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 28, 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 (I.R.S. Employer
jurisdiction Identification No.)
of incorporation
or organization)
One Station Place, Metro Center
Stamford, Connecticut 06902
(address of principal (Zip Code)
executive offices)
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 28, 1997, was $1,341,609,190.
The number of shares of Common Stock of the registrant
outstanding as of February 28, 1997 was 72,961,866.
DOCUMENTS INCORPORATED BY REFERENCE
Annual Report to Stockholders for
fiscal year ended December 28, 1996 ........ Parts I, II and IV
Proxy Statement for Annual Meeting
of Stockholders on April 29, 1997 ........ 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. Since January 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 Cedar Grove, New Jersey. 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. In April 1996,
the Corporation acquired the Hartig line of plastic blow molding
machines from Battenfeld Gloucester Engineering Co.
In August 1996, Uniroyal Chemical Corporation ("UCC") was
merged into and became a wholly owned subsidiary of the
Corporation. UCC has no operations, and its sole material asset
is the capital stock of Uniroyal Chemical Company, Inc.
("Uniroyal"). Uniroyal is a multinational manufacturer of
specialty chemical products, including specialty elastomers,
rubber chemicals, crop protection chemicals and additives for the
plastics and lubricants industries. Uniroyal's products are
currently marketed in approximately 120 countries and serve a
wide variety of end use markets including agriculture,
petrochemical, automotive, tires, hoses, plastics, appliances,
lubricants, construction, recreation and mining.
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 34 of the Corporation's 1996 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
Chemicals & Polymers
Chemicals & Polymers, the Corporation's largest business
with net sales for fiscal 1996 of $493.7 million, has three
principal product lines: rubber chemicals, Royalene(R) EPDM
rubber and Paracril(R) Nitrile Rubber.
The rubber chemicals product line contains over 100
different chemicals for use in processing rubber. Those products
include accelerators, antioxidants, antiozonants, chemical
foaming agents and waxes. Accelerators are used for curing
natural and synthetic rubber, and have a wide range of activation
temperatures, curing ranges and use forms. Antiozonants protect
rubber compounds from flex cracking and ozone, oxygen and heat
degradation. Antioxidants provide rubber compounds with
protection against oxygen, light and heat. Blowing agents
produce gas by thermal decomposition or via a chemical reaction
with other components of a polymer system and are mixed with
rubber to produce sponge rubber products. Waxes inhibit static
atmospheric ozone cracking in rubber. Tire manufacturers
accounted for approximately 60% of the Corporation's rubber
chemical sales in fiscal 1996 with the balance of the sales to
numerous manufacturers of hoses, belting, sponge and a wide
variety of other engineered rubber products.
Uniroyal produces and markets approximately 30 different
ethylene-propylene-diene rubber ("EPDM") polymer variations.
EPDM is popularly known as "crackless rubber" because of its
ability to withstand sunlight and ozone without cracking. EPDM's
applications include single ply roofing, automobile, garden and
radiator hoses, electrical insulation, tire sidewalls, mechanical
seals and gaskets, sponge rubber seals for automobile doors, oil
additives, and plastic modifiers.
Nitrile rubber polymers, produced and marketed by Uniroyal
under the Paracril(R) trademark, are resistant to most types of
oils. Paracril(R) nitrile rubber is produced in 22 different
variations to meet specific end use requirements in automotive
hoses, seals, rings, printing rolls, insulation and many other
products exposed to oil.
Net sales of rubber chemicals during fiscal 1996, 1995 and
1994 were 16.8%, 16.2% and 17.2% of the Corporation's net sales,
respectively. The Corporation believes it is the second largest
supplier of rubber chemicals in the world, the third largest
supplier of EPDM polymers in the world, and the largest supplier
of EPDM polymers in North America. Uniroyal's success in this
business has been due to several factors, including product
performance, effective technical assistance and outstanding
customer service which have earned Uniroyal a reputation for
excellence and strong customer loyalty.
The Chemicals & Polymers business' products are
predominantly sold by a direct common sales force to a generally
overlapping customer base. The sales force is supported by a
highly qualified staff of technical service specialists with
extensive field and operational experience. Strong customer
relations and market knowledge result from this direct sales
effort. In certain geographic areas outside the United States,
the Chemicals and Polymers business' products are sold through
distributors.
Crop Protection
The Crop Protection business manufactures and markets
a wide variety of agricultural chemicals for many major food
crops, including grains, fruits, nuts and vegetables, and many
non-food crops, such as tobacco, cotton, turf, flax and
ornamental plants. The business focuses its efforts mainly on
products used on high value cash crops, such as vegetables, nuts,
citrus and tree and vine fruits as opposed to commodity crops
such as soybeans and corn. The Crop Protection business had net
sales for fiscal 1996 of $353.3 million.
The Crop Protection business offers four major crop
protection chemical product lines: fungicides;
miticides/insecticides; growth regulants and herbicides. Each
product line is composed of numerous formulations for specific
crops and geographic regions.
The Corporation has a substantial presence in its targeted
segments of the agrichemicals market due to its strategy of
focusing research, product development, and sales and marketing
on highly profitable market niches which are less sensitive to
competitive pricing pressures than commodity segments of the
market. While the products of the Crop Protection business
represent a relatively small percentage of the grower's overall
costs, these products are often critical to the success or
failure of the crops being treated. In addition, product line
extensions, attention to application effectiveness and customer
service are important factors in developing strong customer
loyalty.
The Corporation is also a leading producer and marketer of
seed treatment chemicals and, through Gustafson, Inc.
("Gustafson"), a wholly owned subsidiary, is a leading producer
of seed treatment formulations and equipment. Gustafson has the
leading share of the North American commercial seed treatment
formulation market and is recognized as a technological leader in
this market. Gustafson is engaged directly and through
cooperative ventures in developing and formulating seed treatment
systems, offering a broad line of chemical formulations which
contain fungicides, insecticides and seed conditioning aids in
addition to commercial seed treating equipment. These
formulations include crop protection chemicals purchased from
Uniroyal and other major agricultural chemical producers.
Gustafson's expertise enables it to develop and produce
formulations consisting of multiple components to obtain optimum
efficacy against seed and soil disease pathogens and insects.
Gustafson's products are primarily used to treat cotton, cereals,
corn, sorghum, soybeans, rapeseed, peanuts and vegetables.
Gustafson's equipment line includes numerous models that
treat different volumes and types of seed at various dosage rates
using many commercial chemical formulations. Gustafson equipment
can apply two or more chemicals simultaneously, regardless of the
types of formulations.
For the last several years, Gustafson has maintained a major
developmental program in the field of naturally occurring
biological control agents targeted for disease. Gustafson has
focused its efforts on naturally occurring organisms as opposed
to genetically engineered organisms. The United States
Environmental Protection Agency ("EPA") approval and registration
process is generally shorter and less costly for novel
agricultural products of this type. Gustafson received
regulatory approval in 1992 for the first of a series of new
biological formulations.
In Australia, the Corporation's subsidiary, Hannaford
Seedmaster Services Pty. Ltd., provides seed treatment chemicals
and treating services to the local market. The Crop Protection
business, under the Uniroyal name, promotes seed treatment
chemicals in all regions of the world other than North America
and Australia and enjoys a substantial position in the
international seed treatment market. The Corporation anticipates
continuing growth in seed treatment, which is environmentally
attractive because it involves very localized use of agricultural
chemicals and very low use rates compared to broad foliar or soil
treatment.
The Crop Protection business markets its products in North
America through a direct sales force selling to a distribution
network consisting of more than one hundred distributors and
direct customers. In the international market, the Crop
Protection business' direct sales force services over 300
distributors, dealers and agents.
Colors
The Colors business had net sales in fiscal 1996 of $271.1
million. Textile dyes manufactured and sold by the Colors
business 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.
The Corporation 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 recognized domestically as a leader in products and dyeing
process technology for the broadloom carpet industry. In
addition, the Corporation supplies unique dyes for can coating
applications and ink-jet computer printers. In Europe, the
primary dyes offerings of the Corporation have been acid and
pre-metallized dyes for wool and nylon fibers. The Corporation is
less of a factor in other segments of the dyes industry and in
the European market.
Sales of this class of products accounted for 15.0%, 16.3%
and 19.3% of the total revenues of the Corporation in 1996, 1995,
and 1994, respectively.
Domestically, the Corporation sells dyes and chemical
auxiliaries predominantly through its own dedicated sales force.
The Corporation's position as a leading dyes supplier in the
United States has been maintained by satisfying the market's
needs with quick customer response, efficient production, quality
products and strong technical service. Outside the United States,
as much as one-half of the Corporation's sales of dyes and
chemical auxiliaries are made through distributors.
Specialties
The Specialties business consists of two principal product
lines: specialty chemicals and Adiprene(R)/ Vibrathane(R)
urethane prepolymers. The Specialties business had net sales for
fiscal 1996 of $296.6 million.
The Corporation offers its customers one of the broadest
lines of additives for plastics and lubricants in the specialty
chemical industry, including antioxidants, petroleum additives,
chemical foaming agents, synthetic fluids, chemical
intermediates, polymerization inhibitors, curatives, dispersants
and polymer modifiers. These products are used in the
manufacture of numerous plastic and petroleum related products
which in turn have diverse end uses, including plastic products,
adhesives, aerospace, athletic equipment, automotive components,
construction, electronics, food packaging, vinyl flooring, wire
and cable and automotive and industrial oils and lubricants.
These chemicals are often specially developed for a customer's
specific manufacturing requirements. Although niche markets
within these product categories are highly profitable, the
Corporation believes that the relatively small size of these
markets combined with their customer specific nature make them
unattractive to larger chemical companies. Future growth is
expected to result from continued penetration in existing niche
markets and expansion into worldwide markets, particularly Europe
and Asia, and through the further development of a new series of
polymerization inhibitors and high performance antioxidants.
Specialty chemicals are sold through a specialized sales
force, including technical service professionals who address
customer inquiries and problems. The technical service
professionals generally have degrees in chemistry and/or chemical
engineering and are knowledgeable in specific product application
fields. The sales and technical service professionals identify
and focus on customers' growth opportunities, working not only
with the customers' headquarters staff, but also with their
research and development and manufacturing personnel on a
worldwide basis.
The Corporation believes that Uniroyal is the leading
manufacturer of high performance liquid castable urethane
prepolymers in the world. Among the most common products using
these prepolymers are solid industrial tires, printing rollers,
industrial rolls, abrasion-resistant mining products such as
chutes, hoppers and slurry transport systems, mechanical goods
and a variety of sports equipment and other consumer items.
Uniroyal effectively competes in this business by providing
efficient customer service and technical assistance through
Uniroyal's highly regarded technical service staff. Uniroyal's
proven ability to develop new products and new technologies for
its customers provides significant competitive advantages. Over
150 grades of urethane prepolymers are commercially available
from Uniroyal.
Adiprene(R)/Vibrathane(R) is sold directly by a dedicated
sales force in the United States, Canada and Australia and by
direct sales and through distributorships in Europe, Latin
America and the Far East. Adiprene(R)/Vibrathane(R) customers are
serviced worldwide by a dedicated technical and research and
development staff, because the technology and service needs
related to liquid casting is unique. Technical service personnel
support field sales worldwide, while a research and development
staff is dedicated to support rapidly changing customer needs.
Ingredient Technology
The Ingredient Technology business had fiscal 1996 net sales
of $104.4 million. 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.
The Corporation is 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.
The products of the Ingredient Technology business are sold
predominantly through the Corporation's own sales force.
SPECIALTY PROCESS EQUIPMENT AND CONTROLS
The Corporation's wholly owned subsidiary, Davis-Standard
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. This business segment had net sales in the
1996 fiscal year of $284.9 million.
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.
Davis-Standard Corporation is a major user of such controls.
The Corporation 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. Sales of this class of products accounted for 15.8%,
16.0%, and 12.8% of the total revenues of the Corporation in
1996, 1995 and 1994, respectively.
In the United States, most of the Corporation's sales of
specialty process equipment and controls are made by its own
dedicated sales force. In other parts of the world, and for
export sales from the United States, the Corporation's sales of
such equipment and controls are made largely through agents.
Sources of Raw Materials
Chemicals, steel, castings, parts, machine components,
edible molasses, spices, and other raw materials required in the
manufacture of the Corporation's products are generally available
from a number of sources, some of which are foreign. Uniroyal
uses large amounts of petrochemical feedstocks in its chemical
manufacturing processes. Large increases in the cost of these
petrochemical feedstocks could adversely affect Uniroyal's
operating margins. Significant sales of the colors business
consist of dyes manufactured from intermediates purchased from
foreign sources.
The Corporation holds a 50% interest in Rubicon Inc.
("Rubicon"), a manufacturing joint venture between Uniroyal and
ICI American Holdings, Inc. ("ICI") located in Geismar,
Louisiana, which supplies both ICI and Uniroyal with aniline, and
Uniroyal with diphenylamine ("DPA"). The Corporation believes
that its aniline and DPA needs in the foreseeable future will be
met by production from Rubicon and Uniroyal's DPA facility
located in Huddersfield, England.
Patents and Licenses
The Corporation has over 1,800 United States and foreign
patents and pending applications and has trademark protection for
approximately 500 product names. Patents, trade names,
trademarks, know-how, trade secrets, formulae, and manufacturing
techniques assist in maintaining the competitive position of
certain of the Corporation's products. Patents, formulae, and
know-how are of particular importance in the manufacture of a
number of specialty chemicals manufactured and sold by the
Corporation, and patents and know-how are also significant in the
manufacture of certain wire insulating and plastics processing
machinery product lines. The Corporation is licensed to use
certain patents and technology owned by other companies,
including some 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 crop protection chemicals, dyes, plastics
machinery and flavored ingredients.
While the existence of a patent is prima facie evidence of
its validity, the Corporation cannot assure that any of its
patents will not be challenged nor can it predict the outcome of
any such challenge. 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.
Seasonal Business
With the exception of the Crop Protection business,
approximately 14% of the annual sales of which occur in the
fourth calendar quarter, 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 a material 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 the end of 1996,
totalled approximately $92 million (including $21 million from
1996 acquisitions) compared with $72 million in 1995. It is
expected that most of the 1996, backlog will be shipped during
1997. Orders for specialty chemicals and equipment repair parts
are filled primarily from inventory stocks and thus are excluded
from backlog.
Competitive Conditions
The Corporation is a major manufacturer of specialty
chemicals and specialty process equipment and controls. No
single competitor currently competes across the Corporation's
full product line in either of its business segments.
Competition varies by product and by geographic region, except
that in rubber chemicals the market is fairly concentrated. In
that market, Uniroyal and its two principal competitors account
for approximately 50% of total worldwide sales. In addition, the
EPDM and nitrile rubber markets are fairly concentrated.
Uniroyal and its two principal competitors in each of these two
products account for approximately 69% of sales within the United
States and approximately 51% worldwide.
Two new EPDM technologies are being developed and
commercialized by competitors. The first technology, which is
based on a new metallocene catalyst system and which may expand
the application areas of EPDM, is also being developed by the
Corporation. The second technology is a gas phase process that
has not been fully commercialized by any company and cannot be
fully assessed at this time.
Product performance, service, and competitive prices are all
important factors in competing in the specialty chemicals and
specialty process equipment and controls businesses.
Research and Development
The Corporation conducts research and development on a
worldwide basis at a number of facilities, including field
stations that are used for crop protection research and
development activities. Research and development expenditures
by the Corporation totalled $52.4 million for the year 1996,
$50.1 million for the year 1995 and $44.7 million for the year
1994.
Environmental Matters
Chemical companies are subject to extensive environmental
laws and regulations concerning, among other things, emissions to
the air, discharges to land, surface, subsurface strata and water
and the generation, handling, storage, transportation, treatment
and disposal of waste and other materials and are also subject to
other federal, state and local laws and regulations regarding
health and safety matters.
Environmental Regulation. The Corporation believes that its
business, operations and facilities have been and are being
operated in substantial compliance in all material respects with
applicable environmental and health and safety laws and
regulations, many of which provide for substantial fines and
criminal sanctions for violations. However, the ongoing
operations of chemical manufacturing plants entail risks in these
areas and there can be no assurance that material costs or
liabilities will not be incurred. In addition, future
developments, such as increasingly strict requirements of
environmental and health and safety laws and regulations and
enforcement policies thereunder, could bring into question the
handling, manufacture, use, emission or disposal of substances or
pollutants at facilities owned, used or controlled by the
Corporation or the manufacture, use or disposal of certain
products or wastes by the Corporation and could involve
potentially significant expenditures. To meet changing
permitting and regulatory standards, the Corporation may be
required to make significant site or operational modifications,
potentially involving substantial expenditures and reduction or
suspension of certain operations. The Corporation incurred $8.8
million of costs for capital projects and $29.8 million for
operating and maintenance costs related to environmental
compliance at its facilities during fiscal 1996. In fiscal 1997,
the Corporation expects to incur approximately $14.5 million of
costs for capital projects and $29.9 million for operating and
maintenance costs related to environmental compliance at its
facilities. During fiscal 1996, the Corporation incurred costs
of $12.3 million to clean up previously utilized waste disposal
sites and to remediate current and past facilities, and, during
the third quarter of the year, recorded a special provision in
the amount of $30 million for environmental remediation
activities. The Corporation expects to incur costs of
approximately $4.1 million during fiscal 1997 to clean up such
waste disposal sites.
Pesticide Regulation. The Corporation's Crop Protection
business is subject to regulation under various federal, state,
and foreign laws and regulations relating to the manufacture,
sales and use of pesticide products.
In August, 1996, Congress enacted significant changes to the
Federal Insecticide, Fungicide, and Rodenticide Act ("FIFRA"),
governing U.S. sale and use of pesticide products, and the
Federal Food, Drug, and Cosmetic Act ("FFDCA"), which limits
pesticide residues on food with the Food Quality Protection Act
of 1996 ("FQPA"). Under FIFRA, the new law will facilitate
registrations and reregistrations of pesticides for special (so
called minor) uses and authorize collection of maintenance fees
to support pesticide reregistrations. Coordination of
regulations implementing FIFRA and FFDCA will be required. Food
safety provisions will establish a single standard of safety for
pesticide residue on raw and processed foods; provide
information through large food retail stores to consumers about
the health risks of pesticide residues and how to avoid them;
preempt state and local food safety laws if they are based on
concentrations of pesticide residues below recently established
federal residue limits (called "tolerances"); and ensure that
tolerances protect the health of infants and children.
FFDCA, as amended by FQPA, authorizes EPA to set a tolerance
for a pesticide in or on food at a level which poses "a
reasonable certainty of no harm" to consumers. The EPA is
required to review all tolerances for all pesticide products
within 10 years. It is not known when the Corporation's products
will be reviewed under this standard. However, the Corporation
does not anticipate any significant restrictions to our product
uses based on this EPA review.
In April, 1996, UCC announced that it had voluntarily
canceled registered uses of its propargite miticide on certain
crops in the United States. The action was taken to reduce
dietary exposure as requested by the EPA, using the EPA's current
risk assessment model. Tests to confirm that propargite does not
pose a dietary risk are continuing under EPA approved protocols.
Impact of this voluntary action on fiscal 1996 annual pretax
earnings was approximately $5.0 million. Propargite will be
reviewed under the new FQPA standard; however, no further
reduction in use is anticipated.
The European Commission ("EC") has established procedures
whereby all existing active ingredient pesticides will be
reviewed. This EC regulation became effective in 1993 and will
result in a review of all commercial products during the next few
years. The initial round of reviews covered ninety products,
four of which are Corporation's products. It is anticipated that
other of the Corporation's products will be reviewed in
subsequent years. The process may lead to full re-registration
in member states of the EC or may lead to some restrictions, if
adverse data is discovered.
Employees
The Corporation had approximately 5,665 employees on
December 28, 1996.
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 34 of the Corporation's
1996 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:
Location Facility Products/Businesses
UNITED STATES
Alabama
Bay Minette Plant* Specialties
Connecticut
Bethany Research Center* Crop Protection
Middlebury Office and Crop Protection,
Research Center** Chemicals & Polymers
and Specialties
Naugatuck Plant, Research
Center* Crop Protection,
Chemicals & Polymers
and Specialties
Pawcatuck Office and Plastics and Rubber
Machine Shop* Extrusion and
Electronic
Control Equipment and
Systems
Stamford Office** Corporate
Headquarters
Idaho
Marsing Plant Crop Protection
Lease Land;
Own Building
Illinois
Des Plaines Office and Plant* Flavors
Pekin Plant** Crop Protection
Iowa
Des Moines Plant** Crop Protection
Louisiana
Geismar Plant* Crop Protection,
Chemicals & Polymers
and Specialties
Minnesota
Eden Prairie Plant** Crop Protection
New Jersey
Cedar Grove Office and Precision Laboratory
Machine Shop** Extrusion Equipment
& Extrusion Systems
Edison Office and Blow Molding and
Machine Shop** Extrusion Equipment
Mahwah Office, Laboratory Flavors and
and Plant** Seasonings
Newark Plant* Textile Dyes and
Organic Chemicals
Nutley Office, Laboratory Textile and Other
and Plant* Dyes
Somerville Office and Extrusion Systems
Machine Shop*
Vineland Office and Plant* Food & Pharmaceutical
Ingredients and
Colors
North Carolina
Charlotte Office and Dyes
Laboratory*
Gastonia Plant* Crop Protection and
Specialties
Lowell Plant* Textile Dyes, Organic
Chemicals
Ohio
Elyria Office and Plant** Seasonings
Painesville Plant* Chemicals & Polymers
Pennsylvania
Gibraltar Office, Laboratory Textile and Other
and Plant* Dyes
Reading Plant* Textile Dyes, Organic
Chemicals and Food
Colors
Texas
Carollton Office and Plant** Seasonings
Frisco Research Center* Crop Protection
INTERNATIONAL
Bahamas
Freeport Plant* Specialties
Belgium
Brussels Office** Dyes
Tertre Office, Laboratory Textile and Other
and Plant* Dyes
Brazil
Rio Claro Plant* Crop Protection,
Chemicals & Polymers
and Specialties
Canada
Ontario
Elmira Plant* Crop Protection,
Chemicals & Polymers
and Specialties
Guelph Research Center* Crop Protection,
Chemicals & Polymers
and Specialties
France
Dannemarie Office and Extrusion Systems
Machine Shop*
Oissel Office, Laboratory Textile and Other
and Plant* Dyes
Germany
Erkrath Office and Extrusion Systems
Machine Shop*
Italy
Latina Plant* Crop Protection,
Chemicals & Polymers
and Specialties
Mexico
Tampico Plant* Chemicals & Polymers
and Specialties
The Netherlands
Amsterdam Plant* Crop Protection
United Kingdom
Langley Office** Chemicals & Polymers,
Specialties, Dyes and
Crop Protection
_______________
* Facility Owned by the Corporation
**Facility Leased by the Corporation
Uniroyal Chemical holds a 50% interest in Rubicon, which operates
a chemical production facility located in Geismar, Louisiana that
in part is dedicated to producing certain intermediates for
Uniroyal Chemical.
Uniroyal Chemical leases the land and owns the facilities at its
Huddersfield, England site which is operated by a third party
under contract to manufacture DPA for Uniroyal Chemical.
All facilities are considered to be in good operating condition,
well maintained, and suitable for the Corporation's requirements.
ITEM 3. LEGAL PROCEEDINGS
The Corporation is involved in claims, litigation,
administrative proceedings and investigations of various types in
several jurisdictions. A number of such matters involve claims
for a material amount of damages and relate to or allege
environmental liabilities, including clean-up costs associated
with hazardous waste disposal sites, natural resource damages,
property damage and personal injury.
Environmental Liabilities. Each quarter, the Corporation
evaluates and reviews estimates for future remediation and other
costs to determine appropriate environmental reserve amounts.
