SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 30, 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 incorporation or organization)
(I.R.S. Employer 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
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Common Stock, $0.10 par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: NONE
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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of the
registrant, computed as of February 9, 1996, was $640,834,968.
The number of shares of Common Stock of the registrant outstanding as of
February 9, 1996 was 48,022,079.
DOCUMENTS INCORPORATED BY REFERENCE
Annual Report to Stockholders for fiscal year
ended December 30, 1995 Parts I, II and IV
Proxy Statement for Annual Meeting of Stockholders
on April 9, 1996 Part III
CROMPTON & KNOWLES CORPORATION
PART I
ITEM 1. BUSINESS
General
Crompton & Knowles Corporation (together with its consolidated
subsidiaries, the "Corporation"), was incorporated in Massachusetts in 1900.
The Corporation has engaged in the manufacture and sale of specialty chemicals
since 1954 and, since 1961, in the manufacture and sale of specialty process
equipment and controls. The Corporation expanded its specialty chemical
business in 1988 with the acquisitions of Ingredient Technology Corporation, a
leading supplier of ingredients for the food and pharmaceutical industries,
and Townley Dyestuffs Auxiliaries Company, Ltd., one of the largest
independent suppliers of dyes for Great Britain's textile and paper
industries. The Corporation made two acquisitions in calendar year 1990,
acquiring the business and certain assets and liabilities of Atlantic
Industries, Inc., a domestic dye manufacturer, and APV Chemical Machinery,
Inc., which manufactured the Sterling line of extruders, extrusion systems and
industrial blow molding equipment for the plastics industry. In 1991, the
Corporation acquired a wire and cable equipment business from Clipper
Machines, Inc. In 1992, the Corporation acquired a pre-metallized dyes
business and facility located in Oissel, France. The Corporation made two
acquisitions in 1994, the Egan Machinery plastics extrusion, precision coating
and cast and blown film equipment business and the plastics and rubber
extrusion machinery and parts and after-market services business of McNeil &
NRM, Inc. Effective January 1, 1995, the Corporation's textile dyes and
chemicals business and its specialty process equipment and controls business
have been conducted by Crompton & Knowles Colors Incorporated and
Davis-Standard Corporation, respectively, wholly owned subsidiaries of the
Corporation. In 1995, the Corporation acquired the plastics and rubber
extrusion business of McNeil Akron Repiquet SARL, including a manufacturing
facility located in Dannemarie, France, and Killion Extruders, Inc., a
producer of precision laboratory and small scale extrusion systems. In
January 1996, the Corporation acquired Klockner ER-WE-PA GmbH, a manufacturer
of extrusion coating, cast film and plastic extrusion equipment located in
Erkrath, Germany, and retained Salomon Brothers Inc to assist in exploring
strategic alternatives to maximize shareholder value with respect to the
Ingredient Technology Corporation business.
Information as to the sales, operating profit, and identifiable assets
attributable to each of the Corporation's business segments during each of
its last three fiscal years is set forth in the Notes to Consolidated
Financial Statements on page 23 of the Corporation's 1995 Annual Report to
Stockholders, and such information is incorporated herein by reference.
Products and Services
The principal products and services offered by the Corporation are described
below.
SPECIALTY CHEMICALS
Textile dyes manufactured and sold by the Corporation are used on both
synthetic and natural fibers for knit and woven garments, home furnishings
such as carpets, draperies, and upholstery, and automotive furnishings
including carpeting, seat belts, and upholstery. Industrial dyes and
chemicals are marketed to the paper, leather, and ink industries for use on
stationery, tissue, towels, shoes, apparel, luggage, and other products and
for transfer printing inks. The Corporation also markets organic chemical
intermediates and a line of chemical auxiliaries for the textile industry,
including leveling agents, dye fixatives, and scouring agents. Sales of this
class of products accounted for 43%, 50%, and 57% of the total revenues of the
Corporation in 1995, 1994, and 1993, respectively.
The Corporation manufactures and sells reaction and compounded flavor
ingredients for the food processing, bakery, beverage and pharmaceutical
industries; colors certified by the Food & Drug Administration for sale to
domestic producers of food and pharmaceuticals; and inactive ingredients for
the pharmaceutical industry. The Corporation is also a leading supplier of
specialty sweeteners, including edible molasses, molasses blends, malt
extracts, and syrups for the bakery, confectionery and food processing
industries and a supplier of seasonings and seasoning blends for the food
processing industry. Sales of this class of products accounted for 15%, 17%,
and 16% of the total revenues of the Corporation in 1995, 1994, and 1993,
respectively.
SPECIALTY PROCESS EQUIPMENT AND CONTROLS
The Corporation manufactures and sells plastics and rubber extrusion
equipment, industrial blow molding equipment, electronic controls, and
integrated extrusion systems and offers specialized service and modernization
programs for in-place extrusion systems. Sales of this class of products
accounted for 42%, 33%, and 27% of the total revenues of the Corporation in
1995, 1994, and 1993, respectively.
Integrated extrusion systems, which include extruders in combination with
controls and other accessory equipment, are used to process plastic resins and
rubber into various products such as plastic sheet used in appliances,
automobiles, home construction, sports equipment, and furniture; cast and
blown film used to package many consumer products; and extruded shapes used as
house siding, furniture trim, and substitutes for wood molding. Integrated
extrusion systems are also used to compound engineered plastics, to recycle
and reclaim plastics, to coat paper, cardboard and other materials used as
packaging, and to apply plastic or rubber insulation to high voltage power
cable for electrical utilities and to wire for the communications,
construction, automotive, and appliance industries.
Industrial blow molding equipment produced by the Corporation is sold to
manufacturers of non-disposable plastic items such as tool cases and beverage
coolers.
The Corporation's HES unit produces electrical and electronic controls
primarily for use with extrusion systems. The Corporation is a major user of
such controls.
Sources of Raw Materials
Chemicals, steel, castings, parts, machine components, edible molasses,
spices, and other raw materials required in the manufacture of Crompton &
Knowles' products are generally available from a number of sources, some of
which are foreign. Significant sales of the dyes and auxiliary chemicals
business consist of dyes manufactured from intermediates purchased from
foreign sources.
Patents and Licenses
Crompton & Knowles owns patents, trade names, and trademarks and uses
know-how, trade secrets, formulae, and manufacturing techniques which assist
in maintaining the competitive position of certain of its products. Patents,
formulae, and know-how are of particular importance in the manufacture of a
number of the dyes and flavor ingredients sold in the Corporation's specialty
chemicals business, and patents and know-how are also significant in the
manufacture of certain wire insulating and plastics processing machinery
product lines. The Corporation believes that no single patent, trademark, or
other individual right is of such importance, however, that expiration or
termination thereof would materially affect its business. The Corporation is
also licensed to use certain patents and technology owned by foreign companies
to manufacture products complementary to its own products, for which it pays
royalties in amounts not considered material to the consolidated results of
the enterprise. Products to which the Corporation has such rights include
certain dyes, plastics machinery and flavored ingredients.
Seasonal Business
No material portion of any segment of the business of the Corporation is
seasonal.
Customers
The Corporation does not consider any segment of its business dependent
on a single customer or a few customers, the loss of any one or more of whom
would have an adverse effect on the segment. No one customer's business
accounts for more than ten percent of the Corporation's gross revenues nor
more than ten percent of its earnings before taxes.
Backlog
Because machinery production schedules range from about 60 days to 10
months, backlog is important to the Corporation's specialty process equipment
and controls business. Firm backlog of customers' orders for this business at
December 30, 1995, totalled approximately $72 million compared with $66
million at December 31, 1994. It is expected that most of the December 30,
1995, backlog will be shipped during 1996. Orders for specialty chemicals and
equipment repair parts are filled primarily from inventory stocks and thus are
excluded from backlog.
Competitive Conditions
Crompton & Knowles is among the largest suppliers of dyes in the United
States and is a leading domestic producer of specialty dyes for nylon,
polyester, acrylics, and cotton. The Corporation is less of a factor in other
segments of the domestic dyes industry and in the European market. The
Corporation is also a major United States and Canadian supplier of edible
molasses, a major United States supplier of malt extracts, and a significant
supplier of other sugar-based specialty products. As a supplier of flavors
and seasonings, the Corporation has many competitors in the United States and
abroad.
Crompton & Knowles is a leading producer of extrusion machinery for the
plastics industry and a leading domestic producer of industrial blow molding
equipment and competes with domestic and foreign producers of such products.
The Corporation is one of a number of producers of other types of plastics
processing machinery.
Product performance, service, and competitive prices are all important
factors in competing in the specialty chemicals and specialty process
equipment and controls product lines. No one competitor or small number of
competitors is believed to be dominant in any of the Corporation's major
markets.
Research and Development
Crompton & Knowles employs about 280 engineers, draftsmen, chemists, and
technicians responsible for developing new and improved chemical products and
process equipment systems for the industries served by the Corporation.
Often, new products are developed in response to specific customer needs. The
Corporation'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 Corporation's results of operations
from year to year. Research and development expenditures totalled $14.0
million for the year 1995, $12.1 million for the year 1994, and $11.2 million
for the year 1993.
Environmental Matters
The Corporation'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. Although precise amounts are difficult to define, in 1995, the
Corporation spent approximately $15.8 million to comply with those
requirements, including approximately $4.9 million in capital expenditures.
The Corporation 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 an inactive subsidiary has been designated, along
with others, as a potentially responsible party at two other sites.
While the cost of compliance with existing environmental requirements is
expected to increase, based on the facts currently known to the Corporation,
management expects that those costs, including the cost to the Corporation of
remedial actions at the waste disposal sites where it has been named a
potentially responsible party, will not have a material effect on the
Corporation's liquidity and financial condition and that the cost to the
Corporation of any remedial actions will not be material to the results of the
Corporation's operations in any given year.
Employees
The Corporation had 2,761 employees on December 30, 1995.
Financial Information Concerning Foreign Operations and Export Sales
The information with respect to sales, operating profit, and identifiable
assets attributable to each of the major geographic areas served by the
Corporation and export sales, for each of the Corporation's last three fiscal
years, set forth in the Notes to Consolidated Financial Statements on page 23
of the Corporation's 1995 Annual Report to Stockholders, is incorporated
herein by reference.
The Corporation considers that the risks relating to operations of its
foreign subsidiaries are comparable to those of other U.S. companies which
operate subsidiaries in developed countries. All of the Corporation's
international operations are subject to fluctuations in the relative values of
the currencies in the various countries in which its activities are conducted.
ITEM 2. PROPERTIES
The following table sets forth information as to the principal operating
properties of the Corporation and its subsidiaries:
Ownership
Business Segment Dates or Lease
and Location Products Built Expiration
Specialty Chemicals:
Carrollton, TX Seasonings 1982 1997
office and plant
Des Plaines, IL Flavors 1968 Owned
office and plant
Elyria, OH Seasonings 1978 2001
office and plant
Gibraltar, PA Textile and 1964- Owned
office, laboratory other dyes 1980
and chemical plant
Lowell, NC Textile dyes,
chemical plant organic chemicals 1961 Owned
Mahwah, NJ Flavors and 1984- 2004
office, laboratory Seasonings 1989
and plant
Newark, NJ Textile dyes, 1949- Owned
chemical plant organic chemicals 1985
Nutley, NJ Textile and 1949- Owned
office, laboratory other dyes 1977
and chemical plant
Oissel, France Textile and 1946- Owned
office, laboratory other dyes 1992
and chemical plant
Reading, PA Textile dyes, 1910- Owned
chemical plant organic chemicals 1979
and food colors
Tertre, Belgium Textile and 1970 Owned
office, laboratory other dyes
and chemical plant
Vineland, NJ Food and pharmaceutical 1995 Owned
office and plant ingredients and colors
Specialty Process
Equipment and Controls:
Cedar Grove, NJ Precision Laboratory 1929 1996
office and extrusion equipment
machine shop and extrusion systems
Dannemarie, France Extrusion systems 1967- Owned
office and 1980
machine shop
Edison, NJ Blow molding and 1974- 2000
office and extrusion 1979
machine shop equipment
Erkrath, Germany Extrusion systems 1954- Owned
office and 1991
machine shop
Pawcatuck, CT Plastics and rubber 1965- Owned
office and extrusion and 1985
machine shop electronic control
equipment and systems
Pawcatuck, CT Extrusion systems 1968 1998
office and
machine shop
Somerville, NJ Extrusion systems 1966- Owned
office and 1994
machine shop
All plants are built of brick, tile, concrete, or sheet metal materials
and are of one-floor construction except parts of the plants located in
Reading and Gibraltar, Pennsylvania, Nutley, Cedar Grove, and Somerville, New
Jersey, Oissel and Dannemarie, France, Erkrath, Germany, and Tertre, Belgium.
All are considered to be in good operating condition, well maintained, and
suitable for the Corporation's requirements.
ITEM 3. LEGAL PROCEEDINGS
In the normal course of its business, the Corporation is subject to
investigations, claims and legal proceedings, some of which concern
environmental matters, involving both private and governmental parties. In
some cases, the remedies sought or damages claimed may be substantial. While
each of these matters is subject to various uncertainties as to outcome, and
some of them may be decided unfavorably to the Corporation, based on the facts
known to the Corporation and on consultation with legal counsel, management
believes that there are no such matters pending or threatened which will have
a material effect on the financial position of the Corporation or the results
of the Corporation's operations in any given year.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The information concerning the range of market prices for the
Corporation's Common Stock on the New York Stock Exchange and the amount of
dividends paid thereon during the past two years, set forth in the Notes to
Consolidated Financial Statements on page 24 of the Corporation's 1995 Annual
Report to Stockholders, is incorporated herein by reference.
The number of registered holders of Common Stock of the Corporation on
December 30, 1995, was 4,664.
ITEM 6. SELECTED FINANCIAL DATA
The selected financial data for the Corporation for each of its last five
fiscal years, set forth under the heading "Eleven Year Selected Financial
Data" on pages 26 and 27 of the Corporation's 1995 Annual Report to
Stockholders, is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Management's discussion and analysis of the Corporation's financial
condition and results of operations, set forth under the heading "Management's
Discussion and Analysis of Financial Condition and Results of Operations" on
pages 11 through 13 of the Corporation's 1995 Annual Report to Stockholders,
is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements of the Corporation, notes thereto, and
supplementary data, appearing on pages 14 through 25 of the Corporation's 1995
Annual Report to Stockholders, are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information called for by this item concerning directors of the
Corporation is included in the definitive proxy statement for the
Corporation's Annual Meeting of Stockholders to be held on April 9, 1996,
which has been filed with the Commission pursuant to Regulation 14A, and such
information is incorporated herein by reference.
The executive officers of the Corporation are as follows:
Vincent A. Calarco, age 53, has served as President and Chief Executive
Officer of the Registrant since 1985 and Chairman of the Board since 1986. He
is former Vice President for Strategy and Development, Uniroyal, Inc.
(1984-1985), and former President of Uniroyal Chemical Company (1979-1984).
Mr. Calarco has been a member of the Board of Directors of the Registrant
since 1985. Mr. Calarco also serves as a director of Caremark International
Inc.
Robert W. Ackley, age 54, has served as a Vice President of the Registrant
since 1986 and as President of Davis-Standard Corporation (formerly the
Davis-Standard Division) since 1983.
Peter Barna, age 52, has served as Treasurer of the Registrant since 1980 and
as Principal Accounting Officer since 1986.
John T. Ferguson, II, age 49, has served as General Counsel and Secretary of
the Registrant since 1989.
Nicholas Fern, Ph.D., age 52, has served as President, Dyes and Chemicals -
Asia, for the Registrant since 1994, as President of the Registrant's
International Dyes and Chemicals Division from 1992 to 1994, and as Managing
Director of Crompton & Knowles Europe, S.A. (formerly Crompton & Knowles
Tertre) from 1978 to 1994.
Gerald H. Fickenscher, Ph.D., age 52, has served as President, Dyes and
Chemicals - Europe, for the Registrant and as Managing Director of Crompton &
Knowles Europe, S.A. since 1994. He is the former Chief Financial Officer of
Uniroyal Chemical Corporation (1986-1994).
Edmund H. Fording, Jr., age 59, has served as Vice President of the Registrant
since 1991 and as President of Crompton & Knowles Colors Incorporated
(formerly the domestic Dyes and Chemicals Division) since 1989. He is the
former General Manager of the Dyes Division of Hilton Davis Co. (1988-1989)
and Director of the Organic Department of Mobay Corporation (1980-1988).
Marvin H. Happel, age 56, has served as Vice President -Organization of the
Registrant since 1986. He is the former Director of Human Resources of
Uniroyal Chemical Company (1979-1986).
Charles J. Marsden, age 55, has served as Vice President - Finance and Chief
Financial Officer and as a member of the Board of Directors of the Registrant
since 1985.
Rudy M. Phillips, age 54, has served as President of Ingredient Technology
Corporation since January, 1996. He is a former Vice President of Ingredient
Technology Corporation (1988-1996).
The term of office of each of the above-named executive officers is until
the first meeting of the Board of Directors following the next annual meeting
of stockholders and until the election and qualification of his successor.
There is no family relationship between any of such officers, and there
is no arrangement or understanding between any of them and any other person
pursuant to which any such officer was selected as an officer.
ITEM 11. EXECUTIVE COMPENSATION
Information called for by this item is included in the definitive proxy
statement for the Corporation's Annual Meeting of Stockholders to be held on
April 9, 1996, which has been filed with the Commission pursuant to Regulation
14A, and such information is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Information called for by this item is included on pages 1 and 5 of the
definitive proxy statement for the Corporation's Annual Meeting of
Stockholders to be held on April 9, 1996, and such information is incorporated
herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information called for by this item is included in the definitive proxy
statement for the Corporation's Annual Meeting of Stockholders to be held on
April 9, 1996, and such information is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
(a) The following documents are filed as part of this report:
1. Financial statements and Independent Auditors' Report, as required
by Item 8 of this form, which appear on pages 14 through 25 of the
Corporation's 1995 Annual Report to Stockholders and are
incorporated herein by reference:
(i) Consolidated Statements of Earnings for the fiscal years ended December
30, 1995, December 31, 1994,and December 25, 1993;
(ii) Consolidated Balance Sheets as at December 30, 1995, and December 31,
1994;
(iii) Consolidated Statements of Cash Flows for the fiscal years ended
December 30, 1995, December 31, 1994, and December 25, 1993;
(iv) Consolidated Statements of Stockholders' Equity for the fiscal years
ended December 30, 1995, December 31, 1994, and December 25, 1993;
(v) Notes to Consolidated Financial Statements; and
(vi) Independent Auditors' Report.
2. Independent Auditors' Report on Financial Statement Schedule and financial
statement schedule II, Valuation and Qualifying Accounts, required by
Regulation S-X. Pages S-1 and S-2 hereof.
3. Exhibits filed herewith or incorporated herein by reference:
Exhibit No. Description
3(i) Restated Articles of Organization of the Corporation filed with the
Commonwealth of Massachusetts on October 27, 1988, as amended on April 10,
1990 and on April 14, 1992. (Exhibit 3(a) to Form 10-K for the fiscal year
ended December 26, 1992.)
3(ii) By-laws of the Corporation as amended to date. (Exhibit 3(b) to Form
10-K for the fiscal year ended December 30, 1989.)
4(a)(1) Rights Agreement dated as of July 20, 1988, between the Registrant
and The Chase Manhattan Bank, N.A., as Rights Agent. (Exhibit 1 to Form 8-K
dated July 29, 1988.)
4(a)(2) Agreement dated as of March 28, 1991, amending Rights Agreement dated
as of July 20, 1988, between the Registrant and The Chase Manhattan Bank,
N.A., as Rights Agent. (Exhibit 4(i)(i) to Form 10-K for the fiscal year ended
December 29, 1990.)
4(b)(1) Credit Agreement dated as of September 28, 1992, among the
Registrant, five banks, and Bankers Trust Company as Agent. (Exhibit 10.1 to
Registration Statement No. 33-52642 on Form S-3.)
4(b)(2) First Amendment to Credit Agreement dated as of September 1, 1994,
among the Registrant, five banks, and Bankers Trust Company as Agent.
(Exhibit 4(b)(2) to Form 10-K for the fiscal year ended December 31, 1994.)
*4(b)(3) Second Amendment to Credit Agreement dated as of May 18, 1995, among
the Registrant, five banks, and Bankers Trust Company as Agent.
+10(a) 1983 Stock Option Plan of Crompton & Knowles Corporation, as amended
through April 14, 1987. (Exhibit 10(c) to Form 10-Q for the quarter ended
March 28, 1987.)
+10(b) Amendments to Crompton & Knowles Corporation Stock Option Plans
adopted February 22, 1988. (Exhibit 10(d) to Form 10-K for the fiscal year
ended December 26, 1987.)
+10(c) Amended Annual Incentive Compensation Plan for "A" Group of Senior
Executives dated January 24, 1994. (Exhibit 10(d) to Form 10-K for the fiscal
year ended December 25, 1993.)
+10(d) Summary of Management Incentive Bonus Plan for selected key management
personnel. (Exhibit 10(m) to Form 10-K for the fiscal year ended December 27,
1980.)
+10(e) Supplemental Medical Reimbursement Plan. (Exhibit 10(n) to Form 10-K
for the fiscal year ended December 27, 1980.)
+10(f) Supplemental Dental Reimbursement Plan. (Exhibit 10(o) to Form 10-K
for the fiscal year ended December 27, 1980.)
+10(g) Employment Agreement dated February 22, 1988, between the Registrant
and Vincent A. Calarco. (Exhibit 10(j) to the Form 10-K for the fiscal year
ended December 26, 1987.)
+10(h) Form of Employment Agreement entered into in 1988, 1989, 1992, 1994
and 1996 between the Registrant or one of its subsidiaries and nine of the
executive officers of the Registrant. (Exhibit 10(k) to Form 10-K for the
fiscal year ended December 26, 1987.)
*+10(i) Amended Supplemental Retirement Agreement dated October 18, 1995
between the Registrant and Vincent A. Calarco.
*+10(j) Form of Amended Supplemental Retirement Agreement dated October 18,
1995 between the Registrant and three of its executive officers.
*+10(k) Form of Supplemental Retirement Agreement dated October 18, 1995
between the Registrant and five of its executive officers.
+10(l) Supplemental Retirement Agreement Trust Agreement dated October 20,
1993 between the Registrant and Shawmut Bank, N.A. (Exhibit 10(l) to
Form 10-K for the fiscal year ended December 25, 1993.)
+10(m) Amended Benefit Equalization Plan dated October 20, 1993. (Exhibit
10(m) to Form 10-K for the fiscal year ended December 25, 1993.)
+10(n) Amended Benefit Equalization Plan Trust Agreement dated October 20,
1993 between the Registrant and Shawmut Bank, N.A. (Exhibit 10(n) to
Form 10-K for the fiscal year ended December 25, 1993.)
