SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 for the quarterly period
ended June 29, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 for the transition period
from to
Commission File No. 1-4663
Crompton & Knowles Corporation
(exact name of registrant as specified in its charter)
Massachusetts 04-1218720
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Station Place, Metro Center
Stamford, Connecticut 06902
(address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (203)353-5400
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date.
Class Outstanding at July 17, 1996
Common Stock, $.10 par value 48,039,309 shares
CROMPTON & KNOWLES CORPORATION
FORM 10-Q
FOR QUARTER ENDED JUNE 29, 1996
INDEX
PART I. FINANCIAL INFORMATION:
Item 1. Condensed Financial Statements and
Accompanying Notes
. Consolidated Statements of Earnings
(unaudited) - Quarters and six months
ended June 29, 1996 and July 1, 1995
. Consolidated Balance Sheets - June 29, 1996
(unaudited) and December 30, 1995
. Consolidated Statements of Cash Flows
(unaudited) - Six months ended
June 29, 1996 and July 1, 1995
. Notes to the Consolidated Financial
Statements - Quarter ended June 29, 1996
(unaudited)
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
PART II. OTHER INFORMATION:
Item 1. Legal Proceedings
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signatures
Exhibit 11 Statement Re Computation of Per Share Earnings
*Exhibit 27 Financial Data Schedule
* A copy of this Exhibit is annexed to this report on Form 10-Q
provided to the Securities and Exchange Commission and the New
York Stock Exchange.
UNAUDITED
CROMPTON & KNOWLES CORPORATION AND SUBSIDIARIES
Consolidated Statements of Earnings
Quarters and six months ended June 29, 1996 and July 1, 1995
(In thousands, except per share data)
Quarters ended Six months ended
June 29, July 1, June 29, July 1,
1996 1995 1996 1995
Net sales $ 167,570 $ 175,617 $ 332,410 $ 343,810
Cost of products sold 118,854 123,799 235,802 240,358
Selling, general and administrative 27,564 26,736 54,658 52,158
Depreciation and amortization 4,117 3,769 8,126 7,494
Interest 2,293 2,034 4,330 3,602
Other income (199) (13) (451) (241)
Total costs and expenses 152,629 156,325 302,465 303,371
Earnings before income taxes 14,941 19,292 29,945 40,439
Income taxes 5,229 7,234 10,765 15,185
Net earnings $ 9,712 $ 12,058 $ 19,180 $ 25,254
Net earnings per common share $ .20 $ .25 $ .40 $ .52
Dividends per common share $ .135 $ .135 $ .27 $ .255
Average shares outstanding 48,499 48,577 48,499 48,569
See accompanying notes to consolidated financial statements.
June 29, 1996 UNAUDITED
CROMPTON & KNOWLES CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
June 29, 1996 and December 30, 1995
(In thousands of dollars)
June 29, December 30,
1996 1995
ASSETS
CURRENT ASSETS
Cash $ 3,869 $ 918
Accounts receivable 128,173 112,693
Inventories 170,147 154,846
Other current assets 29,070 23,038
Total current assets 331,259 291,495
NON-CURRENT ASSETS
Property, plant and equipment 134,204 129,991
Cost in excess of acquired net assets 60,594 51,922
Other assets 11,312 10,730
$ 537,369 $ 484,138
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $ 75,358 $ 60,439
Accounts payable 58,913 49,415
Accrued expenses 39,212 35,136
Income taxes payable 6,050 3,747
Other current liabilities 21,089 16,578
Total current liabilities 200,622 165,315
NON-CURRENT LIABILITIES
Long-term debt 79,000 64,000
Accrued postretirement liability 7,768 7,559
Deferred income taxes 7,170 7,217
STOCKHOLDERS' EQUITY
Common stock 5,336 5,336
Additional paid-in capital 59,567 59,440
Retained earnings 240,326 234,113
Accumulated translation adjustment 2,301 6,320
Treasury stock at cost (62,831) (62,972)
Deferred compensation (1,890) (2,190)
Total stockholders' equity 242,809 240,047
$ 537,369 $ 484,138
See accompanying notes to consolidated financial statements.