For each site, a determination is made of the specific measures
that are believed to be required to remediate the site, the
estimated total cost to carry out the remediation plan, the
portion of the total remediation costs to be borne by the
Corporation and the anticipated time frame over which payments
toward the remediation plan will occur. As a result of current
information and analysis, the Corporation recorded a special
provision of $30 million during the third quarter of 1996 for
environmental remediation activities. The total amount accrued
for such environmental liabilities at December 28, 1996, was
$96.2 million. The Corporation estimates the potential
liabilities to range from $68 million to $130 million at December
28, 1996. It is reasonably possible that the Corporation's
estimates for environmental remediation liabilities may
subsequently change should additional sites be identified,
further remediation measures be required or undertaken, the
interpretation of current laws and regulations be modified or
additional environmental laws and regulations be enacted.
The Corporation generally assesses the possibility for toxic
tort claims. Such liabilities are dependent upon complex
factors. Five facilities have been identified where the
possibility for toxic tort claims may be significant, i.e. as
situations where chemicals are believed to have migrated
off-site, thus posing risk of exposure. There are no lawsuits
pending involving any of these five facilities. Virtually all,
if not all, of the off-site disposal sites to which the
Corporation may have sent toxic materials pose a possibility for
toxic tort claims. There are currently pending five toxic tort
claims against Uniroyal Chemical and others arising from these
off-site disposal sites.
The Corporation has been identified by federal, state or
local governmental agencies, and by other potentially responsible
parties (a "PRP") under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, or comparable
state statutes, as a PRP with respect to costs associated with
waste disposal sites at various locations in the United States.
Because these regulations have been construed to authorize joint
and several liability, the EPA could seek to recover all costs
involving a waste disposal site from any one of the PRP's for
such site, including the Corporation, despite the involvement of
other PRPs. In many cases, the Corporation is one of several
hundred PRPs so identified. In a few instances, the Corporation
is one of only a handful of PRPs. In certain instances, a
number of other financially responsible PRPs are also involved,
and the Corporation expects that any ultimate liability resulting
from such matters will be apportioned between the Corporation and
such other parties. In addition, the Corporation is involved
with environmental remediation and compliance activities at some
of its current and former sites in the United States and abroad.
The more significant of these matters are described below.
. Beacon Heights and Laurel Park - Uniroyal is a member of
the Beacon Heights Coalition, a group of entities engaged in
remedial work at the Beacon Heights site in the State of
Connecticut pursuant to a Consent Decree entered in 1987. The
actions required by this Consent Decree have been essentially
completed. There is a continuing requirement for operation and
maintenance at the site.
Over many years, Uniroyal has entered into and performed
activities pursuant to a series of Administrative Orders with
respect to the Laurel Park site located in the State of
Connecticut. The EPA, the State of Connecticut, and the Laurel
Park Coalition (consisting of Uniroyal and a number of other
parties) have entered into a Consent Decree governing the design
and implementation of the selected remedy. Remedial construction
began at the Laurel Park site in July 1996, and is anticipated to
be completed in 1998.
Consolidated litigation brought by the Beacon Heights and
Laurel Park Coalitions seeking contribution to the costs from the
owner/operators of the site and later from other identified
generator parties has resulted in substantial recoveries from a
number of parties. In November 1996, the United States Court of
Appeals for the Second Circuit reversed judgments granted to
other defendants in that litigation and the litigation will be
remanded for further proceedings.
. Cleve Reber - Uniroyal and three other corporations named in
an Administrative Order issued by the EPA have complied with such
Order which governs remediation of the site located in the State
of Louisiana. The cooperating parties are negotiating a consent
agreement with the EPA for operation and maintenance of the site
and to resolve all of the EPA's past cost claims.
. Petro Processors - This matter relating to a site in the
State of Louisiana was initiated in 1981. Litigation was
instituted by the EPA against a number of parties, including
Uniroyal, Inc. (which Uniroyal has agreed to indemnify), seeking
cleanup of the Petro Processors site. A Consent Decree was
entered to settle the case in February 1984, which required the
defendants to clean up the site to the satisfaction of the EPA
under supervision of the court. A settlement among the ten
defendants, dated December 16, 1983, defines the percentage to be
borne by each defendant of the currently estimated future cost of
$100 million to complete remediation of the site. Although the
allocations are subject to a confidentiality order, Uniroyal
believes that the amount it will pay will not be material to its
financial condition or results of operations.
. Vertac - Uniroyal and its Canadian subsidiary, Uniroyal
Chemical Ltd., were joined with others as defendants in
consolidated civil actions brought in the United States District
Court, Eastern District of Arkansas, Western Division by the
United States of America, the State of Arkansas and Hercules
Incorporated ("Hercules") relating to a Vertac Chemical
Corporation site in Jacksonville, Arkansas allegedly contaminated
by dioxins. Uniroyal has been dismissed from the litigation. On
November 18, 1993, the liability phase of trial in this matter,
as to Uniroyal Chemical Ltd., concluded with the issuance of a
jury verdict holding that Uniroyal Chemical Ltd. is liable under
CERCLA Section 107 to the United States of America, the State of
Arkansas and Hercules; that there is a reasonable basis for
divisibility in this matter so that Uniroyal Chemical Ltd.'s
liability is not joint and several; that Uniroyal Chemical Ltd.
is not liable in contribution to Hercules; and that Hercules is
liable in contribution to Uniroyal Chemical Ltd. The Court has
received full briefs on the issues of which, if any, portions of
the jury verdict are binding and which are advisory only, but has
yet to rule on such issues or enter judgment in the matter. If
interlocutory appeals from judgment once entered are not allowed,
the allocation phase of the proceedings will begin. No ultimate
determination of the amount of Uniroyal Chemical Ltd.'s
liability, if any, is expected prior to the end of 1997. In
addition, a new case was filed by several individuals seeking
natural resource damages. Uniroyal Chemical Ltd. filed a Motion
to Dismiss and the plaintiffs voluntarily withdrew the action,
without prejudice. Recently, Uniroyal and Uniroyal Chemical Ltd.
received a notice from the U.S. Department of Interior of its
intent to perform a Natural Resource Damage Assessment at the
site.
Other Environmental Matters
. Sundor Canada Inc. - On July 13, 1990, Sundor Canada Inc.
("Sundor") instituted suit against Uniroyal Chemical Ltd. and
others including the Ontario Ministry of the Environment and the
Regional Municipality of Waterloo in the Ontario Court of Justice
(General Division) at Toronto claiming that Uniroyal Chemical
Ltd. and others are responsible for losses resulting from
Sundor's recall of packaged juices and fruit due to Sundor's use
of the public water derived from Elmira groundwater which was
allegedly contaminated by Uniroyal Chemical Ltd. Uniroyal
Chemical Ltd. has asserted, inter alia, that such recall was
completely voluntary and in any event unnecessary to protect
health and was not caused or justified by any activities of
Uniroyal Chemical Ltd. Uniroyal Chemical Ltd. has instituted
third-party claims against its co-defendants in the action.
Co-defendants in the action have instituted third-party claims
against Uniroyal Chemical Ltd. Examinations for discovery,
restricted to the issue of damages suffered by the plaintiff,
were held in March 1995. The plaintiff has provided additional
information requested by defendants relating to plaintiff's
damages. Mediation of this claim commenced in March 1997.
The Corporation intends to assert all meritorious legal
defenses and all other equitable factors which are available to
it with respect to the above matters. The Corporation believes
that the resolution of these environmental matters will not have
a material adverse effect on its consolidated financial position.
While the Corporation believes it is unlikely, the resolution of
these environmental matters could have a material adverse effect
on its consolidated results of operations in any given year if a
significant number of these matters are resolved unfavorably.
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 35 of the Corporation's 1996 Annual Report to Stockholders,
is incorporated herein by reference.
The number of registered holders of Common Stock of the
Corporation on December 28, 1996, was 4,588.
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 "Five
Year Selected Financial Data" on page 37 of the Corporation's
1996 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 18 through 21 of
the Corporation's 1996 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 22 through 36 of the
Corporation's 1996 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 29, 1997, which has been filed with the Commission pursuant
to Regulation 14A of the Securities Exchange Act of 1934, and
such information is incorporated herein by reference.
The executive officers of the Corporation are as follows:
Vincent A. Calarco, age 54, has served as President and Chief
Executive Officer of the Registrant since 1985 and Chairman of
the Board since 1986. Mr. Calarco has been a member of the Board
of Directors of the Registrant since 1985.
Robert W. Ackley, age 55, has served as a Vice President of the
Registrant since 1986 and as President of Davis-Standard
Corporation (prior to 1995, Davis-Standard Division) since 1983.
Peter Barna, age 53, has served as Vice President-Finance of the
Registrant since 1996 and served as Treasurer of the Registrant
from 1980 to 1996 and Chief Accounting Officer of the Registrant
from 1986 to 1996.
Joseph B. Eisenberg, age 55, has served as Executive Vice
President, Chemical & Polymers, of Uniroyal since 1994; and
served as Vice President and General Manager of the Chemicals and
Polymers Division of Uniroyal from 1991-1994.
John T. Ferguson II, age 50, has served as Vice President of the
Registrant since 1996, and General Counsel and Secretary of the
Registrant since 1989.
Gerald H. Fickenscher, Ph.D., age 53, has served as Vice
President European Region of Uniroyal since 1997, and served as
President, Dyes and Chemicals - Europe, for the Registrant and as
Managing Director of Crompton & Knowles Europe, S.A. from 1994-1997.
Edmund H. Fording, Jr., age 60, has served as Vice President of
the Registrant since 1991 and as President of Crompton & Knowles
Colors Incorporated (prior to 1995, the Dyes and Chemicals
Division) since 1989.
Marvin H. Happel, age 57, has served as Vice President -Organization and
Administration of the Registrant since 1996 and Vice President-Organization
from 1986-1996.
Alfred F. Ingulli, age 55, has served as Executive Vice
President, Crop Protection of Uniroyal since 1994; and served as
Vice President and General Manager, Crop Protection Division of
Uniroyal from 1989-1994.
Eric W. Johnson, age 57, has served as Vice President, Chemical
Operations, Uniroyal Chemical since 1985.
Charles J. Marsden, age 56, has served as Senior Vice President
and Chief Financial Officer of the Registrant since 1996 and 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 55, has served as President of Ingredient
Technology Corporation since January, 1996.
William A. Stephenson, age 49, has served as Executive Vice
President, Specialty Chemicals of Uniroyal since 1994; and served
as Vice President and General Manager, Specialties Division,
Uniroyal from 1990-1994.
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 29, 1997, 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 29, 1997, 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 29, 1997, 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 22 through 36 of the Corporation's
1996 Annual Report to Stockholders and are
incorporated herein by reference:
(i) Consolidated Statements of Operations for the
fiscal years ended 1996, 1995, and 1994;
(ii) Consolidated Balance Sheets for the fiscal
years ended 1996 and 1995;
(iii) Consolidated Statements of Cash Flows for the
fiscal years ended 1996, 1995, and 1994;
(iv) Consolidated Statements of Stockholders' Equity
[Deficit] for the fiscal years ended 1996, 1995
and 1994;
(v) Notes to Consolidated Financial Statements;
and
(vi) Independent Auditors' Report of KPMG Peat
Marwick LLP
2. Independent Auditors' Report and Consent, and
Financial Statement Schedule II, Valuation and
Qualifying Accounts, required by Regulation S-X.
Pages S-1 and S-2 hereof.
3. The following exhibits are either filed herewith or
incorporated herein by reference to the respective
reports and registration statements identified in the
parenthetical clause following the description of the
exhibit:
Exhibit No. Description
2 Agreement and Plan of Merger dated April 30, 1996, by
and among Crompton & Knowles Corporation, Tiger Merger
Corp. and UCC. (Exhibit 2 to Form 10-Q for the period
ended March 31, 1996.)
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.
4.1 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.)
4.2 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.)
4.3 Form of Indenture, dated as of February 8, 1993, among
UCC and State Street Bank and Trust Company, as
Trustee, relating to the 10 1/2% Notes, including form of
securities. (Exhibit 4.1 to the UCC Registration
Statement Nos. 33-45296 and 33-45295 on Form S-1 ["UCC
Form S-1, Registration No. 33-45296/45295"].)
4.4 Form of Indenture, dated as of February 8, 1993, among
UCC and United States Trust Company of New York, as
Trustee, relating to the 11% Notes, including form of
securities. (Exhibit 4.1(a) to UCC Form S-1,
Registration No. 33-45296/45295.)
4.5 Form of Indenture, dated as of February 8, 1993, among
UCC and The Shawmut Bank Connecticut, N.A. as Trustee,
relating to the 12% Notes, including form of
securities. (Exhibit 4.1(b) to UCC Form S-1,
Registration No. 33-45296/45295.)
4.6 Form of Indenture, dated as of September 1, 1993,
among Uniroyal and State Street Bank and Trust
Company, as Trustee, relating to $270 million of 9%
Notes, including the form of securities. (Exhibit 4.2
to UCC Form S-1, Registration No. 33-66740.)
4.7 $530 Million Amended and Restated Credit Agreement
dated as of December 19, 1996, by and among Crompton &
Knowles Corporation and certain of its subsidiaries,
as Borrowers, and various lenders, and Citicorp
Securities, Inc., as Arranger, and Citicorp USA, Inc.,
as Agent and the Chase Manhattan Bank, as Managing
Agent. (Exhibit 10 to the UCC/Uniroyal Form 10-QT
for the transition period ended December 28, 1996.)
4.8 Warrant Agreement, dated as of October 30, 1989,
between UCC and Avery, Inc. (Exhibit 10.2 to UCC Form
S-1, Registration No. 33-32770.)
+10.1 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.)
+10.2 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.)
+10.3 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.)
+10.4 Supplemental Medical Reimbursement Plan. (Exhibit
10(n) to Form 10-K for the fiscal year ended December
27, 1980.)
+10.5 Supplemental Dental Reimbursement Plan. (Exhibit
10(o) to Form 10-K for the fiscal year ended December
27, 1980.)
+10.6 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.)
+10.7 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.)
+10.8 Form of Employment Agreement dated as of August 21,
1996, between a subsidiary of the Registrant and four
executive officers of the Registrant. (Exhibit 10.28
to the UCC/Uniroyal Form 10-K for the fiscal year
ended September 28, 1996.)
+10.9 Amended Supplemental Retirement Agreement dated
October 18, 1995, between the Registrant and Vincent
A. Calarco. (Exhibit 10(i) to Form 10-K for the
fiscal year ended December 30, 1995.)
+10.10 Form of Amended Supplemental Retirement Agreement
dated October 18, 1995, between the Registrant and
three of its executive officers. (Exhibit 10(j) to
Form 10-K for the fiscal year ended December 30,
1995.)
+10.11 Form of Supplemental Retirement Agreement dated
October 18, 1995, between the Registrant and five of
its executive officers. (Exhibit 10(k) to Form 10-K
for the fiscal year ended December 30, 1995.)
+10.12 Form of Supplemental Retirement Agreement dated as of
August 21, 1996, between a subsidiary of the
Registrant and two executive officers of the
Registrant. (Exhibit 10.29 to the UCC/Uniroyal Form
10-K for the fiscal year ended September 28, 1996.)
+10.13 Form of Supplemental Retirement Agreement dated as of
August 21, 1996, between a subsidiary of the
Registrant and two executive officers of the
Registrant. (Exhibit 10.30 to the UCC/Uniroyal Form
10-K for the fiscal year ended September 28, 1996.)
+10.14 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.)
+10.15 Amended Benefit Equalization Plan dated October 20,
1993. (Exhibit 10(m) to Form 10-K for the fiscal year
ended December 25, 1993.)
+10.16 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.)
+10.17 Amended 1988 Long Term Incentive Plan. (Exhibit 10(o)
to Form 10-K for the fiscal year ended December 25,
1993.)
*+10.171 Amendment No. 4 to 1988 Long Term Incentive Plan.
10.18 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.)
+10.19 Form of 1992 - 1994 Long Term Performance Award
Agreement. (Exhibit 10(y) to Form 10-K for the fiscal
year ended December 28, 1991.)
+10.20 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.)
*+10.21 Amended 1993 Stock Option Plan for Non-Employee
Directors.
10.22 Form of Assignment and Assumption of Raw Materials
Agreement, dated as of October 30, 1989, between UCC
and Avery. (Exhibit 10.1 to UCC Form S-1,
Registration No. 33-32770.)
+10.23 UCC Purchase Right Plan, as amended and restated as of
March 16, 1995. (Exhibit 10.1 to the UCC Form 10-Q
for the period ended April 2, 1995 ["UCC April 1995
Form 10-Q"].)
+10.24 UCC 1993 Stock Option Plan. (Exhibit 28.1 to UCC's
Registration Statement No. 33-62030 on Form S-8, filed
on May 4, 1993.)
+10.25 Form of Amendment No. 2 to the UCC 1993 Stock Option
Plan. (Exhibit 10.2 to the UCC April 1995 Form 10-Q.)
+10.26 Form of Executive Stock Option Agreement, dated as of
November 15, 1993. (Exhibit 10.22 to the UCC 1994 Form
10-K.)
*+10.27 Form of 1996 - 1998 Long Term Performance Award
Agreement entered into in 1996 between the Registrant
or one of its subsidiaries and fourteen of the
executive officers of the Registrant.
*11 Statement re computation of per share earnings.
*13 1996 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. (See Item 14(a)2
herein.)
*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 28, 1996.
*29 Annual Report on Form 11-K of Crompton & Knowles
Corporation Employee Stock Ownership Plan for the
fiscal year ended December 31, 1996.
*99 Independent Auditors' Report of Deloitte & Touche LLP.
* 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 28, 1997 By:/s/ Charles J. Marsden
Charles J. Marsden
Senior Vice President
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* Senior Vice President and Director
(Chief Financial Officer)
Peter Barna* Vice President - Finance
(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 28, 1997 *By:/s/ Charles J. Marsden
Charles J. Marsden
as attorney-in-fact
Independent Auditors' Report and Consent
The Board of Directors and Stockholders
Crompton & Knowles Corporation:
Under date of January 30, 1997, we reported on the consolidated
balance sheet of Crompton & Knowles Corporation and subsidiaries
("the Company") as of December 28, 1996, and the related
consolidated statements of operations, stockholders' equity
(deficit) and cash flows for the year then ended, which are
included in this Form 10-K. Our report includes an explanatory
paragraph regarding our responsibility for the Company's 1995 and
1994 consolidated financial statements. In connection with our
audit of the aforementioned consolidated financial statements, we
also audited the related consolidated financial statement
schedule included in this Form 10-K for the year then ended.
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 audit.
In our opinion, such financial statement schedule, when
considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly, in all material
respects, the 1996 information set forth therein.
We previously audited and reported on the consolidated financial
statement schedule as of and for the years ended December 30,
1995 and December 31, 1994 of Crompton & Knowles Corporation and
subsidiaries prior to the Company's pooling-of-interests with
Uniroyal Chemical Corporation, as more fully described in the
notes to the consolidated financial statements under the heading
"Accounting Policies - Business Combination". We also audited
the combination of the financial statement schedule as of and for
the years ended December 30, 1995 and December 31, 1994, after
restatement for the pooling-of-interests referred to above; in
our opinion, the restated schedule, when considered in relation
to the basic consolidated financial statements taken as a whole,
has been properly combined on the basis described in the
aforementioned note to the consolidated financial statements.
We consent to the incorporation by reference in the registration
statement (Nos. 33-21246, 33-42280 and 33-67600) on Form S-8 of
Crompton & Knowles Corporation of our report, which includes an
explanatory paragraph regarding our responsibility related to the
Company's consolidated balance sheet as of December 30, 1995 and
the related consolidated statements of operations, stockholders'
equity (deficit), and cash flows for each of the years in the
two-year period then ended, dated January 30, 1997, relating to
the consolidated balance sheet of Crompton & Knowles Corporation
and subsidiaries as of December 28, 1996, and the related
consolidated statements of operations, stockholders' equity
(deficit), and cash flows for the year then ended, which report
appears in the December 28, 1996 Annual Report on Form 10-K of
Crompton & Knowles Corporation. We also consent to the
incorporation by reference in the registration statement (No. 33-21246) on
Form S-8 of Crompton & Knowles Corporation of our
report dated March 20, 1997 relating to the statements of
financial condition of Crompton & Knowles Corporation Employee
Stock Ownership Plan as of December 31, 1996 and 1995, and the
related statements of income and changes in plan equity for each
of the years in the three-year period ended December 31, 1996, as
included in Exhibit 29 of said Form 10-K.
/s/ KPMG Peat Marwick LLP
Stamford, Connecticut
March 28, 1997
S-1
Schedule II
CROMPTON & KNOWLES CORPORATION AND SUBSIDIARIES
Valuation and Qualifying Accounts
(In thousands of dollars)
Additions
Balance at charged to Adjustments Balance
beginning costs and at end
of year expenses Recurring Other of year
Fiscal Year ended December 28, 1996:
Allowance for doubtful accounts
$ 6,142 $ 2,333 $ (1,525)(1) $ 349 (6) $ 7,299
Accumulated amortization of cost in
excess of acquired net assets
29,562 5,835 140 (2) 1,079 (6) 36,616
Accumulated amortization of other
intangible assets
89,036 15,700 (296)(2) 3,723 (6) 108,163
Fiscal Year ended December 30, 1995:
Allowance for doubtful accounts
$ 6,281 $ 1,415 $ (1,584)(1) $ 30 (3) $ 6,142
Accumulated amortization of cost in
excess of acquired net assets
23,816 5,544 214 (2) (12)(5) 29,562
Accumulated amortization of other
intangible assets
75,486 14,887 (815)(2) (522)(5) 89,036
Fiscal Year ended December 31, 1994:
Allowance for doubtful accounts
$ 6,018 $ 1,204 $ (963)(1) $ 22 (3) $ 6,281
Accumulated amortization of cost in
excess of acquired net assets
32,608 6,270 76 (2) (15,138)(4)(5) 23,816
Accumulated amortization of other
intangible assets
95,231 20,101 (432)(2) (39,414)(4) 75,486
(1) Represents accounts written off as uncollectible (net of recoveries)
denominated in foreign currencies.
(2) Represents the translation effect of intangible assets denominated i
(3) Represents allowance related to the acquisition of Killion Extruders
(4) Represents write-offs due to the 1994 intangible asset revaluation a
(5) Represents intangible asset retirements.
(6) Represents adjustment to conform fiscal year of Uniroyal.
S-2
Exhibit 3(ii)
BY-LAWS
of
CROMPTON & KNOWLES CORPORATION
ARTICLE I
Stockholders
Section 1. Annual Meeting. The annual meeting of the
stockholders shall be held on the last Tuesday of April in each
year, at such time as shall be fixed by the Board of Directors in
the call of the meeting. If that day be a legal holiday at the
place where the meeting is to be held, the meeting shall be held
on the next succeeding day not a legal holiday at such place.
Purposes for which an annual meeting is to be held, in addition
to those prescribed by law, by the Articles of Organization, or
by these By-Laws, may be specified by the Board of Directors in
the notice of the meeting.
Section 2. Special Meeting in Lieu of Annual Meeting. If
no annual meeting has been held in accordance with the foregoing
provisions, a special meeting of the stockholders may be held in
lieu thereof. Any action taken at such special meeting shall have
the same force and effect as if taken at the annual meeting, and
in such case all references in these By-Laws to the annual
meeting of the stockholders shall be deemed to refer to such
special meeting. Any such special meeting shall be called as
provided in Section 3 of this Article I.
Section 3. Special Meetings. A special meeting of the
stockholders may be called at any time by the chairman of the
Board, the President, or by the Board of Directors. A special
meeting of the stockholders shall be called by the Clerk (or, in
the case of the death, absence, incapacity, or refusal of the
Clerk, by any other officer) upon written application of one or
more stockholders who hold at least forty percent in interest of
the capital stock entitled to vote at the meeting. Each call of
a meeting shall state the place, date, hour, and purposes of the
meeting.
Section 4. Place of Meetings. All meetings of the
stockholders shall be held at such place, either within or
without the Commonwealth of Massachusetts, within the United
States as shall be fixed by the board of Directors in the notice
of the meeting. Any adjourned session of any meeting of the
stockholders shall be held within the United States at the place
designated in the vote of adjournment.