+10(o) Amended 1988 Long Term Incentive Plan. (Exhibit 10(o) to Form 10-K
for the fiscal year ended December 25, 1993.)
10(p) Trust Agreement dated as of May 15, 1989, between the Registrant and
Shawmut Worcester County Bank, N.A. and First Amendment thereto dated as of
February 8, 1990. (Exhibit 10(w) to Form 10-K for the fiscal year ended
December 30, 1989.)
+10(q) Form of 1992 - 1994 Long Term Performance Award Agreement. (Exhibit
10(y) to Form 10-K for the fiscal year ended December 28, 1991.)
+10(r) Crompton & Knowles Corporation Restricted Stock Plan for Directors
approved by the stockholders on April 9, 1991. (Exhibit 10(z) to Form 10-K
for the fiscal year ended December 28, 1991.)
*+10(s) Amended 1993 Stock Option Plan for Non-Employee Directors.
*11 Statement re computation of per share earnings.
*13 1995 Annual Report to Stockholders of Crompton & Knowles Corporation.
(Not to be deemed filed with the Securities and Exchange Commission except
those portions expressly incorporated by reference into this report on Form
10-K.)
*21 Subsidiaries of the Registrant.
*23 Consent of independent auditors.
*24 Power of attorney from directors and executive officers of the Registrant
authorizing signature of this report. (Original on file at principal executive
offices of Registrant.)
*27 Financial Data Schedule for the fiscal year ended December 30, 1995.
*29 Annual Report on Form 11-K of Crompton & Knowles Corporation Employee
Stock Ownership Plan for the fiscal year ended December 31, 1995.
* Copies of these Exhibits are annexed to this report on Form 10-K provided
to the Securities and Exchange Commission and the New York Stock Exchange.
+ This Exhibit is a compensatory plan, contract or arrangement in which one
or more directors or executive officers of the Registrant participate.
(b) There were no reports on Form 8-K filed during the last quarter of the
period covered by this report.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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)
Date: March 29, 1996 By: /s/ Charles J. Marsden
Charles J. Marsden
Vice President-Finance
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.
Name Title
Vincent A. Calarco* Chairman of the Board,President, and Director
(Principal Executive Officer)
Charles J. Marsden* Vice President-Finance and Director
(Principal Financial Officer)
Peter Barna* Treasurer (Principal Accounting Officer)
James A. Bitonti* Director
Robert A. Fox* Director
Roger L. Headrick* Director
Leo I. Higdon, Jr.* Director
Michael W. Huber* Director
C. A. Piccolo* Director
Patricia K. Woolf* Director
Date: March 29, 1996 By: /s/ Charles J. Marsden
Charles J. Marsden
as attorney-in-fact
INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENT SCHEDULE
Board of Directors
Crompton & Knowles Corporation:
Under date of January 24, 1996, we reported on the consolidated balance sheets
of Crompton & Knowles Corporation and subsidiaries as of December 30, 1995 and
December 31, 1994, and the related consolidated statements of earnings,
stockholders' equity and cash flows for each of the fiscal years in the
three-year period ended December 30, 1995, as contained in the 1995 Annual
Report to Stockholders. These consolidated financial statements and our
report thereon are incorporated by reference in the Annual Report on Form 10K of
Crompton & Knowles Corporation for the fiscal year 1995. In connection with
our audits of the aforementioned consolidated financial statements, we also
have audited the financial statement schedule as listed in the accompanying
index. This financial statement schedule is the responsibility of the
Company's management. Our responsibility is to express an opinion on this
financial statement schedule based on our audits.
In our opinion, such financial schedule, when considered in relation to the
basic consolidated financial statements taken as a whole, presents fairly, in
all material respects, the information set forth therein.
/s/ KPMG Peat Marwick LLP
Stamford, Connecticut
January 24, 1996
SCHEDULE II
CROMPTON & KNOWLES CORPORATION AND SUBSIDIARIES
Valuation and Qualifying Accounts
(In thousands of dollars)
Additions
Balance at charged to Balance
beginning costs and at end
of year expenses Recurring Other of year
Fiscal Year ended
December 30, 1995
Allowance for
doubtful accounts $3,829 $ 707 $(1,297)(1) $ 30(3) $3,269
Accumulated amortization
of costin excess of
acquired net assets 6,622 1,591 80(2) (12)(4) 8,281
Accumulated amortization
of other intangible assets 1,505 240 - (522)(4) 1,223
Fiscal Year ended
December 31, 1994
Allowance for
doubtful accounts $4,072 $ 84 $ (349)(1) $ 22(3) $3,829
Accumulated amortization
of cost in excess of
acquired net assets 5,456 1,097 101 (2) (32)(4) 6,622
Accumulated amortization
of other intangible assets 1,239 266 - - 1,505
Fiscal Year ended
December 25, 1993
Allowance for
doubtful accounts $3,736 $ 483 $ (147)(1) $ - $4,072
Accumulated amortization
of costin excess of
acquired net assets 4,510 963 (17)(2) - 5,456
Accumulated amortization
of other intangible assets 996 285 (42)(2) - 1,239
(1)Represents accounts written off as uncollectible (net of recoveries), and
the translation effect of accounts denominated in foreign currencies.
(2)Represents the translation effect of intangible assets denominated in
foreign currencies.
(3)Represents allowance related to the acquisition of Killion Extruders, Inc.
in 1995 and Egan Machinery in 1994.
(4)Represents intangible asset retirements.
SECOND AMENDMENT TO CREDIT AGREEMENT
SECOND AMENDMENT (this "Amendment"), dated as of May 18, 1995, among
Crompton & Knowles Corporation, a Massachusetts corporation (the "Company"),
the financial institutions listed on the signature pages hereto and Bankers
Trust Company, as Agent under the Credit Agreement referred to below. All
capitalized terms used herein and not otherwise defined shall have the
respective meanings provided such terms in the Credit Agreement referred to
below.
W I T N E S S E T H :
WHEREAS, the Company, various lending institutions (the "Banks"),
and Bankers Trust Company, as Agent, are parties to a Credit Agreement dated
as of September 28, 1992 (as amended, modified or supplemented through the
date hereof, the "Credit Agreement"); and
WHEREAS, the parties hereto wish to amend the Credit Agreement as
herein provided;
NOW, THEREFORE, it is agreed:
1. Schedule I to the Credit Agreement is hereby amended by
deleting the same in its entirety and inserting in lieu thereof as a new
Schedule I thereto the Schedule I attached hereto. Each Bank hereby
acknowledges and agrees that from and after the Amendment Effective Date (as
hereinafter defined) its Commitment shall be the amount set forth opposite
such Bank's name on Schedule I attached hereto, as such amount may be reduced
from time to time in accordance with the terms of the Credit Agreement.
2. In order to induce the Banks to enter into this Amendment, the
Company hereby (i) makes each of the representations, warranties and agreement
contained in the Credit Agreement a d (ii) represents and warrants that there
exists no Default or Event of Default, in each case on the Amendment Effective
Date (as hereinafter defined), both before and after giving effect to this
Amendment.
3. This Amendment is limited as specified and shall not constitute
a modification, acceptance or waiver of any other provision of the Credit
Agreement.
4. This Amendment may be executed in any number of counterparts
and by the different parties hereto on separate counterparts, each of which
counterparts when executed and delivered shall be an original, but all of
which shall together constitute one and the same instrument. A complete set
of counterparts shall be lodged with the Company and the Agent.
5. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE
STATE OF NEW YORK.
6. This Amendment shall become effective on the date (the Amendment
Effective Date") when (a) each of the parties hereto shall have signed a
counterpart hereof (whether the same or different counterparts) and shall have
delivered the same to the Agent at its New York Office and (b) the Company
shall have delivered to the Agent (i) an opinion of counsel in form and
substance satisfactory to the Agent, (ii) an officer's certificate in form and
substance satisfactory to the Agent (which officer's certificate shall in any
event have attached thereto a true and correct copy of resolutions of the
Board of Directors of the Company and each Guarantor authorizing the increase
in the Total Commitment as set forth in Schedule I attached hereto) and (iii)
for the account of each Bank, a new Note duly executed by the Borrower in the
amount, maturity and as otherwise provided in the Credit Agreement after
giving effect to this Amendment.
7. From and after the Amendment Effective Date, all references in
the Credit Agreement and the Notes to the Credit Agreement shall be deemed to
be references to the Credit Agreement as modified hereby.
<PAGE>
SCHEDULE I
Schedule of Commitments
Name of Bank Commitment
Bankers Trust Company $ 35,714,285.71
The Bank of New York 35,714,285.71
ABN AMRO Bank N.V., New York Branch 17,857,142.86
Shawmut Bank Connecticut, N.A. 17,857,142.86
First Fidelity Bank, National Association, 17,857,142.86
New Jersey
IN WITNESS WHEREOF, each of the parties hereto has caused this
Amendment to be duly executed and delivered as of the date first above
written.
CROMPTON & KNOWLES CORPORATION
By /s/ Charles Marsden
Charles Marsden
Title: Vice President-Finance
By /s/ Peter Barna
Peter Barna
Title: Treasurer
BANKERS TRUST COMPANY,
Individually and as Agent
By /s/ Katherine A. Judge
Katherine A. Judge
Title: Vice President
THE BANK OF NEW YORK
By /s/ Maria C. Mamilorvich
Maria C. Mamilorvich
Title: Vice President
FIRST FIDELITY BANK, NATIONAL
ASSOCIATION, NEW JERSEY
By /s/ Robert Strunk
Robert Strunk
Title: Vice President
ABN AMRO BANK N.V.
NEW YORK BRANCH
By /s/ David A. Mandell
David A. Mandell
Title: Vice President
By /s/ David W. Stack
David W. Stack
Title: Acting Vice President
SHAWMUT BANK CONNECTICUT, N.A.
By /s/ Robert Surdam
Robert Surdam
Title: Director
Acknowledged and Agreed:
INGREDIENT TECHNOLOGY CORPORATION
By /s/ Peter Barna
Peter Barna
Title: Treasurer
CROMPTON & KNOWLES COLORS
INCORPORATED
By /s/ Peter Barna
Peter Barna
Title: Treasurer
DAVIS-STANDARD CORPORATION
By /s/ Peter Barna
Peter Barna
Title: Treasurer
AMENDED
SUPPLEMENTAL RETIREMENT AGREEMENT
AMENDMENT dated as of October 18, 1995 to the Amended Supplemental
Retirement Agreement dated as of October 20, 1993 (the "Amended Agreement")
by and (the "Employee") and Crompton & Knowles Corporation, a Massachusetts
corporation (the "Corporation").
WITNESSETH:
WHEREAS, the Employee and the Corporation wish to make certain changes in
the Amended Agreement and to restate the Amended Agreement, as further amended
hereby, in the form of this Amended Supplemental Retirement Agreement (the
"Agreement");
NOW, THEREFORE, the Employee and the Corporation hereby agree that the
Amended Agreement shall be further amended and restated in its entirety to
read as follows:
1. The Corporation has entered into this Agreement to induce the Employee
to continue in its employment, recognizing that in the case of a limited
number of key executive employees to whom similar contracts may be offered the
ordinary retirement benefits provided under the Corporation's retirement
system do not afford sufficient incentive in terms of economic security, when
compared with retirement arrangements available from other prospective
employers who have been, are, or may be competing for their services. Nothing
herein shall be deemed a contract of employment for any minimum fixed term, or
shall restrict the freedom of the Corporation or the Employee to terminate the
employment relationship between them at any time.
2. All references herein to the Corporation shall be deemed to include any
subsidiary, which shall be defined as meaning any corporation of which this
Corporation owns all of the voting stock.
3. For the purposes of this Agreement, the following terms shall have the
following meanings:
(a) "Normal Retirement Date" shall mean the first day of the month on
or next after the Employee's sixty-fifth (65th) birthday.
(b) "Compensation" shall mean all of the Employee's cash compensation
for a calendar year, including salary, any amount contributed by the Employee
to a cash or deferred plan under Section 401(k) of the Internal Revenue Code
of 1986, as amended, and any incentive compensation award or bonus with
respect to such year (even if paid in a subsequent year), but excluding any
incentive compensation award or bonus paid during such year with respect to a
prior year and extraordinary earnings such as insurance costs or gains on
exercise of stock options.
(c) "Actuarial Equivalent" shall mean an amount of equivalent value
computed on the basis of the actuarial assumptions used from time to time by
the actuarial consultants employed by the Corporation in connection with its
employee benefit plans, but using an interest assumption which is not less
than the Pension Benefit Guaranty Corporation interest assumption in effect at
the beginning of the month as of which the computation is made.
(d) "Cause" shall mean (i)the Employee's willful and continued failure
to substantially perform assigned duties with the Corporation (other than any
such failure resulting from incapacity due to physical or mental illness or
any such actual or anticipated failure resulting from termination for Good
Reason), after a demand for substantial performance is delivered to the
Employee by the Board of Directors of the Corporation, specifically
identifying the manner in which the Board believes that the duties have not
been substantially performed, or (ii) the Employee's willful conduct which is
demonstrably and materially injurious to the Corporation. For purposes of
this sub-paragraph (d), no act, or failure to act, shall be considered
"willful" unless done, or omitted to be done, not in good faith and without
reasonable belief that such action or omission was in the best interest of
the Corporation.
(e) "Good Reason" shall mean (i) the assignment to the Employee of
any duties inconsistent in any respect with the Employee's position
(including status, offices, titles, and reporting requirements), authority,
duties, or responsibilities as contemplated by any Employment Agreement
between the Employee and the Corporation, or any other action by the
Corporation which results in a diminishment in such position,authority,
duties, or responsibilities, other than an insubstantial and inadvertent
action which is remedied by the Corporation promptly after receipt of notice
thereof given by the Employee; (ii) any failure by the Corporation to comply
with any of the provisions of any Employment Agreement between the Employee
and the Corporation, other than an insubstantial and inadvertent failure
which is remedied by the Corporation promptly after receipt of notice thereof
given by the Employee; (iii) any change not concurred in by the Employee in
the location of the office at which the Employee is principally based, except
for travel reasonably required in the performance of the Employee's
responsibilities and substantially consistent with prior business travel
obligations of the Employee; or (iv) any purported termination by the
Corporation of the Employee's employment otherwise than as permitted by any
Employment Agreement between the Employee and the Corporation.
(f) "Change in Control" shall mean a change in control of the
Corporation of a nature that would be required to be reported in response to
Item 1(a) of the Current Report on Form 8-K, as in effect on January 1,
1988, pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
(the "Exchange Act"); provided that, without limitation, such a "Change in
Control" shall be deemed to have occurred if: (i) a third person, including
a "group" as such term is used in Section 13(d)(3) of the Exchange Act,
other than the trustee of any employee benefit plan of the Corporation,
becomes the beneficial owner, directly or indirectly, of 20% or more of the
combined voting power of the Corporation's outstanding voting securities
ordinarily having the right to vote for the election of directors of the
Corporation; (ii) during any period of 24 consecutive months individuals
who, at the beginning of such consecutive 24-month period, constitute the
Board of Directors of the Corporation (the "Board" generally and, as of the
date of this Agreement, the "Incumbent Board") cease for any reason (other
than retirement upon reaching normal retirement age, disability, or death)
to constitute at least a majority of the Board; provided that any person
becoming a director subsequent to the date hereof whose election, or
nomination for election by the Corporation's shareholders, was approved by a
vote of at least three quarters of the directors comprising the Incumbent
Board (other than an election or nomination of an individual whose initial
assumption of office is in connection with an actual or threatened election
contest relating to the election of the Directors of the Corporation, as
such terms are used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) shall be, for purposes of this Agreement, considered as though
such person were a member of the Incumbent Board; or (iii) the Corporation
shall cease to be a publicly owned corporation having its outstanding Common
Stock listed on the New York Stock Exchange or quoted in the NASDAQ National
Market System.
(g) "Projected Compensation" shall mean (I) for any calendar year
throughout which the Employee is employed by the Corporation, his
Compensation (as defined in paragraph 3(b) hereof) for such year, and (ii)
for any calendar year during or after which his employment has been
terminated, the compensation the Employee would have received for such year
if he had received (A) salary at a rate determined by projecting his annual
rate of salary at the end of the last full calendar year of his employment
forward at a rate equal to 5% in excess of the annual percentage change in
the Consumer Price Index as published by the U.S. Bureau of Labor Statistics
for such year and (B) a bonus equal to 40% of his salary as thus projected.
4. If, prior to his Normal Retirement Date, the Employee shall voluntarily
terminate his employment with the Corporation without Good Reason or his
employment shall be terminated by the Corporation for Cause, he shall thereby
forfeit all rights and benefits under this Agreement. If the employment of
the Employee shall be terminated on or after his Normal Retirement date, or
if, prior to that date but after the conditions of paragraph 2 hereof have
been satisfied, the Employee shall voluntarily terminate his employment for
Good Reason or his employment shall be terminated by the Corporation without
Cause, this Agreement shall continue in full force and effect, and the
Employee shall become entitled to the rights and benefits hereinafter set
forth upon the occurrence of the events respectively giving rise thereto.
5. If the Employee shall remain in employment by the Corporation until and
shall reach his Normal Retirement Date, he shall be entitled to receive a
supplemental retirement benefit under this Agreement which shall be at an
annual rate equal to the amount by which
(a) sixty percent (60%) of the Employee's average annual Compensation
during those five (5) calendar years in which such Compensation was highest
during the ten (10) calendar years immediately preceding his Normal
Retirement Date
exceeds
(b) the annual benefit, payable for the life of the Employee commencing
on his Normal Retirement Date and without refund, which is the Actuarial
Equivalent of that portion of the Employee's total accounts held under the
Corporation's Individual Account Retirement Plan (the "IARP") which is
attributable to contributions made to the IARP by the Corporation.
Such supplemental retirement benefit shall commence on the Employee's actual
retirement date and shall be payable in one of the benefit payment forms
described in paragraph 8, as the Employee shall elect.
6. If the Employee's employment by the Corporation shall be terminated
(other than by reason of his death or disability) prior to his Normal
Retirement Date under circumstances not resulting in his forfeiture of
benefits and rights under paragraph 4 of this Agreement, he shall be entitled
to receive a reduced supplemental retirement benefit under this Agreement
which shall be at an annual rate computed as follows:
(a) There shall first be determined the amount by which
(i) sixty percent (60%) of the Employee's average annual
Compensation during those five(5) calendar years in which such
Compensation on was highest during the ten (10) calendar years
immediately preceding the year in which the termination of his
employment occurs
exceeds
(ii) the annual benefit, payable for the life of the Employee
commencing on the date of the termination of his employment and without
refund, which is the Actuarial Equivalent of that portion of the
Employee's total accounts under the IARP which is attributable to
contributions made to the IARP by the Corporation.
(b) The amount thus determined shall then be multiplied by a fraction
in which the numerator shall be the number of full years of continuous
service the Employee shall have completed prior to the termination of
his employment and the denominator shall be the number of full years of
continuous service he would have completed had he remained in the
continuous service of the Corporation until his normal retirement date.
Such reduced supplemental retirement benefit shall commence on the first day
of the month following the Employee's termination of employment and shall be
payable in one of the benefit payment forms described in paragraph 8, as the
Employee shall elect.
Anything in this paragraph or paragraph 4 to the contrary notwithstanding,
if, prior to his Normal Retirement Date but after a Change in Control of the
Corporation shall have occurred, the Corporation shall terminate the
Employee's employment other than for Cause, disability, or death or the
employment of the Employee shall be terminated voluntarily by the Employee for
Good Reason, he shall be entitled to elect to receive a supplemental
retirement benefit under this Agreement, whether or not the Employee shall
have then satisfied the conditions of paragraph 2 hereof, in lieu of any
benefit he is entitled to receive under sub-paragraphs (a) and (b) of this
paragraph 6, which shall be at an annual rate computed as follows:
(c) If the Employee has not attained the age of 55 on the date his
termination of employment occurs, his benefit shall be equal to the amount
by which
(i) sixty percent (60%) of the Employee's average annual Projected
Compensation during those five (5) calendar years in which such
Projected Compensation is highest during the ten (10) calendar years
immediately preceding the year in which he would have attained age 55
exceeds
(ii) the annual benefit, payable for the life of the Employee
commencing on the date of the termination of his employment and without
refund, which is the Actuarial Equivalent of that portion of the
Employee's total accounts under the IARP which is attributable to
contributions made to the IARP by the Corporation.
(d If the Employee has attained age 55 on the date his termination of
employment occurs, his benefit shall be equal to the amount determined under
sub-paragraph (a) of this paragraph without the application of sub-paragraph
(b) hereof.
Such supplemental retirement benefit under sub-paragraph (c) or (d) hereof
shall commence on the first day of the month following the month in which the
Employee attains age 65 and shall be payable in one of the benefit payment
forms described in paragraph 8, as the Employee shall elect.
7. If in the opinion of the Corporation the Employee becomes totally and
permanently disabled at any time while in the employment of the Corporation
and after the conditions of paragraph 2 hereof have been satisfied, he shall
become entitled to a disability benefit which shall be at an annual rate equal
to the amount by which
(a) seventy-five percent (75%) of the Employee's average annual
Compensation during the last five (5) consecutive calendar years preceding
the year in which his disability occurs
exceeds
(b) the annual benefit which the Employee would be entitled to receive
under the Corporation's Long Term Disability Insurance Program if he was then
eligible for benefits thereunder (regardless of whether he participates in
said Program);
provided, however, that if the Employee is not entitled to receive any benefit
under said Program, the disability benefit to which he is entitled hereunder
shall be in an amount equal to forty percent (40%) of the Employee's average
annual Compensation determined as provided in sub-paragraph (a) above, and
provided further that the disability benefit to which the Employee is entitled
hereunder shall in no event be less than five percent (5%) of his average
annual Compensation determined as provided in sub-paragraph (a) above. Such
disability benefit shall be payable in equal monthly installments, the first
payment to be made on the first day of the month following that in which the
Employee's salary is terminated because of such disability, and payments shall
be made on the first day of each month thereafter so long as such total
disability subsists and the Employee lives; provided, however, if the Employee
lives until his Normal Retirement Date, he may thereupon elect to receive, in
lieu of the disability benefit he had been receiving under this paragraph, the
supplemental retirement benefit to which he would then be entitled under
paragraph 6 if his employment by the Corporation had terminated other than by
reason of disability on the date his disability occurred.
8. The normal form in which the supplemental retirement benefit payable
under paragraph 5 or 6 of this Agreement shall be paid shall be a monthly
benefit payable for life and without refund. In lieu of such normal benefit
payment form, the Employee may elect to receive his supplemental retirement
benefit hereunder in the form of a monthly benefit payable for life with a
period certain of up to 180 months, in the form of a monthly benefit payable
for a period certain, or in the form of a monthly benefit payable for life
with continuation of such payments (or a specified percentage thereof) to such
beneficiary as the Employee may designate for the life of such beneficiary.