UNAUDITED
CROMPTON & KNOWLES CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Six months ended June 29, 1996 and July 1, 1995
(In thousands of dollars)
June 29, July 1,
Increase (decrease) to cash 1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 19,180 $ 25,254
Adjustments to reconcile net earnings
to net cash provided by operations:
Depreciation and amortization 8,126 7,494
Deferred compensation 300 383
Changes in assets and liabilities, net (18,638) (29,845)
Net cash provided by operations 8,968 3,286
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions (15,713) (8,633)
Capital expenditures (6,209) (10,037)
Other investing activities (954) (584)
Net cash used by investing activities (22,876) (19,254)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term borrowings 15,000 -
Change in notes payable 15,074 33,329
Net treasury stock activity 104 (3,395)
Dividends paid (12,967) (12,361)
Net cash provided by financing activities 17,211 17,573
CASH
Effect of exchange rates on cash (352) 110
Change in cash 2,951 1,715
Cash at beginning of period 918 1,832
Cash at end of period $ 3,869 $ 3,547
See accompanying notes to consolidated financial statements.
CROMPTON & KNOWLES CORPORATION AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
Quarter ended June 29, 1996 (Unaudited)
(In thousands)
PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS
The information included in the foregoing consolidated financial
statements is unaudited but reflects all adjustments (consisting
only of normal recurring adjustments) which are, in the opinion
of management, necessary for a fair statement of the results for
the interim periods presented.
Included in accounts receivable are allowances for doubtful
accounts of $3,017 in 1996 and $3,269 at December 30, 1995.
Accumulated depreciation amounted to $105,527 in 1996 and $99,292
at December 30, 1995.
Accumulated amortization of cost in excess of acquired net assets
amounted to $9,044 in 1996 and $8,281 at December 30, 1995.
Other current liabilities primarily include customer deposits.
It is suggested that the interim consolidated financial
statements be read in conjunction with the consolidated financial
statements and notes included in the Company's 1995 Annual Report
on Form 10-K.
CAPITAL STOCK
There are 53,361,072 common shares issued at $.10 par value, of
which 5,321,763 shares and 5,351,962 shares were held in the
treasury at June 29, 1996 and December 30, 1995, respectively.
INVENTORIES
Components of inventories are as follows:
June 29, Dec. 30,
1996 1995
Finished goods $ 96,213 $ 89,177
Work in process 37,993 30,316
Raw materials and supplies 35,941 35,353
$170,147 $154,846
EARNINGS PER COMMON SHARE
The computation of earnings per common share is based on the
weighted average number of common and common equivalent shares
outstanding. A dual presentation of earnings per common share
has not been made since there is no significant difference in
earnings per share calculated on a primary or fully diluted
basis.
ACQUISITIONS
In January 1996, the Company acquired ER-WE-PA, GMBH at a cost of
$10,025 subject to audit adjustment. In April 1996, the Company
acquired the Hartig line of industrial blow molding systems at a
cost of $5,688. 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 $9,142 is being
amortized over forty years. The operating results of each
acquisition are included in the consolidated statements of
earnings since the date of acquisition.