Section 5. Notice of Meetings. A written notice of each
meeting of stockholders, stating the placated, hour, and purposes
of the meeting, shall be given at least seven days before the
meeting to each stockholder entitled to vote thereat and to each
stockholder who, by law, by the Articles of Organization, or by
these By-Laws, is entitled to notice, by leaving such notice with
him or at his residence or usual place of business, or by mailing
it, postage prepaid, addressed to such stockholder at his address
as it appears in the records of the Corporation. Such notice
shall be given by the Clerk or an Assistant Clerk or by an
officer designated by the Board of Directors. Whenever notice of
a meeting is required to be given to a stockholder under any
provision of the Business Corporation Law of the Commonwealth of
Massachusetts or of the Articles of Organization or these
By-Laws, a written waiver thereof, executed before or after the
meeting by such stockholder or his attorney thereunto authorized
and filed with the records of the meeting, shall be deemed
equivalent to such notice.
Section 6. Quorum of Stockholders. At any meeting of the
stockholders, a quorum shall consist of a majority in interest of
all stock issued and outstanding and entitled to vote at the
meeting, except when a larger quorum is required by law, by the
Articles of Organization, or by these By-Laws. Stock owned
directly or indirectly by the Corporation, if any, shall not be
deemed outstanding for this purpose. Any meeting may be
adjourned from time to time by a majority of the votes properly
cast upon the question, whether or not a quorum is present, and
the meeting may be held as adjourned without further notice
Section 7. Action by Vote. When a quorum is present at any
meeting, a plurality of the votes properly cast for election to
any office shall elect to such office, and a majority of the
votes properly cast upon any question other than an election to
an office shall decide the question, except when a larger vote is
required by law, by the Articles of Organization, or by these
By-Laws.
Section 8. Voting. Stockholders entitled to vote shall have
one vote for each share of stock held by them of record according
to the records of the Corporation, unless otherwise provided by
the Articles of organization. No ballot shall be required for
any vote for election to any office unless requested by a
stockholder present or represented at the meeting and entitled to
vote in such election. The Corporation shall not, directly or
indirectly, vote any share of its own stock.
Section 9. Proxies. To the extent permitted by law,
stockholders entitled to vote may vote either in person or by
written proxy. No proxy dated more than six months before the
meeting named therein shall be valid All proxies shall be filed
with the clerk of the meeting before being voted. Unless
otherwise specified or limited by their terms, such proxies shall
entitle the holders thereof to vote at any adjournment of such
meeting but shall not be valid after the final adjournment of
such meeting.
ARTICLE II
Board of Directors
Section 1. Number, Election, and Terms. Subject to the
rights of the holders of Preferred Stock to elect additional
directors under specified circumstances as provided in Article 4
of the Articles of organization, the Board of Directors shall
consist of not less than six nor more than 15 persons, the exact
number to be fixed from time to time by the Board of Directors
pursuant to a resolution adopted by a majority vote of the
directors then in office. The Board of Directors shall be
classified with respect to the time for which they shall
severally hold office by dividing them into three classes, as
nearly equal in number as possible, with the term of office of
one class expiring at the annual meeting of stockholders each
year. At each annual meeting of the stockholders of the
Corporation, the successors to the class of directors whose terms
expire at the meeting shall be elected to hold office for terms
expiring at the annual meeting of stockholders held in the third
year following the year of their election. If the number of
directors is changed, any increase or decrease shall be
apportioned by the Board of Directors among the classes so as to
maintain the number of directors in each class as nearly equal as
possible. Each director shall hold office until the annual
meeting for the year in which such director's term expires and
until such director's successor shall be elected and shall
qualify. No director need to be a stockholder.
Section 2. Nomination. Nominations for the election of
directors may be made by the Board of directors or a committee
appointed by the Board of Directors or by any stockholder
entitled to vote in the election of directors generally.
However, any stockholder entitled to vote in the election of
directors generally may nominate one or more persons for election
as directors at a meeting only if written notice of such
stockholder's intent to make such nomination or nominations has
been given, either by personal delivery or by mailing it, postage
prepaid, to the Clerk of the Corporation not later than (a) with
respect to an election to be held at an annual meeting of
stockholders, ninety (90) days prior to the anniversary date of
the immediately preceding annual meeting, and (b) with respect to
an election to be held at a special meeting of stockholders for
the election of directors, the close of business on the tenth day
following the date on which notice of such meeting is first given
to stockholders. Each such notice shall set forth (i) the name
and address of the stockholder who intends to make the nomination
and of the person or persons to be nominated; (ii) a
representation that the stockholder is a holder of record of
stock of the Corporation entitled to vote at such meeting and
intends to appear in person or by proxy at the meeting to
nominate the person or persons specified in the notice; (iii) a
description of all arrangements or understandings between the
stockholder and each nominee and any other person or persons
(naming such person or persons) pursuant to which the nomination
or nominations are to be made by the stockholder;(iv) such other
information regarding each nominee proposed by such stockholder
as would be required to be included in a proxy statement filed
pursuant to the proxy rules of the Securities and Exchange
Commission; and (v) the consent of each nominee to serve as a
director of the Corporation if so elected. The presiding officer
of the meeting may refuse to acknowledge the nomination of any
person not made in compliance with the foregoing procedure.
Section 3. Newly Created Directorships and Vacancies. Newly
created directorships resulting from any increase in the number
of directors and any vacancies on the Board of Directors
resulting from death, resignation, disqualification, removal, or
other cause shall be filled only by the affirmative vote of a
majority of the remaining directors then in office, even though
less than a quorum of the Board of directors. Any director
elected in accordance with the preceding sentence shall hold
office for the remainder of the full term of the class of
directors in which the new directorship was created or the
vacancy occurred and until such director's successor shall have
been elected and qualified. No decrease in the number of
directors constituting the Board of Directors shall shorten the
term of any incumbent director.
Section 4. Removal of Directors. Any director may be
removed from office by stockholder vote at any time, with or
without assigning any cause, but only by the affirmative vote of
the holders of at least 80% of the voting power of the then
outstanding shares of capital stock of the Corporation entitled
to vote generally in the election of directors, voting together
as a single class. Any director may also be removed from office
for cause by vote of a majority of the directors then in office.
Section 5. Directors Elected by Holders of Preferred Stock.
Whenever the holders of any class or series of Preferred stock or
of any other class or series of shares issued by the Corporation
shall have the right, voting separately as a class or series, to
elect one or more directors under specified circumstances, the
election, term of office, filling of vacancies, and other
features of such directorships shall be governed by the terms of
the Articles of Organization applicable thereto, and none of the
provisions of Sections 1 to 4 of this Article II shall apply with
respect to directors so elected.
Section 6. Resignations. Any director, member of a
committee, or officer may resign at any time by delivering his
resignation in writing to the Chairman of the Board, the
President, the Clerk, or to a meeting of the Board of Directors.
Such resignation shall be effective upon receipt unless specified
to be effective at some other time.
Section 7. Powers. Except as reserved to the stockholders by
law, the Articles of Organization, or by these By-Laws, the
business of the Corporation shall be managed by the Board of
Directors who shall have and may exercise all the powers of the
Corporation.
Section 8. Executive Committee. The Board of Directors may,
by vote of a majority of the directors then in office, elect from
their number an Executive Committee, which shall consist of the
Chief Executive Officer and such number of other directors as the
Board shall determine. The Executive Committee shall have and
may exercise, when the Board of Directors is not in session, the
authority of the Board of Directors in the management of the
business of the Corporation, except that it shall not have
authority to:
(a) Change the principal office of the Corporation;
(b) Amend the By-Laws;
(c) Issue stock;
(d) Establish and designate series of stock or fix and
determine the relative rights and preferences of any
series of stock;
(e) Elect officers required by law or these By-Laws to be
elected by the stockholders or directors or fill
vacancies in any such offices;
(f) Change the number of the Board of Directors or fill
vacancies in the Board of Directors;
(g) Remove officers or directors from office;
(h) Authorize the payment of any dividend or distribution
to stockholders;
(i) Authorize the reacquisition for value of stock of the
Corporation; or
(j) Authorize a merger which by law may be authorized by
the Board of Directors.
Section 9. Other Committees. The Board of Directors may, by
vote of a majority of the directors then in office, elect from
their number other committees and may delegate to any such
committee or committees some or all of the powers of the Board of
Directors except those powers which by law, by the Articles of
Organization, or by these By-Laws they are prohibited from
delegating. Except as the board of Directors may otherwise
determine, the Executive Committee and any such other committee
may make rules for the conduct of its business, but unless
otherwise provided by the Board of Directors or such rules, its
business shall be conducted as nearly as may be in the same
manner as is provided by these By-Laws for the conduct of
business by the Board of Directors. The Board of Directors shall
have power to rescind any vote, resolution, or other action of
any committee, provided that the rights of third parties shall
not be impaired by such rescission.
Section 10. Regular Meetings. At least one regular meeting
of the Board of Directors shall be held in each quarter of the
calendar year. A regular meeting of the Board of Directors shall
be held without call or notice immediately after and at the same
place as the annual meeting of the stockholders. Other regular
meetings of the Board of Directors may be held without call or
notice at such places and at such times as the Board of Directors
may, from time to time, determine, provided that notice of the
first regular meeting following any such determination shall be
given to absent directors.
Section 11. Special Meetings. Special meetings of the Board
of Directors may be held at any time and at any place designated
in the call of the meeting, when called by the Chairman of the
Board, the President, or by two or more directors.
Section 12. Notice of Meetings. It shall be sufficient
notice to a director of a meeting of the Board of Directors to
send notice by mail at least forty-eight (48) hours or by
telegram at least twenty-four (24)hours before the meeting,
addressed to such director at his usual or last known business or
residence address, or to give notice to such director in person
or by telephone at least twenty-four (24) hours before the
meeting. Notice of a meeting need not be given to any director
if a written waiver of notice, executed by him before or after
the meeting, is filed with the records of the meeting, or to any
director who attends the meeting without protesting prior thereto
or at its commencement the lack of notice to him. Neither notice
of a meeting nor a waiver of a notice need specify the purposes
of the meeting.
Section 13. Quorum of Directors. At any meeting of the
Board of Directors, a majority of the directors then in office
shall constitute a quorum. Any meeting may be adjourned from
time to time by a majority of the votes cast upon the question,
whether or not a quorum is present, and the meeting maybe held as
adjourned without further notice.
Section 14. Action by Vote. When a quorum is present at any
meeting, a majority of the directors present may take any action,
except when a larger vote is required by law, by the Articles of
organization, or by these By-Laws.
Section 15. Action by Written Consent. Unless the Articles
of Organization otherwise provide, any action required or
permitted to be taken at any meeting of the Board of Directors or
of any committee thereof may be taken without a meeting if all
the directors or members of the committee, as the case maybe,
consent to the action in writing and the written consents are
filed with the records of the meetings of the Board of Directors
or such committee. Such consents shall be treated for all
purposes as a vote taken at a meeting.
Section 16. Participation Through Communications Equipment.
Unless otherwise provided by law or the Articles of Organization,
members of the Board of Directors or of any committee thereof may
participate in a meeting of such Board or committee, as the case
may be, through conference telephone or similar communications
equipment by means of which all persons participating in the
meeting can hear each other at the same time, and participation
by such means shall constitute presence in person at a meeting.
Section 17. Compensation of Directors. The Board of
Directors may provide for the payment to any of the directors,
other than officers or employees of the Corporation, of a
specified amount for services as a director or member of a
committee of the Board, or of a specified amount for attendance
at each regular or special Board or committee meeting, or of
both, and all directors shall be reimbursed for expenses of
attendance at any such meeting; provided, however, that nothing
herein contained shall be construed to preclude any director from
serving the Corporation in any other capacity and receiving
compensation therefor.
ARTICLE III
Officers and Agents
Section 1. Enumeration; Qualification. The officers of the
Corporation shall be a President, a Treasurer, a Clerk, and such
other officers, including, without limitation, a Chairman of the
Board, one or more Vice Presidents, Assistant Treasurers, and
Assistant Clerks as the Board of Directors from time to time may
in their discretion elect or appoint. In addition, the
Corporation shall have such other agents as may be appointed by
management in accordance with these By-Laws. The Chairman of the
Board and the President shall each be a director. The Clerk
shall be a resident of Massachusetts unless the Corporation had a
resident agent appointed for the purpose of service of process.
Any two or more offices may be held by the same person. Any
officer may be required by the Board of Directors to give bond
for the faithful performance of his duties to the Corporation in
such amount and with such sureties as the directors may
determine.
Section 2. Powers. Subject to law, to the Articles of
Organization, and to the other provisions of these By-Laws, each
officer shall have, in addition to the duties and powers herein
set forth, such duties and powers as are commonly incident to his
office and such duties and powers as the Board of Directors may
from time to time designate.
Section 3. Election. The Chairman of the Board, if any, the
President, the Treasurer, and the Clerk shall be elected annually
by the Board of Directors at their first meeting following the
annual meeting of the stockholders. Other officers, if any, may
be elected or appointed by the Board of Directors at said meeting
or at any other time.
Section 4. Tenure. Except as otherwise provided by law, by
the Articles of Organization, or by these By-Laws, the Chairman
of the Board, if any, the President, the Treasurer, and the Clerk
shall hold office until the first meeting of the Board of
Directors following the next annual meeting of the stockholders
and until their respective successors are chosen and qualified,
and each other officer shall hold office for such term as may be
designated in the vote electing or appointing him, or in each
case until such officer sooner dies, resigns, is removed, or
becomes disqualified.
Section 5. Chief Executive Officer. The Chief Executive
Officer of the Corporation shall be the chairman of the Board,
the President, or such other officer as may from time to time be
designated by the Board of Directors. If no such designation is
made, the President shall be the Chief Executive Officer. The
Chief Executive Officer shall, subject to the control of the
Board of Directors, have general charge and supervision of the
business of the Corporation and, except as the Board of Directors
shall otherwise determine, shall preside at all meetings of the
stockholders and of the Executive Committee. Unless otherwise
determined by the Board of Directors, the Chief Executive Officer
shall have the authority to appoint such agents, in addition to
those officers enumerated in Section 1 of this Article III as
being elected or appointed by the Board of Directors, as he shall
deem appropriate and to define their respective duties and
powers.
Section 6. Chairman of the Board. If a Chairman of the
Board of Directors is elected, he shall preside at all meetings
of the Board of Directors and shall have the duties and powers
specified in these By-Laws and such other duties and powers as
may be determined by the Board of Directors.
Section 7. Presidents and Vice Presidents. The President
shall have the duties and powers specified in these By-Laws and
shall have such other duties and powers as may be determined by
the Board of directors.
The Vice Presidents shall have duties and powers as shall be
designated from time to time by the board of Directors. Unless
the Board of Directors otherwise determines, one Vice President
shall be designated as the Chief Financial Officer of the
Corporation and, as such, shall be the chief financial and
accounting officer of the Corporation and shall have the duties
and powers commonly incident thereto.
Section 8. Treasurer and Assistant Treasurers. The Treasurer
shall have general responsibility for the corporate treasury
function, shall be in charge of its funds and valuable paper,
books of account, and accounting records, and shall have such
other duties and powers as may be designated from time to time by
the Board of Directors.
Any Assistant Treasurer shall have such other duties and
powers as shall be designated from time to time by the Board of
Directors or the Treasurer.
Section 9. Clerk and Assistant Clerks. The Clerk shall
record all proceedings of the stockholders and Board of Directors
in a book or series of books to be kept for that purpose, which
book or books shall be kept at the principal office of the
Corporation and shall be open at all reasonable time to the
inspection of any stockholder. In the absence of the Clerk from
any meeting of the stockholders or Board of directors, an
Assistant Clerk, or if there be none or he is absent, a temporary
clerk chosen at the meeting, shall record the proceedings thereof
in the aforesaid book.
Any Assistant Clerks shall have such other duties and powers
as shall be designated from time to time by the Board of
Directors or the Clerk.
The Clerk or any Assistant Clerk may also have the title
Secretary or Assistant Secretary, as the case may be, and may
execute or attest documents using either title.
ARTICLE IV
Capital Stock
Section 1. Stock Certificates. Each stockholder shall be
entitled to a certificate stating the number and the class and
the designation of the series, if any, of the shares held by him,
in such form as shall, in conformity to law, be prescribed from
time to time by the Board of Directors. Such certificate shall
be signed by the President or a Vice President and by the
Treasurer or an Assistant Treasurer. Such signatures may be
facsimile if the certificate is signed by a transfer agent or by
a registrar, other than a director, officer, or employee of the
Corporation. In case any officer who has signed or whose
facsimile signature has been placed on such certificate shall
have ceased to be such officer before such certificate is issued,
it may be issued by the Corporation with the same effect as if he
were such officer at the time of its issue.
Every certificate for shares of stock which are subject to
any restriction on transfer pursuant to the Articles of
Organization, these By-Laws, or any agreement to which the
Corporation is a party shall have the restriction noted
conspicuously on the certificate and shall also set forth on the
face or back either the full text of the restriction or a
statement of the existence of such restriction and a statement
that the Corporation will, upon written request, furnish a copy
thereof to the holder of such certificate without charge.
Every certificate issued when the Corporation is authorized
to issue more than one class or series of stock shall set forth
on its face or back either the full text of the preferences,
voting powers, qualifications, and special and relative rights of
the shares of each class and series authorized to be issued or a
statement of the existence of such preferences, powers,
qualifications, and rights and a statement that the Corporation
will, upon written request, furnish a copy thereof to the holder
of such certificate without charge.
Section 2. Lost Certificates. In the case of the alleged
loss, destruction, or mutilation of a certificate of stock, a
duplicate certificate may be issued in place thereof, upon such
conditions as the Board of directors may prescribe. When
authorizing such issue of a new certificate, the Board may in its
discretion require the owner of such lost, destroyed, or
mutilated certificate, or his legal representative, to give the
Corporation a bond, with or without surety, sufficient in the
Board's opinion to indemnify the Corporation against any loss or
claim that may be made against it with request to the certificate
alleged to have been lost, destroyed, or mutilated.
Section 3. Transfer of Shares. Subject to the restrictions,
if any, stated or noted on the stock certificates, shares of
stock may be transferred on the books of the Corporation by the
surrender to the Corporation or its transfer agent of the
certificate therefor properly endorsed or accompanied by a
written assignment and power of attorney properly executed with
necessary transfer stamps affixed, and with such proof of the
authenticity of signature as the Board of Directors or the
transfer agent of the Corporation may reasonably require. Except
as may be otherwise required by law, by the Articles of
Organization, or by these By-Laws, the Corporation shall be
entitled to treat the record holder of stock as shown on its
books as the owner of such stock for all purposes, including the
payment of dividends and the right to receive notice and to vote
with respect thereto, regardless of any transfer, pledge, or
other disposition of such stock, until the shares have been
transferred on the books of the Corporation in accordance with
the requirements of these By-Laws.
Section 4. Record Date and Closing Transfer Books. The
Board of Directors may fix in advance a time, which shall not be
more than sixty (60) days before the date of any meeting of
stockholders or the date for a payment of any dividend or making
of any distribution to stockholders or the last day on which the
consent or dissent of stockholders may be effectively expressed
for any purpose, as the record date for determining the
stockholders having the right to notice of and to vote at such
meeting any adjournment thereof or the right to receive such
dividend or distribution or the right to give such consent or
dissent, and in such case only stockholders of record on such
record date shall have such right, notwithstanding any transfer
of stock on the books of the Corporation after the record date;
or without fixing such record date the Board of Directors may for
any of such purposes close the transfer books for all of any part
of such period.
If no record date is fixed and the transfer books are not
closed, the record date for determining stockholders having the
right to notice of or to vote at a meeting of stockholders shall
be at the close of business on the date next preceding the day on
which notice is given, and record date for determining
stockholders for any other purpose shall be at the close of
business on the date on which the Board of directors acts with
respect thereto.
ARTICLE V
Indemnification of Directors and Officers
The Corporation shall, to the full extent permitted by law,
indemnify each of its directors and officers(including persons
who serve at its request as directors, officers, or trustees of
another organization in which it has any interest, direct or
indirect, as a shareholder, creditor, other otherwise or who
serve at its request in any capacity with respect to any employee
benefit plan) against all liabilities and expenses, including
amounts paid in satisfaction of judgments, in compromise, or as
fines and penalties, and counsel fees, reasonably incurred by him
in connection with the defense or disposition of any action,
suit, or other proceeding, whether civil or criminal, in which he
may be involved or with which he may be threatened, while in
office or thereafter, by reason of his being or having been such
a director, officer, or trustee, except with respect to any
matter as to which he shall have been adjudicated in any
proceeding not to have acted in good faith in the reasonable
belief that his action was in the best interests of the
Corporation or, to the extent that such matter relates to service
with respect to an employee benefit plan, in the best interests
of the participants of beneficiaries of such employee benefit
plan; provided, however, that as to any matter disposed of by a
compromise payment by such director or officer, pursuant to a
consent decree of otherwise, no indemnification either for said
payment or for any other expenses shall be provided unless such
compromise shall be approved as in the best interests of the
Corporation, after notice that it involves such indemnification:
(a) by a disinterested majority of the directors then in office;
or (b) by a majority of the disinterested directors then in
office, provided that there has been obtained an opinion in
writing of independent legal counsel to the effect that such
director or officer appears to have acted in good faith in the
reasonable belief that his action was in the best interests of
the Corporation; or (c) by the holders of a majority of the
outstanding stock at the time entitled to vote for directors,
voting as a single class, exclusive of any stock owned by any
interested director or officer.
Expenses, including counsel fees, reasonably incurred by any
director or officer in connection with the defense or disposition
of any such action, suite, or other proceeding may be paid from
time to time by the Corporation, at the discretion of a majority
of the disinterested directors then in office, in advance of the
final disposition thereof upon receipt of an undertaking by such
director or officer to repay the amounts so paid to the
Corporation if it is ultimately determined that indemnification
for such expenses is not authorized under this Article V, which
undertaking may be accepted without reference to the financial
ability of such director or officer to make repayment.
The right of indemnification hereby provided shall not be
exclusive of or affect any other rights to which any director or
officer may be entitled. As used in this section, the terms
"director" and "officer"include their respective heirs,
executors, and administrators, an "interested" director or
officer is one against whom in such capacity the proceedings in
question of another proceeding on the same or similar grounds is
then pending or threatened, and a "disinterested" director is one
against whom no such proceeding is then pending or threatened.
Nothing contained in this section shall affect any rights to
indemnification to which corporate personnel other than directors
and officers may be entitled by contractor otherwise under law.
The Board of Directors may authorize the purchase and
maintenance of insurance, in such amounts as the Board of
Directors may from time to time deem appropriate, on behalf of
any person who is or was a director or officer or agent of the
Corporation, or who is or was serving at the request of the
Corporation as a director, officer, or agent of another
organization in which it has any interest, direct or indirect, as
a shareholder, creditor, or otherwise, or with respect to any
employee benefit plan, against any liability incurred by him in
any such capacity, or arising out of his status as such, whether
or not such person is entitled to indemnification by the
Corporation pursuant to this Article V or otherwise and whether
or not the Corporation would have the power to indemnify him
against such liability.
ARTICLE VI
Miscellaneous
Section 1. Corporate Seal. The seal of the Corporation
shall be circular in form and shall bear substantially the
following legend: "Crompton & Knowles Corporation, Incorporated
Under Chapter 51 Acts of 1900 Massachusetts Laws"; provided,
however, that the Board of Directors may from time to time alter
or amend the form of the seal or the inscription thereon.
Section 2. Fiscal Year. The fiscal year of the Corporation
shall be such period as shall from time to time be determined by
the Board of Directors.
Section 3. Authorization of Loans and Indebtedness. No
loan shall be contracted on behalf of the Corporation, and no
bond, note, debenture, guarantee, or other obligation or evidence
of indebtedness of the Corporation issued with respect thereto
shall be made, executed, and delivered, unless authorized by the
Board of Directors, which authorization may be general or
confined to specific instances.
Section 4. Execution of Documents. Except as the Board of
Directors may generally or in specific instances authorize the
execution thereof in some other manner, all deeds, leases,
transfers, contracts, checks, drafts, and other orders for the
payment of money out of the funds of the Corporation, and (if the
issuance thereof shall have been authorized pursuant to Section 3
of this Article VI) all bonds, notes, debentures, guarantees, an
other obligations or evidences of indebtedness of the Corporation
shall be executed by the Chairman of the Board, the President,
any Vice President, or the Treasurer.