The amount of benefit payable under each such alternative benefit payment form
shall be the Actuarial Equivalent of the benefit payable in the normal form to
which the Employee would otherwise be entitled hereunder. Any election of an
alternative benefit payment form shall be made in writing and may be changed
or rescinded by the Employee at any time prior to the date on which benefit
payments are to commence. The Employee shall have the right to designate in
writing the beneficiary or beneficiaries to receive the benefit, if any, which
is payable under any benefit payment form after the Employee's death and may
change his designation of beneficiary from time to time, at any time prior to
the date on which benefit payments are to commence. If there shall be no
beneficiary designated and surviving at the Employee's death, the estate of
the Employee shall be the beneficiary. Whenever any benefits hereunder become
payable to the beneficiary of the Employee, the Corporation may, in its
discretion, authorize payment of such benefits to the beneficiary in a single
lump sum which is the Actuarial Equivalent of such benefits.
Anything in this paragraph 8 to the contrary notwithstanding, at any time
after the date on which benefit payments commence, the Employee may elect to
receive his benefits hereunder in a single lump sum in an amount which is
equal to 90% of the Actuarial Equivalent of the benefit payable in the normal
form to which the Employee is otherwise entitled hereunder on the date as of
which such election is made.
9. If the Employee shall die while currently receiving a supplemental
retirement benefit under the provisions of paragraph 5 or 6 of this Agreement
(or after his Normal Retirement Date while currently receiving a supplemental
retirement benefit in lieu of the disability benefit provided under paragraph
7) and the Employee shall have elected a benefit payment form other than a
monthly benefit payable for life with no period certain, any benefits payable
after his death shall be paid to his beneficiary in accordance with the
provisions of the benefit payment form elected by the Employee. If the
Employee shall die having reached his Normal Retirement Date but prior to his
actual retirement date and the Employee shall have elected a benefit payment
form other than a monthly benefit payable for life with no period certain,
benefits shall be paid to his beneficiary as if the Employee had commenced to
receive benefits under on the first day of the month in which his death
occurred. If the Employee shall die after the conditions of paragraph 2 have
been satisfied and while in the active employ of the Corporation but prior to
his Normal Retirement Date, or if the Employee shall die while currently
receiving a disability benefit under paragraph 7 but prior to his Normal
Retirement Date, a death benefit shall be paid to the Employee's beneficiary,
in lieu of any other benefit under this Agreement, which shall be at an annual
rate equal to thirty-five percent (35%) of the Employee's average annual
Compensation during those five (5) calendar years in which such Compensation
was highest during the ten (10) calendar years immediately preceding the year
in which his death occurs or the year in which his disability occurred, as the
case may be. Such death benefit shall be payable in equal monthly
installments beginning on the first day of the month following that in which
the death of the Employee occurs and continuing thereafter for a period
certain of 120 months; provided that the Beneficiary entitled thereto may
elect to have such benefit paid in any of the forms described in paragraph 8
in an amount which is the Actuarial Equivalent of the form of benefit
otherwise payable under this paragraph.
If the Employee shall die after having become entitled to a benefit under
sub-paragraph (c) or (d) of paragraph 6 hereof but prior to attaining age 65,
a death benefit shall be paid to the Employee's beneficiary, in lieu of any
other benefit under this Agreement, which shall be the single sum Actuarial
Equivalent value as of the Employee's death of the benefit to which he would
have been entitled had he survived to age 65. Such death benefit shall be
payable in a lump sum as soon as practicable after the Employee's death;
provided that the beneficiary entitled thereto may elect to have such death
benefit paid in any of the forms described in paragraph 8.
10. Anything in this Agreement to the contrary notwithstanding, if at any
time following termination of his employment with the Corporation the Employee
shall directly or indirectly compete with the Corporation (which shall be
deemed to include any subsidiary or affiliate of the Corporation), whether as
an individual proprietor or entrepreneur or as an officer, employee, partner,
stockholder, or in any capacity connected with any enterprise, in any business
in which the Corporation is engaged at the time of the termination of the
Employee's employment within any state or possession of the United States of
America or any foreign country within which business is then specifically
planned by the Corporation to be conducted, the Corporation may suspend the
payment of any benefits hereunder to the Employee until such competition shall
have ceased, and in the event such competition by the Employee shall not have
ceased to the satisfaction of the Corporation within 90 days after the
Corporation shall have given written notice to the Employee to cease the
conduct thereof, the Corporation may at any time thereafter terminate its
obligations under this Agreement. For the purpose of the preceding sentence,
conducting business, doing business, or engaging in business shall be deemed
to embrace sales to customers or performance of services for customers who are
within a relevant geographical area, without any necessity of any presence of
the Corporation therein. Nothing herein, however, shall prohibit the Employee
from acquiring or holding any issue of stock or securities of any company
which has any securities listed on a national exchange or quoted in the daily
listing of over-the-counter market securities, provided that at any one time
he and members of his immediate family do not own more than five percent (5%)
of the voting securities of any such company.
11. This Agreement is an unfunded plan maintained for the purpose of
providing deferred compensation for one of a select group of management or
highly compensated employees for purposes of Title I of the Employee
Retirement Income Security Act of 1974.
The Corporation will make all benefit payments hereunder solely on a current
disbursement basis out of the general assets of the Corporation, including
without limitation from assets held in any grantor trust established by the
Corporation for the purpose of making some or all of such payments.
12. This Agreement shall bind and run to the benefit of the successors and
assigns of the Corporation, including any corporation or other form of
business organization with which it may merge or consolidate or to which it
may transfer substantially all of its assets.
13. The rights of the Employee under this Agreement shall not be assigned,
hypothecated, or otherwise transferred in any manner.
14. This Agreement shall be governed by and construed in accordance with
the laws of the State of Connecticut.
IN WITNESS WHEREOF, the Employee has hereunto signed his name and Crompton &
Knowles Corporation has caused this instrument to be executed in its name and
on its behalf by its duly authorized officer, as of the 18th day of October,
1995.
Employee
CROMPTON & KNOWLES CORPORATION
AMENDED
SUPPLEMENTAL RETIREMENT AGREEMENT
AMENDMENT dated as of October 18, 1995 to the Amended Supplemental
Retirement Agreement dated as of October 20, 1993 (the "Amended Agreement")
by and between (the "Employee") and Crompton & Knowles Corporation, a
Massachusetts corporation (the "Corporation").
WITNESSETH:
WHEREAS, the Employee and the Corporation wish to make certain changes in
the Amended Agreement and to restate the Amended Agreement, as further amended
hereby, in the form of this Amended Supplemental Retirement Agreement (the
"Agreement");
NOW, THEREFORE, the Employee and the Corporation hereby agree that the
Amended Agreement shall be further amended and restated in its entirety to
read as follows:
1. The Corporation has entered into this Agreement to induce the Employee
to continue in its employment, recognizing that in the case of a limited
number of key executive employees to whom similar contracts may be offered the
ordinary retirement benefits provided under the Corporation's retirement
system do not afford sufficient incentive in terms of economic security, when
compared with retirement arrangements available from other prospective
employers who have been, are, or may be competing for their services. Nothing
herein shall be deemed a contract of employment for any minimum fixed term, or
shall restrict the freedom of the Corporation or the Employee to terminate the
employment relationship between them at any time.
2. All references herein to the Corporation shall be deemed to include any
subsidiary, which shall be defined as meaning any corporation of which this
Corporation owns all of the voting stock..
3. For the purposes of this Agreement, the following terms shall have the
following meanings:
(a) "Normal Retirement Date" shall mean the first day of the month on
or next after the Employee's sixty-fifth (65th) birthday.
(b) "Compensation" shall mean all of Employee's cash compensation for a
calendar year, including salary, any amount contributed by the Employee to a
cash or deferred plan under Section 401(k) of the Internal Revenue Code of
1986, as amended, and any incentive compensation award or bonus with respect
to such year (even if paid in a subsequent year), but excluding any incentive
compensation award or bonus paid during such year with respect to a prior year
and extraordinary earnings such as insurance costs or gains on exercise of
stock options.
(c) "Actuarial Equivalent" shall mean an amount of equivalent value
computed on the basis of the actuarial assumptions used from time to time by
the actuarial consultants employed by the Corporation in connection with its
employee benefit plans, but using an interest assumption which is not less
than the Pension Benefit Guaranty Corporation interest assumption in effect
at the beginning of the month as of which the computation is made.
(d)"Company Plan Benefit" shall mean the amount of benefit payable to or
for the account of the Employee from the Corporation's Individual Account
Retirement Plan (or from any other retirement plan sponsored by the
Corporation which may hereafter be adopted in lieu of or in addition to said
Individual Account Retirement Plan) which is attributable to contributions
made by the Corporation, calculated in the form of a straight life annuity
(regardless of the form in which such benefit may actually be payable).
(e) "Cause" shall mean (i) the Employee's willful and continued failure
to substantially perform assigned duties with the Corporation (other than any
such failure resulting from incapacity due to physical or mental illness or
any such actual or anticipated failure resulting from termination for Good
Reason), after a demand for substantial performance is delivered to the
Employee by the Board of Directors of the Corporation, specifically
identifying the manner in which the Board believes that the duties have not
been substantially performed, or (ii) the Employee's willful conduct which is
demonstrably and materially injurious to the Corporation. For purposes of
this sub-paragraph (e), no act, or failure to act, shall be considered
"willful" unless done, or omitted to be done, not in good faith and without
reasonable belief that such action or omission was in the best interest of
the Corporation.
(f) "Good Reason" shall mean (i) the assignment to the Employee of any
duties inconsistent in any respect with the Employee's position (including
status, offices, titles, and reporting requirements), authority, duties, or
responsibilities as contemplated by any Employment Agreement between the
Employee and the Corporation, or any other action by the Corporation which
results in a diminishment in such position, authority, duties, or
responsibilities, other than an insubstantial and inadvertent action which is
remedied by the Corporation promptly after receipt of notice thereof given by
the Employee; (ii) any failure by the Corporation to comply with any of the
provisions of any Employment Agreement between the Employee and the
Corporation, other than an insubstantial and inadvertent failure which is
remedied by the Corporation promptly after receipt of notice thereof given by
the Employee; (iii) any change not concurred in by the Employee in the
location of the office at which the Employee is principally based, except for
travel reasonably required in the performance of the Employee's
responsibilities and substantially consistent with prior business travel
obligations of the Employee; or (iv) any purported termination by the
Corporation of the Employee's employment otherwise than as permitted by any
Employment Agreement between the Employee and the Corporation.
(g) "Change in Control" shall mean a change in control of the
Corporation of a nature that would be required to be reported in response to
Item 1(a) of the Current Report on Form 8-K, as in effect on January 1,
1988, pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
(the "Exchange Act"); provided that, without limitation, such a "Change in
Control" shall be deemed to have occurred if: (i) a third person, including
a "group" as such term is used in Section 13(d)(3) of the Exchange Act,
other than the trustee of any employee benefit plan of the Corporation,
becomes the beneficial owner, directly or indirectly, of 20% or more of the
combined voting power of the Corporation's outstanding voting securities
ordinarily having the right to vote for the election of directors of the
Corporation; (ii) during any period of 14 consecutive months individuals
who, at the beginning of such consecutive 24-month period, constitute the
Board of Directors of the Corporation (the "Board" generally and, as of the
date of this Agreement, the "Incumbent Board") cease for any reason (other
than retirement upon reaching normal retirement age, disability, or death)
to constitute at least a majority of the Board; provided that any person
becoming a director subsequent to the date hereof whose election, or
nomination for election by the Corporation's shareholders, was approved by a
vote of at least three quarters of the directors comprising the Incumbent
Board (other than an election or nomination of an individual whose initial
assumption of office is in connection with an actual or threatened election
contest relating to the election of the Directors of the Corporation, as
such terms are used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) shall be, for purposes of this Agreement, considered as though
such person were a member of the Incumbent Board; or (iii) the Corporation
shall cease to be a publicly owned corporation having its outstanding Common
Stock listed on the New York Stock Exchange or quoted in the NASDAQ National
Market System.
(h) "Projected Compensation" shall mean (i) for any calendar year
throughout which the Employee is employed by the Corporation, his
Compensation (as defined in paragraph 3(b) hereof) for such year, and (ii)
for any calendar year during or after which his employment has been
terminated, the compensation the Employee would have received for such year
if he had received (A) salary at a rate determined by projecting his annual
rate of salary at the end of the last full calendar year of his employment
forward at a rate equal to 5% in excess of the annual percentage change in
the Consumer Price Index as published by the U.S. Bureau of Labor Statistics
for such year and (B) a bonus equal to 40% of his salary as thus projected.
4. If, prior to his Normal Retirement Date, the Employee shall voluntarily
terminate his employment with the Corporation (except as hereinafter provided)
or his employment shall be terminated by the Corporation for Cause, he shall
thereby forfeit all rights and benefits under this Agreement. If the
employment of the Employee shall be terminated on or after his Normal
Retirement Date, or if, prior to that date but after the conditions of
paragraph 2 hereof have been satisfied, the Employee shall voluntarily
terminate his employment with the approval of the Corporation (as evidenced by
vote of its Board of Directors or the Committee thereof authorized to
administer this Agreement) or his employment shall be terminated by the
Corporation without Cause, this Agreement shall continue in full force and
effect, and the Employee shall become entitled to the rights and benefits
hereinafter set forth upon the occurrence of the events respectively giving
rise thereto.
5. If the Employee shall remain in employment by the Corporation until and
shall reach his Normal Retirement Date, he shall be entitled to receive a
supplemental retirement benefit under this Agreement which shall be at an
annual rate equal to the amount by which
(a) fifty percent (50%) of the Employee's average annual Compensation
during those five (5) calendar years in which such Compensation was highest
during the ten (10) calendar years immediately preceding his Normal
Retirement Date
exceeds
(b) the annual amount of the Company Plan Benefit payable to the
Employee, determined as of his Normal Retirement Date.
Such supplemental retirement benefit shall commence on the Employee's actual
retirement date and shall be payable in one of the benefit payment forms
described in paragraph 8, as the Employee shall elect.
6. If the Employee's employment by the Corporation shall be terminated
(other than by reason of his death or disability) prior to his Normal
Retirement Date under circumstances not resulting in his forfeiture of
benefits and rights under paragraph 4 of this Agreement, he shall be entitled
to receive a reduced supplemental retirement benefit under this Agreement
which shall be at an annual rate computed as follows:
(a) There shall first be determined the amount which is equal to fifty
percent (50%) of the Employee's average annual Compensation during those five
(5) calendar years in which such Compensation was highest during the ten (10)
calendar years immediately preceding the year in which the termination of his
employment occurs.
(b) The amount thus determined shall be multiplied by a fraction in
which the numerator shall be the number of full years of continuous service
the Employee shall have completed between the effective date of this
Agreement and the termination of his employment and the denominator shall be
the number of full years of continuous service he would have completed
between the effective date of this Agreement and his Normal Retirement Date
had he remained in the continuous service of the Corporation until his Normal
Retirement Date.
(c) There shall then be subtracted from the amount thus determined the
annual amount of the Company Plan Benefit payable to the Employee, determined
as of the date of the termination of his employment.
Such reduced supplemental retirement benefit shall commence on the first day
of the month following the Employee's termination of employment and shall be
payable in one of the benefit payment forms described in paragraph 8, as the
Employee shall elect.
Anything in this paragraph or paragraph 4 to the contrary notwithstanding,
if, prior to his Normal Retirement Date but after a Change in Control of the
Corporation shall have occurred, the Corporation shall terminate the
Employee's employment other than for Cause, disability, or death or the
employment of the Employee shall be terminated voluntarily by the Employee for
Good Reason, he shall be entitled to elect to receive a supplemental
retirement benefit under this Agreement, whether or not the Employee shall
have then satisfied the conditions of paragraph 2 hereof, in lieu of any
benefit he is entitled to receive under sub-paragraphs (a)-(c), inclusive, of
this paragraph 6, which shall be at an annual rate computed as follows:
(d) If the Employee has not attained the age of 55 on the date his
termination of employment occurs, his benefit shall be equal to the amount by
which
(i) fifty percent (50%) of the Employee's average annual Projected
Compensation during those five (5) calendar years in which such
Projected Compensation is highest during the ten (10) calendar years
immediately preceding the year in which he would have attained age 55
exceeds
(ii) the annual amount of the Company Plan Benefit payable to the
Employee, determined as of the date of the termination of his
employment.
(e) If the employee has attained age 55 on the date his termination of
employment occurs, his benefit shall be equal to the amount determined under
sub-paragraphs (a) and (c) of this paragraph without the application of
sub-paragraph (b) hereof.
Such supplemental retirement benefit under sub-paragraph (d) or (e) hereof
shall commence on the first day of the month following the month in which the
Employee attains age 65 and shall be payable in one of the benefit payment
forms described in paragraph 8, as the Employee shall elect.
7. If the Employee becomes qualified for benefits under any long term
disability plan sponsored by the Corporation as a result of total disability
while in the employment of the Corporation and after the conditions of
paragraph 2 hereof have been satisfied, but prior to his Normal Retirement
Date, he shall become entitled to a disability benefit hereunder which shall
be at an annual rate computed as follows:
(a) There shall first be determined the amount which is equal to fifty
percent (50%) of the Employee's average annual Compensation during those five
(5) calendar years in which such Compensation was highest during the Ten (10)
calendar years preceding the year in which his disability occurs.
(b) The amount thus determined shall be multiplied by a fraction in
which the numerator shall be the number of full years of continuous service
the Employee shall have completed between the effective date of this
Agreement and the date his employment terminates on account of disability and
the denominator shall be the number of full years of continuous service he
would have completed between the effective date of this Agreement and his
Normal Retirement Date had he remained in the continuous service of the
Corporation until his Normal Retirement Date.
(c) There shall then be subtracted from the amount thus determined the
annual amount of the Company Plan Benefit payable to the Employee, determined
as of the date his disability benefit hereunder is to commence.
Such disability benefit shall commence on the date the benefits payable to the
Employee under such long term disability plan sponsored by the Corporation
cease, if the Employee is then living, and shall be payable in one of the
benefit payment forms described in paragraph 8, as the Employee shall elect.
8. The normal form in which the benefit payable under paragraphs 5, 6, or 7
of this Agreement shall be paid shall be a monthly benefit payable for life
and without refund. In lieu of such normal benefit payment form, the Employee
may elect to receive his benefit hereunder in the form of a monthly benefit
payable for life with a period certain of up to 180 months, in the form of a
monthly benefit payable for a period certain, or in the form of a monthly
benefit payable for life with continuation of such payments (or a specified
percentage thereof) to such beneficiary as the Employee may designate for the
life of such beneficiary. The amount of benefit payable under each such
alternative benefit payment form shall be the Actuarial Equivalent of the
benefit payable in the normal form to which the Employee would otherwise be
entitled hereunder. Any election of an alternative benefit payment form shall
be made in writing and may be changed or rescinded by the Employee at any time
prior to the date on which benefit payments are to commence. The Employee
shall have the right to designate in writing the beneficiary or beneficiaries
to receive the benefit, if any, which is payable under any benefit payment
form after the Employee's death and may change his designation of beneficiary
from time to time, at any time prior to the date on which benefit payments are
to commence. If there shall be no beneficiary designated and surviving at the
Employee's death, the estate of the Employee shall be the beneficiary.
Whenever any benefits hereunder become payable to the beneficiary of the
Employee, the Corporation may, in its discretion, authorize payment of such
benefits to the beneficiary in a single lump sum which is the Actuarial
Equivalent of such benefits.
Anything in this paragraph 8 to the contrary notwithstanding, at any time
after the date on which benefit payments commence, the Employee may elect to
receive his benefits hereunder in a single lump sum in an amount which is
equal to 90% of the Actuarial Equivalent of the benefit payable in the normal
form to which the Employee is otherwise entitled hereunder on the date as of
which such election is made.
9. If the Employee shall die while currently receiving a benefit under the
provisions of paragraphs 5, 6, or 7 of this Agreement and the Employee shall
have elected a benefit payment form other than a monthly benefit payable for
life with no period certain, any benefits payable after his death shall be
paid to his beneficiary in accordance with the provisions of the benefit
payment form elected by the Employee. If the Employee shall die after having
reached his Normal Retirement Date but prior to his actual retirement date and
the Employee shall have elected a benefit payment form other than a monthly
benefit payable for life with no period certain, benefits shall be paid to his
beneficiary as if the Employee had commenced to receive benefits hereunder on
the first day of the month in which his death occurred. If the Employee shall
die after the condition of paragraph 2 has been satisfied and while in the
active employ of the Corporation but prior to his Normal Retirement Date, or
if the Employee shall die after having become entitled to receive a disability
benefit under paragraph 7 but prior to his Normal Retirement Date, a death
benefit shall be paid to the Employee's beneficiary, in lieu of any other
benefit under this Agreement, which shall be at an annual rate equal to twenty
percent (20%) of the Employee's average annual Compensation during those five
(5) calendar years in which such Compensation was highest during the ten (10)
calendar years immediately preceding the year in which his death occurs or the
year in which his disability occurred, as the case may be. Such death
benefit, which shall be in addition to any Company Plan Benefit or benefits
under any group life insurance plan sponsored by the Corporation which is
payable on account of the Employee's death, shall be payable in equal monthly
installments beginning on the first day of the month following that in which
the death of the Employee occurs and continuing thereafter for a period
certain of 120 months; provided that the Beneficiary entitled thereto may
elect to have such benefit paid in any of the forms described in paragraph 8
in an amount which is the Actuarial Equivalent of the form of benefit
otherwise payable under this paragraph.
If the Employee shall die after having become entitled to a benefit under
sub-paragraph (d) or (e) of paragraph 6 hereof but prior to attaining age 65,
a death benefit shall be paid to the Employee's beneficiary, in lieu of any
other benefit under this Agreement, which shall be the single sum Actuarial
Equivalent value as of the Employee's death of the benefit to which he would
have been entitled had he survived to age 65. Such death benefit shall be
payable in a lump sum as soon as practicable after the Employee's death;
provided that the beneficiary entitled thereto may elect to have such death
benefit paid in any of the forms described in paragraph 8.