BUSINESS SEGMENT DATA
Quarter Ended
June 29, July 1,
1996 1995
SALES
Specialty chemicals $ 96,935 $101,229
Specialty process equipment
and controls 70,635 74,388
$167,570 $175,617
OPERATING PROFIT
Specialty chemicals $ 13,039 $ 13,133
Specialty process equipment
and controls 6,395 11,043
General corporate expense ( 2,399) ( 2,863)
Operating profit 17,035 21,313
Interest expense ( 2,293) ( 2,034)
Other income 199 13
Earnings before income taxes $ 14,941 $ 19,292
Six Months Ended
June 29, July 1,
1996 1995
SALES
Specialty chemicals $193,018 $203,771
Specialty process equipment
and controls 139,392 140,039
$332,410 $343,810
OPERATING PROFIT
Specialty chemicals $ 25,830 $ 28,724
Specialty process equipment
and controls 13,501 21,100
General corporate expense ( 5,507) ( 6,024)
Operating profit 33,824 43,800
Interest expense ( 4,330) ( 3,602)
Other income 451 241
Earnings before income taxes $ 29,945 $ 40,439
Recent Event
Pursuant to an Agreement and Plan of Merger, dated as of April
30, 1996 (the "Merger Agreement"), Crompton has agreed to the
merger (the "Merger") of Tiger Merger Corp., a Delaware
corporation and a wholly owned subsidiary of Crompton
("Subcorp"), with and into Uniroyal Chemical Corporation, a
Delaware corporation ("Uniroyal"), subject to the approval of the
transaction by the stockholders of each of Uniroyal and Crompton
at special meetings thereof currently scheduled to be held on
August 21, 1996. The Board of Directors of Crompton has fixed
the close of business on July 9, 1996, as the record date for
determination of holders of Crompton Common Stock entitled to
notice of and to vote at such meeting of Crompton stockholders.
The Merger will be accounted for on a pooling-of-interests basis
and will be consummated on the terms and subject to the
conditions set forth in the Merger Agreement (which was filed by
Crompton with the Commission as an exhibit to Crompton's
Quarterly Report on Form 10-Q for the quarter ended March 30,
1996), pursuant to which, among other things, (i) Subcorp will be
merged with and into Uniroyal as a result of which Uniroyal will
become a wholly owned subsidiary of Crompton, (ii) each issued
and outstanding share (other than shares, if any, held in the
treasury of Uniroyal or held by Crompton or any of its
subsidiaries, which will be canceled) of common stock, $0.01 par
value per share (together with the attached preferred stock
purchase rights, "Uniroyal Common Stock"), of Uniroyal will be
converted into 0.9577 shares of Crompton Common Stock (with cash
in lieu of fractional shares), and (iii) each issued and
outstanding share (other than shares, if any, held in the
treasury of Uniroyal or held by Crompton or any of its
subsidiaries, which will be canceled, and other than shares as to
which dissenters' appraisal rights have been perfected) of Series
A Cumulative Redeemable Preferred Stock, par value $0.01 per
share ("Series A Preferred Stock"), of Uniroyal and of Series B
Preferred Stock, par value $0.01 per share ("Series B Preferred
Stock," and together with the Series A Preferred Stock, "Uniroyal
Preferred Stock"), of Uniroyal will be converted into 6.3850
shares of Crompton Common Stock (with cash in lieu of fractional
shares). It is currently anticipated that the Merger will be
consummated shortly after the special meetings of Crompton and
Uniroyal stockholders, assuming the Merger Agreement and the
Merger are approved at such meetings and all other conditions of
the Merger have been satisfied or waived.
Crompton, Uniroyal and the Directors of Uniroyal were named as
defendants in a purported class action lawsuit (the "Stockholder
Action") filed in connection with the proposed Merger in the
Court of Chancery, County of New Castle, State of Delaware.
Fassbender v. Mazaika, C.A. No. 14980. The Stockholder Action
alleged, among other things, that defendant directors breached
their fiduciary duties by pursuing the Merger at an allegedly
unfair and inadequate price; by agreeing to the proposed Merger
without having conducted an "auction process or active market
check" or a full and thorough investigation; and by agreeing to
the allegedly unfair terms of the Merger. The Stockholder Action
was brought on behalf of a purported class of persons consisting
of the stockholders of Uniroyal other than defendants.
