOYEE STOCK OWNERSHIP PLAN Line 27 (d) Schedule of (5%) Reportable Transactions Year Ended December 31, 1998 Cash (paid) Realized Description received Cost gain Single Transactions: None Series of transactions : Galaxy Money Market Trust Purchases $ (5,836,317) $ 5,836,317 $ - Sales 6,307,483 (6,307,483) Crompton & Knowles Corporation - - common stock Purchases 283,440 shares (5,832,608) 5,832,608 Sales 168,440 shares (incl. withdrawals) 4,386,443 (1,590,822) 2,795,621 SIGNATURE The Plan. Pursuant to the requirements of the Securities and Exchange Act of 1934, the trustees (or other persons who administer the employee benefit plan) have duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized. CROMPTON & KNOWLES CORPORATION EMPLOYEE STOCK OWNERSHIP PLAN Date: June 30, 1999 By:/s/Peter Barna Peter Barna Vice President Finance & Chief Financial Officer EX-23 2 EXHIBIT 23 Independent Auditors' Consent The Board of Directors Crompton & Knowles Corporation We consent to incorporation by reference in the registration statement (Nos. 333-62429, 33-21246, and 2-57629) on Form S-8 of Crompton & Knowles Corporation of our report dated June 4, 1999, relating to the statements of net assets available for plan benefits of the Crompton & Knowles Corporation Employee Stock Ownership Plan as of December 31, 1998, and 1997, and the related statements of changes in net assets available for plan benefits for the years then ended, and all related schedules, included in this annual report on Form 11-K. /s/KPMG LLP Stamford, Connecticut June 25, 1999 -----END PRIVACY-ENHANCED MESSAGE-----