10. Anything in this Agreement to the contrary notwithstanding, if at any
time following termination of his employment with the Corporation the Employee
shall directly or indirectly compete with the Corporation (which shall be
deemed to include any subsidiary or affiliate of the Corporation), whether as
an individual proprietor or entrepreneur or as an officer, employee, partner,
stockholder, or in any capacity connected with any enterprise, in any business
in which the Corporation is engaged at the time of the termination of the
Employee's employment within any state or possession of the United States of
America or any foreign country within which business is then specifically
planned by the Corporation to be conducted, the Corporation may suspend the
payment of any benefits hereunder to the Employee until such competition shall
have ceased, and in the event such competition by the Employee shall not have
ceased to the satisfaction of the Corporation within 90 days after the
Corporation shall have given written notice to the Employee to cease the
conduct thereof, the Corporation may at any time thereafter terminate its
obligations under this Agreement. For the purpose of the preceding sentence,
conducting business, doing business, or engaging in business shall be deemed
to embrace sales to customers or performance of services for customers who are
within a relevant geographical area, without any necessity of any presence of
the Corporation therein. Nothing herein, however, shall prohibit the Employee
from acquiring or holding any issue of stock or securities of any company
which has any securities listed on a national exchange or quoted in the daily
listing of over-the-counter market securities, provided that at any one time
he and members of his immediate family do not own more than five percent (5%)
of the voting securities of any such company.
11. This Agreement is an unfunded plan maintained for the purpose of
providing deferred compensation for one of a select group of management or
highly compensated employees for purposes of Title I of the Employee
Retirement Income Security Act of 1974. The Corporation will make all benefit
payments hereunder solely on a current disbursement basis out of the general
assets of the Corporation, including without limitation from assets held in
any grantor trust established by the Corporation for the purpose of making
some or all of such payments.
12. This Agreement shall bind and run to the benefit of the successors and
assigns of the Corporation, including any corporation or other form of
business organization with which it may merge or consolidate or to which it
may transfer substantially all of its assets.
13. The rights of the Employee under this Agreement shall not be assigned,
hypothecated, or otherwise transferred in any manner.
14. This Agreement shall be governed by and construed in accordance with
the laws of the State of Connecticut.
IN WITNESS WHEREOF, the Employee has hereunto signed his name and Crompton &
Knowles Corporation has caused this instrument to be executed in its name and
on its behalf by its duly authorized officer, as of the 18h day of October,
1995.
Employee
CROMPTON & KNOWLES CORPORATION
By:
SUPPLEMENTAL RETIREMENT AGREEMENT
AGREEMENT dated as of October 18, 1995 (the "Agreement") by and between
(the "Employee") and Crompton & Knowles Corporation, a Massachusetts
corporation (the "Corporation.")
WITNESSETH:
WHEREAS, the Corporation wishes to induce the Employee to continue in its
employment, recognizing that in the case of a limited number of key executive
employees to whom similar contracts may be offered the ordinary retirement
benefits provided under the Corporation's retirement system do not afford
sufficient incentive in terms of economic security, when compared with
retirement arrangements available from other prospective employers who have
been, are, or may be competing for their services;
NOW, THEREFORE, the Employee and the Corporation hereby agree as follows:
1. Nothing herein shall be deemed a contract of employment for any minimum
fixed term, or shall restrict the freedom of the Corporation or the Employee
to terminate the employment relationship between them at any time.
2. It is expressly agreed that the Employee shall be entitled to no
benefits by reason of this Agreement unless and until he shall have completed
five (5) years of continuous employment by the Corporation from the effective
date of this Agreement. All references herein to the Corporation shall be
deemed to include any subsidiary, which shall be defined as meaning any
corporation of which this Corporation owns all of the voting stock.
3. For the purposes of this Agreement, the following terms shall have the
following meanings:
(a) "Normal Retirement Date" shall mean the first day of the month on
or next after the Employee's sixty-fifth (65th) birthday.
(b) "Compensation" shall mean all of Employee's cash compensation for
a calendar year, including salary, any amount contributed by the Employee to a
cash or deferred plan under Section 401(k) of the Internal Revenue Code of
1986, as amended, and any incentive compensation award or bonus with respect
to such year (even if paid in a subsequent year), but excluding any incentive
compensation award or bonus paid during such year with respect to a prior year
and extraordinary earnings such as insurance costs or gains on exercise of
stock options.
(c)"Actuarial Equivalent" shall mean an amount of equivalent value
computed on the basis of the actuarial assumptions used from time to time by
the actuarial consultants employed by the Corporation in connection with its
employee benefit plans, but using an interest assumption which is not less
than the Pension Benefit Guaranty Corporation interest assumption in effect at
the beginning of the month as of which the computation is made.
(d) "Company Plan Benefit" shall mean the amount of benefit payable to
or for the account of the Employee from the Corporation's Individual Account
Retirement Plan (or from any other retirement plan sponsored by the
Corporation which may hereafter be adopted in lieu of or in addition to said
Individual Account Retirement Plan) which is attributable to contributions
made by the Corporation, calculated in the form of a straight life annuity
(regardless of the form in which such benefit may actually be payable).
(e) "Cause" shall mean (i) the Employee's willful and continued
failure to substantially perform assigned duties with the Corporation (other
than any such failure resulting from incapacity due to physical or mental
illness or any such actual or anticipated failure resulting from termination
for Good Reason), after a demand for substantial performance is delivered to
the Employee by the Board of Directors of the Corporation, specifically
identifying the manner in which the Board believes that the duties have not
been substantially performed, or (ii) the Employee's willful conduct which is
demonstrably and materially injurious to the Corporation. For purposes of
this sub-paragraph (e), no act, or failure to act, shall be considered
"willful" unless done, or omitted to be done, not in good faith and without
reasonable belief that such action or omission was in the best interest of the
Corporation.
(f) "Good Reason" shall mean (i) the assignment to the Employee of any
duties inconsistent in any respect with the Employee's position (including
status, offices, titles, and reporting requirements), authority, duties, or
responsibilities as contemplated by any Employment Agreement between the
Employee and the Corporation, or any other action by the Corporation which
results in a diminishment in such position, authority, duties, or
responsibilities, other than an insubstantial and inadvertent action which is
remedied by the Corporation promptly after receipt of notice thereof given by
the Employee; (ii) any failure by the Corporation to comply with any of the
provisions of any Employment Agreement between the Employee and the
Corporation, other than an insubstantial and inadvertent failure which is
remedied by the Corporation promptly after receipt of notice thereof given by
the Employee; (iii) any change not concurred in by the Employee in the
location of the office at which the Employee is principally based, except for
travel reasonably required in the performance of the Employee's
responsibilities and substantially consistent with prior business travel
obligations of the Employee; or (iv) any purported termination by the
Corporation of the Employee's employment otherwise than as permitted by any
Employment Agreement between the Employee and the Corporation.
(g) "Change in Control" shall mean a change in control of the
Corporation of a nature that would be required to be reported in response to
Item 1(a) of the Current Report on Form 8-K, as in effect on January 1, 1988,
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (the
"Exchange Act"); provided that, without limitation, such a "Change in Control"
shall be deemed to have occurred if: (i) a third person, including a "group"
as such term is used in Section 13(d)(3) of the Exchange Act, other than the
trustee of any employee benefit plan of the Corporation, becomes the
beneficial owner, directly or indirectly, of 20% or more of the combined
voting power of the Corporation's outstanding voting securities ordinarily
having the right to vote for the election of directors of the Corporation;
(ii) during any period of 14 consecutive months individuals who, at the
beginning of such consecutive 24-month period, constitute the Board of
Directors of the Corporation (the "Board" generally and, as of the date of
this Agreement, the "Incumbent Board") cease for any reason (other than
retirement upon reaching normal retirement age, disability, or death) to
constitute at least a majority of the Board; provided that any person becoming
a director subsequent to the date hereof whose election, or nomination for
election by the Corporation's shareholders, was approved by a vote of at least
three quarters of the directors comprising the Incumbent Board (other than an
election or nomination of an individual whose initial assumption of office is
in connection with an actual or threatened election contest relating to the
election of the Directors of the Corporation, as such terms are used in Rule
14a-11 of Regulation 14A promulgated under the Exchange Act) shall be, for
purposes of this Agreement, considered as though such person were a member of
the Incumbent Board; or (iii) the Corporation shall cease to be a publicly
owned corporation having its outstanding Common Stock listed on the New York
Stock Exchange or quoted in the NASDAQ National Market System.
(h) "Projected Compensation" shall mean (i) for any calendar year
throughout which the Employee is employed by the Corporation, his Compensation
(as defined in paragraph 3(b) hereof) for such year, and (ii) for any calendar
year during or after which his employment has been terminated, the
compensation the Employee would have received for such year if he had received
(A) salary at a rate determined by projecting his annual rate of salary at the
end of the last full calendar year of his employment forward at a rate equal
to 5% in excess of the annual percentage change in the Consumer Price Index as
published by the U.S. Bureau of Labor Statistics for such year and (B) a bonus
equal to 40% of his salary as thus projected.
4. If, prior to his Normal Retirement Date, the Employee shall voluntarily
terminate his employment with the Corporation (except as hereinafter provided)
or his employment shall be terminated by the Corporation for Cause, he shall
thereby forfeit all rights and benefits under this Agreement. If the
employment of the Employee shall be terminated on or after his Normal
Retirement Date, or if, prior to that date but after the conditions of
paragraph 2 hereof have been satisfied, the Employee shall voluntarily
terminate his employment with the approval of the Corporation (as evidenced by
vote of its Board of Directors or the Committee thereof authorized to
administer this Agreement) or his employment shall be terminated by the
Corporation without Cause, this Agreement shall continue in full force and
effect, and the Employee shall become entitled to the rights and benefits
hereinafter set forth upon the occurrence of the events respectively giving
rise thereto.
5. If the Employee shall remain in employment by the Corporation until and
shall reach his Normal Retirement Date, he shall be entitled to receive a
supplemental retirement benefit under this Agreement which shall be at an
annual rate equal to the amount by which
(a) thirty-five percent (35%) of the Employee's average annual Compensation
during those five (5) calendar years in which such Compensation was highest
during the ten (10) calendar years immediately preceding his Normal Retirement
Date
exceeds
(b) the annual amount of the Company Plan Benefit payable to the Employee,
determined as of his Normal Retirement Date.
Such supplemental retirement benefit shall commence on the Employee's actual
retirement date and shall be payable in one of the benefit payment forms
described in paragraph 8, as the Employee shall elect.
6. If the Employee's employment by the Corporation shall be terminated
(other than by reason of his death or disability) prior to his Normal
Retirement Date under circumstances not resulting in his forfeiture of
benefits and rights under paragraph 4 of this Agreement, he shall be entitled
to receive a reduced supplemental retirement benefit under this Agreement
which shall be at an annual rate computed as follows:
(a) There shall first be determined the amount which is equal to thirty-five
percent (35%) of the Employee's average annual Compensation during those
five (5) calendar years in which such Compensation was highest during the ten
(10) calendar years immediately preceding the year in which the termination of
his employment occurs.
(b) The amount thus determined shall be multiplied by a fraction in which
the numerator shall be the number of full years of continuous service the
Employee shall have completed between the effective date of this Agreement and
the termination of his employment and the denominator shall be the number of
full years of continuous service he would have completed between the effective
date of this Agreement and his Normal Retirement Date had he remained in the
continuous service of the Corporation until his Normal Retirement Date.
(c) There shall then be subtracted from the amount thus determined the
annual amount of the Company Plan Benefit payable to the Employee, determined
as of the date of the termination of his employment.
Such reduced supplemental retirement benefit shall commence on the first day
of the month following the Employee's termination of employment and shall be
payable in one of the benefit payment forms described in paragraph 8, as the
Employee shall elect.
Anything in this paragraph or paragraph 4 to the contrary notwithstanding,
if, prior to his Normal Retirement Date but after a Change in Control of the
Corporation shall have occurred, the Corporation shall terminate the
Employee's employment other than for Cause, disability, or death or the
employment of the Employee shall be terminated voluntarily by the Employee for
Good Reason, he shall be entitled to elect to receive a supplemental
retirement benefit under this Agreement, whether or not the Employee shall
have then satisfied the conditions of paragraph 2 hereof, in lieu of any
benefit he is entitled to receive under sub-paragraphs (a)-(c), inclusive, of
this paragraph 6, which shall be at an annual rate computed as follows:
(d) If the Employee has not attained the age of 55 on the date his
termination of employment occurs, his benefit shall be equal to the amount by
which
(i) thirty-five percent (35%) of the Employee's average annual
Projected Compensation during those five (5) calendar years in which such
Projected Compensation is highest during the ten (10) calendar years
immediately preceding the year in which he would have attained age 55
exceeds
(ii) the annual amount of the Company Plan Benefit payable to the
Employee, determined as of the date of the termination of his employment.
(e) If the employee has attained age 55 on the date his termination of
employment occurs, his benefit shall be equal to the amount determined under
sub-paragraphs (a) and (c) of this paragraph without the application of
sub-paragraph (b) hereof.
Such supplemental retirement benefit under sub-paragraph (d) or (e) hereof
shall commence on the first day of the month following the month in which the
Employee attains age 65 and shall be payable in one of the benefit payment
forms described in paragraph 8, as the Employee shall elect.
7. If the Employee becomes qualified for benefits under any long term
disability plan sponsored by the Corporation as a result of total disability
while in the employment of the Corporation and after the conditions of
paragraph 2 hereof have been satisfied, but prior to his Normal Retirement
Date, he shall become entitled to a disability benefit hereunder which shall
be at an annual rate computed as follows:
(a) There shall first be determined the amount which is equal to
thirty-five percent (35%) of the Employee's average annual Compensation during
those five (5) calendar years in which such Compensation was highest during
the ten (10) calendar years preceding the year in which his disability occurs.
(b) The amount thus determined shall be multiplied by a fraction in
which the numerator shall be the number of full years of continuous service
the Employee shall have completed between the effective date of this Agreement
and the date his employment terminates on account of disability and the
denominator shall be the number of full years of continuous service he would
have completed between the effective date of this Agreement and his Normal
Retirement Date had he remained in the continuous service of the Corporation
until his Normal Retirement Date.
(c) There shall then be subtracted from the amount thus determined the
annual amount of the Company Plan Benefit payable to the Employee, determined
as of the date his disability benefit hereunder is to commence.
Such disability benefit shall commence on the date the benefits payable to the
Employee under such long term disability plan sponsored by the Corporation
cease, if the Employee is then living, and shall be payable in one of the
benefit payment forms described in paragraph 8, as the Employee shall elect.
8. The normal form in which the benefit payable under paragraphs 5, 6, or 7
of this Agreement shall be paid shall be a monthly benefit payable for life
and without refund. In lieu of such normal benefit payment form, the Employee
may elect to receive his benefit hereunder in the form of a monthly benefit
payable for life with a period certain of up to 180 months, in the form of a
monthly benefit payable for a period certain, or in the form of a monthly
benefit payable for life with continuation of such payments (or a specified
percentage thereof) to such beneficiary as the Employee may designate for the
life of such beneficiary. The amount of benefit payable under each such
alternative benefit payment form shall be the Actuarial Equivalent of the
benefit payable in the normal form to which the Employee would otherwise be
entitled hereunder. Any election of an alternative benefit payment form shall
be made in writing and may be changed or rescinded by the Employee at any time
prior to the date on which benefit payments are to commence. The Employee
shall have the right to designate in writing the beneficiary or beneficiaries
to receive the benefit, if any, which is payable under any benefit payment
form after the Employee's death and may change his designation of beneficiary
from time to time, at any time prior to the date on which benefit payments are
to commence. If there shall be no beneficiary designated and surviving at the
Employee's death, the estate of the Employee shall be the beneficiary.
Whenever any benefits hereunder become payable to the beneficiary of the
Employee, the Corporation may, in its discretion, authorize payment of such
benefits to the beneficiary in a single lump sum which is the Actuarial
Equivalent of such benefits.
Anything in this paragraph 8 to the contrary notwithstanding, at any time
after the date on which benefit payments commence, the Employee may elect to
receive his benefits hereunder in a single lump sum in an amount which is
equal to 90% of the Actuarial Equivalent of the benefit payable in the normal
form to which the Employee is otherwise entitled hereunder on the date as of
which such election is made.
9. If the Employee shall die while currently receiving a benefit under the
provisions of paragraphs 5, 6, or 7 of this Agreement and the Employee shall
have elected a benefit payment form other than a monthly benefit payable for
life with no period certain, any benefits payable after his death shall be
paid to his beneficiary in accordance with the provisions of the benefit
payment form elected by the Employee. If the Employee shall die after having
reached his Normal Retirement Date but prior to his actual retirement date and
the Employee shall have elected a benefit payment form other than a monthly
benefit payable for life with no period certain, benefits shall be paid to his
beneficiary as if the Employee had commenced to receive benefits hereunder on
the first day of the month in which his death occurred. If the Employee shall
die after the condition of paragraph 2 has been satisfied and while in the
active employ of the Corporation but prior to his Normal Retirement Date, or
if the Employee shall die after having become entitled to receive a disability
benefit under paragraph 7 but prior to his Normal Retirement Date, a death
benefit shall be paid to the Employee's beneficiary, in lieu of any other
benefit under this Agreement, which shall be at an annual rate equal to twenty
percent (20%) of the Employee's average annual Compensation during those five
(5) calendar years in which such Compensation was highest during the ten (10)
calendar years immediately preceding the year in which his death occurs or the
year in which his disability occurred, as the case may be. Such death
benefit, which shall be in addition to any Company Plan Benefit or benefits
under any group life insurance plan sponsored by the Corporation which is
payable on account of the Employee's death, shall be payable in equal monthly
installments beginning on the first day of the month following that in which
the death of the Employee occurs and continuing thereafter for a period
certain of 120 months; provided that the Beneficiary entitled thereto may
elect to have such benefit paid in any of the forms described in paragraph 8
in an amount which is the Actuarial Equivalent of the form of benefit
otherwise payable under this paragraph.
If the Employee shall die after having become entitled to a benefit under
sub-paragraph (d) or (e) of paragraph 6 hereof but prior to attaining age 65,
a death benefit shall be paid to the Employee's beneficiary, in lieu of any
other benefit under this Agreement, which shall be the single sum Actuarial
Equivalent value as of the Employee's death of the benefit to which he would
have been entitled had he survived to age 65. Such death benefit shall be
payable in a lump sum as soon as practicable after the Employee's death;
provided that the beneficiary entitled thereto may elect to have such death
benefit paid in any of the forms described in paragraph 8.
10. Anything in this Agreement to the contrary notwithstanding, if at any
time following termination of his employment with the Corporation the Employee
shall directly or indirectly compete with the Corporation (which shall be
deemed to include any subsidiary or affiliate of the Corporation), whether as
an individual proprietor or entrepreneur or as an officer, employee, partner,
stockholder, or in any capacity connected with any enterprise, in any business
in which the Corporation is engaged at the time of the termination of the
Employee's employment within any state or possession of the United States of
America or any foreign country within which business is then specifically
planned by the Corporation to be conducted, the Corporation may suspend the
payment of any benefits hereunder to the Employee until such competition shall
have ceased, and in the event such competition by the Employee shall not have
ceased to the satisfaction of the Corporation within 90 days after the
Corporation shall have given written notice to the Employee to cease the
conduct thereof, the Corporation may at any time thereafter terminate its
obligations under this Agreement. For the purpose of the preceding sentence,
conducting business, doing business, or engaging in business shall be deemed
to embrace sales to customers or performance of services for customers who are
within a relevant geographical area, without any necessity of any presence of
the Corporation therein. Nothing herein, however, shall prohibit the Employee
from acquiring or holding any issue of stock or securities of any company
which has any securities listed on a national exchange or quoted in the daily
listing of over-the-counter market securities, provided that at any one time
he and members of his immediate family do not own more than five percent (5%)
of the voting securities of any such company.
11. This Agreement is an unfunded plan maintained for the purpose of
providing deferred compensation for one of a select group of management or
highly compensated employees for purposes of Title I of the Employee
Retirement Income Security Act of 1974. The Corporation will make all
benefit payments hereunder solely on a current disbursement basis out of the
general assets of the Corporation, including without limitation from assets
held in any grantor trust established by the Corporation for the purpose of
making some or all of such payments.
12. This Agreement shall bind and run to the benefit of the successors and
assigns of the Corporation, including any corporation or other form of
business organization with which it may merge or consolidate or to which it
may transfer substantially all of its assets.
13. The rights of the Employee under this Agreement shall not be assigned,
hypothecated, or otherwise transferred in any manner.
14. This Agreement shall be governed by and construed in accordance with the
laws of the State of Connecticut.
IN WITNESS WHEREOF, the Employee has hereunto signed his name and Crompton &
Knowles Corporation has caused this instrument to be executed in its name and
on its behalf by its duly authorized officer, as of the 18th day of October,
1995.
Employee
CROMPTON & KNOWLES CORPORATION
By:
CROMPTON & KNOWLES CORPORATION
1993 Stock Option Plan for Non - Employee Directors
1. Purpose
The purpose of this 1993 Stock Option Plan for Non - Employee Directors
(the "Plan") of Crompton & Knowles Corporation (the "Company") is to attract
and retain highly qualified non-employee directors of the Company and to
encourage non-employee directors to own shares of the Company's Common Stock,
$.10 par value ("Common Stock").
2. Participation
All directors of the Company who are not employees of the Company or any
subsidiary of the Company shall be eligible to participate in the Plan.
3. Administration
(a) Grants. Grants of stock options under the Plan shall be automatic as
provided in Section 6.
(b) Committee. A committee (the "Committee"), which shall be the
Committee on Executive Compensation of the Board or such other committee
composed of three or more directors or other persons appointed for such
purpose by the Board, shall administer the Plan. If at any time no committee
designated to administer the Plan shall be in office, the functions of the
Committee shall be exercised by the Board.
(c) Rules; Committee Action. The Committee shall have the authority to
adopt, alter and repeal such administrative rules, guidelines, and practices
governing the Plan as it shall from time to time deem advisable and to
interpret the terms and provisions of the Plan and any award issued under the
Plan (and any agreement relating thereto). The Committee may act only by a
majority of its members then in office, except that the members thereof may
authorize any one or more of their number or any officer of the Company to
execute and deliver documents on behalf of the Committee.
4. Stock Available for Options
(a) Shares Available. Subject to adjustment under subsection (b),
options may be granted under the Plan in respect of a maximum of 100,000
shares of Common Stock. Shares subject to an option that expires or
terminates unexercised shall again be available for options hereunder to the
extent of such expiration or termination. Shares issued under the Plan may
consist in whole or in part of authorized but unissued shares or treasury
shares.
(b) Adjustment. In the event of any stock dividend, extraordinary cash
dividend, creation of a class of equity securities, recapitalization,
reorganization, merger, consolidation, split-up, spin-off, combination,
exchange of shares, issuance of warrants or activation of rights to purchase
Common Stock at a price substantially below fair market value, or similar
change affecting the Common Stock, such adjustment shall be made in the
maximum number and kind of shares subject to the Plan, in the number and kind
of shares subject to outstanding options and subsequent options grants, and in
the purchase price of outstanding options as the Board shall deem to be
appropriate under the circumstances to prevent substantial dilution or
enlargement of the rights granted to participants hereunder.