Counsel for Uniroyal, Crompton and Subcorp and the counsel for
plaintiff entered into a memorandum of understanding (the
"Memorandum of Understanding") dated August 5, 1996 in connection
with the settlement of the Stockholder Action. Among other
things, the Memorandum of Understanding provides that, in full
settlement of the claims asserted, (i) the Merger Agreement be
amended so as to reduce the fee payable to Crompton upon
termination of the Merger Agreement under certain circumstances
from $50 million to $35 million, (ii) Uniroyal promptly disseminate to
Uniroyal stockholders its third quarter results, (iii) the
defendants publicly disclose the proposed settlement by a filing
with the Commission and (iv) the plaintiff withdraw his request
for a preliminary injunction enjoining consummation of the
Merger. The Merger Agreement was amended as of August 7, 1996 to
reduce the termination fee as contemplated in the Memorandum of
Understanding.
The consummation of the proposed settlement is subject to (i)
completion by the plaintiff of discovery, (ii) execution of
definitive settlement documents, (iii) notice to members of the
plaintiff class and (iv) approval by the Delaware Court of
Chancery. In connection with the proposed settlement, the
defendants have agreed that they will not oppose plaintiff's
counsel's application for an award of fees and expenses not to
exceed $350,000 in the aggregate, to be paid by Crompton and/or
Uniroyal.
Uniroyal and its directors have denied, and continue to deny,
that any of them have committed any violations of law or breaches
of duty to plaintiff or any member of the plaintiff class,
Uniroyal or its stockholders, or anyone else. The defendants
entered into the Memorandum of Understanding in order to
eliminate the distraction and expense of further litigation.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SECOND QUARTER RESULTS
Overview
Consolidated net sales of $167.6 million for the second quarter
of 1996 declined 5% from the comparable 1995 period. Net
earnings of $9.7 million declined 19% versus the second quarter
of 1995. Net earnings per common share of $.20 were 20% lower
than the $.25 reported last year.
Gross margin as a percentage of net sales decreased to 29.1%
from 29.5% in the second quarter of 1995 primarily as a result
of lower margins in the specialty process equipment and controls
segment. Consolidated operating profit of $17.0 million
declined 20% from the second quarter of 1995 as the specialty
chemicals segment approximated the prior years quarter and the
specialty process equipment and controls segment decreased 42%.
Specialty Chemicals
The Company's specialty chemicals segment reported sales of
$96.9 million which represents a decline of 4% from the second
quarter of 1995. The decrease was attributable to the impact of
lower selling prices (-3%) and lower unit volume (-1%).
Domestic dyes sales of $46.9 million declined 5% from the
comparable 1995 quarter due to lower selling prices (-4%) and
lower unit volume (-1%). International dyes sales of $23.6
million declined 12% versus the second quarter of 1995 primarily
as a result of lower selling prices (-4%) and the balance
primarily from lower unit volume under a long-term supply
agreement. Specialty ingredients sales of $26.5 million rose 7%
primarily as a result of increased unit volume. The percentage
of sales outside the United States was 26%, versus 28% in the
comparable 1995 period.
Operating profit of $13.0 million approximated the $13.1 million
reported in the second quarter of 1995. The percentage of
operating profit outside the United States increased to 20% from
15% in the comparable quarter in 1995.
Specialty Process Equipment and Controls
The Company's specialty process equipment and controls segment
reported sales of $70.7 million, which represents a decrease of
5% from the second quarter of 1995. The decrease was
attributable primarily to lower unit volume in the domestic
business (as lower demand for U.S. extrusion equipment
continued) more than offsetting a 23% increase from acquisitions
(primarily ER-WE-PA). Export sales shipped from the U.S.
accounted for 16% of total segment sales versus 19% in the
comparable period in 1995. International sales increased as a
result of the ER-WE-PA acquisition and accounted for 24% of
total segment sales versus 6% in the second quarter 1995.
Operating profit for the second quarter of 1996 declined 42% to
$6.4 million primarily attributable to lower unit volume in the
higher margin domestic business. International operating profit
was not significant in either the second quarter of 1996 or
1995. The order backlog for extruders and related equipment at
the end of the second quarter of 1996 amounted to $89 million
(including ER-WE-PA backlog of $16 million) compared to $72
million at December 30, 1995.
