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 April 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 April 19, 1995
Common Stock, $.10 par value 48,454,589 shares
CROMPTON & KNOWLES CORPORATION
FORM 10-Q
FOR QUARTER ENDED APRIL 1, 1995
INDEX
PART I. FINANCIAL INFORMATION:
Item 1. Condensed Financial Statements and
Accompanying Notes
. Consolidated Statements of Earnings
(unaudited) - Quarters ended April 1, 1995
and March 26, 1994
. Consolidated Balance Sheets - April 1, 1995
(unaudited) and December 31, 1994
. Consolidated Statements of Cash Flows
(unaudited) - Quarters ended April 1, 1995
and March 26, 1994
. Notes to the Consolidated Financial
Statements - Quarter ended April 1, 1995
(unaudited)
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
PART II. OTHER INFORMATION:
Item 4. Submission of Matters 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
-1-
UNAUDITED
CROMPTON & KNOWLES CORPORATION AND SUBSIDIARIES
Consolidated Statements of Earnings
Quarters ended April 1, 1995 and March 26, 1994
(In thousands, except per share data)
April 1, March 26,
1995 1994
Net sales $ 168,193 $ 133,594
Cost of products sold 116,559 90,910
Selling, general and administrative 25,422 19,804
Depreciation and amortization 3,725 3,226
Interest 1,568 182
Other income (228) (544)
Total costs and expenses 147,046 113,578
Earnings before income taxes 21,147 20,016
Income taxes 7,951 7,258
Net earnings $ 13,196 $ 12,758
Net earnings per common share $ .27 $ .25
Dividends per common share $ .12 $ .10
Average shares outstanding 48,921 51,988
See accompanying notes to the consolidated financial statements.
- 2 -
April 1, 1995 UNAUDITED
CROMPTON & KNOWLES CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
April 1, 1995 and December 31, 1994
(In thousands)
April 1, December 31,
1995 1994
ASSETS
CURRENT ASSETS
Cash $ 2,803 $ 1,832
Accounts receivable 103,813 81,859
Inventories 169,520 157,356
Other current assets 24,977 19,610
Total current assets 301,113 260,657
NON-CURRENT ASSETS
Property, plant and equipment 123,190 117,105
Cost in excess of acquired net assets 50,379 43,429
Other assets 11,727 11,137
$ 486,409 $ 432,328
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $ 59,741 $ 39,670
Accounts payable 57,505 47,000
Accrued expenses 39,184 33,369
Income taxes payable 8,364 4,138
Other current liabilities 18,886 14,865
Total current liabilities 183,680 139,042
NON-CURRENT LIABILITIES
Long-term debt 54,000 54,000
Accrued postretirement liability 8,655 8,698
Deferred income taxes 7,016 6,681
STOCKHOLDERS' EQUITY
Common stock 5,336 5,336
Additional paid-in capital 62,389 62,241
Retained earnings 226,219 218,837
Accumulated translation adjustment 6,586 1,858
Treasury stock at cost (57,793) (54,213)
Deferred compensation (9,679) (10,152)
Total stockholders' equity 233,058 223,907
$ 486,409 $ 432,328
See accompanying notes to the consolidated financial statements.
- 3 -
UNAUDITED
CROMPTON & KNOWLES CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Quarters ended April 1, 1995 and March 26, 1994
(In thousands)
April 1, March 26,
Increase (decrease) to cash 1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 13,196 $ 12,758
Adjustments to reconcile net earnings
to net cash provided by operations:
Depreciation and amortization 3,726 3,226
Deferred compensation 473 404
Changes in assets and liabilities, net (12,979) (416)
Net cash provided by operations 4,416 15,972
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions (8,633) -
Capital expenditures (5,733) (3,267)
Other investing activities 457 12
Net cash used by investing activities (13,909) (3,255)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments of long-term debt - (10,000)
Change in notes payable 19,851 (2,142)
Net treasury stock activity (3,607) 70
Dividends paid (5,814) (5,131)
Net cash provided (used) by financing activities 10,430 (17,203)
CASH
Effect of exchange rates on cash 34 67
Change in cash 971 (4,419)
Cash at beginning of period 1,832 9,284
Cash at end of period $ 2,803 $ 4,865
See accompanying notes to the consolidated financial statements.
-4-
CROMPTON & KNOWLES CORPORATION AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
Quarter ended April 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 $2,869 in 1995 and $3,829 at December 31, 1994.
Accumulated depreciation amounted to $90,523 in 1995 and $85,691
at December 31, 1994.
Accumulated amortization of cost in excess of acquired net assets
amounted to $7,050 in 1995 and $6,622 at December 31, 1994.
Other current liabilities primarily include customer deposits.
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 1994 Annual Report
on Form 10-K.
CAPITAL STOCK
There are 53,361,072 common shares issued at $.10 par value, of
which 4,906,483 shares and 4,703,891 shares were held in the
treasury at April 1, 1995 and December 31, 1994, respectively.
INVENTORIES
Components of inventories are as follows:
April 1, Dec. 31,
1995 1994
Finished goods $ 99,224 $ 90,386
Work in process 32,987 32,640
Raw materials and supplies 37,309 34,330
$169,520 $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 a 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.