5. Nonstatutory Stock Options
All options granted under the Plan shall be nonstatutory options not
intended to qualify under Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code").
6. Terms and Conditions of Options
Each option granted under the Plan shall be evidenced by a written
instrument in such form as the Committee may approve and shall be subject to
the following terms and conditions:
(a) Grant of Options. As used in the Plan, the term "Grant Date" means
the date of the first regular meeting of the Board in the fourth quarter of
each calendar year. Each year, an option shall be granted automatically to
each eligible director on the Grant Date to purchase that number of full
shares of Common Stock determined by dividing the amount of the annual
retainer then payable to directors for service on the Board by the Fair Market
Value (as hereinafter defined) of the Common Stock on the Grant Date.
(b) Purchase Price. The purchase price for Common Stock subject to an
option shall be 100% of the Fair Market Value of the Common Stock on the Grant
Date.
(c) Fair Market Value. As used in the Plan, the term "Fair Market Value"
means the mean, as of any given date, between the highest and lowest reported
sales prices of the Common Stock on the New York Stock Exchange Composite
Index on such date (or, if there is no reported sale on such date, on the last
preceding date on which any reported sale occurred).
(d) Expiration Date of Options. The expiration date of each option shall
be fixed by the Committee, but no option granted under the Plan shall be
exercisable more than ten years after the Grant Date.
(e) Exercisability of Options. Options shall be exercisable in whole or
in part with respect to 50% of the shares covered thereby on or after the
first anniversary of the Grant Date and as to the remaining 50% of such shares
on or after the second anniversary of the Grant Date.
(f) Termination of Service. In the event service on the Board by the
holder of any option terminates for any reason other than disability, death,
or Change in Control (as hereinafter defined), the then outstanding options of
such holder may thereafter be exercised, to the extent exercisable at the time
of such termination, for a period of one year from the date of such
termination but in no event after the stated expiration date of each option.
(g) Disability or Death; Change in Control. In the event service on the
Board by the holder of any option terminates by reason of disability, death,
or Change in Control, the then outstanding options of such holder will become
immediately exercisable, to the extent not otherwise exercisable, and will
expire one year after such termination. Such options may be exercised during
such one-year period regardless of their stated expiration dates. The rights
of the option holder may be exercised by the holder's guardian or legal
representative in the case of disability and by the beneficiary designated by
the holder in writing delivered to the Company or, if none has been
designated, the holder's estate in the case of death.
(h) Exercise and Payment. Options may be exercised only by written
notice to the Secretary of the Company accompanied by payment of the full
purchase price for the shares as to which they are exercised. The purchase
price may be paid in cash, in shares of Common Stock already owned for at
least six months by the optionee (or other person entitled to exercise the
option), or partly in cash and partly in such shares of Common Stock. The
value of shares delivered in payment of the purchase price shall be their Fair
Market Value, as determined above, as of the date of exercise. Upon receipt
of such notice and payment, the Company shall promptly issue and deliver to
the optionee (or other person entitled to exercise the option) a certificate
or certificates for the number of shares as to which the exercise is made.
(i) Change in Control. As used herein, a "Change in Control" means a
change in control of the Company of a nature that would be required to be
reported in response to Item 1(a) of the Current Report on Form 8-K, as in
effect on the effective date of the Plan, pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934 (the "Exchange Act"); provided that,
without limitation, such a "Change in Control" shall be deemed to have
occurred if:
(i) A third person, including a "group" as such term is used in
Section 13(d)(3) of the Exchange Act, other than the trustee of a Company
employee benefit plan, becomes the beneficial owner, directly or indirectly,
of 20 percent or more of the combined voting power of the Company's
outstanding voting securities ordinarily having the right to vote for the
election of directors of the Company;
(ii) During any period of 24 consecutive months individuals who, at
the beginning of such consecutive 24-month period, constitute the Board of
Directors of the Company (the "Board" generally and as of the effective date
of the Plan the "Incumbent Board") cease for any reason (other than retirement
upon reaching normal retirement age, disability, or death) to constitute at
least a majority of the Board; provided that any person becoming a director
subsequent to the effective date of the Plan whose election, or nomination for
election by the Company's shareholders, was approved by a vote of at least
three-quarters of the directors comprising the Incumbent Board (other than an
election or nomination of an individual whose initial assumption of office is
in connection with an actual or threatened election contest relating to the
election of the Directors of the Company, as such terms are used in Rule
14a-11 of Regulation 14A promulgated under the Exchange Act) shall be, for
purposes of this Agreement, considered as though such person were a member of
the Incumbent Board; or
(iii) The Company shall cease to be a publicly owned corporation
having its outstanding stock listed on the New York Stock Exchange or quoted
in the NASDAQ National Market System.
7. Options not Transferable
Options granted under the Plan shall not be transferable by the holder other
than by will or the laws of descent and distribution or pursuant to a
qualified domestic relations order as defined by the Code or Title I of the
Employee Retirement Income Security Act ("ERISA") or the rules thereunder.
8. Limitation of Rights
Neither the Plan nor the granting of any option hereunder shall constitute
an agreement or understanding that the Company will retain a director for any
period of time or at any particular rate of compensation. The holder of an
option shall have no rights as a shareholder with respect to shares as to
which the option has not been exercised and payment made hereunder.
9. Purchase for Investment
Unless the options and shares of Common Stock covered by the Plan have been
registered under the Securities Act of 1933, as amended, or the Company has
determined that such registration is unnecessary, each holder exercising an
option may be required by the Company to represent in writing that such holder
is acquiring the shares subject to the option for his own account for
investment and not with a view to, or for sale in connection with, the
distribution of any part thereof.
10. Compliance with Regulations
It is the intention of the Company that the Plan comply in all respects with
Rule 16b-3 promulgated under Section 16(b) of the Exchange Act and that
eligible directors remain disinterested persons for purposes of administering
other employee benefit plans of the Company and having such other plans be
exempt from Section 16(b) of the Exchange Act. Therefore, if any Plan
provision or Committee rule is later found not to be in compliance with Rule
16b-3 or if any Plan provision or Committee rule would disqualify eligible
directors from remaining disinterested persons, that provision or rule shall
be deemed null and void, and in all events the Plan shall be construed in
favor of its meeting the requirements of Rule 16b-3.
11. Effective Date of the Plan
The Plan shall be effective as of the date it is adopted by the Board.
Options granted under the Plan may not be exercised prior to the time the Plan
shall have been approved by the holders of a majority of the outstanding
Common Stock present or represented and entitled to vote at a meeting of
shareholders of the Company. If such approval of the Plan by the shareholders
is not obtained within one year of the adoption of the Plan by the Board, the
Plan and any options granted pursuant to the Plan shall be null and void.
12. Amendment of the Plan
The Board may amend, suspend, or terminate the Plan or any portion thereof
at any time, provided that no amendment affecting the amount of Common Stock
subject to options granted under the Plan, the exercise price of options, or
the timing of grants may be made more than once every six months, other than
to comport with changes in the Code, ERISA, or the rules thereunder.
13. Governing Law
The Plan shall be governed by and interpreted in accordance with the laws of
the Commonwealth of Massachusetts.
j:\BOARD\DSOPLAN
CROMPTON & KNOWLES CORPORATION AND SUBSIDIARIES
EXHIBIT 11 - STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
(In thousands of dollars except per share data)
PRIMARY
1995 1994 1993
Earnings
Net earnings $40,493 $50,916 $51,958
Shares
Weighted average
shares outstanding 48,035 50,545 51,287
Common stock equivalents 442 600 649
Average shares outstanding 48,477 51,145 51,936
Per share
Net earnings $ .84 $ 1.00 $ 1.00
FULLY DILUTED
1995 1994 1993
Earnings
Net earnings $40,493 $50,916 $51,958
Shares
Weighted average
shares outstanding 48,035 50,545 51,287
Common stock equivalents 413 607 889
Average shares outstanding 48,448 51,152 52,176
Per share
Net earnings $ .84 $ 1.00 $ 1.00
Crompton & Knowles Corporation
Crompton & Knowles is a worldwide producer and marketer of specialty chemicals
and equipment. The company's 48 million shares of common stock outstanding are
traded on the New York Stock Exchange under the symbol CNK. Dividends on the
stock have been paid for 252 consecutive quarters and have increased in each of
the last 19 years. Crompton & Knowles has gained leadership positions in its
chosen markets by providing quality products, technical service and performance
know-how to solve problems and add value to customers' products. The company's
businesses are grouped into two segments:
Specialty Chemicals
Crompton & Knowles is a major producer and marketer of dyes worldwide and a
major producer and marketer of specialty food and pharmaceutical ingredients
in North America.
Specialty Process Equipment and Controls
The company is a recognized world leader in extrusion systems, industrial blow
molding equipment and related electronic controls for the plastics industry.
Crompton & Knowles is a member of the Chemical Manufacturers Association and a
signatory of the Association's Responsible Care Program. The company is
committed to a continuous good faith effort to improve performance in health,
safety and environmental quality.
Financial Highlights
(In thousands of dollars, except per share data)
1995 1994 %Change
Net sales $665,513 $589,757 13
Earnings before income taxes $ 64,091 $ 79,969 (20)
Income taxes 23,598 29,053 (19)
Net earnings $ 40,493 $ 50,916 (20)
Per common share:
Net earnings $ .84 $ 1.00 (16)
Dividends $ .52 $ .46 13
Book value $ 5.00 $ 4.60 9
Return on average common equity 17.4% 21.1%
Common stock trading range:
High 20 24 1/8
Low 12 13 7/8
Average shares outstanding
(in thousands) 48,448 51,152
Shareholders of record 4,700 4,800
(Bar Graph)
Sales Continuing Operations
(In millions of dollars)
(Bar Graph)
Earnings Per Share
Continuing Operations
(Bar Graph)
Return on Average Common Equity
Continuing Operations
Fellow shareholders: Crompton & Knowles experienced significant change in 1995
with strong earnings gains in our specialty process equipment and controls
segment more than offset by lower earnings in our specialty chemicals business
as the dyes industry undergoes a worldwide restructuring.
While total company sales increased to record levels, rising 13 percent to
$665.5 million, net earnings declined 20 percent to $40.5 million and earnings
per share declined 16 percent to 84 cents per share.
The decline in earnings is obviously a disappointment to all of us. We are
confident, however, that we have taken actions to become more efficient, to
reinforce our commitment to our customers and to focus our businesses on areas
of competitive strength. We are strengthening the foundations of our business
which will enable us to meet our long-term strategic goals and to enhance
shareholder value.
In our specialty chemicals business segment, sales slipped two percent to
$385.6 million and operating profit declined 30 percent to $42.6 million. The
primary reason for the lower sales and operating profit was weak demand for dyes
in major markets around the world, resulting in excess capacity and competitive
pricing. These conditions were further exacerbated by decisions of key
competitors to realign their dyes operations and by producers in the Far East to
become more aggressive participants in international markets.
We had anticipated that the worldwide dyes industry would undergo
restructuring. However, we were unable to avoid being impacted by the price
pressures and competitive maneuvering during 1995. Over the long-term we are
confident that Crompton & Knowles will benefit from the changes and prosper as
the industry stabilizes.
We took a number of initiatives during the year to improve our position.
In our domestic operations we reduced costs by streamlining operations. We
improved our effectiveness by consolidating dyes management at a single location
in Charlotte, North Carolina, by broadening our sales and technical service
capabilities in key market niches and by consolidating major distribution
activities at Greenville, South Carolina. In 1995, we also completed
implementation of a fully integrated computer system for sales, technical
service and distribution.
As a result, we now deliver 95 percent of our orders within 48 hours and
have gained market share in several key markets while lowering our inventory
requirements. For instance, even as total domestic apparel dyes sales continued
to decline during the year, we posted volume increases in specialized areas of
strength such as dyes for nylon activewear and fleecewear. Similarly, our sales
to the broadloom carpet industry increased during the year, reinforcing our
market position.
In Europe, the effects of the industry-wide dyes consolidation also
impacted results. While sales volume increased, operating profit decreased from
prior-year levels as a result of competitive pricing and currency effects. A
program to increase sales of dyes directly to key customers, rather than through
dealers, is paying dividends in terms of volume growth but, more importantly,
direct sales will enable us to offer our customers more value-added services to
help solve their problems through our technical and applications expertise.
As 1995 came to a close we reached a strategic crossroads with our
specialty ingredients business. Sales in the business increased five percent to
$101.6 million, and we were encouraged by the gains resulting from our emphasis
on producing fully integrated ingredient systems for the food industry. However,
we also noted that the prices being paid for specialty ingredient businesses
were high relative to prices we were prepared to pay. Therefore, in
January 1996 we retained Salomon Brothers Inc. to assist in exploring
strategic alternatives to maximize shareholder value in the business. This is
a sound business with excellent capabilities and a line-up of strong new
products and we expect to have a resolution of our strategy for it within the
first half of 1996.
The outstanding performance of our specialty process equipment and controls
segment continued from the prior year as sales rose 43 percent to $279.9 million
and operating profit increased 29 percent to $40.2 million. The performance
gains resulted from internal growth programs as well as from acquisitions. As
the leading North American supplier of specialized plastics extrusion
systems, cast film and precision coating equipment, we have set the standard
for efficient, cost effective designs to meet every customer need. This
capability, combined with recognized quality and problem-solving ability,
also enabled us to increase our international sales for this equipment by
48 percent in 1995 to $71 million.
To further reinforce our international participation in this industry, in
early 1995 we acquired the extrusion business of McNeil Akron Repiquet S.a.r.l.
in France. In January, 1996 we also acquired ER-WE-PA, a leading producer of
extrusion coating, cast film and plastics extrusion equipment based in Germany.
These operations add approximately $60 million to our international sales.
Retiring during 1995 was Warren A. Law, Ph.D., a member of our Board of
Directors for more than 20 years. His sharpness of mind and keen strategic sense
played a vital role in shaping Crompton & Knowles. We sincerely thank Dr. Law
for his contributions and we wish him well in his future activities.
The bottom line is that the major worldwide changes in the dyes industry
during 1995 significantly impacted our specialty chemicals performance. The
double-digit gains in our equipment business did provide a partial offset, but
not enough, and our performance was less than expected. Yet, we are confident
that we will continue to outperform our competitors in our chosen businesses and
that our long-term objective of increasing shareholder value will be met.
We are confident because our management thinking is guided by three key
strategic principles: 1) produce and market products for niche markets where our
company holds leadership positions, 2) add value for customers by providing
experience and technical service capabilities resulting in effective problem
solving and, 3) produce and market products which play a key role in improving
our customers' process, yield and quality.
Our experience tells us that a strategy of service, technology and
performance has and will continue to pay off for Crompton & Knowles and its
shareholders. The Board of Directors, management and every one of our employees
are conscientiously working to reinforce this strategy. We thank you for your
support and we will keep you informed.
Respectfully yours,
Vincent A. Calarco
Chairman, President &
Chief Executive Officer
March 1, 1996
Sales of the specialty chemical segment were $385.6 million in 1995, two percent
below sales of $393.6 million the prior year. Operating profit of $42.6 million
declined 30 percent from the $60.8 million achieved in 1994.
These results primarily reflect the continuing weakness in worldwide demand
for dyes in key markets, which has created an overcapacity situation. These
conditions, combined with increased supply of dyes from the Far East, have
depressed dyes prices significantly. In addition, during 1995 several major
international dyes producers undertook consolidations and restructuring of their
businesses, which further destabilized the marketplace.
High cotton prices and the weak retail environment reduced demand for
direct and reactive dyes for apparel, with declines also posted in the company's
hosiery, automotive, paper and leather markets. The company is confident that
its sales declines in these market segments were less than or equal to declines
experienced by its major competitors.
The company's dyes business was unable to completely overcome the impact
of the industry-wide dislocations created by the weak demand and competitive
restructurings. As a result, worldwide dyes sales declined four percent to
$284.0 million, with a more significant decline in operating profit. In response
management took actions to reinforce and strengthen its operations, sales and
service capabilities.
At the heart of this effort has been the company's longstanding commitment
to technical service and customer support. The completion of a $3 million
investment in a computerized order input, production, product tracking and
distribution system has enabled the company to achieve dramatic gains in
delivery times. With the new system, 95 percent of orders are delivered
within 48 hours and performance is still improving. Simultaneously, the new
system is enabling the company to reduce inventory levels of raw materials,
work in process and finished goods. To further enhance customer satisfaction,
product technology and technical support were realigned and selectively
augmented to coordinate more closely with sales activities, to speed new
product development and to focus on solving customer problems.
In response to market opportunities and in keeping with its strategy of
offering a broad product line serving specialized niches in the dyes industry,
the company introduced new products and organized a new team focused on
exploiting growth opportunities in the continuous dyeing segment. New products
included specialized blue and yellow disperse dyes for polyester used in
automotive applications where high lightfastness is required. For cotton using
direct dyes, a new heavy black dye combined with a new fixative offers unique
technology which delivers color fastness equal to more costly alternatives
without their environmental concerns.
The result of these customer-driven actions was that Crompton & Knowles
gained market share in certain key markets, while maintaining its competitive
position in other markets. A notable area of strength was the broadloom carpet
industry, where the company is a recognized leader both in products and dyeing
process technology. In the apparel industry, which had the most significant
declines, the company's strength in dyes for synthetic fibers such as nylon,
polyester and acetates enabled it to increase sales in applications such as
activewear and fleecewear. The company was also able to post gains in the
industrial sector, supplying unique dyes for can coating applications and
ink-jet computer printers.
Just as the company reinforced its focus on value-added service for the
customer, it also took action to ensure its position as North America's largest
and most cost-efficient producer of dyes by implementing cost reductions. This
was achieved through ongoing debottlenecking of production facilities; the
relocation of senior division management into a single location in Charlotte,
North Carolina; the consolidation of a distribution center in Charlotte with a
more efficient facility in Greenville, South Carolina; a net decrease in
personnel and renegotiation of certain supply and service agreements. During the
year the company also completed the construction of waste treatment facilities
at its dyes production center in Lowell, North Carolina. The new facilities will
enable the company to continue to meet local and national standards of
environmental responsibility while remaining a cost-effective producer.
International dyes operations also experienced competitive pricing
resulting from low demand for apparel as well as effects from the industry's
restructuring. In Europe, unit volume and sales revenues increased, but
profitability declined due in large part to pricing pressures as well as
exchange rate fluctuations. In December, as part of its strategy to bring
value-added technical service directly to key customers, Crompton & Knowles
acquired a key German distributor. To broaden its market participation
throughout the continent, the company introduced a line of disperse dyes
for polyester and acetates. In 1996, a further broadening of the product line
will include the marketing of reactive dyes for cotton. The company's primary
dyes offerings in Europe have been acid and pre-metallized dyes for wool
and nylon fibers. Rationalization of production between the company's two
European manufacturing facilities, in Belgium and France, combined with staff
reductions, achieved significant cost reductions in 1995, and should improve
operating results in 1996 and future years.
Photo Captions:
Textiles for automotive seating demand specialized dyes with high lightfastness.
Apparel, hosiery and leather are important markets for dyes produced by Crompton
& Knowles.
Broadloom carpet producers such as Carriage Industries, Inc. of Calhoun,
Georgia, depend on Crompton & Knowles for consistent performance, technical
service and customer support. Crompton's Nylanthrene liquid acid dyes for
nylon are used on automated equipment capable of producing broadloom carpet
at speeds of 60 to 200 feet per minute. Approximately 90 percent of broadloom
carpet is domestically made.
Continuous dyeing, used in the production of linens, sheets and towels, is a
segment of increased focus for Crompton & Knowles.
During 1995 Crompton & Knowles' specialty ingredients sales rose five
percent to $101.6 million, deriving gains from the unit's three core areas of
expertise - flavored ingredients and seasonings, food systems including
sweeteners and high value pharmaceutical ingredients.
This unique combination of product offerings and technical development
capabilities has enabled Crompton & Knowles to establish strong niche positions
in its chosen market segments.
In the flavored ingredients and seasonings markets, the development of
proprietary reaction compound flavors has enabled the company to market unique
customized savory flavors used to duplicate tastes produced by home cooking.
These include sauces, gravies, condiments, side dishes and soups supplied to
food service companies and national brand producers of consumer convenience
foods. Newly-introduced rotisserie and grilled flavors for convenience foods and
prepared meats gained acceptance during 1995.
The company's flavored seasonings business continued its gains in 1995 as
a result of the growth of the convenience food and snack markets, as well as the
growing popularity of spicy ethnic foods among consumers. Highly differentiated
flavored seasonings developed to meet very specific taste profiles enhance the
taste of a diverse line of products such as tortilla chips, pretzels, salad
dressings, frozen side dishes and microwaveable entrees.
In the food systems segment of the market, Crompton & Knowles' position as
the leading U.S. supplier of specialty sweeteners, including food grade molasses
for bakery, confectionery, cereal and convenience foods, has enabled it to
achieve a record of performance and customer service unmatched in the industry.
Specialized syrups, designed to meet customer needs by combining sweeteners with
flavored ingredients, reflected sales increases during 1995, especially with
producers of breakfast cereals seeking unique coatings and tastes.
The technological strength of the company's food ingredients business was
demonstrated in late 1994 with the introduction of a functional filling system
that creates low-calorie and low-fat or no-fat fillings with the texture and
taste of full-fat systems. Called Miracle Middles, this new technology combines
the company's core competencies in flavors, colors sweeteners and seasonings
into one product line.
Miracle Middles gained growing interest in 1995 in the bakery, cereal,
snack and confectionery markets due to its properties of low water activity as
well as high heat stability. In fact, it can be customized to meet specific food
industry needs across a range of applications and manufacturing configurations.
Growth also continued in the company's pharmaceutical ingredients business
which includes products such as coatings, colors, excipients and flavors used in
prescription and over-the-counter drugs. Crompton & Knowles' agreement to market
in the United States pharmaceutical grade lactose produced by a major European
supplier, while that company in turn sells Crompton & Knowles' proprietary
calcium coatings products in Europe and Asia, will benefit both companies.
Products on both sides of the reciprocal agreement have been well received and
met with increasing sales success.
To reinforce the growth of its pharmaceutical business, late in 1995 the
company brought onstream a multimillion dollar facility in Vineland, New Jersey.
A state-of-the-art manufacturing plant, Vineland meets all Pharmaceutical
General Management Practices codes, and resulted in reduced costs and the
closing of two less efficient facilities.
In January 1996, the company retained Salomon Brothers Inc. to assist in
exploring strategic alternatives to maximize shareholder value in the specialty
ingredients business. A resolution is expected by mid-year 1996.
Photo Captions:
Specialized capabilities in savory flavors have enabled Crompton & Knowles to
grow its food ingredients business.
Miracle Middles, a unique no-fat filling with low water activity, was developed
by Crompton & Knowles and can be customized for use in a variety of foods.