Section 5. Voting of Securities. Except as the Board of
Directors may generally or in specific instances direct
otherwise, the Chairman of the Board, the President, any Vice
President, or the Treasurer shall have the power, in the name and
on behalf of the Corporation, to waive notice of, appoint any
person or persons to act as proxy or attorney-in-fact of the
Corporation (with or without power of substitution)to vote at, or
attend and act for the Corporation at, any meeting of holders of
shares or other securities of any other organization of which the
Corporation holds shares or securities.
Section 6. Appointment of Auditor. The Board of Directors,
or a committee thereof, shall each year select independent public
accountants to report to the stockholders on the financial
statements of the Corporation for such year. The selection of
such accountants shall be presented to the stockholders for their
approval at the annual meeting each year; provided, however, that
if the stockholders shall not approve the selection made by the
Board, the Board shall appoint other independent public
accountants for such year.
ARTICLE VII
Amendments
Except as provided in the second paragraph of this Article
VII, these By-Laws may be altered, amended, or repealed, and new
By-Laws not inconsistent with any provision of the Articles of
organization or applicable statute may be made either by the
affirmative vote of a majority of the voting power of the then
outstanding shares of capital stock of the Corporation entitled
to vote generally in the election of directors, voting together
as a single class, at any annual or special meeting of the
stockholders called for the purpose, or (except with respect to
any provision hereof which by law, the Articles of organization,
or these By-Laws requires action by the stockholders) by the
affirmative vote of a majority of the Board of Directors then in
office. Not later than the time of giving notice of the meeting
of stockholders next following the making, amending, or repealing
by the Board of Directors of any By-Law, notice thereof stating
the substance of such change shall be given to all stockholders
entitled to vote on amending the By-Laws. Any By-Law made,
amended, or repealed by the Board of Directors may be altered,
amended, repealed, or reinstated by the stockholders.
Notwithstanding anything contained in these By-Laws to the
contrary, the affirmative vote of the holders of 80% of the
voting power of the then outstanding shares of capital stock of
the Corporation entitled to vote generally in the election of
directors, voting together as a single class, shall be required
to alter, amend, adopt any provision inconsistent with, or repeal
by provision of Section 1, 2, 3, or 4 of Article II of these
By-Laws or this Article VII.
Exhibit 10.171
AMENDMENT No. 4
Crompton & Knowles Corporation
1988 Long Term Incentive Plan
THIS AMENDMENT NO. 4 dated as of the 21st day of August,
1996, to the 1988 Long Term Incentive Plan, as amended (the
"Plan"), of Crompton & Knowles Corporation ("the Company"),
amends the Plan.
WHEREAS, the Company desires to amend the Plan to increase
the number of shares available under the Plan.
WHEREAS, the stockholders of the Company on this date
approved the amendment of the Plan as hereinafter set forth.
NOW, THEREFORE, the Plan is amended as follows:
1. In accordance with Section 11 of the Plan, Section 4 of the
Plan shall be amended by replacing the number "4,000,000", which
number represents the shares available under the Plan, with the
number "10,000,000".
2. The amendment set forth under item 1 hereof shall become
effective upon the execution of this amendment by the Company.
3. Except as expressly hereby amended, the Plan is hereby
ratified and confirmed in all respects. On and after the date
hereof, each reference in the Plan to "this Plan," "hereunder" or
words of like import shall mean and be a reference to the Plan as
amended hereby.
IN WITNESS WHEREOF, this instrument is duly executed as of
the date first set forth above.
Crompton & Knowles Corporation
By: /s/John T. Ferguson II
John T. Ferguson II
Vice President, General Counsel and Secretary
Exhibit 10.21
CROMPTON & KNOWLES CORPORATION
1993 Stock Option Plan for Non - Employee Directors
(Reflect 5/15/95 Amendment)
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 Boardin the forth 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 an amount equal to twice 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.
Amended 10/18/95
Amended 05/15/96
Exhibit 10.27
1996-1998 Long Term Performance Award Agreement
This Agreement, dated as of , 1996, is made by
and between (the "Corporation") and (the
"Executive").
WHEREAS, the Corporation has adopted the 1988 Long Term
Incentive Plan (the "Plan") for the purpose of attracting,
motivating and retaining key employees by offering them long term
performance-based incentives and an opportunity to acquire
ownership of shares of the Corporation's common stock.
NOW, THEREFORE, the Executive, a key employee of the
Corporation, is granted the opportunity to earn shares of common
stock of the Corporation in accordance with the terms and
conditions of the Plan and this Agreement.
1. The Executive is hereby granted the opportunity to earn
a maximum of maximum shares of the common stock
of the Corporation (the actual number of shares earned
by the Executive, if any, hereinafter being called the
"Award") during the Performance Period.
2. Performance Period
The Performance Period shall be January 1, 1996, to
December 31, 1998.
3. Performance Objectives
There shall be two Performance Objectives used to
determine the amount of the Award, if any, earned by
the Executive, as follows:
(a) Return on Equity Objective
This objective, which must be achieved in order
for the Executive to earn an Award, shall be the
achievement by the Corporation of an average
annual return on common equity for the Performance
Period equal to or greater than the lesser of (i)
fifteen percent (15%) or (ii) the average annual
return on common equity achieved by a select group
of specialty chemical companies as monitored by
the Corporation.
(b) Earnings Per Share ("EPS") Objective
This objective shall be the achievement by the
Corporation of cumulative earnings per share for
the Performance Period of not less than $3.06 per
common share.
The following table shows by way of example the
cumulative earnings per share which will be
realized by the Corporation if the earnings per
share increase annually during the Performance
Period at rates of ten, thirteen and fifteen
percent from the 1995 base of $.84 per share and
the Award associated with cumulative earnings per
share at each of those levels:
Threshold Award Target Award Maximum Award
Cumulative EPS $3.06 $3.22 $3.36
Award Earned
The actual Award, if any, earned by the Executive shall be
based upon the actual cumulative earnings per share achieved by
the Corporation during the Performance Period, and except in the
event that cumulative earnings per share for the Performance
Period are equal to the amounts shown in the above table, shall
be determined by interpolation from the values shown in the
table.
4. Termination of Employment During Performance Period
(a) If the Executive's employment with the Corporation
terminates during the Performance Period because
of death, disability, retirement or a Change in
Control, the Executive Compensation Committee of
the Board of Directors of the Corporation (the
"Committee") may, in its sole discretion, make a
pro rata Award to the Executive.
(b) In the event that the Executive's employment with
the Corporation terminates during the Performance
Period for any reason other than death,
disability, retirement or a Change in Control, the
Executive shall not be entitled to receive any
Award for the Performance Period.
5. After the date of any Award to the Executive hereunder,
and prior to the transfer to the Executive of all of
the shares of the Corporation comprising the Award, the
Executive shall have the right to instruct the Trustee
of the Crompton & Knowles Corporation Long Term
Incentive Plan Trust as to the voting of such number of
shares of the Corporation comprising the Award as are
held by the Trustee, together with any other shares
held by the Trustee in any account which may be
established by the Trustee on or after the date of the
Award in the name of the Executive.
6. The Executive shall be paid, at the time any shares
earned by him are transferred to him, such sum of money
or, at the sole discretion of the Corporation, such
additional shares or other property, as shall be equal
to the Executive's pro rata share of the Trust earnings
to the date of and attributable to such payment, but
less such cash or shares, if any, as the Corporation
shall in its sole discretion determine are required to
be withheld to pay taxes due on the cash or shares then
being transferred to the Executive. The Executive
shall have the right to defer any portion of the earned
Award.
7. Any Award made to the Executive hereunder shall vest in
the Executive and the Executive shall be entitled to
receive the Award only as follows:
25% on December 31, 1998
25% on December 31, 1999
25% on December 31, 2000
25% on Retirement of the Executive
Notwithstanding any other provision of this Section 7, upon
the termination of the Executive's employment with the
Corporation on or after December 31, 1998, due to death,
disability, retirement or a Change in Control, any Award
theretofore earned by the Executive hereunder shall
immediately become fully vested in him. Termination of the
Executive's employment with the Corporation on or after
December 31, 1998, for any reason other than those specified
in the preceding sentence shall cause the forfeiture of any
portion of an Award not vested prior to the date of such
termination of employment.
8. This Agreement does not alter the "at will" nature of
the Executive's employment with the Corporation, which
employment may be terminated at any time by the
Executive or the Corporation.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the day and year first above written.
CROMPTON & KNOWLES CORPORATION
By:_______________________
_______________________
Executive
CROMPTON & KNOWLES CORPORATION AND SUBSIDIARIES
EXHIBIT 11 - STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
(In thousands, except per share data)
PRIMARY
YEAR ENDED
Dec.28, Dec.30, Dec.31,
1996 1995 1994
Earnings
Earnings(loss) before extraordinary charge $ (22,054) $ 139,922 $ (162,927)
Extraordinary loss on early extinguishment
of debt (441) (8,279) -
Net earnings(loss) $ (22,495) $ 131,643 $ (162,927)
Shares
Weighted average shares outstanding 72,026 65,572 60,908
Common stock equivalents - 699 -
Average shares outstanding 72,026 66,271 60,908
Per share
Earnings(loss) before extraordinary charge $ (.31) $ 2.11 $ (2.67)
Extraordinary loss on early extinguishment
of debt - (.12) -
Net earnings(loss) $ (.31) $ 1.99 $ (2.67)
FULLY DILUTED
YEAR ENDED
Dec.28, Dec.30, Dec.31,
1996 1995 1994
Earnings
Earnings(loss) before extraordinary charge $ (22,054) $ 139,922 $ (162,927)
Extraordinary loss on early extinguishment
of debt (441) (8,279) -
Net earnings(loss) $ (22,495) $ 131,643 $ (162,927)
Shares
Weighted average shares outstanding 72,026 65,572 60,908
Common stock equivalents - 717 -
Average shares outstanding 72,026 66,289 60,908
Per share
Earnings(loss) before extraordinary charge $ (.31) $ 2.11 $ (2.67)
Extraordinary loss on early extinguishment
of debt - (.12) -
Net earnings(loss) $ (.31) $ 1.99 $ (2.67)
Exhibit 13
Crompton & Knowles Corporation
1996 Annual Report
Service Technology Performance
Crompton & Knowles Corporation
Crompton & Knowles is a global producer and marketer of specialty
chemicals and equipment with 5,700 employees in research,
manufacturing, sales and administrative facilities in the United
States, Canada, Europe, Asia and Latin America. The company's 73
million shares of common stock outstanding are traded on the New
York Stock Exchange under the symbol CNK.
Crompton & Knowles has gained leadership positions in its chosen
markets by providing quality products,technical service and
performance know-how to solve customer problems and add value to
customers' products. The company has six primary lines of
business grouped into two segments:
Specialty Chemicals Segment
Chemicals & Polymers
Business Description
A leading worldwide producer and marketer of rubber chemicals,
EPDM rubber polymers and nitrile rubber polymers.
Product Trademarks
Delac(R) accelerators, Naugard(R) antioxidants, Flexzone(R)
antiozonants,Celogen(R) chemical foaming agents, Royalene(R)
EPDM, Paracril(R) nitrile rubber
Markets
Rubber chemicals for producers of rubber products such as tires,
hoses, belting, sponge and engineered rubber products; EPDM for
producers of single ply roofing, electrical insulation, seals,
gaskets, sponge rubber and oil additives; nitrile rubber for
producers of oil-resistant seals, hoses, rings, printing rolls
and insulation.
Crop Protection
Business Description
Manufactures and markets agricultural chemicals,including
fungicides, miticides/insecticides, growth regulants and
herbicides; and is a leading producer of seed treatment
formulations and equipment
Product Trademarks
Vitavax(R), Terrazole(R) and Procure(R) fungicides; Omite(R) and
Comite(R) miticides; Dimilin(R) insecticide; Harvade(R), Royal
MH-30(R) and B-Nine(R) growth regulants; Alanap(R) and Pantera(R)
herbicides; Gustafson and Hannaford Seedmaster seed treatment
Markets
Worldwide growers of major food crops such as grains, fruits,
nuts and vegetables and non-food crops including tobacco, cotton,
turf, flax and ornamental plants
Colors
Business Description
A major producer and marketer of textile, paper, leather and
specialty dyes
Product Trademarks
Sevron(R), Nylanthrene(R), Intralan(R), Intracid(R),
Intracron(R), Supernylite(R), Intralite(R), Superlitefast(R),
Intramet(R), Intrasil(R), Intratherm(R), Intrabond(R), and
Intrapel(R)
Markets
International producers of apparel, home furnishings, automotive
fabrics, paper, leather and inks
Specialties
Business Description
A leading global producer and marketer of specialty additives for
plastics and lubricants and a leading manufacturer of high
performance liquid castable urethane prepolymers.
Product Trademarks
Naugard(R) antioxidants, polymerization inhibitors,Trilene(R)
liquid polymers, Synton(R) PAO synthetic fluids Naugalube(R)
petroleum additives, Tonox(R) curatives, Polywet(R) dispersants,
Polybond(R) polymer modifiers, Celogen(R) chemical foaming
agents, Adiprene(R)and Vibrathane(R) urethane prepolymers
Markets
Specialty additives for producers of plastic and petroleum
products used in adhesives, athletic equipment, automotive parts,
construction materials, food packaging, industrial oils and
lubricants. Urethane prepolymers for abrasion resistant
applications such as solid industrial tires, printing and
industrial rolls, mining equipment and consumer goods.
Ingredients
Business Description
Produces and markets ingredients and ingredient systems including
reaction and compounded flavors, specialty sweeteners, colors,
coatings, excipients, carriers and binders.
Product Trademarks
Flav-O-Roast(TM), Savory Saute(R), Ulta-Meat(TM), Maltoline(R),
Nulomoline(R), Sucrovert(R), Nulofond(R), Homemaid(R), Dri-
Flo(R), Rise'N Shine(R), and Miracle Middles(TM) for food
processing; Gel-Tone(TM), Gel-Klear, Chroma-Kote(R), Chroma-
Tone(R), Dri-Klear(R), Nu-Pareil(R), Nu-Core(R), Nu-Tab(R),
Cal-Carb(R) for pharmaceuticals
Markets
Food processing industries including bakery, confectionery,
cereal, snack, convenience and institutional feeding
establishments such a restaurants, fast food outlets and
cafeterias; producers of pharmaceutical products such as
vitamins, nutritional supplements, prescription, over-the-counter
and generic drugs.
Specialty Process Equipment & Controls Segment
Davis-Standard
Business Description
A leading worldwide manufacturer, marketer and technical service
supplier of plastics and rubber extrusion equipment, industrial
blow molding equipment, related electronic controls and
integrated extrusion systems.
Product Trademarks
Davis-Standard(R), Egan, NRM Extrusion, Sterling FHB Hartig,
Killion, ER-WE-PA, Mark VI(TM), Gemini(R), EPIC III(TM),
Thermatic(R), DSB(R)
Markets
Worldwide processors of plastic resins and elastomers making
products such as plastic sheet for appliances, construction and
automobiles; cast and blown film for packaging of consumer items;
extruded shapes for construction and furniture; compounders of
engineered plastics; recyclers of plastics; producers of wire and
cable products; producers of non-disposable containers.
The New Crompton & Knowles
Chemicals & Polymers
Crop Protection
Colors
Davis-Standard
Ingredients
Specialties
Financial Highlights
(In thousands of dollars, except per share amounts)
1996 1995
Net sales $1,803,969 $1,744,834
Operating profit1 $ 103,615 $ 218,122
Interest expense $ 114,244 $ 122,398
Net earnings (loss)2 $ (22,495) $ 131,643
Net earnings (loss) per share $ (.31) $ 1.99
Total assets $1,657,190 $1,655,845
Long-term debt $1,054,982 $ 974,156
Cash flow from operations $ 95,353 $ 106,348
1 Operating profit before merger and related costs of $85 million
and a special charge for environmental costs of $30 million in
1996 and exclusive of certain special income, net of $4.9 million
in 1995 would be as follows:
Adjusted operating profit $ 218,615 $ 213,222
2 Net earnings before after-tax merger and related costs
of $68.1 million, a special charge for environmental costs of
$18.5 million and an extraordinary charge of $.5 million in 1996
and exclusive of a special tax credit of $78.9 million, an
extraordinary charge of $8.3 million and other special income,
net of $4.4 million in 1995 would be as follows:
Adjusted net earnings $ 64,594 $ 56,642
(Pie chart)
Percentage of Sales By Business
Chemicals & Polymers 27%
Crop Protection 20%
Specialties 16%
Specialty Process Equipment & Controls 16%
Colors 15%
Ingredients 6%
(Bar chart)
Sales
(In Billions of Dollars)
(Bar chart)
Earnings On Average Total Capital
(Before Special Items)
(Bar chart)
Earnings On Sales
(Before Special Items)
Worldwide Locations
(World map showing national and international office and plant
locations)
World Headquarters
Stamford, CT
Map Legend
Manufacturing
Research & Development
Sales and Business Offices
Welcome to the NEW Crompton & Knowles.
In 1996 we undertook the most significant strategic move in the
156-year history of our company. By completing the merger with
Uniroyal Chemical Corporation we set Crompton & Knowles on course
for extending its success with new businesses and new products in
markets around the world. With this milestone event our company
is positioned to build upon our standing as one of the most
successful participants in the worldwide specialty chemicals
industry.
The merger supports our declared corporate objectives to expand
our asset base in specialty chemicals; significantly increase
worldwide market positions; add new platforms for growth; and
enhance our company's earnings power.
Combined, these four corporate objectives are aimed at achieving
a single strategic objective which has guided this management
over the years: Increase shareholder value.
The NEW Crompton & Knowles is a $1.8 billion, broadly-based,
specialty chemicals company dedicated to meeting customer needs
through innovative technology, problem solving technical service
and product performance. This will be accomplished by 5,700
skilled and dedicated employees developing, producing and selling
products in 82 countries. In brief, the NEW Crompton & Knowles
has six major lines of business. The largest business, Chemicals
and Polymers, which accounts for 27 percent of sales, produces
and markets chemicals for the processing of natural and synthetic
rubber, and produces EPDM and nitrile rubbers; Crop Protection,
accounts for 20 percent of sales and produces and markets
chemicals to protect crops from infestation and disease and
markets seed treatment services; Colors, which accounts for 15
percent of sales, produces and markets dyes for the textile
industry and industrial products; Specialties, which accounts for
16 percent of sales, produces and markets chemical additives for
the plastics and petroleum industries, as well as urethane
prepolymers; Specialty Ingredients, which accounts for six
percent of total corporate sales, produces ingredients for the
food and pharmaceuticals industries; Specialty Process Equipment
and Controls, accounts for 16 percent of sales and manufactures,
sells and services systems used in the processing of plastics.
Crompton & Knowles logo
Uniroyal Chemical logo
The merger with Uniroyal Chemical has tripled the size of the
company and expanded its global reach while reinforcing its
presence and leadership in many international markets and
businesses.
The NEW Crompton & Knowles is a market leader, positioned as
number one or two in thirteen key markets globally or in North
America. This strength has enabled our international sales to
reach $718 million, or 40 percent of total corporate revenues in
1996, up from 35 percent in 1995. We have long recognized the
value of a strong international presence. The NEW Crompton &
Knowles has both the corporate presence and the geographic reach
to meet competitive international trade challenges and compete
effectively on a global scale.
However, we recognize that in the final analysis all business is
local. Our company's success over the past twelve years was
derived from an intimate understanding of our customers' needs
within each market segment, and an ability to satisfy those needs
with meaningful one-on-one solutions based on an entrepreneurial
spirit and a customer-first strategy.
This, coupled with the positioning of the corporation to achieve
leadership positions in key market segments is what we call
nichemanship. This concept has been central to our past success
and remains key to our future performance as the NEW Crompton &
Knowles. Successful exploitation of niches calls for continuous
assessment and improvement; for seeking ways to establish and
maintain new competitive advantages; and for producing and
marketing products which play a key role in improving our
customer success. This means putting our customers first and is
at the heart of our strategy.
As a $1.8 billion corporation, we have new strength on which to
build. Nonetheless, we are a series of small businesses embracing
small business values that are key to maintaining sustainable
competitive advantage. Regardless of size, these values of being
first, focused and fast will help us to achieve our objectives.
To innovate, to be first, in our view, is indispensable in the
high-performance business culture we seek in the NEW Crompton &
Knowles. Employees committed to be first are creative. They make
independent decisions, take prudent risks and lead with
determination.
photo caption
Vincent A. Calarco
Focus is characterized by a clear and precise understanding of
the company's objectives and the knowledge and skill to execute a
plan for success. The third element, acting fast, involves a
responsiveness to customers that keeps us first in satisfying
their needs. Whether it's a new product introduction, a delivery
schedule, or customer service, doing it fast is a critical
advantage.
As we blend the best of the Crompton & Knowles and Uniroyal
Chemical business cultures we fully expect our strategy will help
us to grow our company for all constituencies, especially for
you, our shareholders.
Our company's committed management team, responsible for assuring
the success of this niche strategy at the NEW Crompton & Knowles,
has a proven track record of success in each of our businesses.
In subsequent sections of this report our senior operating
managers review the performance, key issues and opportunities for
each of these business units. There are challenges, to be sure,
but you will note that there are also substantial opportunities
for our company. With the support and participation of our
committed employees we will achieve notable successes in 1997 and
over the long-term.
When we announced our company's merger with Uniroyal in the
Spring of 1996, we committed to reducing costs by as much as $10
million of corporate expenses. We identified those savings in
1996 and began realizing some of these savings late in the fourth
quarter of the year. The full benefits of the reductions will
accrue throughout 1997.
Cost-effective asset management has been a hallmark of Crompton &
Knowles over the years and these principles will continue to
guide our plans and our actions. Our strong focus on efficient
asset management should reinforce your confidence that the NEW
Crompton & Knowles will improve its balance sheet, which, as a
result of the merger, has approximately $1 billion of total debt.
Our company's excellent cash flow should enable us to reduce this
debt by at least $75 million a year and to achieve an investment
grade debt rating within five years. To strengthen our ability to
lower debt at an accelerated pace, we reduced the company's
dividend to five cents a share to be paid annually each May.
While our company has had a history of regular dividend growth,
most of our future growth in shareholder value will come through
capital appreciation, as it has in the past. To assure the
ongoing growth of the NEW Crompton & Knowles we will continue to
fund capital projects at a level to enable us to realize our goal
of achieving annual earnings per share gains of at least 10
percentage points above inflation before deleveraging.
This is an exciting time for everyone associated with our
company. We are combining the cultures of two corporations with
more than 255 combined years of tradition to form a greater, more
powerful, more resourceful, and more profitable enterprise. We
are confident that our goals are clear, our programs are
achievable, the interests of our suppliers, customers, employees
and shareholders are aligned, and that the NEW Crompton & Knowles
is built for success.
Thank you for your support. We look forward to keeping you
informed of our progress.
Respectfully yours,
Vincent A. Calarco
Chairman, President &
Chief Executive Officer
March 17, 1997
photo caption
The new management team of Crompton & Knowles, photographed
at the President's Meeting in September last year. The
team met for three days for strategy sessions and other
planning issues.
Our Businesses
Chemicals & Polymers 6
Crop Protection 8
Colors 10
Specialties 12
Ingredients 14
Davis-Standard 15
Chemicals & Polymers
"Our leading market positions, supported by our strong technology
and highly efficient operations, will enable us to continue to
satisfy our customers' needs and to grow with them."
Joseph B. Eisenberg
Executive Vice President
Chemicals & Polymers
Uniroyal Chemical Company, Inc.
photo caption
Weather stripping made of Royalene(R) EPDM limits water, dust
and noise penetration in automotive vehicles.
Specialty Chemicals Segment
Sales of the specialty chemicals segment increased four percent
to $1.5 billion in 1996. Operating profit of $216.3
million was 11 percent above the prior year's level of $195.2
million after adjustment for certain special income, net of $4.9
million.