BUSINESS SEGMENT DATA
Quarter Ended
April 1, March 26,
1995 1994
SALES
Specialty chemicals $102,542 $ 95,586
Specialty process equipment
and controls 65,651 38,008
$168,193 $133,594
OPERATING PROFIT
Specialty chemicals $ 15,591 $ 16,078
Specialty process equipment
and controls 10,057 6,858
General corporate expense ( 3,161) ( 3,282)
22,487 19,654
Interest expense ( 1,568) ( 182)
Other income 228 544
Earnings before income taxes $ 21,147 $ 20,016
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FIRST QUARTER RESULTS
Overview
Consolidated net sales of $168.2 million for the first quarter
of 1995 increased 26% over the comparable 1994 period. Net
earnings of $13.2 million were 3% higher than the first quarter
of 1994. Net earnings per common share of $.27 increased 8%
from the $.25 reported last year.
Gross margin as a percentage of net sales decreased to 30.7%
from 32% in the first quarter of 1994 primarily as a result of
lower margins in the acquired specialty equipment businesses and
selling price decreases in the dyes business. Consolidated
operating profit of $22.5 million increased 14% from the first
quarter of 1994 as the specialty process equipment and controls
segment increased 47% while the specialty chemicals segment
decreased 3%.
Specialty Chemicals
The Company's specialty chemicals segment reported sales of
$102.5 million representing an increase of 7% from 1994. The
increase was attributable to higher unit volume (9%) plus
foreign currency translation (2%) less the impact of lower
selling prices (-4%).
Domestic dyes sales of $52.3 million were 4% higher than the
1994 first quarter primarily due to unit volume growth (11%)
offset by lower selling prices (-7%). International dyes sales
of $24.5 million increased 10% versus the first quarter of 1994
primarily as a result of foreign currency translation with the
positive impact of unit growth (4%) offset by lower selling
prices (-4%). Specialty ingredients sales of $25.7 million rose
12% primarily as a result of increased unit volume. The
percentage of sales outside the United States was 25%, unchanged
from the comparable 1994 period.
Operating profit of $15.6 million for the first quarter of 1995
decreased 3% from 1994. The decrease was attributable primarily
to the impact of lower pricing. The percentage of operating
profit outside the United States declined to 17% from 19% in
1994.
Specialty Process Equipment and Controls
The Company's specialty process equipment and controls segment
reported sales of $65.7 million, which represents an increase of
73% from the first quarter of 1994. Approximately 55% was
attributable to acquisitions completed since the first quarter
of 1994 with the balance primarily from increased unit volume.
Export sales accounted for 18% of total segment sales versus 17%
for the comparable period in 1994. Operating profit for the
first quarter of 1995 increased 47% to $10 million.
Approximately 29% was attributable to acquisitions completed
since the first quarter of 1994 with the balance primarily from
higher unit volume. The order backlog for extruders and related
equipment at the end of the first quarter of 1995 amounted to
$78 million compared to $66 million at December 31, 1994.
Other
Selling, general and administrative expenses of $25.4 million
increased 28% versus the comparable period in 1994 primarily due
to acquisitions completed since the first quarter of 1994 and
the impact of inflation. Depreciation and amortization of $3.7
million increased 15% versus 1994 primarily as a result of a
higher fixed asset base including the acquisitions completed
since the first quarter of 1994. Interest expense increased
$1.4 million to $1.6 million primarily as a result of increased
borrowings. Other income of $228 thousand decreased by $316
thousand versus 1994 primarily due to lower royalty income. The
effective tax rate of 37.6% increased versus the 36.3% in the
1994 period.
LIQUIDITY AND CAPITAL RESOURCES
The April 1, 1995 working capital balance of $117.4 million
decreased $4.2 million from $121.6 million at year-end 1994.
The current ratio declined to 1.6 from 1.9 at the end of 1994
primarily as a result of increased short-term borrowings. Days
sales in receivables decreased to 49 days from 54 days at year-
end 1994. Inventory turnover averaged 2.8 for the first quarter
of 1995 compared to 3.0 at year-end 1994.
Cash flows from operating activities of $4.4 million decreased
$11.6 million from the first quarter of 1994 primarily
attributable to 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 ratio
increased to 33% 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
$4.7 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 $3.4 million for the first
quarter of 1995 compared to $2.6 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.
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 11, 1995
(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 1998:
FOR AGAINST
James A. Bitonti 41,411,477 shares 452,293 shares
Michael W. Huber 41,387,512 shares 476,258 shares
Patricia K. Woolf, Ph.D. 41,372,811 shares 490,959 shares
2. Approval of the selection by the Board of Directors of
an auditor for 1995:
FOR AGAINST ABSTAINED
41,448,678 shares 354,886 shares 60,206 shares
-11-
PART II. OTHER INFORMATION:
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.
-12-
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)
May 12, 1995 By: /s/ Peter Barna
Peter Barna
Treasurer & Principal Accounting
May 12, 1995 By: /s/ John T. Ferguson, II
John T. Ferguson, II
General Counsel and Secretary
-13-
CROMPTON & KNOWLES CORPORATION AND SUBSIDIARIES
EXHIBIT 11 - STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
(In thousands, except per share data)
PRIMARY FULLY DILUTED
Quarter Ended Quarter Ended
April 1, March 26, April 1, March 26,
1995 1994 1995 1994
Earnings
Net earnings $ 13,196 $ 12,758 $ 13,196 $ 12,758
Shares
Weighted average shares
outstanding 48,471 51,305 48,471 51,305
Common stock equivalents 435 654 450 683
Average shares
outstanding 48,906 51,959 48,921 51,988
Per share
Net earnings $ 0.27 $ 0.25 $ 0.27 $ 0.25
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