Technically sophisticated reaction flavors developed and marketed by Crompton &
Knowles are produced in automated reactors to assure high volume
reproducibility. These reaction flavors are marketed to major national
food companies for use in high value consumer entrees, fast food and food
service establishments. The pharmaceuticals industry is an important market
for Crompton's specialized coatings, excipients, colors and flavors.
Specialty process equipment and controls segment results were outstanding in
1995. Sales increased 43 percent to a record $279.9 million compared with $196.2
million in 1994. Operating profit also increased, rising 29 percent to $40.2
million from $31.2 million in the prior year.
The strong growth was achieved through internal developments as well as
through acquisitions, both in North America and internationally. Gains were made
in all major market segments, with particularly notable strength in sales of
systems for production of plastic sheet for packaging, rubber extrusion systems
and industrial blow molding systems.
The company's leading North American position was reinforced in existing
markets such as blown film, profiles, recycle/reclaim, wire and cable, fiber
systems, cast film, precision coating and medical tubing. Access to new markets,
domestically and overseas, was achieved with the strategic acquisition of three
operations. The largest of these was the January 1996 acquisition of ER-WE- PA,
a leading manufacturer of extrusion coating, cast film and plastics extrusion
equipment based in Erkrath, Germany. With annual revenues of $50 million,
ER-WE-PA significantly broadens the company's participation in the international
arena and reinforces the acquisition of McNeil Akron Repiquet S.a.r.l. in
January 1995. Repiquet has a production facility in Dannemarie, France and
makes and markets extrusion systems for pipe, profile, sheet and elastomer
applications.
International sales of specialty process equipment and controls accounted
for 25 percent of total segment sales during 1995. The two European acquisitions
ensure the company's ability to provide essential customer service and technical
support necessary for the success of the business.
The third acquisition completed in March 1995 was Killion Extruders, Inc.,
which broadened the company's capabilities in extrusion technology for specialty
laboratory equipment. Killion's complete range of precision laboratory and
medium sized production equipment is recognized for quality and
dependability, thereby blending well with Crompton & Knowles' existing
equipment operations which are broadly accepted as the standard setters for
the industry.
Among the important new equipment offerings introduced to the market by
Crompton & Knowles during 1995 was a fiber optic cable system. Able to produce
tubing for fiber optic cable at speeds of up to 750 feet per minute, the line
incorporates all equipment from a payoff system for feeding optic fiber to the
system, to tube extrusion, to cooling systems and take-up equipment, all managed
by a single computerized control center tracking all production functions.
With the increasing complexity of extrusion and plastics processing
equipment, the company also introduced an advanced technology control system
based on the Windows computer operating system. Called EPIC III, the touch
screen control system includes data exchange, networking and multitasking
capabilities and can be expanded for future process control needs. Electronic
and computer control systems now account for approximately 13 percent of the
segment's sales and are expected to continue to increase.
As one of the world's leading producers and marketers of plastics extrusion
systems, Crompton & Knowles has also become one of the leading suppliers of
aftermarket systems and services, providing engineering, operating, maintenance,
parts and systems upgrade support. Technicians based in the United States,
England, France and Hong Kong provide around-the-clock problem-solving.
Aftermarket services accounted for nearly 15 percent of the segment's revenues
in 1995.
The segment's equipment order backlog at the end of 1995 was $72 million.
Photo Captions:
Snowboards made of colorful impact-resistant plastics are among the newer
applications of Crompton & Knowles' extrusion technology.
Childrens' playthings are made with the company's industrial blow molding
systems.
Medical tubing is produced on specialized extruders by Crompton & Knowles.
Advanced polymer processing is made possible by computer-controlled twin screw
extruders designed and marketed by Crompton & Knowles. Customers around the
world requiring polymer alloying, grafting and additive dispersion capabilities
are able to achieve output of up to three tons per hour using this
state-of-the-art equipment.
Financial Contents
Management's Discussion and Analysis of Financial Condition
and Results of Operations 11
Consolidated Financial Statements 14
Notes To Consolidated Financial Statements 18
Responsibility For Financial Statements 25
Independent Auditors' Report 25
Eleven Year Selected Financial Data 26
Board of Directors 28
Corporate Officers and Operating Management Inside Back Cover
Corporate Data Inside Back Cover
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Financial Condition and Liquidity
Acquisitions
In January 1995, the Company acquired the business and certain assets of
McNeil Akron Repiquet S.a.r.l. in France. In March 1995, the Company acquired
Killion Extruders, Inc. Costs of these acquisitions were accounted for based on
the purchase method and, accordingly, the results of operations of these
businesses have been included in the Consolidated Statements of Earnings since
their dates of acquisition.
Liquidity and Capital Resources
The December 30, 1995 working capital balance of $126.2 million increased
$4.6 million from the December 31, 1994 balance of $121.6 million, while the
current ratio declined to 1.8 from 1.9 at the end of 1994. The decline in the
current ratio is primarily attributable to the increase in notes payable. Days
sales in receivables increased slightly to 55 days in 1995 from 54 days in 1994.
Inventory turnover averaged 2.8 in 1995, compared to 3.0 in 1994.
Cash flow from operating activities of $26.7 million increased $4.9 million
from $21.8 million in 1994 and was used with cash reserves and increased
borrowings to finance acquisitions, fund capital expenditures, pay cash
dividends and repurchase 272,800 shares of the Company's outstanding common
shares. Dividends paid in 1995 of $25.2 million represent a payout ratio of
62% of earnings. The Company's debt-to-capital ratio increased to 34% from
29% at year-end 1994.
Capital expenditures of $18.2 million decreased $3.5 million from $21.7
million in 1994. Capital expenditures are expected to approximate $16 million in
1996 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 through
operations. The Company has available numerous uncommitted short-term lines of
credit, and a revolving credit agreement providing for borrowings up to $125
million through September 1998. At year-end, there were $60.4 million of
short-term borrowings outstanding and $60 million outstanding under the
revolving credit agreement.
Inflation
During the last three years, inflation has not been a significant factor
in the net earnings of the Company. The LIFO method of accounting is used for a
major portion of the Company's inventories. Under this method, the cost of
products sold approximates current costs and thus reduces possible distortion of
reported earnings due to rising costs. The Company continually emphasizes cost
controls and efficient management of resources to mitigate the influence of
inflation.
International operations
The lower U.S. dollar exchange rate versus primarily the Belgian Franc and
the French Franc accounted for the favorable adjustment of $4.5 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 280 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 totaled $14.0 million, $12.1 million and
$11.2 million in the fiscal years 1995, 1994 and 1993, respectively.
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. Although
precise amounts are difficult to define, the Company spent approximately $15.8
million in 1995 to comply with those requirements, including approximately $4.9
million in capital expenditures.
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 an inactive subsidiary has been designated, along with others, as a
potentially responsible party at two 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 at the waste disposal sites where it has been named a
potentially responsible party, will not be material to the results of the
Company's operations in any given year.
Operating Results - 1995 as Compared to 1994
Overview
Consolidated net sales increased 13% to $665.5 million from $589.8 million
in 1994. Net earnings declined 20% to $40.5 million from $50.9 million in 1994.
Earnings per common share declined 16% to $.84 from $1.00 in the prior year.
Average shares outstanding decreased 2.7 million to 48.5 million primarily as a
result of the Company's share repurchase program.
The gross margin percentage decreased to 28.8% from 31.5% in 1994 primarily
from lower margins in the specialty chemicals segment. Consolidated operating
profit of $72.3 million was 11% lower than 1994 as the specialty process
equipment and controls segment increased 29% while the specialty chemicals
segment decreased 30%.
Specialty Chemicals
The Company's specialty chemicals segment reported sales of $385.6 million
representing a decline of 2% from 1994. The decrease was attributable to lower
selling prices (-4%), offset in part primarily by foreign currency translation.
The proportion of sales outside the United States increased slightly to 26% from
25% in 1994.
Domestic dyes sales declined 8% reflecting lower selling prices (-5%) and
lower unit volume (-3%) as weak demand primarily for apparel dyes continued to
negatively affect the business. International dyes sales increased by 3% versus
1994 due primarily to foreign currency translation (6%) and unit volume (4%),
offset by lower selling prices (-7%). Sales of specialty ingredients increased
5% reflecting primarily increased unit volume.
Operating profit declined 30% to $42.6 million from $60.8 million in 1994.
The decline was primarily due to domestic and international dyes. Domestic dyes
declined primarily due to lower pricing. International dyes declined primarily
due to lower pricing and exchange rate fluctuations among European currencies.
The percentage of operating profit outside the United States decreased to 13%
from 21% in 1994.
Specialty Process Equipment and Controls
The Company's specialty process equipment and controls segment reported
sales of $279.9 million representing an increase of 43% from $196.2 million in
1994. Approximately 27% was attributable to the incremental impact of
acquisitions with the balance primarily from increased unit volume.
International sales of $71 million increased 48% from 1994 and accounted for
25% of total segment sales versus 24% in 1994. Operating profit increased 29% to
$40.2 million from $31.2 million in 1994. Approximately 11% was attributable to
the incremental impact of acquisitions with the balance primarily
attributable to unit volume, offset in part by a lower-margin product mix.
The equipment order backlog totalled $72 million at the end of 1995 compared
to $66 million at the end of 1994.
Other
Selling, general and administrative expenses increased 14% primarily due
to the impact of acquisitions. Depreciation and amortization increased 13% over
1994 primarily as a result of a higher fixed asset base including acquisitions.
Interest expense increased $6.2 million over 1994 reflecting the increased
levels of borrowings in 1995. Other income declined $876 thousand versus 1994
primarily due to lower foreign exchange gains. The Company's effective tax
rate of 36.8% was up slightly from the prior year level of 36.3%.
Operating Results - 1994 as Compared to 1993
Overview
Consolidated net sales of $589.8 million increased 6% from $558.3 million
in 1993. Net earnings of $50.9 million declined 2% from $52 million in 1993.
Earnings per common share of $1.00 were unchanged from the prior year. Average
shares outstanding decreased 1 million to 51.2 million primarily as a result of
the Company's share repurchase program.
The gross margin percentage of 31.5% decreased slightly from 31.8% in 1993.
Consolidated operating profit of $81.1 million was 2% lower than 1993 as profit
of the specialty process equipment and controls segment increased 20% while the
specialty chemicals segment decreased 11%.
Specialty Chemicals
The Company's specialty chemicals segment reported sales of $393.6 million
representing a decline of 3% from 1993. The decrease was primarily attributable
to lower selling prices (-2%) and unit volume (-1%). The proportion of sales
outside the United States was 25% in 1994, unchanged from 1993.
Domestic dyes sales declined 6% reflecting lower selling prices (-4%) and
lower unit volume (-2%) as demand for apparel dyes remained weak. International
dyes sales were 5% lower than 1993 due primarily to lower unit volume under a
long-term supply agreement. Specialty ingredients sales increased 5% reflecting
increased unit volume in all major product groups.
Operating profit declined 11% to $60.8 million from $68 million in 1993 due
primarily to lower pricing and unit volume offset in part by lower dye
intermediate costs. The percentage of operating profit outside the United States
was 21% in 1994, unchanged from 1993.
Specialty Process Equipment and Controls
The Company's specialty process equipment and controls segment reported
sales of $196.2 million representing an increase of 30% from $151 million in
1993. Approximately 21% was attributable to the acquisition of Egan Machinery
with the balance attributable equally between pricing and unit volume. Export
sales of $48 million increased 18% from 1993 and accounted for 24% of total
segment sales versus 27% in 1993. Operating profit increased 20% to $31.2
million from $26 million in 1993. Approximately 7% was attributable to the
acquisition of Egan Machinery with the balance attributable primarily to unit
volume and improved pricing offset in part by higher manufacturing costs. The
equipment order backlog totalled $66 million at the end of 1994 compared to
$38 million at the end of 1993.
Other
Selling, general and administrative expenses increased 10% primarily due
to the acquisition of Egan Machinery and the impact of inflation. Depreciation
and amortization increased 10% over 1993 primarily as a result of the Egan
Machinery acquisition and a higher fixed asset base. Interest expense of $2.2
million was double the amount in 1993 reflecting the increased level of
borrowings in 1994. Other income declined $163 thousand versus 1993. The
Company's effective tax rate of 36.3% was slightly lower that the prior year
level of 37%.
Consolidated Statements of Earnings
Fiscal years ended December 30, 1995, December 31, 1994, and December 25, 1993
(In thousands of dollars, except per share data)
1995 1994 1993
Net sales $665,513 $589,757 $558,348
Costs and Expenses
Cost of products sold 473,654 403,784 380,941
Selling, general and administrative 104,535 91,581 82,970
Depreciation and amortization 15,035 13,298 12,076
Interest 8,364 2,167 1,093
Other income (166) (1,042) (1,205)
Total costs and expenses 601,422 509,788 475,875
Earnings
Earnings before income taxes 64,091 79,969 82,473
Income taxes 23,598 29,053 30,515
Net earnings $ 40,493 $ 50,916 $ 51,958
Net Earnings Per Common Share $ .84 $ 1.00 $ 1.00
Consolidated Balance Sheets
Fiscal years ended December 30, 1995, December 31, 1994
(In thousands of dollars, except per share data)
1995 1994
Assets
Current Assets
Cash $ 918 $ 1,832
Accounts receivable 112,693 81,859
Inventories 154,846 157,356
Other current assets 23,038 19,610
Total current assets 291,495 260,657
Non-Current Assets
Property, plant and equipment 129,991 117,105
Cost in excess of acquired net assets 51,922 43,429
Other assets 10,730 11,137
$484,138 $432,328
Liabilities and Stockholders' Equity
Current Liabilities
Notes payable $ 60,439 $ 39,670
Accounts payable 49,415 47,000
Accrued expenses 35,136 33,369
Income taxes payable 3,747 4,138
Other current liabilities 16,578 14,865
Total current liabilities 165,315 139,042
Non-Current Liabilities
Long-term debt 64,000 54,000
Accrued postretirement liability 7,559 8,698
Deferred income taxes 7,217 6,681
Stockholders' Equity
Common stock, $.10 par value -
issued 53,361,072 shares 5,336 5,336
Additional paid-in capital 59,440 62,241
Retained earnings 234,113 218,837
Accumulated translation adjustment 6,320 1,858
Treasury stock at cost (62,972) (54,213)
Deferred compensation (2,190) (10,152)
Total stockholders' equity 240,047 223,907
$484,138 $432,328
Consolidated Statements of Cash Flows
Fiscal years ended December 30, 1995, December 31, 1994, and December 25, 1993
Increase (decrease) to cash (in thousands of dollars)
1995 1994 1993
Cash Flows from Operating Activities
Net earnings $40,493 $ 50,916 $ 51,958
Adjustments to reconcile net
earnings to net cash
provided by operations:
Depreciation and amortization 15,035 13,298 12,076
Deferred income taxes 729 2,389 340
Deferred compensation 768 (332) 1,611
Changes in assets and liabilities:
Accounts receivable (27,234) 5,815 (11,798)
Inventories 8,247 (34,695) (253)
Other current assets (3,080) (2,735) 722
Other assets (485) (943) 2
Accounts payable and accrued expenses (4,719) (8,186) (4,937)
Income taxes payable 323 (7,986) 3,918
Other current liabilities (1,938) 4,777 (1,435)
Accrued postretirement liability (1,139) (386) 310
Other (264) (175) (109)
Net cash provided by operations 26,736 21,757 52,405
Cash Flows from Investing Activities
Acquisitions (9,538) (13,734) -
Capital expenditures (18,249) (21,710) (14,299)
Other investing activities (1,505) 590 1,972
Net cash used by investing
activities (29,292) (34,854) (12,327)
Cash Flows from Financing Activities
Proceeds from (payments on)
long-term borrowings 10,000 40,000 (10,000)
Change in notes payable 20,675 34,533 (282)
Treasury stock acquired (4,296) (47,647) (5,103)
Treasury stock issued under
stock options and other plans 393 1,756 1,905
Dividends paid (25,217) (23,309) (19,482)
Net cash provided (used) by
financing activities 1,555 5,333 (32,962)
Cash
Effect of exchange rates on cash 87 312 (273)
Change in cash (914) (7,452) 6,843
Cash at beginning of year 1,832 9,284 2,441
Cash at end of year $ 918 $ 1,832 $ 9,284
Consolidated Statements of Stockholders' Equity
Fiscal years ended December 30, 1995, December 31, 1994, and December 25, 1993
(In thousands of dollars, except per share data)
1995 1994 1993
Common Stock
Balance at beginning and end
of year $ 5,336 $ 5,336 $ 5,336
Additional Paid-in Capital
Balance at beginning of year 62,241 61,783 59,644
Stock options and other issuances (410) 1,592 2,139
Return of shares from long-term
incentive plan trust (2,391) - -
Issuance under long-term
incentive plan - (1,134) -
Balance at end of year 59,440 62,241 61,783
Retained Earnings
Balance at beginning of year 218,837 191,230 158,754
Net earnings 40,493 50,916 51,958
Cash dividends declared on
common stock ($.525 per share
in 1995, $.46 in 1994, and
$.38 in 1993) (25,217) (23,309) (19,482)
Balance at end of year 234,113 218,837 191,230
Accumulated Translation Adjustment
Balance at beginning of year 1,858 (557) 3,803
Equity adjustment for translation
of foreign currencies 4,462 2,415 (4,360)
Balance at end of year 6,320 1,858 (557)
Treasury Stock
Balance at beginning of year (54,213) (11,278) (7,956)
Issued, primarily under stock
options (72,729 shares in 1995,
58,957 shares in 1994, and
489,976 in 1993) 340 276 1,781
Common stock acquired (272,800
shares in 1995, 2,954,700 shares
in 1994 and 280,000 in 1993) (4,296) (47,647) (5,103)
Return of shares from long-term
incentive plan trust
(448,000 shares) (4,803) - -
Issuance under long-term
incentive plan (261,399 shares) - 4,436 -
Balance at end of year (62,972) (54,213) (11,278)
Deferred Compensation
Balance at beginning of year (10,152) (6,518) (8,129)
Return of shares from long-term
incentive plan trust 7,194 - -
Issuance under long-term
incentive plan - (3,302) -
Amortization 768 (332) 1,611
Balance at end of year (2,190) (10,152) (6,518)
Total stockholders' equity $240,047 $223,907 $239,996
Notes to Consolidated Financial Statements
(In thousands of dollars, except per share data)
Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of all
subsidiaries. Intercompany balances and transactions are eliminated in
consolidation. The Company's fiscal year ends on the last Saturday in December
for domestic operations and a week earlier for most foreign operations.
Translation of Foreign Currencies
Foreign currency accounts are translated into U.S. dollars as follows:
exchange rates at the end of the period are used to translate all assets and
liabilities; average exchange rates during the year are used to translate income
and expense accounts. Gains and losses resulting from the translation of foreign
currency balance sheet accounts into U.S. dollars and related hedging
transactions are included in a separate caption, "Accumulated translation
adjustment," in the stockholders' equity section of the consolidated balance
sheets.
Property, Plant and Equipment
Property, plant and equipment are carried at cost, less accumulated
depreciation. Depreciation expense ($13,204 in 1995, $11,935 in 1994 and $10,828
in 1993) is computed generally on the straight-line method using the following
ranges of asset lives: buildings and improvements - 10 to 40 years, machinery
and equipment - 5 to 15 years, and furniture and fixtures - 5 to 10 years.
Renewals and improvements which extend the useful lives of the assets are
capitalized. Capitalized leased assets and leasehold improvements are
depreciated over their useful lives or the remaining lease term, whichever is
shorter. Expenditures for maintenance and repairs are charged to expense
as incurred.
Inventory Valuation
Inventories are valued at the lower of cost or market. Cost is determined
using the last-in, first-out (LIFO) method for a significant portion of
chemicals inventories and the first-in, first-out (FIFO) method for the
remaining inventories.
Cost In Excess of Acquired Net Assets
The cost of acquisitions in excess of tangible and identifiable intangible
assets in the amount of $51,922 has, in the opinion of management, incurred no
permanent impairment in value. This cost is being amortized using the
straight-line method over periods from twenty to forty years. Accumulated
amortization amounted to $8,281 in 1995 and $6,622 in 1994.
Research and Development
Expenditures for research and development costs are charged to operations
as incurred ($14,027 in 1995, $12,106 in 1994, and $11,184 in 1993).
Income Taxes
A provision has not been made for U.S. income taxes which would be payable
if undistributed earnings of foreign subsidiaries of approximately $72,400 at
December 30, 1995, were distributed to the Company in the form of dividends,
since it is management's intention to permanently invest such earnings in the
related foreign operations. If distributed, such earnings would incur income tax
expense at substantially less than the U.S. income tax rate, primarily because
of the offset of foreign tax credits.
Statements of Cash Flows
Cash includes bank term deposits of three months or less. Cash payments
during the years ended 1995, 1994 and 1993 included interest of $8,488, $2,005
and $1,556 and income taxes of $23,515, $35,319 and $24,347, respectively.
<PAGE>
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 amounting to
48,447,686 in 1995, 51,151,525 in 1994 and 52,175,691 in 1993. 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.
Financial Instruments
Financial instruments are presented in the accompanying consolidated
financial statements at either cost or fair value as required by generally
accepted accounting principles. The fair value of the Company's financial
instruments approximate carrying value.
Other Disclosures
Included in accounts receivable are allowances for doubtful accounts in the
amount of $3,269 in 1995 and $3,829 in 1994. Included in other current
liabilities are customer deposits in the amount of $11,322 in 1995 and $11,183
in 1994.
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 $4,900. 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 the purchase price over fair value of net assets
acquired in the amount of $9,649 is being amortized over forty years. The
operating results of each acquisition are included in the Consolidated
Statements of Earnings since the date of the acquisition.
Inventories
1995 1994
Finished goods $ 89,177 $ 90,386
Work in process 30,316 32,640
Raw materials and supplies 35,353 34,330
$154,846 $157,356
At December 30, 1995, inventories valued using the last-in, first-out (LIFO)
method amounted to $70,550 ($75,958 at December 31, 1994). The LIFO reserve was
not significant in 1995 and 1994.
Property, Plant and Equipment
1995 1994
Land $ 7,490 $ 7,292
Buildings and improvements 71,677 61,926
Machinery and equipment 133,111 113,296
Furniture and fixtures 4,030 3,662
Construction in progress 12,975 16,620
229,283 202,796
Less accumulated depreciation 99,292 85,691
$129,991 $117,105
Leases
The future minimum rental payments under operating leases having initial
or remaining non-cancellable lease terms in excess of one year (as of December
30, 1995) total $21,434 as follows: $5,533 in 1996, $4,254 in 1997, $3,637 in
1998, $3,223 in 1999, $1,676 in 2000 and $3,111 in later years. Total rental
expense for all operating leases was $8,126 in 1995, $7,305 in 1994, and $6,509
in 1993.