All businesses within the segment Chemicals & Polymers, Crop
Protection, Specialties and Food Ingredients achieved improved
sales and profitability during the year, with the exception of
Colors, which continued to be affected by worldwide overcapacity
and resultant price competition.
The company's largest business, Chemicals & Polymers,increased
sales by four percent to $493.7 million during the year. This
growth was lead by rubber chemicals and Paracril nitrile rubber,
offset in part by slightly lower sales of Royalene EPDM.
Rubber chemicals benefitted from increased worldwide consumption
of rubber in 1996, accompanied by generally firmer prices
throughout the year. As the worldwide rubber chemicals industry
has undergone recent consolidations of producers, the company has
maintained its number two worldwide market share position based
on its competitive strengths which include a longstanding history
of product innovation, a record of outstanding service to the
world's leading producers of rubber products and backward
integration in key raw materials used in the company's products.
In 1996, the company built on these strengths by introducing new
products, increasing capacity and improving production
efficiencies.
New product introductions included Bonding Agent TZ which gained
significant interest in applications demanding superior adhesion
to brass-coated steel wire used in tires, steel reinforced
conveyor belts and radiator hoses, and a new vulcanization
accelerator aimed at reducing potentially undesirable
nitrosomines generated by traditional chemical agents.
At the Geismar, Louisiana production facility, the company's
largest rubber chemicals plant, debottlenecking and process
improvement programs lead to significant increases in output
utilizing existing capacity. In fact, the Quality Circle team
responsible for some of the changes was voted first place winner
by the Association for Quality and Participation from among
10,000 members and 4,400 corporations for the team process used
to implement the improvements. The Geismar facility also received
the 1996 Regional Administrator's Environmental Excellence Award
from the Federal Environmental Protection Agency for its
non-hazardous deep-well injection program and the State of
Louisiana's 1997 Governor's Award for outstanding achievement for
pollution prevention.
photo caption
Paracril(R) nitrile rubber's excellent oil-resistant properties
ensure consistent performance of cables and hoses in engine
compartments.
Consistent with the company's global manufacturing and technical
service strategy, at mid-year, Uniroyal Chemical started up a
joint venture facility in Thailand to produce antiozonants for
the growing markets in Southeast Asia.
The growth outlook for the worldwide rubber chemicals industry
varies by geographic region. In North America, growth is expected
to remain at historic rates about equal to GDP growth through the
end of the decade. Significantly faster growth is expected in
Asia/Pacific and Latin America.
In the EPDM polymer business the company's sales in 1996 were
slightly lower than the prior year. Nevertheless, Uniroyal
Chemical maintained its position as the leader in North America
and the third largest producer in the world. Sales and pricing
weakened over the year in anticipation of new U.S.-based capacity
scheduled to begin production in the first half of 1997. Key
markets for Uniroyal Chemical's EPDM include single ply roofing
and automotive parts.
The company has been a technology pacesetter in the industry,
maintaining low-cost production and introducing innovative
Royalene EPDM products on an ongoing basis since 1964. In fact,
approximately 45 percent of current Royalene EPDM sales derive
from products developed by the company within the last five
years. Among the innovative new products successfully introduced
in 1996 were RoyalEdge polymers specially designed to incorporate
in a single polymer multiple grades of EPDM meeting a variety of
properties such as high abrasion resistance and a smooth surface
for automotive door seal sponges. Royalene LVEP, a new family of
low viscosity EPDM polymers, is also finding specialty
applications in mechanical goods and plastics modification.
On the technology front, a new pilot facility to prove out
metallocene catalyst-based technology began operations in 1996.
Production from this facility is expected to be commercialized by
the end of 1997 and will give the company opportunities to expand
use of EPDM into applications not currently served. The company
is a pioneer in producing liquid EPDM using metallocene
technology, introducing its new product, Trilene, in 1988 for
highly specialized applications in products such as lubricants,
sealants and coatings.
The EPDM industry has grown at an annualized rate of
approximately four percent over the last five years. New product
applications, new process technology and expanded markets are
expected to sustain this growth rate over the next five years.
The Uniroyal Chemical operation will continue to participate in
this growth and maintain its leading market positions, supported
by its proven technology, high levels of customer service and
distribution strengths.
The third product line within the company's chemicals and
polymers business, Paracril nitrile rubber(NBR), had strong
sales growth in 1996 as a result of the acquisition of Negromex's
NBR business in Mexico, in 1996, increasing Uniroyal Chemical's
capacity by nearly 30 percent. The Negromex facility utilizes
Uniroyal's process technology and augments its existing
production in Painesville, Ohio. It also enhances the company's
ability to service international customers demanding the
consistent quality and performance of Paracril NBR, widely used
in oil resistant applications such as automotive hoses, seals and
rings.
The company is confident that continuing customer acceptance of
the nitrile rubber produced at the new Mexican facility, combined
with process efficiency improvements implemented in 1996, will
assure strong growth of its Paracril business.
photo caption
Royalene(R) EPDM's natural ability to withstand harsh weather
makes it an outstanding choice for use in single-ply roofing
membranes.
photo caption
Rubber chemicals used in the production of tires assure
resistance to ozone, oxygen, light and heat degradation.
Crop Protection
"With our strategy of marketing a diverse but select line of crop
protection products which improve yields on more than 400 crops
in 82 countries, we will see ongoing gains in our business."
Alfred F. Ingulli
Executive Vice President
Crop Protection
Uniroyal Chemical Company, Inc.
The Crop Protection business of Crompton & Knowles, consisting of
insecticides, fungicides, plant growth regulants, herbicides and
seed treatment chemicals and equipment marketed under the
Uniroyal Chemical and Gustafson brand names, had an excellent
year in 1996, reporting its 10th consecutive year of record sales
and the 13th consecutive year of record profits. 1996 sales for
the business were $353.3 million, eight percent above the prior
year.
photo caption
The growing use of genetically engineered seeds is increasing
demand for the company's Gustafson seed treatment and equipment
to protect seeds from fungus and insect attack.
Crop protection's success in achieving these record results
derived from its strategy of focusing on distinct market niches
with a diverse, yet select product lineup used by thousands of
farmers growing more than 400 crops in 82 countries around the
world. The value of this global strategy was well demonstrated
during 1996 as sales declines in certain products were
more than offset by gains elsewhere. Sales of the company's
proprietary insecticide Dimilin declined in the United States due
to reduced cotton acreage and low insect infestation levels,
while lower Omite miticide sales reflected regulatory changes.
These declines were more than offset by strong sales of other
products around the world. These included international sales of
Vitavax, a fungicide which is Crop Protection's largest single
product; Procure, a foliar fungicide for grapes, apples and
pears; Harvade, a defoliant and maturation agent for cotton, flax
and sunflowers; Micromite, a citrus miticide; Comite, a miticide
for cotton, corn, potatoes and alfalfa; Royal MH-30, a
desuckering agent for tobacco and a sprout inhibitor for onions
and potatoes; and Pantera, a post-emergent grass herbicide.
photo caption
Farmers around the world achieve superior crop yields by using
the company's proven crop protection chemicals.
photo caption
Cotton producers around the world have come to depend on
Comite(R) and Dimilin(R) to protect their crop from harmful
mites and insects, and during havest they use Harvade(R)
defoliant to increase quality and harvest efficiency.
Sales growth was also reinforced by the introduction of new
products such as Topcide, an insecticide specially designed for
use in greenhouses, and Adept, an insect growth regulator used in
ornamental production. Late in the year, the company also
announced a new, broad-spectrum acaricide based on novel
chemistry and developed in its own laboratories, for use on
apples, citrus and tea crops. Code-named D-2341, the new product
will be first commercialized in Japan, the largest potential
market, by a licensed partner starting in 2001.
International sales of crop protection products accounted for a
record 50 percent of sales in 1996, with notable strength in the
Europe/Africa, Latin America and Asia/Pacific regions.
The company's seed treatment business also had an excellent year
with significantly higher sales and improved profitability. North
American seed treatment and equipment operations, conducted under
the Gustafson brand name, grew strongly. Contributing to
Gustafson's growth was Gaucho(R), an innovative seed treatment
insecticide in its first full year of commercial introduction
which is rapidly gaining acceptance as a seed treatment due to
its lower labor intensity, safety in use, efficacy and
significantly lower application rates. Raxil(R), another seed
treatment fungicide, was introduced in 1996.
The company's international seed treatment operations grew
substantially in 1996, especially Europe, Latin America and
Australia.
Crompton Knowles' strategy in the Crop Protection business will
continue to be to develop its own proprietary products, license
new products from third parties for exclusive marketing and sales
through Uniroyal Chemical's existing distribution network, and to
acquire available unique technology or products which would
reinforce or broaden the company's niche market positions.
In the worldwide seed treatment business, the company uses many
of its own specialized products to serve specific market
segments. However, recognizing the diverse needs of its broad
agricultural customer base, the company also seeks out the latest
and best available third party technology and compounds to
deliver optimum efficacy in all applications.
The strong worldwide demand for raising agricultural production
through the application of improved technology presents Crompton
& Knowles with numerous opportunities for continued growth of its
global Crop Protection business. The acceptance of integrated
pest management will continue to reduce the use of many chemicals
by farmers, but at the same time will increase the need for
highly specialized crop protection chemicals applied at very low
concentrations-grams, rather than kilograms per acre-to protect
seeds, and plants, and to assure improved yields. The company's
product portfolio is particularly compatible with integrated pest
management. Similarly, the development of new sophisticated and
increasingly valuable genetically engineered seeds will require
the use of seed treatment chemicals to guarantee germination and
stand establishment for growth into productive plants.
In total, while worldwide demand for crop protection products and
services is expected to continue to grow at approximately three
percent a year, the specialized niche market-driven nature of
Crompton & Knowles' business can be expected to enable it to
continue to maintain its leadership positions in many market
segments and to outpace the industry's growth rate
for the foreseeable future.
photo caption
Agricualtural chemicals used on a wide range of high-value fruit
and vegtable crops such as grapes, tomatoes, and apples help
growers produce higher yields and more marketable produce.
photo caption
Serving the expanding ornamental plant market with growth
regulants such as B-Nine(R) and Bonzi(R) provides excellent
growth opportunities.
C&K Colors
"High levels of technical service and quality have enabled us to
secure premier positions in chosen niche markets even as the dyes
industry undergoes worldwide restructuring."
Edmund H. Fording, Jr.
President
Crompton & Knowles Colors Incorporated
The Colors business of Crompton & Knowles recorded sales of
$271.1 million in 1996, a decline of five percent from the prior
year, as the worldwide dyes industry continued to be affected by
overcapacity, competitive pricing of dyes, and weak demand for
apparel in major markets in the United States and Europe.
In the United States, Crompton & Knowles maintained its position
as a leading supplier despite difficult market conditions. This
was accomplished by rededicating the company's Colors operation
to its long standing principles of satisfying the market's need
with quick customer response, efficient production, quality
products and strong technical service.
The effectiveness of this consistent strategy was dramatically
confirmed in an industry-wide survey conducted by an independent
organization comparing the leading suppliers of dyes in the
United States based on responses from major textile customers.
Crompton & Knowles was highly rated as a leader in all
categories, with a particularly strong showing in the "Best
Value" category, which asked customers to name the supplier
providing the best combination of product quality, price and
service. Of utmost importance also was the recognition of
Crompton & Knowles' stability and commitment to the dyes
industry.
The company's long-term commitment to value guided its actions in
1996 as it countered weak industry fundamentals with actions
programmed to build on its proven market strengths.
To deliver quality products the company broadened its offerings
in key market segments characterized by growth and its own
competitive advantage. In the carpet industry, where Crompton &
Knowles is a leading supplier and experienced growth during 1996,
it added several key products during the year. These included new
liquid dyes for carpet producers with continuous production
processes seeking ease of application and reproducibility of
shade. For use on wool and nylon, the company introduced a new
high light fast dye range that applies to both residential and
commercial uses, based on the company's proprietary Intralan
pre-metallized dye technology. These new dyes have also been
introduced for use on nylon apparel.
Dyeing of nylon, a specialized technology developed by Crompton &
Knowles simultaneously with the invention of nylon fiber,
continued to present growth opportunities in 1996. New wet fast
acid dyes responded to growth in the athletic activewear and
swimwear sectors of the apparel industry. In total, apparel,
which accounts for approximately 50 percent of the company's dyes
sales, had lower demand and resulted in dyes sales declines
during 1996.
photo caption
Increased production and marketing of dyes for non-apparel
applications such as leather, as well as paper and inks,
continue to present the company with growth opportunies.
photo caption
Fashion apparel and hosiery producers turn to Crompton &
Knowles Colors as "Best Value" supplier of dyes providing
the best combination of product quality, price and service.
For the growing home furnishings and industrial apparel
continuous dyeing industry, producing textiles for toweling,
sheeting, uniforms and other applications utilizing fast-speed
high volume dyeing processes, a new color palate of liquid
reactive and disperse dyes enabled the company to increase its
participation and to grow sales.
New quality products serving the paper industry reinforced the
company's strong performance in its industrial products area. New
colors and expanded product lines also increased business in
specialized soluble dyes for the wood stain and ink industries.
To support the value of new products, the company continued in
1996 to partner with its customers and suppliers in researching
and developing the most efficient processes and systems for the
production and application of dyes. Rationalization of the
product line with a tight focus on customer needs, combined with
a strategy of capital spending specifically targeted on profit
improvement projects and debottlenecking to make specialty
products, has made Crompton & Knowles the most cost competitive
producer in North America. Operating rates at the company's
facilities remained high during the year even as debottlenecking
resulted in higher throughput rates.
The third element in the "Best Value" equation, service,
continued to be an area of focus for the company. In recent years
the company has successfully installed new computerized order
entry and tracking systems tied into production planning to
assure the best possible customer service, distribution and
delivery. To further strengthen the technical service
capabilities of its sales force, in 1996 the company created a
new team of Technical Demonstrators who do on-site problem
solving at customer locations and run product trials at the
company's own laboratories.
International Colors operations suffered from the same demand and
pricing issues faced by the company in the United States. In
Europe, some of these negative effects were offset by an increase
in the percent of sales made direct to major customers, in lieu
of dealing primarily through agents and distributors. In Asia,
sales grew during 1996 in specialty applications in the more
developed markets like Taiwan, Korea, Hong Kong and Japan.
To increase strategic coordination and effectiveness the
company's worldwide Colors operations have been consolidated into
a single business, while the regional activities outside the
United States will benefit from consolidation with Uniroyal
Chemical administrative functions.
Crompton & Knowles Colors continues to maintain strong positions
in its chosen markets despite negative industry-wide pressures.
Trends such as increased apparel imports to the United States
from Mexico, using textiles produced and dyed in the United
States, will continue to partially offset high textile imports
from China and elsewhere in the Pacific region. Nevertheless,
the fundamentals of the dyes industry will improve only when the
ongoing consolidations of major dyes producers result in a
worldwide reduction of production capacity and improved pricing.
The company is well positioned to benefit quickly from these
events and to resume growth in both sales and profitability over
the long term.
photo caption
The recent introduction of specialized dyes for the continuous
dyeing market-serving the towel, linen, sheet and industrial
apparel industries- has delivered strong sales growth.
photo caption
A strong market position in dyes for home furnishings, including
carpeting, draperies and upholstery fabics, has enabled the
company's Colors operations to grow sales in this sector.
Specialties
"Our ability to quickly respond to customers' changing
requirements with our performance-enhancing specialty products
will drive our growth in the global marketplace."
William A. Stephenson
Executive Vice President
Specialties
Uniroyal Chemical Company, Inc.
Sales for the company's Specialties business, including lubricant
and polymer additives, intermediates and urethane prepolymers,
increased seven percent, to $296.6 million in 1996, as a result
of effective marketing, enhanced global presence, increased
production and the introduction of new products.
During the year the Uniroyal Chemical business reinforced its
position as the world's leading producer and marketer of high
performance liquid castable urethane prepolymers. Marketed under
the Adiprene and Vibrathane brand names, these prepolymers have
gained growing acceptance as the product of choice for use in
fabricated parts such as solid industrial tires, mining
equipment, printing rolls, sports equipment, and numerous other
specialized applications requiring high abrasion resistance and
toughness.
photo caption
Increased demand for fuel efficiency and longer equipment life
continues to raise consumption of the company's proprietary
lubricant additives such as Synton(R) PAO and Nauglube(R)
antioxidants which prolong the service life of a broad range
of lubricating fluids.
The company's 1996 sales growth of urethane prepolymers was
especially strong in international markets. Global marketing
programs supported by increased local technical resources have
delivered on growing opportunities in Europe, Asia and Latin
America. Slower growth of the in-line skate market in the North
American market has been offset by new market opportunities that
have developed as higher performance wheels have gained
popularity.
Such shifts in market requirements have kept Uniroyal Chemical in
the forefront with its customers as it has developed new or
improved prepolymers, applications and processing technologies.
The company produces and tests as many as 100 experimental
applications a year in its laboratories resulting in a 10 to 15
percent annual expansion of its product line with new prepolymer
formulas designed to solve specific customer problems. New-
urethane technologies developed within this program include
Ribbon Flow systems which can be efficiently applied to exterior
surfaces of industrial rolls; Solithane systems which cure at
room temperatures; and coatings which meet increasingly
restrictive codes regulating volatile organic hydrocarbon
emissions.
photo caption
Producers of petrochemicals such as styrene, acrylics and other
monomers increasingly use the company's Naugard polymerization
inhibitors to prevent polymer formation during manufacturing.
On a broader scale, during 1996 the company introduced several
new products, and broadened its offerings of low free isocyanate
prepolymers which offer improved customer processability and
higher performance in the finished product, while improving
workplace safety. Increased production capacity at the company's
facility in North Carolina enabled it to meet the growing demand
for its low free isocyanate urethane products.
In the specialty additives market, lubricant additives, including
antioxidants and synthetic fluids which prolong the service life
of automotive and industrial lubricants, achieved strong gains in
1996. Synton PAO, a synthetic fluid developed in the company's
laboratories, and used in automotive gear oils, remained in high
demand through the year as production capacity was expanded
significantly at the company's Canadian facility.
Sales of Naugalube amine and phenolic antioxidants to the
lubricants market continued to increase in 1996. Uniroyal
Chemical achieved share gains in all geographic regions as a
result of its position as the world's largest producer of
diphenylamine, global antioxidant manufacturing strategy, and
customer-oriented new product development.
For the plastics industry, Uniroyal Chemical offers a broad range
of plastics additives. These inhibitors, modifiers and
stabilizers improve the processability and performance of plastic
resins. Plastics additives delivered another year of strong
customer satisfaction, as evidenced by good sales growth.
Contributing to this performance was the global growth of
polymerization inhibitors produced for the world's major
petrochemical manufacturers to inhibit the adverse formation of
polymers in the purification of styrene monomer. Enhancing the
company's premier position in this market, a new generation
inhibitor Naugard SFR was introduced to immediate acceptance by
the industry.
Plastics antioxidants, which provide protection against oxygen
and heat degradation, had higher sales during the year, as did
polymer modifiers, which increase the strength and durability of
engineered thermoplastics and polyolefins. Sales of chemical
foaming agents also grew around the world as demand for closed
cell foam plastic products increased.
The Specialties operations of Crompton & Knowles have maintained
a record of steady growth over the years, as sales have increased
more than 10 percent annually since 1991. These gains were
achieved by the company's innovative research and
development-driven response to demand for abrasion-resistant
castable urethanes and increased global demand for
high-performance products and value-added specialty additives.
The increasing demand for more efficient production systems, and
higher product performance combined with stricter environmental
standards are expected to provide opportunities for Crompton &
Knowles to continue to deliver outstanding growth.
photo caption
Speedy introduction of customer-responsive products for new
applications have made the company the world's leading producer
of castable urethane prepolymers for solid industrial wheels
such as those used on roller coasters.
photo caption
Skaters around the world take for granted the abrasion resistance
of the company's Adiprene(R) and Vibrathane(R) castable urethane
prepolymers used in skate wheels, while simultaneously benefiting
from the improved performance of safety helmets and pads produced
with plasic resins containing the company's stabilizers, polymer
modifiers and chemical foaming agents.
Ingredients
"Changing consumer tastes for high value convenience and health
conscious foods present us with myriad opportunities to supply
food producers with integrated flavor solutions developed in our
laboratories."
Rudy M. Phillips
President
Ingredient Technology Corporation
photo caption
Pharmaceuticals producers increasingly depend on the company's
ingredients specialist for excipients, coatings, carriers,
colors and flavors.
photo caption
Flavors, seasonings, sweetners and colors produced by the company
for bakery applications make it a multi-functional ingredient
resource for customers.
The Specialty Ingredients business of Crompton & Knowles
increased sales by three percent to $104.4 million in 1996.
Profitability also improved from the prior year as a result of
tightly focused marketing strategies and consolidation of certain
operations.
The company's focus on specialty ingredients-flavors,
seasonings, sweeteners, colors and pharmaceutical excipients-for
leading national producers of food and pharmaceutical products
resulted in notable gains in certain sectors of the market.
The guiding principle for the business continued to be a
comprehensive approach to servicing customers with technological
breadth including the creation and applications development of
innovative and functional flavors, high value flavored seasonings
and specialty sweeteners; and pharmaceutical ingredients for a
range of significant consumer products.
The growing market for rich authentic savory flavors, which
respond to demands by both consumers and institutional food
service suppliers for more tasty "homemade" meals conveniently
packaged for quick and easy preparation, provided numerous
opportunities for Crompton & Knowles in 1996. Reaction compounded
flavors, using technology developed in the company's laboratories
combining flavored ingredients and seasonings, enhance the
appearance, mouth feel, aroma and taste of foods as diverse as
sauces; meats; rice, potato and pasta side dishes; and the full
range of snacks. Applications for rich, authentic savory flavors
have increased as food marketers have broadened their offerings
of microwaveable and calorie-conscious, lower-fat foods for the
home. Similarly, food service manufacturers operating cafeterias,
fast food chains, popular restaurants and institutional kitchens
increasingly use higher value savory ingredients to enhance the
eating experience of food served away from the home.
According to Prepared Foods magazine reporting on new product
tracking, 12,431 new products were introduced by food processors
in the United States through November of 1996. Introductions were
high, though off 20 percent from 1995 as consolidations in the
food industry continued to impact the market timing of new
products.
Specialty sweeteners, a North American market segment lead by
Crompton & Knowles, remained a mainstay for the company in 1996.
Sweetener systems including molasses, honey, malt syrups and
specialty sweeteners used for bakery, cereal and confectionery
applications to impart flavor and texture, or to naturally
improve humectancy or antioxidant qualities, increased sales
during the year.
photo caption
Specialty food ingredients optimize taste, aroma, mouthfeel and
appearance for today's fast changing consumer market.
The company's flavored seasonings business experienced improved
demand in 1996 as food producers continued to respond to consumer
preferences for foods with a Southwestern flavor. These include
hot/spicy, salsa and barbecue flavors applied to snack foods such
as chips and pretzels, especially the new baked or lower fat
snacks.
Pharmaceutical ingredients continued its domestic growth in 1996
and benefited from a continuing reciprocal marketing arrangement
with DMV International to serve markets overseas. Pharmaceutical
coatings, colors, excipients and flavors made by the company are
used in prescription and over-the-counter drugs and nutritional
supplements.
At mid-year Crompton & Knowles completed a strategic review of
the Specialty Ingredients business, and has restructured it to
improve its long-term profitability. To improve efficiencies,
two facilities are being closed and production is being
consolidated into existing facilities. Research and development
activities have been more clearly focused to offer higher value,
integrated flavor systems and ingredient "building blocks" to
customers on a more timely basis consistent with the accelerated
timetables in today's consumer markets
Davis-Standard
"Our enhanced market positions will benefit us in 1997 as
utilization rates of existing plastics processing equipment rises
and worldwide consumption of plastic resins continues to
increase."
Robert W. Ackley
President
Davis-Standard Corporation
Specialty Process Equipment & Controls Segment
Sales of specialty process equipment & controls increased by two
percent to $284.9 million in 1996, while operating profit
declined to $23.4 million from a record $40.2 million in 1995.