Other
Selling, general and administrative expenses of $27.6 million
increased 3% versus the comparable period in 1995 primarily due
to the impact of acquisitions. Depreciation and amortization of
$4.1 million increased 9% versus 1995 primarily as a result of a
higher fixed asset base including acquisitions. Interest
expense increased $259 thousand primarily as a result of
increased borrowings. Other income increased $186 thousand
versus the second quarter of 1995. The effective tax rate of
35.0% decreased from the 37.5% in the comparable 1995 period.
YEAR-TO-DATE RESULTS
Overview
Consolidated net sales of $332.4 million for the first six
months of 1996 decreased 3% from the comparable period in 1995.
Net earnings of $19.2 million decreased 24% versus the $25.3
million earned in the first half of 1995. Net earnings per
common share of $.40 decreased 23% from the $.52 reported last
year.
Gross margin as a percentage of net sales decreased to 29.1%
from 30.1% in the comparable 1995 period primarily as a result
of lower margins in the specialty process equipment and controls
segment. Consolidated operating profit of $33.8 million
declined 23% from $43.8 million in the first half of 1995 as
specialty chemicals decreased 10% and specialty process
equipment and controls decreased 36%.
Specialty Chemicals
The Company's specialty chemicals segment reported sales of
$193.0 million representing a 5% decrease from $203.8 million
in the first six months of 1995. The decrease was primarily
attributable to the impact of lower unit volume (-3%) and lower
selling prices (-2%).
Domestic dyes sales of $93.5 million were 8% lower than the
first six months of 1995 primarily due to lower unit volume
(-5%) and lower selling prices (-3%). International dyes sales
of $47.0 million decreased by 9% versus 1995 primarily as an
equal result of lower selling prices and lower unit volume.
Specialty ingredients sales rose 4% to $52.5 million reflecting
primarily increased unit volume. The percentage of sales
outside the United States decreased slightly to 26% from 27% for
the comparable period in 1995.
Operating profit of $25.8 million for the first six months of
1996 decreased 10% from 1995. The decrease was attributable
primarily to the impact of lower pricing in the domestic dyes
business. The percentage of operating profit outside the United
States remained the same at 16% from year to year.
Specialty Process Equipment and Controls
The Company's specialty process equipment and controls segment
reported sales of $139.4 million versus $140.0 million for the
first six months of 1995. The slight decline was comprised of a
22% increase attributable to the incremental impact of
acquisitions offset primarily by lower unit volume in the
domestic business. Export sales shipped from the U.S. accounted
for 22% of total segment sales versus 19% in the comparable
period in 1995. International sales of $28.2 million increased
from $4.7 million in 1995 primarily as a result of the ER-WE-PA
acquisition and accounted for 20% of total segment sales versus
3% in the first six months of 1995.
Operating profit of $13.5 million decreased 36% versus the
comparable 1995 period due primarily to the decline in unit
volume in the higher margin domestic business. International
operating profit was not significant in either the first half of
1996 or 1995.
Other
Selling, general and administrative expenses of $54.7 million
increased 5% versus the first six months of 1995 primarily due
to the impact of acquisitions. Depreciation and amortization of
$8.1 million increased 8% versus the 1995 period primarily as a
result of a higher fixed capital base including acquisitions.
Interest expense of $4.3 million increased $728 thousand
primarily as a result of increased borrowings. Other income of
$451 thousand increased $210 thousand versus 1995. The
effective tax rate of 36.0% decreased from the 37.6% in the
comparable 1995 period.
LIQUIDITY AND CAPITAL RESOURCES
The June 29, 1996 working capital balance of $130.6 million
increased $4.4 million from $126.2 million at year-end 1995.
The current ratio declined slightly to 1.7 from 1.8 at the end
of 1995. Days sales in receivables averaged 63 days in the first
half of 1996, versus 55 days for all of 1995, primarily as a
result of longer collection periods in the specialty process
equipment and controls business. Inventory turnover averaged
2.8 for the first half of 1996 unchanged from year-end 1995.