All long-term leases expire prior to 2013. Real estate taxes, insurance and
maintenance expenses generally are obligations of the Company and, accordingly,
are not included as part of rental payments. It is expected that, in the normal
course of business, leases that expire will be renewed or replaced by leases on
other properties.
Debt
Long-term debt is summarized as follows:
1995 1994
Revolving credit loans $60,000 $50,000
Industrial revenue bonds 4,000 4,000
Total long-term debt $64,000 $54,000
The industrial revenue bonds mature in 1997 and carry an interest rate that
fluctuates within the tax exempt market. The average interest rate incurred in
1995 was 3.8%. The bonds are secured by a bank letter of credit.
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
to $125,000 through September 28, 1998. The agreement calls for interest at the
prime rate on revolving loans, but offers pricing options based on certificate
of deposit and Eurodollar rates which generally are more favorable than the
prime rate option. The Company must pay an annual fee of .15% of the total
unused commitment. The covenants of the revolving credit agreement impose
restrictions on the Company with respect to debt and tangible net worth
levels. These restrictions are not expected to adversely affect the Company's
operations. At December 30, 1995, the $60,000 borrowed under the revolving
credit agreement bore an interest rate of 6.2%. At December 30, 1995, notes
payable outstanding of $60,439 bore an interest rate of 6.0%.
The aggregate annual maturities of long-term debt are $4,000 in 1997 and
$60,000 in 1998.
Income Taxes
The components of pretax earnings and taxes are as follows:
1995 1994 1993
PreTax Earnings:
Domestic $59,306 $67,555 $68,498
Foreign 4,785 12,414 13,975
Total $64,091 $79,969 $82,473
Taxes:
Domestic
Current taxes $21,500 $23,361 $27,857
Deferred taxes 1,604 2,057 (587)
$23,104 $25,418 $27,270
Foreign
Current taxes $ 1,369 $ 3,303 $ 2,318
Deferred taxes (875) 332 927
$ 494 $ 3,635 $ 3,245
Total
Current taxes $22,869 $26,664 $30,175
Deferred taxes 729 2,389 340
$23,598 $29,053 $30,515
The following is a percentage reconciliation of computed "expected" tax
expense to actual tax expense:
1995 1994 1993
Computed "expected" tax expense 35.0% 35.0% 35.0%
State taxes (net of U.S. tax benefit) 4.3 3.6 3.6
Foreign tax differential (1.8) (0.9) (2.0)
Other, net (0.7) (1.4) .4
36.8% 36.3% 37.0%
Provisions have been made for deferred income taxes based on differences
between financial statement and tax bases of assets and liabilities using
currently enacted tax rates and regulations. The components of the net deferred
tax asset as of December 30, 1995 and December 31, 1994, are as follows:
1995 1994
Deferred tax asset:
Inventory reserves $ 3,596 $ 3,239
Bad debt reserves 515 232
Deferred compensation liability 885 638
Various expense accruals 3,395 4,475
Accrued postretirement liability 3,024 3,598
Total deferred tax assets 11,415 12,182
Deferred tax liability - depreciation (10,241) (10,279)
Net deferred tax asset $ 1,174 $ 1,903
Total deferred tax assets for 1995 and 1994 include current assets of
$8,391 and $8,584, respectively. The deferred tax liability is non-current for
1995 and 1994.
Capital Stock
The Company is authorized to issue 250,000,000 shares of common stock at
a par value of $.10. There are 53,361,072 common shares issued, of which
5,351,962 and 4,703,891 shares were held in the treasury at December 30, 1995
and December 31, 1994, respectively.
The Company is authorized to issue 250,000 shares of preferred stock
without par value, none of which are outstanding. Preferred share purchase
rights (Rights) outstanding with respect to each share of the Company's common
stock entitle the holder to purchase one eight-hundredth of a share of Series A
Junior Participating Preferred Stock at an exercise price of $18.75. The Rights
cannot become exercisable until ten days following a public announcement that a
person or group has acquired 20% or more of the common shares of the Company or
intends to make a tender or exchange offer which would result in their ownership
of 20% or more of the Company's common shares. The Rights also entitle the
holder under certain circumstances to receive shares in another company which
acquires the Company or merges with it.
Stock Incentive Plans
The 1988 Long Term Incentive Plan (the 1988 Plan) authorizes the Board to
grant stock options, stock appreciation rights, restricted stock and long-term
performance awards to the officers and other key employees of the Company over
a period of ten years. Non-qualified and incentive stock options may be granted
under the 1988 plan at prices not less than 100% of the market value on the date
of the grant. All outstanding options will expire not more than ten years and
one month from the date of grant. There were 4,000,000 shares of common stock
reserved for awards under the 1988 Plan.
The 1993 Stock Option Plan for Non-Employee Directors authorizes 100,000
shares to be optioned to non-employee directors at the rate of their annual
retainer divided by the stock price on the date of grant. The option will vest
over a two year period and be exercisable over a ten year period from the date
of grant, at a price equaling the fair market value on the date of grant.
Under the 1988 Plan, 1,261,000 common shares have been transferred to an
independent trustee to administer restricted stock awards for the Company's long
term incentive program. At December 30, 1995 deferred compensation relating to
such shares in the amount of $2,190 is being amortized over an estimated service
period of six to fifteen years. In June 1995, the trustee returned 448,000
common shares to the Company representing those shares which have not yet
been earned under the incentive program. Compensation expense relating to
unearned shares is being accrued annually based upon the expected level of
incentive achievement.
Changes during 1995, 1994 and 1993 in shares under option are summarized
as follows:
Price Per Share
Range Average Shares
Outstanding at 12/26/92 $ 1.29-22.78 $ 7.88 1,929,900
Granted 19.31-23.75 19.45 218,736
Exercised 1.29-18.31 2.87 (424,419)
Lapsed 4.01-19.19 14.01 (6,667)
Outstanding at 12/25/93 2.15-23.75 10.57 1,717,550
Granted 14.63-21.44 14.83 282,647
Exercised 2.15-9.31 5.59 (57,473)
Lapsed 9.31-19.31 18.12 (27,001)
Outstanding at 12/31/94 2.47-23.75 11.24 1,915,723
Granted 9.31-16.06 13.07 330,481
Exercised 2.49-9.31 6.40 (61,299)
Lapsed 9.31-23.75 18.04 (23,791)
Outstanding at 12/30/95 $ 2.47-23.75 $11.59 2,161,114
Exercisable at 12/30/95 $ 2.47-23.75 $10.64 1,592,779
Shares available for grant at December 30, 1995 and December 31, 1994 were
536,302 and 842,992, respectively.
The Company has an Employee Stock Ownership Plan that is offered to
eligible employees of the Company and certain of its subsidiaries. The
Company makes contributions equivalent to a stated percentage of employee
contributions. The Company's contributions were $2,020, $1,677 and $1,617
in 1995, 1994 and 1993, respectively.
Postretirement Health Care Benefits
The Company provides health benefits attributable to past service of
eligible retired and active employees under the Company's postretirement health
care benefit plans. Effective January 1, 1992, the Company adopted the
provisions of FASB Statement No.106 "Employers' Accounting for Postretirement
Benefits Other Than Pensions." In 1994, the Company adopted several changes
to its postretirement health care benefit plans including an annual cap for
medical premiums paid by the Company, higher deductible amounts and
out-of-pocket limits on medical payments. The plan amendments resulted in a
prior service gain of $3,254 which is being amortized over the average
remaining employee service period of 15 years. Postretirement health care
benefit expense did not have a material effect on net earnings for the years
1995, 1994 and 1993.
The financial status of the accrued postretirement liability is as
follows:
1995 1994
Retirees $3,834 $2,812
Fully eligible active participants 662 608
Other active participants 1,150 1,240
Total accumulated postretirement liability 5,646 4,660
Unrecognized actuarial gain (loss) (1,113) 784
Unrecognized prior service gain 3,026 3,254
$7,559 $8,698
For measurement purposes, a 11.5% annual rate of increase in the per capita
cost of covered health care benefits was assumed for 1995. The rate is assumed
to decrease 1% per year to 6.5% in 2000 and remain at that level thereafter. The
weighted-average discount rate used in determining the accumulated
postretirement benefit obligation was 7.0%.
An increase in the assumed health care cost rate of 1% in each year would
increase the accumulated postretirement benefit obligation by approximately
$460.
Pensions
The Company maintains a defined contribution pension plan for eligible
employees under provisions of section 401(k) of the Internal Revenue Code. The
plan provides for Company contributions at a certain percentage of each
participant's salary and allows voluntary tax-deferred employee contributions up
to a stated percentage of salary. Other foreign and domestic pension plans are
not significant. Total pension expense aggregated $4,516 in 1995, $4,251 in 1994
and $4,036 in 1993.
Contingencies
In the normal course of its business, the Company is subject to
investigations, claims and legal proceedings, some of which concern
environmental matters, involving both private and governmental parties. In
some cases, the remedies sought or damages claimed may be substantial. While
each of these matters is subject to various uncertainties as to outcome, and
some of them may be decided unfavorably to the Company, based on the facts
known to the Company and on consultation with legal counsel, management
believes that there are no such matters pending or threatened which will have
a material effect on the financial position of the Company or the results of
the Company's operations in any given year.
Foreign Operations
Financial data applicable to the Company's foreign operations are as
follows:
1995 1994 1993
Net sales $113,280 $97,848 $103,356
Net earnings $ 4,291 $ 8,779 $ 10,730
Assets $113,852 $90,508 $ 82,789
Business Segment Data
Sales by segment represent sales to unaffiliated customers only.
Intersegment sales and transfers between geographic areas are nominal and have
not been disclosed separately. Consolidated operating profit is defined as total
revenue less operating expenses. In computing consolidated operating profit, the
following items have not been deducted: interest expense, other income and
income taxes. Identifiable assets by segment are those assets that are used
in the Company's operations in each segment. Corporate assets are principally
cash, prepayments and other assets maintained for general corporate purposes.
Information by Business Segment
1995 1994 1993
Sales
Specialty chemicals $385,647 $393,544 $407,280
Specialty process equipment
and controls 279,866 196,213 151,068
$665,513 $589,757 $558,348
Operating Profit
Specialty chemicals $ 42,609 $ 60,783 $ 68,067
Specialty process equipment
and controls 40,154 31,195 25,967
General corporate expenses (10,474) (10,884) (11,673)
72,289 81,094 82,361
Interest expense (8,364) (2,167) (1,093)
Other income 166 1,042 1,205
Earnings before income taxes $ 64,091 $ 79,969 $ 82,473
Identifiable Assets
Specialty chemicals $318,020 $313,457 $281,804
Specialty process equipment
and controls 150,320 103,151 69,279
468,340 416,608 351,083
Corporate 15,798 15,720 12,163
$484,138 $432,328 $363,246
Depreciation and Amortization
Specialty chemicals $ 11,510 $ 11,141 $ 10,628
Specialty process equipment
and controls 3,328 1,995 1,324
14,838 13,136 11,952
Corporate 197 162 124
$ 15,035 $ 13,298 $ 12,076
Capital Expenditures
Specialty chemicals $ 15,076 $ 18,891 $ 12,057
Specialty process equipment
and controls 3,087 2,756 2,131
18,163 21,647 14,188
Corporate 86 63 111
$ 18,249 $ 21,710 $ 14,299
Information by Major Geographic Segment
1995 1994 1993
Sales
United States $552,233 $491,909 $454,992
Europe 94,347 88,693 93,808
Other 18,933 9,155 9,548
$665,513 $589,757 $558,348
Exports to Unaffiliated Customers
Included in United States sales:
Far East $ 16,895 $ 19,858 $ 26,244
Latin America 12,225 15,027 10,183
Europe 23,713 9,381 7,251
Other 11,989 10,178 4,338
64,822 54,444 48,016
Included in European sales:
Far East - 10,117 8,649
Latin America 4,422 4,631 4,261
Other 3,042 6,362 3,756
7,464 21,110 16,666
$ 72,286 $ 75,554 $ 64,682
Operating Profit
United States $ 77,893 $ 79,148 $ 79,536
Europe 4,166 12,038 13,736
Other 704 792 762
82,763 91,978 94,034
General corporate expenses (10,474) (10,884) (11,673)
$ 72,289 $ 81,094 $ 82,361
Identifiable Assets
United States $370,286 $341,820 $280,457
Europe 105,408 85,578 77,203
Other 8,444 4,930 5,586
$484,138 $432,328 $363,246
Summarized Unaudited Quarterly Financial Data
1995
First Second Third Fourth
Net sales $168,193 $175,617 $159,065 $162,638
Gross profit 51,634 51,818 44,606 43,801
Net earnings 13,196 12,058 8,077 7,162
Net earnings
per common share .27 .25 .17 .15
Common dividends per share .12 .135 .135 .135
Market price
per common share:
High 17 3/8 20 15 3/4 14 7/8
Low 15 7/8 13 3/8 13 5/8 12
1994
First Second Third Fourth
Net sales $133,594 $154,452 $142,821 $158,890
Gross profit 42,684 50,952 44,025 48,312
Net earnings 12,758 16,107 10,224 11,827
Net earnings
per common share .25 .31 .20 .24
Common dividends
per share .10 .12 .12 .12
Market price
per common share:
High 24 1/8 23 5/8 18 1/2 16 5/8
Low 19 5/8 17 3/8 15 7/8 13 7/8
Responsibility for Financial Statements
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles and have been audited by KPMG Peat
Marwick LLP, Independent Certified Public Accountants, whose report is presented
herein.
Management of the Company assumes responsibility for the accuracy and
reliability of the financial statements. In discharging such responsibility,
management has established certain standards which are subject to continuous
review and are monitored through the Company's financial management and internal
audit group.
The Board of Directors pursues its oversight role for the financial
statements through its Audit Committee which consists of outside directors. The
Audit Committee meets on a regular basis with representatives of management, the
internal audit group and KPMG Peat Marwick LLP.
Independent Auditors' Report
The Board of Directors and Stockholders
Crompton & Knowles Corporation
We have audited the consolidated balance sheets of Crompton & Knowles
Corporation and subsidiaries as of December 30, 1995 and December 31, 1994 and
the related consolidated statements of earnings, stockholders' equity and cash
flows for each of the fiscal years in the three-year period ended December 30,
1995. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Crompton &
Knowles Corporation and subsidiaries at December 30, 1995 and December 31, 1994
and the results of their operations and their cash flows for each of the fiscal
years in the three-year period ended December 30, 1995 in conformity with
generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
Stamford, Connecticut
January 24, 1996
Eleven Year Selected Financial Data
(In thousands of dollars except per share data)
1995 1994 1993
Summary of Operations
Net sales $665,513 589,757 558,348
Interest expense $ 8,364 2,167 1,093
Pretax earnings $ 64,091 79,969 82,473
Income taxes $ 23,598 29,053 30,515
Earnings from continuing
operations $ 40,493 50,916 51,958
Cumulative effect of
accounting changes $ - - -
Extraordinary loss on early
extinguishment of debt $ - - -
Earnings (loss) from
discontinued operations $ - - -
Loss on disposal of
discontinued operations $ - - -
Net earnings $ 40,493 50,916 51,958
Per Share Statistics
Earnings from continuing
operations before
cumulative effect of
accounting changes and
extraordinary loss $ .84 1.00 1.00
Net earnings $ .84 1.00 1.00
Dividends $ .52 .46 .38
Book value $ 5.00 4.60 4.68
Common stock trading range:
High 20 24 1/8 27 1/4
Low 12 13 7/8 17 5/8
Average shares outstanding
(thousands) 48,448 51,152 52,176
Financial Position
Current assets $291,495 260,657 220,396
PP&E, net $129,991 117,105 99,925
Other assets $ 62,652 54,566 42,925
Total assets $484,138 432,328 363,246
Current liabilities $165,315 139,042 95,439
Long-term debt $ 64,000 54,000 14,000
Accrued postretirement
liability $ 7,559 8,698 9,084
Deferred income taxes $ 7,217 6,681 4,727
Stockholders' equity $240,047 223,907 239,996
Current ratio 1.8 1.9 2.3
Total debt-to-equity % 51.8 41.8 8.0
Total debt-to-capital % 34.1 29.5 7.4
Profitability Statistics (Continuing Operations)
% Effective tax rate 36.8 36.3 37.0
% Return on sales 6.1 8.6 9.3
% Return on average
total capital 12.9 18.3 21.0
% Return on average
common equity 17.4 21.1 23.1
Other Statistics (Continuing Operations)
Capital spending $ 18,249 21,710 14,299
Depreciation $ 13,204 11,935 10,828
Sales per employee $ 242 234 240
<PAGE>
Eleven Year Selected Financial Data
(In thousands of dollars except per share data)
1992 1991 1990
Summary of Operations
Net sales $517,718 450,228 390,032
Interest expense $ 6,984 7,419 5,842
Pretax earnings $ 68,337 56,600 47,260
Income taxes $ 25,072 20,659 17,250
Earnings from continuing
operations $ 43,265 35,941 30,010
Cumulative effect of
accounting changes $ (5,800) - -
Extraordinary loss on early
extinguishment of debt $ (3,000) - -
Earnings (loss) from
discontinued operations $ - - -
Loss on disposal of
discontinued operations $ - - -
Net earnings $ 34,465 35,941 30,010
Per Share Statistics
Earnings from continuing
operations before
cumulative effect of
accounting changes and
extraordinary loss $ .87 .73 .61
Net earnings $ .69 .73 .61
Dividends $ .31 .25 .20
Book value $ 4.14 2.94 2.47
Common stock trading range:
High 23 7/8 20 1/4 11 5/8
Low 16 8 3/8 6 3/4
Average shares outstanding
(thousands) 49,967 49,317 49,270
Financial Position
Current assets $207,383 185,235 164,442
PP&E, net $ 98,827 80,154 76,709
Other assets $ 44,505 43,173 41,493
Total assets $350,715 308,562 282,644
Current liabilities $102,593 85,712 88,340
Long-term debt $ 24,000 76,118 70,330
Accrued postretirement
liability $ 8,774 - -
Deferred income taxes $ 3,896 5,969 6,409
Stockholders' equity $211,452 140,763 117,565
Current ratio 2.0 2.2 1.9
Total debt-to-equity % 13.9 57.1 77.6
Total debt-to-capital % 12.2 36.3 43.7
Profitability Statistics (Continuing Operations)
% Effective tax rate 36.7 36.5 36.5
% Return on sales 8.4 8.0 7.7
% Return on average
total capital 19.3 18.9 19.8
% Return on average
common equity 27.1 28.4 28.1
Other Statistics (Continuing Operations)
Capital spending $ 12,835 11,434 16,374
Depreciation $ 10,394 8,813 7,156
Sales per employee $ 237 222 218
Eleven Year Selected Financial Data
(In thousands of dollars except per share data)
1989 1988 1987
Summary of Operations
Net sales $355,817 289,787 199,394
Interest expense $ 6,006 3,606 2,042
Pretax earnings $ 38,588 26,943 20,353
Income taxes $ 14,087 10,098 8,341
Earnings from continuing
operations $ 24,501 16,845 12,012
Cumulative effect of
accounting changes $ - - -
Extraordinary loss on early
extinguishment of debt $ - - -
Earnings (loss) from
discontinued operations $ - (597) (262)
Loss on disposal of
discontinued operations $ - (920) -
Net earnings $ 24,501 15,328 11,750
Per Share Statistics
Earnings from continuing
operations before
cumulative effect of
accounting changes and
extraordinary loss $ .50 .36 .25
Net earnings $ .50 .32 .24
Dividends $ .15 .11 .08
Book value $ 2.08 1.75 1.59
Common stock trading range:
High 7 7/8 4 1/2 3 7/8
Low 3 3/4 2 1/2 2 1/4
Average shares outstanding
(thousands) 49,064 47,239 48,168
Financial Position
Current assets $127,216 120,584 94,069
PP&E, net $ 50,847 43,685 29,085
Other assets $ 39,787 41,373 12,075
Total assets $217,850 205,642 135,229
Current liabilities $ 71,068 72,352 40,922
Long-term debt $ 41,213 44,594 12,927
Accrued postretirement
liability $ - - -
Deferred income taxes $ 6,668 6,775 5,575
Stockholders' equity $ 98,901 81,921 75,805
Current ratio 1.8 1.7 2.3
Total debt-to-equity % 52.4 72.1 25.1
Total debt-to-capital % 34.4 41.9 20.1
Profitability Statistics (Continuing Operations)
% Effective tax rate 36.5 37.5 41.0
% Return on sales 6.9 5.8 6.0
% Return on average
total capital 19.3 17.2 14.8
% Return on average
common equity 27.6 22.7 17.7
Other Statistics (Continuing Operations)
Capital spending $ 13,407 6,798 3,523
Depreciation $ 5,666 4,658 3,468
Sales per employee $ 215 190 168
Eleven Year Selected Financial Data
(In thousands of dollars except per share data)
1986 1985
Summary of Operations
Net sales $178,256 163,287
Interest expense $ 789 571
Pretax earnings $ 16,800 15,443
Income taxes $ 7,421 7,122
Earnings from continuing operations $ 9,379 8,321
Cumulative effect of accounting changes $ - -
Extraordinary loss on early
extinguishment of debt $ - -
Earnings (loss) from discontinued
operations $ (678) (746)
Loss on disposal of discontinued
operations $ (7,700) -
Net earnings $ 1,001 7,575
Per Share Statistics
Earnings from continuing operations before
cumulative effect of accounting changes
and extraordinary loss $ .17 .15
Net earnings $ .01 .14
Dividends $ .08 .08
Book value $ 1.42 1.34
Common stock trading range: High 2 1/2 1 3/4
Low 1 5/8 1 1/4
Average shares outstanding (thousands) 50,974 51,694
Financial Position
Current assets $ 95,931 87,400
PP&E, net $ 28,511 30,376
Other assets $ 10,349 12,146
Total assets $134,791 129,922
Current liabilities $ 41,687 32,366
Long-term debt $ 19,455 19,093
Accrued postretirement liability $ - -
Deferred income taxes $ 5,174 4,708
Stockholders' equity $ 68,475 73,755
Current ratio 2.3 2.7
Total debt-to-equity % 47.0 30.5
Total debt-to-capital % 32.0 23.4
Profitability Statistics (Continuing Operations)
% Effective tax rate 44.2 46.1
% Return on sales 5.3 5.1
% Return on average total capital 13.6 13.2
% Return on average common equity 15.0 14.3
Other Statistics (Continuing Operations)
Capital spending $ 2,967 2,888
Depreciation $ 3,101 3,061
Sales per employee $ 146 128
(Bar Graph)
Return on Sales
Continuing Operations
(Bar Graph)
Return on Average Total Capital
Continuing Operations
(Bar Graph)
Sales Per Employee
Continuing Operations
Board of Directors
3 James A. Bitonti
President and Chief Executive Officer
TCOM, L.P.