The results primarily reflect an industry-wide decline in demand
for plastics processing equipment offset in part by an
acquisition which increased the company's revenues in the
international arena.
Although consumption and processing of plastics remained at
record levels during the year, North American processors of
plastics equipment orders slowed in 1996 as the industry focused
on increasing utilization rates of the large number of new
extrusion systems acquired over the prior two years.
As the leading producer of single screw plastics extrusion
equipment and related systems for the plastics processing
industry in North America, the Davis-Standard subsidiary of
Crompton & Knowles was significantly impacted by these events.
Weak industry-wide demand not only reduced unit sales, but
resulted in lower selling prices and weaker margins.
Nevertheless, Davis-Standard was able to maintain its leading
market position in North America and continued its strategy of
leading technological change in the industry and broadening its
product line through niche acquisitions.
New products introduced by the company included a new die for
CPVC pipe extrusion, designed to eliminate burning and to double
the output rate achieved on similar industry systems. The new
IL-P Die is capable of producing in excess of 600 pounds of 1/2
inch CPVC pipe per hour on a dual extrusion line.
photo caption
The health care industry has come to depend on precise
multilumen tubing, blood bags and IV bags produced on the
company's medical products extrusion systems.
photo caption
High-speed plastics extrusion systems manufactured by the company
produce tubing for fiber optic cable at speeds of up to 750
feet per minute.
Utilizing the latest Windows NT technology from the Microsoft
Corporation, Davis-Standard introduced a new superior gauge
thickness control system for use by all sheet, cast film and
extrusion coating processors. The "real time" control combines
into a centralized processing system three proprietary
technologies developed and proven by the company in separate
applications to improve quality.
For blown film lines, where the company is a leading equipment
supplier, new oscillating nips have enabled customers to achieve
higher rates of quality output by limiting the circumference
variation of 30-inch rolls of film to less than two millimeters.
In response to a trend in the industrial blow molding industry
toward large parts manufacturing, Davis-Standard in 1996
augmented its existing blow molding product line with the
acquisition of the Hartig line of blow molders. These high
technology systems can efficiently produce large blow molded
automotive components, industrial containers and outdoor
products. The acquisition also expands the company's extrusion
equipment offerings for the production of carpet backing,
fishing line and non-woven products such as diaper material.
International sales accounted for 43 percent of Davis-Standard
revenues in 1996. The largest single contributor to this
near-doubling of international sales, from 25 percent of sales in
1995, was the acquisition of Klockner ER-WE-PA GmbH, a
leading producer of extrusion coating, cast film and plastics
extrusion equipment based in Germany.
The additional 1996 sales revenues from ER-WE-PA more than offset
the sales decline experienced in North America. However, costs
associated with restructuring the business resulted in losses
from this operation. The acquisition is a key element in the
company's strategy to broaden its plastics extrusion systems
sales. The ER-WE-PA facility, combined with the company's
facility in France, gives Davis-Standard the platform to provide
customer service and technical support for existing and new
customers in Western, Central and Eastern Europe.
To further leverage its broad product range with plastics
processors in Europe, the company began manufacturing its Killion
precision laboratory and medium sized extruders at the French
facility. Repiquet handles all local sales, service and technical
support for the Killion line of equipment.
The segment's equipment order backlog at the end of 1996 was $92
million.
Crompton & Knowles is encouraged about the outlook for its
Davis-Standard equipment business in 1997 and over the long term
by market factors such as rising capacity utilization rates of
existing extrusion equipment and growing worldwide plastic resin
consumption. Positive internal developments include: enhanced
competitive market positions and efficiency improvement programs
in the acquired European operations, as well as at existing
operations in the United States. Together, these trends and
programs will positively affect anticipated performance.
photo caption
The conversion of plastic resin into many products used by
consumers around the world begins with processing through
extrusion systems.
photo caption
Davis-Standard's industrial blow molding systems are used world-
wide to produce non-disposable plastic products such as
children's playthings.
photo caption
As a leading suppliers of extrusion systems used to produce sheet
and shaped parts, Davis-Standard benefits from increased
consumption of plastics in automotive applications.
Financials
[C&K logo]
Mangement's Discussion and Analysis of Financial Condition and
Results of Operations 18
Consolidated Financial Statements 22
Notes to Consolidated Finacial Statements 26
Responsibiity for Financial Statements 36
Independent Auditors' Report 36
Five Year Selected Financial Data 37
Board of Directors 38
Management's Discussion and Analysis of Financial Condition and
Results of Operations
Financial Condition and Liquidity
Merger
On August 21, 1996, the Company merged with Uniroyal Chemical
Corporation ("Uniroyal") in a common stock transaction that was
accounted for on a pooling-of-interests basis. Accordingly, the
consolidated financial information for all periods presented
include the combined accounts and results of operations of both
the Company and Uniroyal.
Liquidity and Capital Resources
The Company's merger with Uniroyal resulted in combined total
debt and stockholders' deficit at December 28, 1996 of $1.1
billion and $96 million, respectively. The Company's debt to
total capital percentage was 110%, up from 106% on a combined
basis at year-end 1995. The Company's liquidity needs including
debt servicing are ultimately expected to be financed from
operations.
In connection with the merger, the Company entered into a
revolving credit agreement ("Agreement") in the amount of $530
million. Borrowings under the Agreement included $300 million
available to the Company for working capital and general
corporate purposes, $150 million available to Uniroyal Chemical
Company, Inc. (a wholly-owned subsidiary of Uniroyal) for
working capital and general corporate purposes and $80 million
available for borrowings by the European subsidiaries of the
Company. The Agreement extends through August 2001 and is
secured, in the case of Uniroyal Chemical Company, Inc.'s
domestic borrowings, by a security interest in its domestic
accounts receivable and inventory. The Agreement calls for
interest based upon various options including a spread over LIBOR
that varies according to certain debt ratios of the Company for
the trailing four quarters and is currently at .875% over LIBOR.
Borrowings under the Agreement amounted to $179.5 million at
December 28, 1996 and bore a weighted average interest rate of
6.8%.
The December 28, 1996 working capital balance of $384.8 million
increased $108.4 million from the December 30, 1995 balance of
$276.4 million, while the current ratio increased to 2.1 from
1.7. Both increases are primarily attributable to the reduction
in notes payable and current debt installments. Days sales in
receivables increased to 55 days in 1996 from 50 days in 1995.
The increase was primarily attributable to increased foreign
sales which generally have longer payment terms. Inventory
turnover averaged 3.2 in 1996 compared to 3.3 in 1995.
Cash flows from operating activities of $95.4 million decreased
$11 million from $106.4 million in 1995 primarily as a result
of merger and related costs totalling $68.1 million on an
after-tax basis. Net cash provided by operations and proceeds
from the sale of treasury stock were used principally to finance
acquisitions, fund capital expenditures, reduce indebtedness and
pay cash dividends. The current dividend payout has been reduced
to $.05 per share payable annually in May.
Capital expenditures in 1996 were unusually low at $39.2 million,
down from $87.7 million in 1995. Capital expenditures in 1995
included significant expenditures to expand capacity primarily
for new products. Capital expenditures are expected to
approximate $60 million in 1997 primarily for replacement needs
and improvement of domestic and foreign operating facilities.
International operations
The stronger U.S. dollar exchange rate versus the international
currencies in which the Company operates accounted for the
unfavorable adjustment of $13.4 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 net
asset value of foreign operations amounting to $223.5 million is
not currently being hedged with respect to translation in U.S.
dollars.
The Company operates on a worldwide basis and exchange rate
disruptions between the United States and foreign currencies are
not expected to have a material effect on year-to-year
comparisons of the Company's results of operations. Cash
deposits, borrowings and forward exchange contracts are used
periodically to hedge fluctuations between the U.S. and foreign
currencies if such fluctuations are earnings related. Such
hedging activities are not significant in total.
Environmental Matters
The Company is involved in claims, litigation, administrative
proceedings and investigations of various types in several
jurisdictions. A number of such matters involve claims for a
material amount of damages and relate to or allege environmental
liabilities, including clean-up costs associated with hazardous
waste disposal sites, natural resource damages, property damage
and personal injury. The Company and some of its subsidiaries
have been identified by Federal, state or local governmental
agencies, and by other potentially responsible parties (each a
"PRP") under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, or comparable
state statutes, as a PRP with respect to costs associated with
waste disposal sites at various locations in the United States.
In addition, the Company is involved with environmental
remediation and compliance activities at some of its current and
former sites in the United States and abroad.
Each quarter, the Company evaluates and reviews estimates for
future remediation and other costs to determine appropriate
environmental reserve amounts. For each site a determination is
made of the specific measures that are believed to be required to
remediate the site, the estimated total cost to carry out the
remediation plan, the portion of the total remediation costs to
be borne by the Company and the anticipated time frame over which
payments toward the remediation plan will occur. Based on current
information and analysis, the Company recorded a special
provision in the amount of $30 million during the third quarter
of 1996 for environmental remediation activities. As of December
28, 1996, the Company's reserves for such environmental
liabilities totaled $96.2 million. These estimates may
subsequently change should additional sites be identified,
further remediation measures be required, the interpretation of
current laws and regulations be modified or additional
environmental laws and regulations be enacted.
The Company intends to assert all meritorious legal defenses and
all other equitable factors which are available to it with
respect to the above matters. The Company believes that the
resolution of these environmental matters will not have a
material adverse effect on the consolidated financial position of
the Company. While the Company believes it is unlikely, the
resolution of these environmental matters could have a material
adverse effect on the Company's consolidated results of
operations in any given year if a significant number of these
matters are resolved unfavorably.
Operating Results-1996 as Compared to 1995
Overview
Consolidated net sales increased 3% to $1.8 billion from $1.74
billion in 1995. The increase was primarily attributable to the
impact of acquisitions (+5%) offset in part primarily by unit
volume. The acquisitions include primarily the worldwide crop
protection business of Solvay Duphar B.V. acquired in March of
1995 and the extrusion machinery business of Klockner ER-WE-PA
GmbH acquired in January of 1996. International sales, including
U.S. exports, increased as a percentage of total sales to 40%
from 35% in 1995.
The net loss for 1996 was $22.5 million, or 31 cents per common
share, compared to earnings of $131.6 million, or $1.99 per
share, in 1995. Before after-tax merger and related costs of
$68.1 million, a special charge for environmental costs of $18.5
million and an extraordinary charge of $.5 million, net earnings
were $64.6 million, or 90 cents per share, in 1996, compared with
adjusted earnings of $56.6 million, or 85 cents per share, in
1995. The adjusted 1995 results exclude $78.9 million of a
special tax credit, an extraordinary charge of $8.3 million and
other special income, net of $4.4 million. Average shares
outstanding in 1996 were 72 million compared with 66.3 million
in 1995.
Gross margin as a percentage of net sales increased slightly to
35.1% from 34.9% in the prior year before certain special income
of $9.9 million in 1995. Consolidated operating profit, before
merger and related costs of $85 million and a special charge for
environmental costs of $30 million, increased 3% to $218.6
million from $213.2 million in the prior year before certain
special income, net of $4.9 million in 1995. The specialty
chemicals segment rose 11% (as adjusted for special income in
1995) and the specialty equipment and controls segment decreased
42%.
Specialty Chemicals
The Company's specialty chemicals segment sales of $1.52 billion
increased 4% from 1995. The increase is primarily attributable to
the impact of acquisitions (+2%) and improved pricing. An
analysis of sales by major product class within the specialty
chemicals segment follows.
Chemicals and polymers sales of $493.7 million increased 4% from
1995 primarily attributable to improved selling prices in rubber
chemicals and increased unit volume for nitrile rubber, partially
offset by lower unit volume and pricing in the EPDM business.
Crop protection sales of $353.3 million increased 8% compared to
1995 primarily attributable to the acquisition of the crop
protection business of Solvay Duphar B.V. in March of 1995. Lower
insecticide sales due to lower U.S. infestation levels and
regulatory actions relative to Omite registrations in the U.S.
were offset primarily by increases in international sales and
sales of seed treatment products.
Specialties sales of $296.6 million increased 7% versus 1995
primarily attributable to higher unit volume and improved pricing
of urethane prepolymers and unit volume increases in lubricant
additives and other specialty chemicals.
Colors sales of $271.1 million decreased 5% from 1995 primarily
attributable to lower selling prices of approximately 3% and
lower unit volume. The lower unit volume was primarily in apparel
dyes which account for approximately 50% of the business.
Specialty ingredient sales of $104.4 million increased 3% versus
1995 primarily attributable to increased unit volume.
Operating profit of $216.3 million increased 11% from $195.2
million in the prior year before certain special income, net of
$4.9 million in 1995. The improvement in operating profit
resulted primarily from improved pricing and the impact of
acquisitions.
Specialty Process Equipment and Controls
The Company's specialty process equipment and controls sales of
$284.9 million represent a 2% increase from 1995. Approximately
20% was attributable to the incremental impact of acquisitions,
primarily Klockner ER-WE-PA GmbH, offset partially by 16% lower
unit volume reflecting primarily reduced domestic demand for
extrusion systems and 2% lower pricing.
Operating profit decreased 42% to $23.4 million from $40.2
million in 1995 primarily due to lower selling prices and lower
unit volume in the domestic business. The equipment order backlog
at the end of 1996 totalled $92 million (including $21 million
from 1996 acquisitions) compared to $72 million at the end of
1995.
Other
Selling, general and administrative expenses increased 3% due
primarily to the impact of acquisitions and inflation offset in
part by the cost reduction program charge of $5 million in 1995
and the benefits of that program in 1996. Depreciation and
amortization of $82.6 million increased 3% compared to 1995
primarily as a result of a higher asset base including
acquisitions. Research and development cost of $52.4 million
increased 5% versus 1995 primarily as a result of the impact of
acquisitions and inflation.
Interest expense of $114.2 million decreased 7% from 1995
primarily due to lower levels of indebtedness. Other income of
$1.3 million in 1996 decreased $1.4 million versus 1995 primarily
due to lower interest income and special licensing income in
1995. The effective tax rate, excluding the impact of merger and
related costs ($68.1 million after-tax) and a special charge for
environmental costs ($18.5 million after-tax), was 38.9% versus
38% in the prior year before special tax credits of $78.9
million in 1995.
Operating Results-1995 as Compared to 1994
Overview
Consolidated net sales increased 14% to $1.74 billion from $1.54
billion in 1994. The increase was primarily attributable to the
impact of acquisitions (+6%) and the balance primarily due to
higher unit volume. The acquisitions include primarily the
worldwide crop protection business of Solvay Duphar B.V. acquired
in March of 1995 and foreign and domestic extrusion machinery
businesses acquired during 1995 and 1994. International sales,
including U.S. exports, increased as a percentage of total sales
to 35% from 34% in 1994.
Net earnings for 1995 were $131.6 million, or $1.99 per share,
compared to a net loss of $162.9 million, or $2.67 per share, in
1994. Before a special tax credit of $78.9 million, an
extraordinary charge of $8.3 million and other special income,
net of $4.4 million, net earnings were $56.6 million, or 85 cents
per share, in 1995, compared with adjusted earnings of $34.5
million, or 57 cents per share, in 1994. The adjusted 1994
results exclude the after-tax impact of the write-off of certain
intangible assets of $162.5 million and a special tax provision
of $34.9 million. Average shares outstanding in 1995 were 66.3
million compared with 60.9 million in 1994.
Gross margin as a percentage of net sales decreased to 34.9% (as
adjusted for certain special income of $9.9 million in 1995) from
36.7% in 1994. The decrease was primarily attributable to higher
raw material costs and lower margin product mix. Operating profit
of $213.2 million, before certain special income, net of $4.9
million in 1995, increased 11% from $192.4 million in 1994. The
1994 operating profit excludes the write-off of intangible assets
in the amount of $191 million. The increase in operating profit
was due to an 8% increase in the specialty chemicals segment and
a 29% increase in the specialty process equipment and controls
segment.
Specialty Chemicals
The Company's specialty chemicals segment reported sales of $1.46
billion representing a 9% increase from 1994 primarily
attributable to the incremental sales from acquisitions and
higher unit volume. An analysis of sales by major product lines
within the specialty chemicals segment follows.
Chemicals and polymers sales of $476.6 million increased 8% from
1994. Rubber chemical sales in 1995 increased in all geographic
regions except Latin America. The increase was primarily
attributable to increased unit volume. Sales increased in both
the nitrile rubber and EPDM businesses primarily due to improved
pricing.
Crop protection sales of $326 million increased 22% versus 1994
with 10% due to the acquisition of the worldwide crop protection
business of Solvay Duphar B.V. and the remainder due primarily to
higher unit volume across all product lines particularly
fungicides, insecticides and seed treatment sales.
Specialties sales of $276.7 million increased 18% from 1994
primarily attributable to higher unit volume and improved pricing
of urethane prepolymers and higher unit volume primarily in
chemical intermediates, polymerization inhibitors and plastic
additives.
Colors sales of $284 million decreased 4% versus 1994
attributable to lower selling prices of 5% offset in part
primarily by foreign currency translation.
Specialty ingredient sales of $101.6 million increased 5%
compared to 1994, reflecting primarily increased unit volume.
Operating profit of $195.2 million increased 6% from $184.5
million in 1994. The operating profit in 1995 excludes certain
special income, net of $4.9 million while the operating profit in
1994 excludes a write-off of intangibles of $191 million. The
improvement in operating profit resulted primarily from an
increase in unit volume, improved pricing and the impact of
acquisitions.
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 1994. Approximately 27% of the sales increase was
attributable to the incremental impact of acquisitions with the
balance primarily from increased unit volume. Operating profit of
$40.2 million increased 29% 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 totaled $72 million at the end of 1995
compared to $66 million at the end of 1994.
Other
Selling, general and administrative expenses of $270.3 million
increased 13% versus 1994 primarily due to the impact of
acquisitions, increased spending to support a higher sales level
and a cost reduction program charge of $5 million. Depreciation
and amortization of $80.1 million in 1995 decreased 7% from $86.1
million in 1994 primarily due to lower amortization of intangible
assets resulting from the write-off of intangibles in 1994.
Research and development costs of $50.1 million increased 12%
from 1994 primarily attributable to the impact of the
acquisitions and increased spending for product development.
Interest expense of $122.4 million decreased 6% from 1994
primarily as a result of a $14.3 million mark-to-market charge in
1994 for an option embedded in an interest rate swap contract
offset in part by approximately $5.8 million from the impact of
higher rates on the swap contract. Other income of $2.7 million
decreased $1.7 million from 1994 primarily due to lower interest
income in 1995. The effective tax rate before special tax credits
of $78.9 million was 38%, versus 47.8% in 1994 before the
write-off of intangible assets ($162.5 million after-tax) and
special taxes of $34.9 million. The higher effective tax rate in
1994 was primarily due to higher state income taxes.
Consolidated Statements of Operations
Fiscal years ended 1996, 1995 and 1994
(In thousands of dollars,
except per share data) 1996 1995 1994
Net Sales $1,803,969 $1,744,834 $1,536,211
Costs and Expenses
Cost of products sold 1,170,586 1,126,166 972,894
Selling, general and
administrative 279,812 270,338 240,079
Depreciation and amortization 82,597 80,118 86,139
Research and development 52,359 50,090 44,682
Merger and related costs 85,000 - -
Special environmental provision 30,000 - -
Write-off of intangibles - - 191,000
Operating Profit 103,615 218,122 1,417
Interest expense 114,244 122,398 130,734
Other income (1,285) (2,736) (4,361)
Earnings
Earnings (loss) before income
taxes and extraordinary charge (9,344) 98,460 (124,956)
Provision (benefit) for
income taxes 12,710 (41,462) 37,971
Earnings (loss) before
extraordinary charge (22,054) 139,922 (162,927)
Extraordinary loss on
early extinguishment of debt (441) (8,279) -
Net earnings (loss) $(22,495) $131,643 $(162,927)
Per Common Share
Earnings (loss) before
extraordinary charge $(.31) $2.11 $(2.67)
Extraordinary loss - (.12) -
Net earnings (loss) $(.31) $1.99 $(2.67)
See accompanying notes to consolidated financial statements
Crompton & Knowles Corporation and Subsidiaries
Consolidated Balance Sheets
Fiscal years ended 1996 and 1995
(In thousands of dollars,
except per share data) 1996 1995
Assets
Current Assets
Cash $21,120 $30,437
Accounts receivable 267,871 271,947
Inventories 362,349 332,493
Other current assets 90,897 62,152
Total current assets 742,237 697,029
Non-Current Assets
Property, plant and equipment 497,979 524,463
Cost in excess of acquired net
assets 189,012 185,648
Other assets 227,962 248,705
$1,657,190 $1,655,845
Liabilities and Stockholders' Equity
Current Liabilities
Current installments of
long-term debt $731 $11,434
Notes payable 8,595 93,744
Accounts payable 151,270 144,241
Accrued expenses 143,133 125,063
Income taxes payable 33,214 32,897
Other current liabilities 20,536 13,274
Total current liabilities 357,479 420,653
Non-Current Liabilities
Long-term debt 1,054,982 974,156
Postretirement health
care liability 181,980 184,209
Other liabilities 159,167 136,012
Stockholders' Equity (Deficit)
Common stock, $.10 par value -
issued 77,237,421 shares
in 1996 and 76,755,875 in 1995 7,724 7,676
Additional paid-in capital 232,010 227,433
Accumulated deficit (257,177) (213,347)
Accumulated translation
adjustment (25,592) (12,168)
Treasury stock at cost (48,083) (62,972)
Deferred compensation (1,587) (2,190)
Pension liability adjustment (3,713) (3,617)
Total stockholders' deficit (96,418) (59,185)
$1,657,190 $1,655,845
See accompanying notes to consolidated financial statements
Crompton & Knowles Corporation and Subsidiaries
Consolidated Statements of Cash Flows
Fiscal years ended 1996, 1995 and 1994
Increase (decrease) to cash
(in thousands of dollars) 1996 1995 1994
Cash Flows from Operating
Activities
Net earnings (loss) $(22,495) $131,643 $(162,927)
Adjustments to reconcile
net earnings (loss)
to net cash provided
by operations:
Depreciation and amortization 82,597 80,118 86,139
Write-off of intangible assets - - 191,000
Noncash interest 16,082 18,781 37,782
Deferred taxes (16,308) (78,611) (1,180)
Changes in assets
and liabilities:
Accounts receivable (9,675) (53,090) (8,716)
Inventories (7,033) (178) (47,192)
Other current assets (614) 2,707 4,329
Other assets (169) 6,067 (1,862)
Accounts payable and
accrued expenses 22,548 16,721 20
Income taxes payable 3,249 (813) 120
Other current liabilities 2,066 (6,139) 4,755
Postretirement health care
liability (2,653) (1,244) (1,204)
Other liabilities 27,106 (9,599) (5,165)
Other 652 (15) 819
Net cash provided by
operations 95,353 106,348 96,718
Cash Flows from Investing
Activities
Acquisitions (15,713) (108,035) (19,965)
Capital expenditures (39,204) (87,744) (52,090)
Proceeds from sale of assets - - 26,006
Other investing activities 2,689 (7,943) (8,013)
Net cash used by
investing activities (52,228) (203,722) (54,062)
Cash Flows from Financing Activities
Proceeds from sale of
common stock, net 14,150 146,626 -
Proceeds (payments) on
short-term borrowings (100,434) 29,976 49,592
Proceeds (payments) on
long-term borrowings 55,985 (136,807) 37,040
Treasury stock acquired - (4,296) (47,647)
Dividends paid (12,967) (25,217) (23,309)
Other financing activities 4,873 (4,493) (1,373)
Net cash provided (used) by
financing activities (38,393) 5,789 14,303
Cash
Effect of exchange rates
on cash (573) (1,154) 713
Change in cash 4,159 (92,739) 57,672
Cash adjustment to conform
fiscal year of Uniroyal (13,476) - -
Cash at beginning of period 30,437 123,176 65,504
Cash at end of period $21,120 $30,437 $123,176
See accompanying notes to consolidated financial statements
Crompton & Knowles Corporation and Subsidiaries
Consolidated Statements of Stockholders' Equity (Deficit)
Fiscal years ended 1996, 1995 and 1994
(In thousands of dollars,
except per share data) 1996 1995 1994
Common Stock
Balance at beginning of year $7,676 $6,365 $6,382
Stock options, warrants and
other issuances (481,546 shares in
1996, 332,530 in 1995 and 182,465
in 1994) 48 32 18
Uniroyal sale of common stock
(12,785,295 shares) - 1,279 -
Uniroyal repurchase
(356,153 shares) - - (35)
Balance at end of year 7,724 7,676 6,365
Additional Paid-in Capital
Balance at beginning of year 227,433 84,527 86,409
Stock options, warrants and
other issuances 5,062 (50) 1,682
Sale of common shares (485) - -
Uniroyal sale of common stock - 145,34 -
Uniroyal repurchase of shares - - (2,430)
Return of shares from long-term
incentive plan trust - (2,391) -
Issuance under long-term
incentive plan - - (1,134)
Balance at end of year $232,010 227,433 84,527
Accumulated Deficit
Balance at beginning of year (213,347 (319,773) (133,537)
Net earnings (loss) (22,495) 131,643 (162,927)
Adjustment to conform fiscal
year of Uniroyal (8,368) - -
Cash dividends declared on
common stock ($.27 per share
in 1996, $.525 in 1995, and
$.46 in 1994) (12,967) (25,217) (23,309)
Balance at end of year (257,177) (213,347) (319,773)
Accumulated Translation Adjustment
Balance at beginning of year (12,168) (8,106) (10,725)
Equity adjustment for
translation of foreign
currencies (13,424) (4,062) 2,619
Balance at end of year (25,592) (12,168) (8,106)
Treasury Stock
Balance at beginning of year (62,972) (54,213) (11,278)
Issued, primarily under
stock options (54,346 shares
in 1996, 72,729 in 1995,
and 58,957 in 1994) 254 340 276
Sale of 1,000,000 common
shares 14,635 - -
Common stock acquired (272,800
shares in 1995 and 2,954,700
in 1994) - (4,296) (47,647)
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 (48,083) (62,972) (54,213)
Deferred Compensation
Balance at beginning of year (2,190) (10,152) (6,518)
Return of shares from
long-term incentive plan trust - 7,194 -
Issuance under long-term
incentive plan - - (3,302)
Amortization 603 768 (332)
Balance at end of year (1,587) (2,190) (10,152)
Pension Liability Adjustment
Balance at beginning of year (3,617) (1,903) (2,681)
Equity adjustment for pension
liability (96) (1,714) 778
Balance at end of year (3,713) (3,617) (1,903)
Total stockholders' deficit $ (96,418)$(59,185) $(303,255)
See accompanying notes to consolidated financial statements
Crompton & Knowles Corporation and Subsidiaries
Notes to Consolidated Financial Statements
Accounting Policies
Business Combination
On August 21, 1996, the Company merged (the "Merger") with
Uniroyal Chemical Corporation ("Uniroyal") in a common stock
transaction that was accounted for on a pooling-of-interests
basis. A total of 23,715,181 shares of the Company's common
stock was exchanged for all of Uniroyal's outstanding common and
preferred shares. The accompanying consolidated financial
statements include the accounts of both companies and all
information has been restated to reflect the combined operations
of both companies. Because of differing fiscal year ends, the
balance sheet for year-end 1995 includes the Company as of
December 30, 1995 and Uniroyal as of October 1, 1995. The
consolidated statements of operations, cash flows and
stockholders' equity (deficit) for 1995 and 1994 reflect the
combined results of the Company and Uniroyal for their respective
December and September fiscal year ends. The 1996 consolidated
statements of operations, cash flows and stockholders' equity
(deficit)reflect the combined results of both companies for the
twelve month period ended December 28, 1996. Accordingly,
Uniroyal's net loss of $8.4 million for its fiscal quarter ended
December 31, 1995, has been charged to the accumulated deficit
account and Uniroyal's change in cash for such quarter has been
reflected as a cash adjustment in the consolidated statements of
cash flows. Net sales and net earnings (loss) prior to the
combination are as follows:
Six months
(In thousands) June 30, 1996 1995 1994
(Unaudited)
Net sales:
Company $332,410 $665,513 $589,757
Uniroyal 597,691 1,079,321 946,454
$930,101 $1,744,834 $1,536,211
Net earnings (loss):
Company $19,180 $40,493 $50,916
Uniroyal 25,909 91,150 (213,843)
$45,089 $131,643 $(162,927)
Certain amounts in the accompanying consolidated financial
statements have been reclassified to conform with the current
year presentation.