Cash flows from operating activities of $9.0 million increased
$5.7 million from the first half of 1995 primarily attributable
to decreases in working capital requirements partially offset by
lower earnings. Cash provided by operations and increased
borrowings were used to finance acquisitions, fund capital
expenditures and pay cash dividends. The Company's debt to
total capital ratio increased to 39% from 34% at year-end 1995.
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 from
operations.
INTERNATIONAL OPERATIONS
The stronger U.S. dollar exchange rate versus the Belgian Franc
and French Franc accounted primarily for the reduction of $4.0
million in the accumulated translation adjustment account since
year-end 1995. 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 285 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 $6.9 million for the first half
of 1996 compared to $7.2 million in the comparable 1995 period.
ENVIRONMENTAL MATTERS
The Company's manufacturing facilities are subject to various
federal, state and local requirements with respect to the
discharge of materials into the environment or otherwise
relating to the protection of the environment. The Company has
been designated, along with others, as a potentially responsible
party under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, or comparable state
statutes, at two waste disposal sites; and 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.
PART II. OTHER INFORMATION:
Item 1. Legal Proceedings
Crompton, Uniroyal and the Directors of Uniroyal were named
as defendants in a purported class action lawsuit (the
"Stockholder Action") filed in connection with the proposed
Merger in the Court of Chancery, County of New Castle, State
of Delaware. Fassbender v. Mazaika, C.A. No. 14980. The
Stockholder Action alleged, among other things, that
defendant directors breached their fiduciary duties by
pursuing the Merger at an allegedly unfair and inadequate
price; by agreeing to the proposed Merger without having
conducted an "auction process or active market check" or a
full and thorough investigation; and by agreeing to the
allegedly unfair terms of the Merger. The Stockholder
Action was brought on behalf of a purported class of persons
consisting of the stockholders of Uniroyal other than
defendants.
Counsel for Uniroyal, Crompton and Subcorp and the counsel
for plaintiff entered into a memorandum of understanding
(the "Memorandum of Understanding") dated August 5, 1996 in
connection with the settlement of the Stockholder Action.
Among other things, the Memorandum of Understanding provides
that, in full settlement of the claims asserted, (i) the
Merger Agreement be amended so as to reduce the fee payable
to Crompton upon termination of the Merger Agreement under
certain circumstances from $50 million to $35 million, (ii)
Uniroyal promptly disseminate to Uniroyal stockholders its
third quarter results, (iii) the defendants publicly
disclose the proposed settlement by a filing with the
Commission and (iv) the plaintiff withdraw his request for a
preliminary injunction enjoining consummation of the Merger.
The Merger Agreement was amended as of August 7, 1996 to reduce
the termination fee as contemplated in the Memorandum of
Understanding.
The consummation of the proposed settlement is subject to
(i) completion by the plaintiff of discovery, (ii) execution
of definitive settlement documents, (iii) notice to members
of the plaintiff class and (iv) approval by the Delaware
Court of Chancery. In connection with the proposed
settlement, the defendants have agreed that they will not
oppose plaintiff's counsel's application for an award of
fees and expenses not to exceed $350,000 in the aggregate,
to be paid by Crompton and/or Uniroyal.
Uniroyal and its directors have denied, and continue to
deny, that any of them have committed any violations of law
or breaches of duty to plaintiff or any member of the
plaintiff class, Uniroyal or its stockholders, or anyone
else. The defendants entered into the Memorandum of
Understanding in order to eliminate the distraction and
expense of further litigation.
Item 5. Other Information
Pursuant to an Agreement and Plan of Merger, dated as of
April 30, 1996 (the "Merger Agreement"), Crompton has agreed
to the merger (the "Merger") of Tiger Merger Corp., a
Delaware corporation and a wholly owned subsidiary of
Crompton ("Subcorp"), with and into Uniroyal Chemical
Corporation, a Delaware corporation ("Uniroyal"), subject to
the approval of the transaction by the stockholders of each
of Uniroyal and Crompton at special meetings thereof
currently scheduled to be held on August 21, 1996. The
Board of Directors of Crompton has fixed the close of
business on July 9, 1996, as the record date for
determination of holders of Crompton Common Stock entitled
to notice of and to vote at such meeting of Crompton
stockholders.