Vincent A. Calarco
Chairman of the Board
President and Chief Executive Officer
2,3 Robert A. Fox
President and Chief Executive Officer
Foster Poultry Farms
2,3 Roger L. Headrick
President and Chief Executive Officer
Minnesota Vikings Football Club
1,2 Leo I. Higdon
Dean
The Darden Graduate School
of Business Administration
University of Virginia
1,3 Michael W. Huber
Retired Chairman of the Board
J.M. Huber Corporation
Charles J. Marsden
Vice President-Finance
and Chief Financial Officer
1,2 C.A. Piccolo
Chairman and Chief Executive Officer
Caremark International Inc.
1 Patricia K. Woolf, Ph.D.
Private Investor and Lecturer
Department of Molecular Biology
Princeton University
1 Member of Audit Committee
2 Member of Nominating Committee
3 Member of Committee on Executive Compensation
Corporate Officers and Operating Management
Vincent A. Calarco
Chairman, President and
Chief Executive Officer
Robert W. Ackley
Vice President
President -
Davis-Standard
Nicholas Fern, Ph.D.
President -
Dyes and Chemicals - Asia
Gerald H. Fickenscher, Ph.D.
President -
Dyes and Chemicals - Europe
Edmund H. Fording
Vice President
President -
Dyes and Chemicals - Americas
Marvin H. Happel
Vice President - Organization
Charles J. Marsden
Vice President -
Finance and Chief Financial Officer
Rudy M. Phillips
President -
Ingredient Technology
Peter Barna
Treasurer and
Principal Accounting Officer
John T. Ferguson, II
General Counsel and Secretary
Robert A. Marchitello
Assistant Treasurer
Corporate Headquarters
One Station Place, Metro Center
Stamford, CT 06902
(203) 353-5400
Auditors
KPMG Peat Marwick LLP
Stamford, CT
Transfer Agent and Registrar
Chemical Mellon Shareholder Services L.L.C.
85 Challenger Road
Ridgefield Park, NJ 07660
(800) 288-9541
Annual Meeting
The annual meeting of stockholders will be held at 11:15 a.m. on Tuesday, April
9, 1996, at the Sheraton Stamford Hotel, One First Stamford Place, Stamford,
Connecticut
Form 10-K
A copy of the Company's report on Form 10-K for 1995, as filed with the
Securities and Exchange Commission, may be obtained free of charge by writing to
the Secretary of the Corporation, One Station Place, Metro Center, Stamford, CT
06902
Significant Subsidiaries
The following are significant subsidiaries of Crompton & Knowles Corporation:
Name Place of Organization
CK Holding Corporation Delaware
Crompton & Knowles
Overseas Corporation Delaware
Crompton & Knowles
Canada Limited Canada
Crompton & Knowles
Europe S.A. Belgium
Crompton & Knowles
(France) S.A. France
Crompton & Knowles
(Hong Kong) Ltd. Hong Kong
Crompton & Knowles (Korea) Ltd. Korea
Davis-Standard Corporation Delaware
Davis-Standard (France) SARL France
Crompton & Knowles Colors
Incorporated Delaware
ER-WE-PA Davis-Standard GmbH Germany
Ingredient Technology Corporation Delaware
Grandma Food Products, Ltd. Canada
Killion Extruders, Inc. New Jersey
INDEPENDENT AUDITOR'S CONSENT
Board of Directors
Crompton & Knowles Corporation
We consent to incorporation by reference in the Registration Statements (No.'s
33-21246, 33-42280 and 33-67600) on Form S-8 of Crompton & Knowles Corporation
of our reports dated January 24, 1996, relating to the consolidated balance
sheets of Crompton & Knowles Corporation and subsidiaries as of December 30,
1995 and December 31, 1994, and the related consolidated statements of
earnings, stockholders' equity and cash flows and the related schedule for
each of the fiscal years in the three-year period ended December 30, 1995,
which reports appear or are incorporated by reference in the December 30, 1995
Annual Report on Form 10-K of Crompton & Knowles Corporation. We also consent
to incorporation by reference in the Registration Statement (No. 33-21246) on
Form S-8 of Crompton & Knowles Corporation of our report dated March 15, 1996
relating to the statements of financial condition of Crompton & Knowles
Corporation Employee Stock Ownership Plan as of December 31, 1995 and 1994,
and the related statements of income and changes in plan equity for each of
the years in the three-year period ended December 31, 1995, as included in
Exhibit 29 of said Form 10-K.
/s/ KPMG Peat Marwick LLP
Stamford, Connecticut
March 28, 1996
POWER OF ATTORNEY
We, the undersigned officers and directors of Crompton & Knowles
Corporation, hereby severally constitute and appoint Vincent A. Calarco,
Charles J. Marsden, and John T. Ferguson II, and each of them severally, our
true and lawful attorneys or attorney, with full power to them and each of
them to execute for us, and in our names in the capacities indicated below,
and to file with the Securities and Exchange Commission the Annual Report on
Form 10-K of Crompton & Knowles Corporation for the fiscal year ended December
30, 1995, and any and all amendments thereto.
IN WITNESS WHEREOF, we have signed this Power of Attorney in the
capacities indicated on January 23, 1996.
Signature Title Signature Title
Principal Executive
Officer:
Chairman of the
Board, President, /s/Robert A. Fox Director
/s/Vincent A. Calarco CEO and Director Robert A. Fox
Vincent A. Calarco
Principal Financial /s/Roger L. Headrick Director
Officer: Roger L. Headrick
Vice President
/s/Charles J. Marsden Finance and Director /s/Leo I. Higdon, Jr. Director
Charles J. Marsden Leo I. Higdon, Jr.
Principal Accounting
Officer: /s/Michael W. Huber Director
Michael W. Huber
/s/Peter Barna Treasurer
Peter Barna /s/C.A. Piccolo Director
C.A. Piccolo
/s/ James A. Bitonti Director /s/Patricia K Woolf Director
James A. Bitonti Patricia K. Woolf
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-30-1995
<PERIOD-END> DEC-30-1995
<CASH> 918
<SECURITIES> 0
<RECEIVABLES> 112,693
<ALLOWANCES> 3,269
<INVENTORY> 154,846
<CURRENT-ASSETS> 291,495
<PP&E> 129,991
<DEPRECIATION> 99,292
<TOTAL-ASSETS> 484,138
<CURRENT-LIABILITIES> 165,315
<BONDS> 0
0
0
<COMMON> 5,336
<OTHER-SE> 234,711
<TOTAL-LIABILITY-AND-EQUITY> 484,138
<SALES> 665,513
<TOTAL-REVENUES> 665,513
<CGS> 473,654
<TOTAL-COSTS> 593,224
<OTHER-EXPENSES> (166)
<LOSS-PROVISION> 707
<INTEREST-EXPENSE> 8,364
<INCOME-PRETAX> 64,091
<INCOME-TAX> 23,598
<INCOME-CONTINUING> 40,493
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 40,493
<EPS-PRIMARY> 0.84
<EPS-DILUTED> 0.84
</TABLE>
Exhibit 29
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 (Fee Required)
For the fiscal year ended December 31, 1995
OR
Transition report pursuant to Section 15 (d) of the
Securities Exchange Act of 1934 (No Fee Required)
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
Exhibit 29
CROMPTON & KNOWLES CORPORATION
Employee Stock Ownership Plan
EXHIBIT INDEX
Form 11-K for the Fiscal Year Ended December 31, 1995
Exhibit Description
No. of Exhibit
1. Consent of KPMG Peat Marwick LLP independent certified
public accountants.
CROMPTON & KNOWLES CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN
STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, 1995 AND 1994
PLAN ASSETS AND EQUITY
1995
Fixed C&K Equity Advisers Mortgage
Income Fund Stock Fund Fund Fund Fund Total
Investments:
Common stock of Crompton
& Knowles Corporation -
2,110,683 shares at market
value (cost $ 15,647,527)
in 1995 and 1,978,585
shares at market value
(cost $ 12,378,799) in 1994
$ - $ 27,966,550 $ - $ - $ - $ 27,966,550
Hartford Life Insurance
Company group annuity
contract
17,882,428 - 3,196,868 647,252 309,648 22,036,196
Cash and short-term
investments at cost,
which approximates market
- 26,164 - - - 26,164
Contribution receivable
from Crompton & Knowles
Corporation
67,233 297,111 34,216 15,525 7,501 421,586
Plan Assets and Equity
$ 17,949,661 $ 28,289,825 $ 3,231,084 $ 662,777 $ 317,149 $ 50,450,496
1994
Fixed C&K Equity Advisers Mortgage
Income Fund Stock Fund Fund Fund Fund Total
Investments:
Common stock of Crompton
& Knowles Corporation -
2,110,683 shares at market
value (cost $ 15,647,527)
in 1995 and 1,978,585
shares at market value
(cost $ 12,378,799) in 1994
$ - $ 32,152,006 $ - $ - $ - $ 32,152,006
Hartford Life Insurance
Company group annuity
contract
15,009,184 - 2,387,815 648,256 237,916 18,283,171
Cash and short-term
investments at cost,
which approximates market
- 35,644 - - - 35,644
Contribution receivable
from Crompton & Knowles
Corporation
55,080 288,372 23,920 9,869 1,619 378,860
Plan Assets and Equity
$ 15,064,264 $ 32,476,022 $ 2,411,735 $ 658,125 $ 239,535 $ 50,849,681
See accompanying notes to financial statements
CROMPTON & KNOWLES CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN
STATEMENTS OF INCOME AND CHANGES IN PLAN EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
1995
Fixed C&K Equity Advisers Mortgage
Income Fund Stock Fund Fund Fund Fund Total
Investment income:
Cash dividends on
investment in common
stock of Crompton &
Knowles Corporation and
interest on short-term
investments
$ 2,885 $ 1,072,287 $ 2,371 $ 1,257 $ 190 $ 1,078,990
Realized gain on sale
of investments and
withdrawals
- 1,297,120 - - - 1,297,120
Interest earned - Hartford
Life Insurance Company
group annuity
contract
1,051,264 - - - - 1,051,264
Net investment
income
1,054,149 2,369,407 2,371 1,257 190 3,427,374
Increase (decrease) in unrealized
appreciation of
investments
- (7,454,185) 824,777 120,815 37,820 (6,470,773)
Contributions:
Employee
Rollovers
67,972 1,846 104,571 17,065 - 191,454
Employees
881,159 1,741,948 373,786 158,134 73,737 3,228,764
Employer - Net of
forfeitures
- 2,043,854 - - - 2,043,854
Withdrawals and
Distributions
(936,731) (1,662,650) (159,231) (48,740) (12,506) (2,819,858)
Employee interfund
transfers
1,818,848 (1,226,417) (326,925) (243,879) (21,627) -
Net increase/(decrease) in
Plan Equity
for the year
2,885,397 (4,186,197) 819,349 4,652 77,614 (399,185)
Plan Equity at beginning
of year
15,064,264 32,476,022 2,411,735 658,125 239,535 50,849,681
Plan Equity at
end of year
$ 17,949,661 $ 28,289,825 $ 3,231,084 $ 662,777 $ 317,149 $ 50,450,496
1994
Fixed C&K Equity Advisers Mortgage
Income Fund Stock Fund Fund Fund Fund Total
Investment income:
Cash dividends on
investment in common
stock of Crompton &
Knowles Corporation and
interest on short-term
investments
$ 4,357 $ 879,230 $ 4,847 $ 1,583 $ 652 $ 890,669
Realized gain on sale
of investments and
withdrawals
- 1,242,744 - - - 1,242,744
Interest earned - Hartford
Life Insurance Company
group annuity
contract
949,787 - - - - 949,787
Net investment
income
954,144 2,121,974 4,847 1,583 652 3,083,200
Increase (decrease) in unrealized
appreciation of
investments
- (12,033,946) 25,662 (14,931) (4,103) (12,027,318)
Contributions:
Employee
Rollovers
1,039 - 221 - - 1,260
Employees
701,355 1,548,111 268,877 94,419 53,431 2,666,193
Employer - Net of
forfeitures
- 1,676,755 - - - 1,676,755
Withdrawals and
Distributions
(972,580) (2,231,903) (122,309) (28,957) (15,192) (3,370,941)
Employee interfund
transfers
750,591 (1,286,569) 416,791 123,419 (4,232) -
Net increase/(decrease) in
Plan Equity
for the year
1,434,549 (10,205,578) 594,089 175,533 30,556 (7,970,851)
Plan Equity at beginning
of year
13,629,715 42,681,600 1,817,646 482,592 208,979 58,820,532
Plan Equity at
end of year
$ 15,064,264 $ 32,476,022 $ 2,411,735 $ 658,125 $ 239,535 $ 50,849,681
1993
Fixed C&K Equity Advisers Mortgage
Income Fund Stock Fund Fund Fund Fund Total
Investment income:
Cash dividends on
investment in common
stock of Crompton &
Knowles Corporation and
interest on short-term
investments
$ 1,755 $ 755,945 $ 1,371 $ 352 $ 288 $ 759,711
Realized gain on sale
of investments and
withdrawals
- 4,614,837 - - - 4,614,837
Interest earned - Hartford
Life Insurance Company
group annuity
contract
865,918 - - - - 865,918
Net investment
income
867,673 5,370,782 1,371 352 288 6,240,466
Increase (decrease) in unrealized
appreciation of
investments
- (5,181,885) 206,916 42,937 8,885 (4,923,147)
Contributions:
Employee
Rollovers
13,566 - - - - 13,566
Employees
860,790 1,435,118 207,199 67,839 56,070 2,627,016
Employer - Net of
forfeitures
- 1,617,481 - - - 1,617,481
Withdrawals and
Distributions
(1,684,871) (5,012,089) (67,674) (42,839) (3,371) (6,810,844)
Employee interfund
transfers
1,448,397 (1,605,768) 112,091 48,780 (3,500) -
Net increase/(decrease) in
Plan Equity
for the year
1,505,555 (3,376,361) 459,903 117,069 58,372 (1,235,462)
Plan Equity at beginning
of year
12,124,160 46,057,961 1,357,743 365,523 150,607 60,055,994
Plan Equity at
end of year
$ 13,629,715 $ 42,681,600 $ 1,817,646 $ 482,592 $ 208,979 $ 58,820,532
See accompanying notes to financial statements
CROMPTON & KNOWLES CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 and 1994
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 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 Corporation to the Plan were made at an
amount equal to 66 2/3% of each participating employee's basic
employee contribution to the Plan.
Funds contributed under the Plan are held in a trust fund (the
"Trust") and were invested in five investment funds, the Crompton
& Knowles Stock Fund ("C&K Stock Fund"), 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, and contributions by the
Corporation to the Plan are invested in this fund. 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 6.5% on, and after January 1, 1995,
(6.885% for the period January 1, 1994 through December 31, 1994,
and 7.25% for the period January 1, 1993 through December 31,
1993).
The value of the Fixed Income Fund is based on contributions
invested and reinvested, interest earned, less withdrawals and
distributions.
The Equity Fund is a fund invested under the terms of a group
annuity contract with the Hartford in the Separate Account A,
which is a pooled separate account maintained by the Hartford
with respect to a portion of its assets, in connection with the
contract and other similar contracts issued by the Hartford.
This fund invests primarily in equity securities such as common
stocks and securities convertible into common stock. The Equity
Fund is valued based on a unit value as determined by the fund
manager as follows:
12/31/95 12/31/94
Unit Value $126.392 $91.101
Total Units Held 25,293.156 26,210.454
The related cost of the Equity Fund at December 31, 1995 was
$2,245,895, and $2,060,686 at December 31, 1994.
The Advisers Fund is a fund invested under the terms of a group
annuity contract with the Hartford in the Separate Account V
which is a pooled separate account maintained by the Hartford
with respect to a portion of its assets, in connection with the
contract and other similar contracts issued by the Hartford.
Assets in the Separate Account V are invested in the HVA Advisers
Fund, Inc. The Hartford Investment Management Company is an
investment advisor to the fund, and Wellington Management is sub-advisor to
the fund. This fund invests in common stocks, debt
securities, and money market instruments. The Advisers Fund is
valued based on a unit of value as determined by the fund manager
as follows:
12/31/95 12/31/94
Unit Value $1.708 $1.338
Total Units Held 378,784.417 484,397.471
The related cost of the Advisers Fund at December 31, 1995 was
$531,228, and $603,983 at December 31, 1994.
The Mortgage Fund is a fund invested under the terms of a group
annuity contract with the Hartford in the Separate Account G
which is a pooled separate account maintained by the Hartford
with respect to a portion of its assets, in connection with the
contract and other similar contracts issued by the Hartford. The
assets in the Separate Account G are invested solely in the
Hartford GNMA/Mortgage Securities Fund. Inc. The Hartford
Investment Management Company is an investment advisor to the
fund. This fund invests in mortgage related securities,
including securities issued by the Government National Mortgage
Association. The Mortgage Fund is valued based on a unit value
as determined by the fund manager as follows:
12/31/95 12/31/94
Unit Value $30.764 $26.623
Total Units Held 10,065.191 8,936.394
The related cost of the Mortgage Fund at December 31, 1995 was
$269,734, and $233,084 at December 31, 1994.
Assets in any of the five 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 five funds in 10% increments.
As of December 31, 1995 and 1994 the number of participants by
fund were as follows:
1995 1994
Stock Fund 1,541 1,293
Fixed Income Fund 994 867
Equity Fund 503 360
Advisers Fund 225 128
Mortgage Fund 142 104
As of the first day of any month, but not more frequently than
once in any six-month period, a participant may elect to transfer
any part of the value of his basic employee account or his
supplemental employee account, which is invested in one of the
funds, to any of the other funds except the Fixed Income Fund and
the Mortgage Fund. Any such transfer must be in increments of 5%
of the amount invested in the fund from which the transfer is
being made.
3. Income Taxes
The Internal Revenue Service has issued a determination letter to
the effect that the Plan as amended through 1994 is a qualified
plan under Section 401(a) of the Internal Revenue Code of 1954
(the Code), as amended.
The Board of Directors of the Corporation amended the Plan,
effective as of July 1, 1989, to convert it to an employee stock
ownership plan. The amendments to the Plan included both changes
to convert the Plan to an employee stock ownership plan and other
changes required or permitted by the Code. Management and
counsel believe that these amendments will not effect the
qualified status of the Plan.
It is believed that, in general, the federal income tax
consequences of participation in the Plan under present law will
be as follows:
Participants are not subject to federal income tax on employer
contributions made under the Plan or on income earned by the
Trust until amounts are withdrawn or distributed. Any withdrawal
from the Plan will be tax free to the extent of the participant's
contributions to the Plan prior to 1987. If the amount exceeds
such pre-1987 contributions of the participant, the excess will
be treated as being in part a tax free return of the
participant's contribution made to the Plan after 1986 and in
part as a taxable distribution subject to federal income tax at
ordinary rates based on the ratio at the time of withdrawal of
the participant's total contributions after 1986 to the total
value of the participant's accounts. If the withdrawal or
distribution qualifies as a lump sum distribution, amounts
attributable to participation in a predecessor plan prior to 1974
may qualify for capital gains treatment (phased out over the
years 1987-1991), and the ordinary income portion attributable to
post-1973 participation may be taxed under a special five-year
income averaging provision if the participant is over age 59 1/2
(or a special ten-year income averaging provision if the
participant turned 50 before January 1, 1986). If a distribution
includes shares of common stock of Crompton & Knowles
Corporation, taxation of any appreciation in the value of such
shares over their cost to the Trust will be deferred until the
later sale or exchange of such shares. Taxable withdrawals or
distributions after January 1, 1987, in addition to being taxed
as ordinary income will be subject to an additional 10% income
tax unless the withdrawal or distribution is on account of the
death or disability of the participant, is made after he turns
age 59 1/2 or retires after age 55, or is used for certain
deductible medical expenses. A participant who receives total
distributions from all retirement plans in a single year in
excess of $150,000 ($144,551 in some cases) may be subject to an
excise tax of 15% of the excess amount.
The foregoing is only a brief summary of the tax consequences of
participation in the Plan. Each participant should consult his
own personal advisor to review the tax consequences of making any
elections under the Plan and to determine his own tax liability.
4. Participant Vesting
A participant in the Plan is fully vested in all of his accounts
under the Plan upon his death, retirement, disability, or
attainment of age 65 or upon change in control of the
Corporation. A participant whose employment terminates for any
reason before his death or retirement is entitled to receive l00%
of his own contributions plus earnings thereon and will receive
his employer contribution account plus earnings thereon based
upon a schedule under which the account is 100% vested after five
years of participation in the Plan, or after completion of five
years of service with the Corporation. The non-vested portion of
the employer contribution account will be forfeited under certain
circumstances and held to reduce future contributions to be made
by the Corporation to the Plan.
5. Investments
A. Unrealized appreciation in Crompton & Knowles Corporation
common stock:
12/31/95 12/31/94 12/31/93
Unrealized
apprec. at the
beginning of
the year $19,773,208 $31,807,154 $36,989,039
Unrealized
apprec. at the
end of the year 12,319,023 19,773,208 31,807,154
Increase/(decrease)
in unrealized
appreciation $(7,454,185) $(12,033,946) $(5,181,885)
B. Net purchases (sales) of shares of Crompton & Knowles
Corporation common stock consist of the following:
Contributions Net
And Sales and Purchases
Purchases Withdrawals (Sales)
1995
No. of shares 283,757 151,659 132,098
Cost amount $4,307,961 $1,039,233 $3,268,728
1994
No. of shares 145,724 86,429 59,295
Cost amount $2,446,717 485,144 $1,961,573
1993
No. of shares 131,841 269,060 (137,219)
Cost amount $2,924,833 $1,275,893 $1,648,940
C. Gain on sale of investments and withdrawals of Crompton &
Knowles Common Stock:
1995 1994 1993
Aggregate
proceeds $2,336,353 $1,727,888 $5,890,730
Aggregate cost
(FIFO) 1,039,233 485,144 1,275,893
Net gain $1,297,120 $1,242,744 $4,614,837
6. Plan Expenses
Significant costs of Plan administration, which are payable from
the Trust or by the Corporation, are generally paid by the
Corporation.
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Crompton & Knowles Corporation:
We have audited the accompanying statements of financial condition of Crompton
& Knowles Corporation Employee Stock Ownership Plan (the Plan) as of December
31, 1995 and 1994, and the related statements of income and changes in plan
equity for each of the years in the three-year period ended December 31, 1995.
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 financial position of the Plan as of December 31,
1995 and 1994, and the income and changes in plan equity for each of the years
in the three-year period ended December 31, 1995 in conformity with generally
accepted accounting principles.
/s/ KPMG Peat Marwick LLP
Stamford, Connecticut
March 15, 1996