Principles of Consolidation
The accompanying consolidated financial statements include the
accounts of all majority-owned subsidiaries. Other companies in
which the Company has a 20% to 50% ownership and exercises
significant management influence are accounted for in accordance
with the equity method. All significant intercompany balances and
transactions have been eliminated in consolidation. The Company's
fiscal year ends on the last Saturday in December for domestic
operations and a week earlier for certain foreign operations.
Translation of Foreign Currencies
Balance sheet accounts denominated in foreign currencies are
translated generally at the current rate of exchange as of the
balance sheet date, while revenues and expenses are translated
at average rates of exchange during the periods presented. The
cumulative foreign currency adjustments resulting from such
translation are included in the accumulated translation
adjustment account in the stockholders' equity (deficit) section
of the consolidated balance sheets. For foreign subsidiaries
operating in highly inflationary economies, principally the
Brazilian operations, monetary balance sheet accounts and
related revenue and expenses are translated at current rates of
exchange while non-monetary balance sheet accounts and related
revenues and expenses are translated at historical exchange
rates. The resulting translation gains and losses related to
those countries are reflected in operations and are not
significant in any of the years presented.
Property, Plant and Equipment
Property, plant and equipment are carried at cost, less
accumulated depreciation. Depreciation expense ($59.2 million in
1996, $57.4 million in 1995 and $56.3 million in 1994) 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: 3 to 25 years, and
furniture and fixtures: 3 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 principally using the first-in, first-out (FIFO)
basis.
Intangible Assets
The excess cost over the fair value of net assets of businesses
acquired is being amortized on a straight-line basis over 20 to
40 years. Accumulated amortization was $36.6 million and $29.6
million in 1996 and 1995, respectively.
Patents, unpatented technology and other intangibles of $94.8
million in 1996 and $111.2 million in 1995, included in other
assets, are being amortized principally on a straight-line basis
over their estimated useful lives ranging from 6 to 20 years.
Accumulated amortization was $108.2 million and $89.0 million in
1996 and 1995, respectively.
Long-Lived Assets
In March, 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed Of." This statement requires that long-lived
assets be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of such assets
may not be recoverable. The Company adopted the new standard in
the first quarter of 1996. The effect of the adoption did not
materially impact the Company's financial position or results of
operations.
The Company evaluates the recoverability of the carrying value of
the intangible assets of each of its businesses by assessing
whether the projected earnings and cash flows of each of its
businesses is sufficient to recover the existing unamortized cost
of these assets. On this basis, if the Company determines that
any assets have been permanently impaired, the amount of the
impaired assets is written-off against earnings in the quarter in
which the impairment is determined.
In 1994, the Company wrote off $191 million of intangible assets
based on lower estimates of future operating results and cash
flows of the Chemicals and Polymer business.
Research and Development
Research and development costs are expensed as incurred.
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 $116.8 at December 28, 1996, were distributed to
the Company in the form of dividends, since certain foreign
countries limit the extent of repatriation of earnings, while
for others, the Company's intention is to permanently reinvest
such foreign earnings.
Statements of Cash Flows
Cash includes bank term deposits of three months or less. Cash
payments during the fiscal years ended 1996, 1995 and 1994
included interest payments of $100.1 million, $107.9 million and
$92 million and income tax payments of $28.7 million, $32.2
million and $40.2 million, respectively.
Earnings Per Common Share
The computations of loss per common share for the fiscal years
ended 1996 and 1994 are based on the weighted average number of
common shares outstanding amounting to 72,025,840 and 60,907,505,
respectively. Common stock equivalents have been excluded
because they are antidilutive for such periods. The computation
of earnings per share for fiscal year 1995 is based on the
weighted average number of common and common equivalent shares
outstanding amounting to 66,289,413. 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.
Stock-Based Compensation
Effective in 1996, the Company adopted FASB Statement No. 123
"Accounting and Disclosure of Stock-Based Compensation". As
permitted, the Company elected to continue to follow the
provisions of Accounting Principles Board No. 25 "Accounting for
Stock Issued to Employees" and related interpretations in
accounting for stock-based compensation plans. Further
information is provided in the footnote on Stock Incentive Plans.
Other Disclosures
Included in accounts receivable are allowances for doubtful
accounts in the amount of $7.3 million in 1996 and $6.1 million
in 1995. Included in other current liabilities are customer
deposits in the amount of $18.7 million in 1996 and $11.3 million
in 1995.
Merger and Related Costs
In connection with the merger with Uniroyal, the Company
incurred $85 million of merger and related costs. The components
of these costs comprise principally severance and other personnel
costs of $37.6 million, investment banking fees of $12.5
million, legal fees of $9.7 million, debt related fees of $8.3
million, facility consolidation costs of $6.4 million and other
costs of $10.5 million.
Acquisitions
During 1996, the Company acquired Klockner ER-WE-PA, GmbH and
the Hartig line of industrial blow molding systems at an
aggregate cost of $15.7 million. During 1995, the Company
acquired the worldwide crop protection business of Solvay Duphar,
B.V., along with five smaller acquisitions, at an aggregate
cost of $108 million. The acquisitions have been accounted for
using the purchase method and, accordingly, the acquired assets
and liabilities have been recorded at their fair values at the
dates of acquisition. The excess cost of purchase price over fair
value of net assets acquired in the amount of $34.9 million, is
being amortized from 20 to 40 years. The operating results of
each acquisition are included in the consolidated statement of
operations from the dates of acquisition.
Inventories
(In thousands) 1996 1995
Finished goods $242,587 $218,440
Work in process 44,445 37,753
Raw materials and supplies 75,317 76,300
$362,349 $332,493
Property, Plant and Equipment
(in thousands) 1996 1995
Land and improvements $30,290 $31,399
Buildings and improvements 159,893 141,259
Machinery and equipment 628,378 564,563
Furniture and fixtures 25,979 26,369
Construction in progress 29,173 71,955
873,713 835,545
Less accumulated
depreciation 375,734 311,082
$497,979 $524,463
Leases
The future minimum rental payments under operating leases having
initial or remaining non-cancelable lease terms in excess of one
year (as of December 28, 1996) total $47.7 million as follows:
$12.2 million in 1997, $11.4 million in 1998, $10.4 million in
1999, $7.7 million in 2000, $2.5 million in 2001 and $3.5
million in later years. Total rental expense for all operating
leases was $16.6 million in 1996, $14.7 million in 1995 and
$13.5 million in 1994.
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.
Accrued Expenses
(In thousands) 1996 1995
Accrued interest $18,739 $26,282
Current portion of
environmental liability 20,270 15,750
Other accruals 104,124 83,031
$143,133 $125,063
Long-term Debt
(In thousands) 1996 1995
9% Senior Notes Due 2000 $250,583 $270,000
10.5% Senior Notes Due 2002 283,078 283,078
11% Senior Subordinated Notes
Due 2003 232,175 232,175
12% Subordinated Discount
Notes Due 2005 103,215 91,857
Credit Agreement 179,466 60,000
Other 7,196 48,480
1,055,713 985,590
Less amounts due within
one year (731) (11,434)
Total long-term debt $1,054,982 $974,156
9% Senior Notes
The 9% Senior Notes due 2000 are an obligation of Uniroyal
Chemical Company, Inc. (a wholly-owned subsidiary of Uniroyal)
and are unsecured. Interest is payable semi-annually. The 9%
Senior Notes are not redeemable prior to maturity, except upon a
change in control (as defined in the related indenture) whereupon
an offer shall be made to purchase the 9% Senior Notes then
outstanding at a purchase price equal to 101% of the principal
amount thereof, plus accrued and unpaid interest. In connection
with the Merger, such an offer was made, resulting in $2.2
million of principal being redeemed. The 9% Senior Notes rank
pari passu in right of payment with all existing and future
senior indebtedness of Uniroyal Chemical Company, Inc.
10.5% Senior Notes
The 10.5% Senior Notes Due 2002 are an obligation of Uniroyal and
are unsecured. Interest is payable semi-annually.
11% Senior Subordinated Notes
The 11% Senior Subordinated Notes Due 2003 are an obligation of
Uniroyal and are unsecured. Interest is payable semi-annually.
The 11% Senior Subordinated Notes are redeemable in whole or in
part, at the option of Uniroyal at any time after May 1, 1998, at
prices commencing at 105.5% of par of the then outstanding
principal amount, plus accrued and unpaid interest, declining
ratably to par by May 1, 2000.
12% Subordinated Discount Notes
The 12% Subordinated Discount Notes Due 2005 are an unsecured
obligation of Uniroyal and have a final accreted value of $126.6
million at May 1, 1998. Beginning on such date, cash interest
will accrue on these securities and will be payable
semi-annually. The Notes are redeemable in whole or in part, at
the option of Uniroyal at any time after May 1, 1998, at
100% of their principal amount, plus accrued and unpaid
interest.
Merger Waivers
The note indentures require that upon a change in control (as
defined in the related indentures), an offer shall be made to
purchase all of the notes at a purchase price equal to 101% of
the principal amounts (or accreted value), thereof, plus
accrued and unpaid interest. In connection with the Merger,
waivers of this requirement were obtained for $2.4 million from
the holders of a majority in principal amount (as required under
the indenture) of each of the notes, except the 9% Senior Notes
for which an offer to purchase was made.
Debt Repurchases
During 1996, the Company repurchased $17.2 million of 9% Senior
Notes in the open market. As a result of this repurchase, the
Company recognized an extraordinary charge of $441 thousand, net
of tax benefit of $293 thousand.
During the first quarter of 1995, Uniroyal completed an initial
public offering and sold 13,350,000 common shares (12,785,295
converted shares). The proceeds of the offering, after deducting
underwriting discounts, other fees and expenses were $146.6
million. The net proceeds along with available cash and
borrowings under a bank credit facility were used to retire an
aggregate of $181.7 million of the Company's 12% Subordinated
Discount Notes, 11% Senior Subordinated Notes, and 10.5% Senior
Notes. As a result of the debt repurchase, the Company
recognized an extraordinary charge in 1995 of $8.3 million, net
of tax benefit of $4.5 million.
Credit Agreement
In connection with the Merger, the Company entered into a $530
million credit agreement with a syndicate of banks. Borrowings
under the credit agreement are divided into three tranches.
Tranche I provides a maximum of up to $300 million available to
the Company for working capital and general corporate purposes.
Tranche II provides a maximum of up to $150 million available to
Uniroyal Chemical Company, Inc. (a wholly-owned subsidiary of
Uniroyal) for working capital and general corporate purposes.
Tranche III allows up to $80 million of borrowings by the
European subsidiaries of the Company. Borrowings may be
denominated in U.S. dollars or the subsidiary's local currency.
The credit agreement extends through August 2001 and is secured,
in the case of Uniroyal Chemical Company, Inc.'s domestic
borrowings, by a security interest in its domestic accounts
receivable and inventory.
The credit agreement calls for interest based upon various
options including a spread over LIBOR that varies according to
certain debt ratios for the trailing four fiscal quarters. In
addition, the Company must pay a commitment fee (currently .25%)
on the total unused portion of the credit agreement based upon
certain debt ratios for the trailing four fiscal quarters. At
December 28, 1996, borrowings under the credit agreement of
$125 million by the Company and $54.5 million by Uniroyal
Chemical Company, Inc. bore a weighted average interest rate of
6.8%.
Debt Covenants
The Company's various debt agreements contain covenants which
limit their ability to incur additional debt, transfer funds
between affiliated companies, pay cash dividends or make certain
other payments. In addition, the credit agreement requires the
Company to maintain certain financial ratios.
Maturities
In 1996, the scheduled maturities of long-term debt during the
next five years and years thereafter were: 1997 - $.7 million;
1998 - $.1 million; 1999 - $.1 million; 2000 - $250.7 million;
2001 - $183.6 million and years thereafter - $620.5 million.
Financial Instruments
At December 28, 1996, the Company had an interest rate swap
contract ("the Swap") outstanding for $270 million with a major
financial institution. Net receipts or payments on the Swap are
accrued and recognized as adjustments to interest expense. The
Swap requires the Company to make semi-annual payments to its
counterparty of an amount equal to a six month LIBOR and requires
the counterparty to make semi-annual payments at a fixed rate of
5.24%. The Company's floating interest rate resets every six
months in arrears with the last payment due on December 10,
1999. The Company paid $3.2 million under the Swap in 1996. A
settlement of the fair market value of the Swap as of
December 28, 1996, would require a payment of approximately
$8.1 million.
The Company remains sensitive to changes in prevailing interest
rates because approximately $465 million of indebtedness of the
Company at December 28, 1996 effectively bears interest at a
floating rate. Accordingly, a 1% change in prevailing interest
rates would result in a $4.7 million change in annual interest
expense.
The carrying amounts for cash, accounts receivable, notes
payable, accounts payable and other current liabilities
approximate fair value because of the short maturities of these
instruments. The fair market values of long-term debt (including
current installments) were $1,124.8 million and $999.1 million
in 1996 and 1995, respectively, and with respect to the notes
have been determined based on quoted market prices.
Income Taxes
The components of earnings (loss) before income taxes and
extraordinary loss and the provision (benefit) for income taxes
are as follows:
Fiscal Year Ended
(In thousands) 1996 1995 1994
Pretax Earnings (Loss):
Domestic $(32,875) $76,575 $(148,370)
Foreign 23,531 21,885 23,414
$(9,344) $98,460 $(124,956)
Taxes:
Domestic
Current $15,576 $25,253 $28,976
Deferred (9,566) (72,379) 912
6,010 (47,126) 29,888
Foreign
Current 13,517 10,603 10,198
Deferred (6,817) (4,939) (2,115)
6,700 5,664 8,083
Total
Current 29,093 35,856 39,174
Deferred (16,383) (77,318) (1,203)
$12,710 $(41,462) $37,971
The provision (benefit) for income taxes differs from the Federal
statutory rate for the following reasons:
Fiscal Year Ended
(In thousands) 1996 1995 1994
Provision (benefit)
at statutory rate $(3,270) $34,461 $(43,735)
Nondeductible merger
and related costs 14,709 - -
Goodwill write-off - - 42,718
Impact of valuation
allowance (2,904) (78,880) 34,931
Foreign dividends
impact 3,744 2,367 2,136
Goodwill amortization 2,214 1,502 2,068
Foreign income tax
rate differential (2,168) (3,308) (2,496)
State income taxes,
net of federal
benefit (601) 3,322 2,476
Other, net 986 (926) (127)
Actual provision
(benefit) for
income taxes $12,710 $(41,462) $37,971
Provisions have been made for deferred 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 assets and liabilities are
as follows:
(In thousands) 1996 1995
Deferred tax assets:
Pension and other
postretirement benefits $91,861 $89,486
Accruals for environmental
remediation 30,427 22,905
Other accruals 38,265 22,507
AMT credit and NOL carryforwards 33,399 45,621
Inventories and other 12,569 10,583
Deferred tax liabilities:
Property, plant and equipment (63,666) (64,583)
Intangibles (14,015) (19,731)
Other (4,235) (4,417)
Net deferred tax asset
before valuation allowance 124,605 102,371
Valuation allowance (16,082) (18,986)
Net deferred tax asset
after valuation allowance $108,523 $83,385
Net deferred taxes (in thousands) include $47,167 and $28,769
in current assets, $67,308 and $63,890 in long-term assets,
$114 and $16 in current liabilities and $5,838 and $9,258 in
long-term liabilities in 1996 and 1995, respectively.
Uniroyal had NOL carryforwards of $62 million, expiring in the
year 2007, which can be used to reduce future Federal taxable
income, while certain of the Company's foreign subsidiaries had
aggregate NOL carryforwards of $38 million which can be used to
reduce future taxable income in those countries. As a result of
the Uniroyal sale of common shares in 1995, Uniroyal has
undergone an "ownership change" within the meaning of Section 382
of the Internal Revenue Code of 1986, as amended. Consequently,
the Federal NOL carryforward is subject to an annual limitation
as prescribed thereunder.
Capital Stock
The Company is authorized to issue 250,000,000 shares of common
stock at a par value of $.10. There were 77,237,421 shares
issued in 1996, of which 4,297,616 shares were held in the
treasury, and 76,755,875 shares issued in 1995, of which
5,351,962 shares were held in the treasury.
In August, 1996, the Company sold 1,000,000 shares of treasury
stock in order to cure a treasury stock taint that would
otherwise preclude the use of pooling-of-interests accounting in
connection with the Uniroyal merger. The net proceeds in the
amount of $14.2 million were used primarily to pay merger and
related costs.
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.
Warrants
In connection with the Uniroyal merger, the Company assumed
warrants that had been issued by Uniroyal to purchase 107,195
converted shares at an adjusted exercise price of $1.04 per
share. At December 28, 1996, warrants to purchase such shares
were still outstanding (212,543 shares at year-end 1995). The
holder may exercise these warrants, in whole or in part, until
they expire on October 30, 1999. Warrants exercised amounted to
105,347, 320,830 and 95,770 converted shares for the years
1996, 1995 and 1994, respectively.
Stock Incentive Plans
The 1988 Long Term Incentive Plan ("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. In conjunction with shareholder approval of the Merger,
the number of common shares covered under the 1988 Plan was
increased from 4 million to 10 million shares.
The 1993 Stock Option Plan for Non-Employee Directors as amended
in 1996 authorizes 200,000 shares to be optioned to non-employee
directors at the rate of twice 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 equal to 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 28, 1996 deferred compensation relating to such shares
in the amount of $1.6 million is being amortized over an
estimated service period of six to fifteen years. In 1995, the
trustee returned 448,000 common shares to the Company
representing those shares which had not been earned under the
incentive program. In 1996, the Company granted long-term
incentive awards in the amount of 917,000 shares to be earned at
the end of 1998 if certain financial criteria are met. If earned,
such shares will vest ratably through the year 2000 with the
final 25% at retirement. Compensation expense related to unearned
shares is accrued annually based upon the expected level of
incentive achievement.
In connection with the Uniroyal merger, the Company assumed
stock options and rights that had been granted by Uniroyal in the
amount of 2,188,333 converted shares as of the merger date.
Effective in 1996, the Company adopted the provisions of FASB
Statement No.123 "Accounting and Disclosure of Stock-Based
Compensation." As permitted, the Company elected to continue its
present method of accounting for stock-based compensation.
Accordingly, compensation expense has not been recognized for
stock-based compensation plans other than restricted stock awards
under the Company's long-term incentive programs. The Company is
required to provide additional information including pro forma
disclosures of net earnings (loss) and net earnings (loss) per
common share as if the fair value method of accounting as
prescribed by FASB Statement No.123 was adopted. Had
compensation cost for the Company's stock option and long-term
incentive awards been determined under the new method, net
earnings (loss) and net earnings (loss) per common share would
not be materially different from those reported in 1996 and 1995.
The fair value per share of long-term incentive awards in 1996
was $13.88 and the average fair value per share of options was
$5.72 in 1996 and $3.51 in 1995. The fair value of options
granted was estimated using the Black-Scholes option pricing
model with the following assumptions for 1996 and 1995,
respectively: dividend yield .34% and 4%, expected volatility
30% and 36%, risk-free interest rate 6.5% and 6%, respectively,
and an expected life of five years.
Changes during 1996, 1995 and 1994 in shares under option are
summarized as follows:
Price Per Share
Range Average Shares
Outstanding at 12/25/93 $ 2.15-23.75 $ 8.87 2,481,626
Granted 11.75-21.44 12.62 2,134,031
Exercised 2.15-9.31 4.66 (144,168)
Lapsed 5.22-19.31 12.37 (48,711)
Outstanding at 12/31/94 2.47-23.75 10.78 4,422,778
Granted 9.31-16.06 12.62 474,136
Exercised 2.49-9.31 6.21 (72,998)
Lapsed 5.22-23.75 14.02 (190,157)
Outstanding at 12/30/95 2.47-23.75 10.91 4,633,759
Granted 9.14-16.88 15.11 2,178,022
Exercised 4.01-18.19 10.19 (419,287)
Lapsed 3.13-23.75 8.14 (120,519)
Outstanding at 12/28/96 $2.47-23.75 $12.47 6,271,975
Exercisable at 12/31/94 $2.47-23.75 $8.89 2,431,013
Exercisable at 12/30/95 $2.47-23.75 $9.98 3,012,170
Exercisable at 12/28/96 $2.47-23.75 $10.87 3,851,369
Shares available for grant at year-end 1996 and 1995 were
4,034,849 and 536,302, respectively.