The Merger will be accounted for on a pooling-of-interests
basis and will be consummated on the terms and subject to
the conditions set forth in the Merger Agreement (which was
filed by Crompton with the Commission as an exhibit to
Crompton's Quarterly Report on Form 10-Q for the quarter
ended March 30, 1996), pursuant to which, among other
things, (i) Subcorp will be merged with and into Uniroyal as
a result of which Uniroyal will become a wholly owned
subsidiary of Crompton, (ii) each issued and outstanding
share (other than shares, if any, held in the treasury of
Uniroyal or held by Crompton or any of its subsidiaries,
which will be canceled) of common stock, $0.01 par value per
share (together with the attached preferred stock purchase
rights, "Uniroyal Common Stock"), of Uniroyal will be
converted into 0.9577 shares of Crompton Common Stock (with
cash in lieu of fractional shares), and (iii) each issued
and outstanding share (other than shares, if any, held in
the treasury of Uniroyal or held by Crompton or any of its
subsidiaries, which will be canceled, and other than shares
as to which dissenters' appraisal rights have been
perfected) of Series A Cumulative Redeemable Preferred
Stock, par value $0.01 per share ("Series A Preferred
Stock"), of Uniroyal and of Series B Preferred Stock, par
value $0.01 per share ("Series B Preferred Stock," and
together with the Series A Preferred Stock, "Uniroyal
Preferred Stock"), of Uniroyal will be converted into 6.3850
shares of Crompton Common Stock (with cash in lieu of
fractional shares). It is currently anticipated that the
Merger will be consummated shortly after the special
meetings of Crompton and Uniroyal stockholders, assuming the
Merger Agreement and the Merger are approved at such
meetings and all other conditions of the Merger have been
satisfied or waived.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Number Description
(11) Statement Re Computation of
Per Share Earnings
(27)* Financial Data Schedule
(b) No reports on Form 8-K were filed during the quarter
for which this report is filed.
* A copy of this Exhibit is annexed to this report on Form
10-Q provided to the Securities and Exchange Commission and the
New York Stock Exchange.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
CROMPTON & KNOWLES CORPORATION
(Registrant)
August 12, 1996 By: /s/ Charles J. Marsden
Charles J. Marsden
Vice President-Finance and
Chief Financial Officer
August 12, 1996 By: /s/ John T. Ferguson II
John T. Ferguson II
General Counsel and Secretary
CROMPTON & KNOWLES CORPORATION AND SUBSIDIARIES
EXHIBIT 11 - STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
(In thousands, except per share data)
PRIMARY
Quarter Ended Six Months Ended
June 29, July 1, June 29, July 1,
1996 1995 1996 1995
Earnings
Net earnings $ 9,712 $ 12,058 $ 19,180 $ 25,254
Shares
Weighted average
shares outstanding 48,033 48,034 48,026 48,031
Common stock
equivalents 424 530 281 504
Average shares
outstanding 48,457 48,564 48,307 48,535
Per share
Net earnings $ 0.20 $ 0.25 $ 0.40 $ 0.52
FULLY DILUTED
Quarter Ended Six Months Ended
June 29, July 1, June 29, July 1,
1996 1995 1996 1995
Earnings
Net earnings $ 9,712 $ 12,058 $ 19,180 $ 25,254
Shares
Weighted average
shares outstanding 48,033 48,034 48,026 48,031
Common stock
equivalents 466 543 473 538
Average shares
outstanding 48,499 48,577 48,499 48,569
Per share
Net earnings $ 0.20 $ 0.25 $ 0.40 $ 0.52
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<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-END> JUN-29-1996
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0
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<SALES> 332,410
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