The following table summarizes information concerning currently
outstanding and exercisable options:
Number Weighted Avg. Weighted Number Weighted
Range of Outstanding Remaining Average Exercisable Average
Exercise at end of Contractual Exercise at end of Exercise
Prices 1996 Life Price 1996 Price
$ 2.47-4.01 603,258 1.45 $3.22 603,258 $3.22
$ 5.22-6.55 523,655 4.74 $5.64 523,655 $5.64
$ 9.14-13.00 1,851,226 6.83 $11.69 1,662,093 $11.54
$13.57-16.88 2,692,869 9.35 $14.95 477,579 $14.05
$18.31-23.75 600,967 5.81 $18.97 584,784 $18.96
6,271,975 7.12 $12.47 3,851,369 $10.87
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 million, $2 million and $1.7 million in
1996, 1995 and 1994, respectively.
Postretirement Health Care Liability
The Company provides health and life insurance benefits for
certain retired and active employees and their beneficiaries and
covered dependents in the U.S. and Canada. Postretirement
benefits for retired employees in other countries are generally
covered by government-sponsored plans.
Net periodic postretirement health care cost included the
following components:
(In thousands) 1996 1995 1994
Service cost-benefits
earned during the period $1,292 $1,372 $2,582
Interest cost on accumulated
postretirement benefit obligation 10,134 10,230 11,761
Government contribution - - (1,414)
Actual return on plan assets 10 (677) (365)
Curtailment gain - - (448)
Net amortization and deferral (7,455) (6,660) (8,078)
Net periodic postretirement
health care cost $3,981 $4,265 $4,038
Postretirement health care is generally not pre-funded, except
for certain plans funded by the United States government, and
are paid by the Company as incurred. The accumulated
postretirement health care liability is as follows:
(In thousands) 1996 1995
Fully eligible and other active
plan participants $42,559 $40,870
Retirees 100,439 100,523
Accumulated postretirement benefit
obligation 142,998 141,393
Plan assets at fair value 5,601 7,639
Unfunded status 137,397 133,754
Unrecognized reduction in
prior service cost 45,956 51,705
Unrecognized net loss (1,373) (1,250)
Postretirement health care liability $181,980 $184,209
The weighted-average discount rate used to calculate the
accumulated health care liability in 1996 and 1995 ranged from 7%
- - 8% and the expected long-term rate of return on plan assets was
3.46% and 3.6%, respectively. The assumed health care cost trend
rate ranged from 12.5% - 9.7% and is assumed to decrease
gradually to a range of 6.07% - 5.5% in 2020 and remain at that
level thereafter.
An increase in the assumed health care cost rate of 1% in each
year would increase the postretirement health care liability by
approximately $9 million.
Pensions
The Company has several defined benefit and defined contribution
plans which cover substantially all employees in the United
States and Canada. Pension benefits for retired employees of the
Company in other countries are generally covered by government-
sponsored plans. The defined benefit plans provide retirement
benefits based on the employees' years of service and
compensation during employment. The Company will make
contributions to the defined benefit plans at least equal to the
minimum amounts required by law, while contributions to the
defined contribution plans are determined as a percentage of each
covered employees' salary.
The Company's net periodic pension cost for the defined benefit
plans included the following components:
Fiscal Year Ended
(In thousands) 1996 1995 1994
Service cost-benefits
earned during the period $5,974 $5,044 $4,334
Interest cost on projected
benefit obligation 13,135 11,882 10,068
Actual return on plan assets (8,837) (13,888) (3,114)
Net amortization and deferral (1,016) 6,144 (4,465)
Net periodic pension cost $9,256 $9,182 $6,823
The funded status and the (accrued) prepaid pension cost of the
defined benefit pension plans are as follows:
1996 1995
Accumulated Assets Accumulated Assets
Benefits Exceed Benefits Exceed
Exceed Accumulated Exceed Accumulated
(In thousands) Assets Benefits Assets Benefit
Vested benefit
obligation $132,958 $20,838 $123,416 $19,501
Non-vested
benefit obligation 11,852 284 7,436 173
Accumulated benefit
obligation 144,810 21,122 130,852 19,674
Excess of projected
benefit obligation
over accumulated
benefit obligation 22,219 1,601 13,045 1,562
Projected benefit
obligation 167,029 22,723 143,897 21,236
Plan assets at
fair value 114,604 25,668 91,054 23,788
Funded status (52,425) 2,945 (52,843) 2,552
Unrecognized prior
service cost 12,047 (351) 13,093 (691)
Unrecognized net
(gain) loss 3,672 (342) 1,046 370
Unrecognized net
transition asset (557) (606) 211 (745)
Equity adjustment
to recognize
minimum liability (3,713) - (3,617) -
(Accrued) prepaid
pension cost $(40,976) $1,646 $(42,110) $1,486
The weighted-average discount rate used to calculate the
projected benefit obligation in 1996 and 1995 ranged from 6.25% -
8% and 6.5% - 8%, respectively. The expected long-term rate of
return on plan assets in 1996 ranged from 6.25% - 9% and from
6.75% - 8% in 1995. The assumed rate of compensation increase
ranged from 2% - 6% in 1996 and 3% - 6% in 1995.
The Company's net periodic cost for all pension plans, including
defined benefit plans, was $17 million, $16.9 million and
$13.6 million in 1996, 1995 and 1994, respectively.
Contingencies
The Company is involved in claims, litigation, administrative
proceedings and investigations of various types in several
jurisdictions. A number of such matters involve claims for a
material amount of damages and relate to or allege environmental
liabilities, including clean-up costs associated with hazardous
waste disposal sites, natural resource damages, property damage
and personal injury. The Company and some of its subsidiaries
have been identified by Federal, state or local governmental
agencies, and by other potentially responsible parties (a "PRP")
under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, or comparable state
statutes, as a PRP with respect to costs associated with waste
disposal sites at various locations in the United States. In
addition, the Company is involved with environmental remediation
and compliance activities at some of its current and former sites
in the United States and abroad.
Each quarter, the Company evaluates and reviews estimates for
future remediation and other costs to determine appropriate
environmental reserve amounts. For each site, a determination is
made of the specific measures that are believed to be required to
remediate the site, the estimated total cost to carry out the
remediation plan, the portion of the total remediation costs to
be borne by the Company and the anticipated time frame over which
payments toward the remediation plan will occur. As a result of
current information and analysis, the Company recorded a special
provision of $30 million during the third quarter of 1996 for
environmental remediation activities. The total amount accrued
for such environmental liabilities at December 28, 1996 was
$96.2 million. The Company estimates the potential environmental
liability to range from $68 million to $130 million at December
28, 1996. It is reasonably possible that the Company's estimates
for environmental remediation liabilities may subsequently change
should additional sites be identified, further remediation
measures be required or undertaken, the interpretation of
current laws and regulations be modified or additional
environmental laws and regulations be enacted.
The Company intends to assert all meritorious legal defenses and
all other equitable factors which are available to it with
respect to the above matters. The Company believes that the
resolution of these environmental matters will not have a
material adverse effect on its consolidated financial position.
While the Company believes it is unlikely, the resolution of
these environmental matters could have a material adverse effect
on its consolidated results of operations in any given year if a
significant number of these matters are resolved unfavorably.
Business Segment Data
Sales by segment represent sales to unaffiliated customers only.
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
(In thousands) 1996 1995 1994
Sales
Specialty chemicals $1,519,093 $1,464,968 $1,339,998
Specialty process
equipment and controls 284,876 279,866 196,213
$1,803,969 $1,744,834 $1,536,211
Operating Profit
Specialty chemicals $216,349 $200,069 $184,524
Specialty process
equipment & controls 23,372 40,154 31,195
General corporate
expenses (21,106) (22,101) (23,302)
Merger and related costs (85,000) - -
Special environmental
provision (30,000) - -
Write-off of intangibles - - (191,000)
$103,615 $218,122 $1,417
Identiflable Assets
Specialty chemicals $1,436,551 $1,489,727 $1,369,474
Specialty process equipment
and controls 196,372 150,320 103,151
Corporate 24,267 15,798 15,720
$1,657,190 $1,655,845 $1,488,345
Depreciation and Amortization
Specialty chemicals $78,070 $76,593 $83,982
Specialty process
equipment and controls 4,342 3,328 1,995
Corporate 185 197 162
$82,597 $80,118 $86,139
Capital Expenditures
Specialty chemicals $37,362 $84,571 $49,271
Specialty process equipment
and controls 1,807 3,087 2,756
Corporate 35 86 63
$39,204 $87,744 $52,090
Information by Major Geographic Segment
(In thousands) 1996 1995 1994
Net sales and transfers
between geographic areas:
United States $1,505,011 $1,501,000 $1,318,848
Americas 214,018 191,195 178,508
Europe/Africa 308,675 238,982 179,479
Asia/Pacific 69,052 67,788 67,651
$2,096,756 $1,998,965 $1,744,486
Less transfers between
geographic areas:
United States $161,048 $147,195 $130,069
Americas 63,580 51,821 48,074
Europe/Africa 67,341 54,115 27,465
Asia/Pacific 818 1,000 2,667
$292,787 $254,131 $208,275
Net sales from geographic
areas to unaffiliated
customers:
United States $1,343,963 $1,353,805 $1,188,779
Americas 150,438 139,374 130,434
Europe/Africa 241,334 184,867 152,014
Asia/Pacific 68,234 66,788 64,984
$1,803,969 $1,744,834 $1,536,211
Transfers between geographic areas are accounted for at market
prices or a negotiated price, with due consideration given to
trade and tax regulations of the respective countries.
Export sales included in United States sales:
Americas $54,489 $51,235 $46,041
Europe/Africa 108,349 105,031 68,037
Asia/Pacific 95,321 70,372 60,525
$258,159 $226,638 $174,603
Operating Profit
United States $94,210 $206,407 $(11,313)
Americas 21,444 19,643 16,481
Europe/Africa 10,052 16,688 20,795
Asia/Pacific (985) (2,515) (1,244)
General corporate
expenses (21,106) (22,101) (23,302)
$103,615 $218,122 $1,417
Identifiable assets
United States $1,287,534 $1,292,437 $1,217,519
Americas 99,603 93,451 90,521
Europe/Africa 232,347 230,838 146,381
Asia/Pacific 37,706 39,119 33,924
$1,657,190 $1,655,845 $1,488,345
Summarized Unaudited Quarterly Financial Data
(In thousands, except per share data) 1996
First Second Third Fourth
Net sales $460,468 $469,633 $468,391 $405,477
Gross profit 165,929 173,965 164,557 128,932
Earnings (loss)
before extraordinary
charge $21,154 $24,376 $(69,572) $1,988
Net earnings (loss) 21,154 23,935 (69,572) 1,988
Earnings (loss) per
common share
before extraordinary
charge .29 .34 (.97) .03
Net earnings (loss)
per common share .29 .34 (.97) .03
Common dividends
per share .135 .135 - -
Market price per
common share:
High 15 1/2 18 3/8 17 20 1/8
Low 13 13 7/8 13 1/8 16 1/8
(In thousands, except per share data) 1995
First Second Third Fourth
Net sales $442,515 $474,221 $453,819 $374,279
Gross profit 167,605 172,129 156,889 122,045
Earnings (loss)
before extraordinary
charge 107,032 24,452 11,812 (3,374)
Net earnings (loss) 98,753 24,452 11,812 (3,374)
Earnings (loss) per
common share
before extraordinary
charge 1.72 .34 .16 (.06)
Net earnings (loss)
per common share 1.59 .34 .16 (.06)
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
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 accompanying consolidated balance sheet of
Crompton & Knowles Corporation and subsidiaries (the Company) as
of December 28, 1996, and the related consolidated statements
of operations, stockholders' equity (deficit) and cash flows for
the year then ended. 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 audit.
We conducted our audit 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
audit provides 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 the Company as of December 28, 1996, and
the results of their operations and their cash flows for the year
then ended in conformity with generally accepted accounting
principles.
We have previously audited and reported on the consolidated
balance sheet of the Company as of December 30, 1995, and the
related consolidated statements of operations, stockholders'
equity (deficit) and cash flows for each of the years in the
two-year period then ended, prior to their restatement for the
1996 pooling-of-interests. The contribution of the Company to
assets, revenues and net income represented 29 percent, 38
percent and 31 percent of the respective 1995 restated totals.
Separate financial statements of the other company included in
the restated consolidated balance sheet as of December 30, 1995,
and the restated consolidated statements of operations,
stockholders' equity (deficit) and cash flows for each of the
years in the two-year period then ended, were audited and
reported on separately by other auditors. We also audited the
combination of the accompanying consolidated balance sheet as of
December 30, 1995 and the related consolidated statements of
operations, stockholders' equity (deficit) and cash flows for
each of the years in the two-year period then ended, after
restatement for the 1996 pooling of interests; in our opinion,
such consolidated statements have been properly combined on the
basis described in the notes to the consolidated financial
statements under the heading "Accounting Policies - Business
Combination."
(KPMG Signature)
Stamford, Connecticut
January 30, 1997
Five Year Selected Financial Data
(In millions of dollars,
except per share data) 1996 1995 1994 1993 1992
Summary of Operations
Net sales $1,804.0 1,744.8 1,536.2 1,466.2 1,374.3
Cost of products
sold $1,170.6 1,126.2 972.9 926.3 859.1
Selling, general
and administrative $279.8 270.3 240.1 220.5 207.3
Depreciation and
amortization $82.6 80.1 86.1 89.9 89.2
Research and
development $52.4 50.1 44.7 42.1 41.1
Merger and related
costs $85.0 - - - -
Special environmental
provision $30.0 - - - -
Write-off of
intangibles $ - - 191.0 - -
Operating profit $103.6 218.1 1.4 187.4 177.6
Interest expense $114.2 122.4 130.7 121.7 132.4
Other expense (income)$(1.3) (2.7) (4.4) 1.5 6.7
Earnings (loss) before
income taxes,
extraordinary charge
and cumulative
effect of accounting
changes $(9.3) 98.4 (124.9) 64.2 38.5
Provision (benefit)
for income taxes $12.7 (41.5) 38.0 37.0 23.0
Earnings (loss) before
extraordinary charge
and cumulative
effect of accounting
changes $(22.0) 139.9 (162.9) 27.2 15.5
Extraordinary charge $(.5) (8.3) - (100.1) (3.0)
Cumulative effect
of accounting changes $ - - - (111.9) (5.8)
Net earnings (loss) $ (22.5) 131.6 (162.9) (184.8) 6.7
Special items,
net of tax
(included above):
Merger and
related costs $(68.1) - - - -
Special environmental
provision $(18.5) - - - -
Early extinguishment
of debt $ (.5) (8.3) - (100.1) (3.0)
Change in deferred
tax valuation
allowance $ - 78.9 (34.9) - -
Write-off of
intangibles $ - - (162.5) - -
Cumulative effect
of accounting changes $ - - - (111.9) (5.8)
Other $ - 4.4 - - -
Total special items $(87.1) 75.0 (197.4) (212.0) (8.8)
Per Share Statistics
Earnings (loss) before
extraordinary charge
and cumulative effect
of accounting changes$(.31) 2.11 (2.67) .44 .25
Net earnings (loss) $(.31) 1.99 (2.67) (2.98) .11
Dividends $ .27 .52 .46 .38 .31
Book value $ (1.32) (.83) (5.15) (1.17) 2.37
Common stock trading
range: High 20 1/8 20 24 1/8 27 1/4 23 7/8
Low 13 12 13 7/8 17 5/8 16
Average shares
outstanding
(thousands) 72,026 66,289 60,908 61,941 61,476
Financial Position
Current assets $742.2 697.0 696.9 582.7 537.5
PP&E, net $498.0 524.5 458.0 456.3 452.7
Other assets $417.0 434.3 333.4 549.7 568.6
Total assets $1,657.2 1,655.8 1,488.3 1,588.7 1,558.8
Current liabilities $ 357.5 420.6 361.6 285.4 285.0
Long-term debt $1,055.0 974.2 1,102.2 1,048.8 904.3
Other liabilities $ 341.1 320.2 327.8 326.4 223.1
Stockholders' equity
(deficit) $ (96.4) (59.2) (303.3) (71.9) 146.4
Current ratio 2.1 1.7 1.9 2.0 1.9
Total capital $ 967.9 1,020.1 866.1 994.1 1,057.8
Total debt-to-capital %110.0 105.8 135.0 107.2 86.2
Profitability Statistics
(Before Special Items)
% Operating profit
on sales 12.1 12.2 12.5 12.8 12.9
% Earnings on sales 3.6 3.2 2.2 1.9 1.1
% Earnings on average
total capital 12.8 14.2 11.2 8.3 8.8
Other Statistics
Capital spending $ 39.2 87.7 52.1 60.4 47.3
Depreciation $ 59.2 57.4 56.3 53.0 52.3
Sales per employee $ .315 .309 .293 .289 .277
Board of Directors
2,3 James A. Bitonti
President and Chief Executive Officer
TCOM, L.P.
4 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
3,4 Roger L. Headrick
President and Chief Executive Officer
Minnesota Vikings Football Club
1,4 Leo I. Higdon, Jr.
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
Senior Vice President and
Chief Financial Officer
1,2 C.A. Piccolo
President and Chief Executive Officer
HealthPIC Consultants, Inc.
1,2 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
4 Member of Finance Committee
Corporate Data
Corporate Officers and Operating Management
Vincent A. Calarco
Chairman, President and
Chief Executive Officer
Robert W. Ackley
Vice President
President,
Davis-Standard Corporation
Joseph B. Eisenberg
Executive Vice President,
Chemicals and Polymers
Uniroyal Chemical Company, Inc.
Edmund H. Fording, Jr.
Vice President
President,
Crompton & Knowles
Colors Incorporated
Alfred F. Ingulli
Executive Vice President,
Crop Protection
Uniroyal Chemical Company, Inc.
Rudy M. Phillips
President,
Ingredient Technology Corporation
William A. Stephenson
Executive Vice President,
Specialties
Uniroyal Chemical Company, Inc.
Charles J. Marsden
Senior Vice President and
Chief Financial Officer
Peter Barna
Vice President,
Finance
John T. Ferguson II
Vice President,
General Counsel and Secretary
Marvin H. Happel
Vice President,
Organization and Administration
Frank Manganella
Treasurer
Michael F. Vagnini
Controller
Corporate Headquarters
One Station Place, Metro Center
Stamford, CT 06902
(203) 353-5400
Auditors
KPMG Peat Marwick LLP
Stamford, CT
Transfer Agent and Registrar
Chase 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 29, 1997,
at the Tara Stamford Hotel,
2701 Summer Street,
Stamford, Connecticut 06905
Form 10-K
A copy of the Company's report on
Form 10-K for 1996, 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
Crompton & Knowles is a member of the Chemical Manufacturers
Association and a signatory of the Association's Responsible
Care(R) Program. The company is committed to a continuous good
faith effort to improve performance in health, safety and
environmental quality.
(C) 1997 Crompton & Knowles Corporation. All rights reserved.
(C&K Logo) and (Uniroyal logo) are registered trademarks of
Crompton & Knowles Corporation; (R) and (TM) indicate registered
and unregistered trade and service marks. Gaucho and Raxil are
trademarks of Bayer Corporation.
[Crompton & Knowles logo] CROMPTON & KNOWLES CORPORATION
One Station Place, Metro Center, Stamford, CT 06902
Exhibit 21
Subsidiaries of the Registrant
The following are 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
Uniroyal Chemical Corporation Delaware
Uniroyal Chemical Company, Inc. New Jersey
Lokar Enterprises, Inc. Delaware
Uniroyal Chemical Company Limited Scotland
Naugatuck Treatment Company Connecticut
Uniroyal Chemical Limited Bahamas/Delaware
Interbel Trading, Inc. Florida
Uniroyal Chemical Investments Ltd. Canada
Gustafson, Inc. Minnesota
Uniroyal Chemical International Company Texas
Uniroyal Chemical Brazil Holding, Inc. Delaware
Uniroyal Quimica Sociedad Anonima Comerciale Argentina
Industrial
Gustafson International Company Texas
Uniroyal Chemical S.A.R.L Switzerland
Uniroyal Chemical S.A. Spain
Uniroyal Chemical (Proprietary) Limited South Africa
Uniroyal Chemical Taiwan Ltd Taiwan
Uniroyal Chemical Pty. Ltd. Australia
Unicorb Limited England
Uniroyal Chemical Export Limited Delaware
Uniroyal Chemical Leasing Company, Inc. Delaware
Industrias Gustafson S.A. de C.V. Mexico
(Continued)
The following are subsidiaries of Crompton & Knowles Corporation:
Name Place of Organization
Uniroyal Chemical Ltd/Ltee Canada
Uniroyal Chemical Asia, Ltd. Delaware
Trace Chemicals Inc. Nevada
Uniroyal Chemical Technology B.V. The Netherlands
Hannaford Seedmaster Services (Australia) Australia
Pty. Ltd.
Uniroyal Chemical International Sales Barbados
Corporation
Novaquim Holdings S.A. de C.V. Mexico
Hancock Tire Company Limited Canada
Uniroyal Chemical Partipacoes Ltda. Brazil
Uniroyal Chemical Holdings B.V. The Netherlands
Novaquim S.A. de C.V. Mexico
Uniroyal Quimica S.A. Brazil
Uniroyal Chimica S.p.A Italy
Uniroyal Chemical B.V. The Netherlands
Monochem, Inc. Louisiana
Rubicon Inc. Louisiana
TOA Uni Chemical Manufacturing Ltd. Thailand
TOA Uni Chemicals Ltd. Thailand
Unikor Chemical Inc. Korea
Exhibit 24
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, CEO /s/Robert A. Fox Director
/s/Vincent A. Calarco and Director Robert A. Fox
Vincent A. Calarco
Principal Financial /s/Roger L. Headrick Director
Officer: Roger L. Headrick
Vice President
Finance &
/s/Charles J. Marsden Director /s/Leo I. Higdon, Jr. Director
Charles J. Marsden Leo I. Higdon, Jr.
Principal Accounting /s/Michael W. Huber Director
Officer: Michael W. Huber
/s/Peter Barna Treasurer /s/C.A. Piccolo Director
Peter Barna 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-28-1996
<PERIOD-END> DEC-28-1996
<CASH> 21,120
<SECURITIES> 0
<RECEIVABLES> 267,871
<ALLOWANCES> 7,299
<INVENTORY> 362,349
<CURRENT-ASSETS> 742,237
<PP&E> 497,979
<DEPRECIATION> 375,734
<TOTAL-ASSETS> 1,657,190
<CURRENT-LIABILITIES> 357,479
<BONDS> 1,054,982
0
0
<COMMON> 7,724
<OTHER-SE> (104,142)
<TOTAL-LIABILITY-AND-EQUITY> 1,657,190
<SALES> 1,803,969
<TOTAL-REVENUES> 1,803,969
<CGS> 1,170,586
<TOTAL-COSTS> 1,700,354
<OTHER-EXPENSES> (1,285)
<LOSS-PROVISION> 2,329
<INTEREST-EXPENSE> 114,244
<INCOME-PRETAX> (9,344)
<INCOME-TAX> 12,710
<INCOME-CONTINUING> (22,054)
<DISCONTINUED> 0
<EXTRAORDINARY> (441)
<CHANGES> 0
<NET-INCOME> (22,495)
<EPS-PRIMARY> (0.31)
<EPS-DILUTED> (0.31)
</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, 1996
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, 1996
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, 1996 AND 1995
PLAN ASSETS AND EQUITY
1996
Fixed C&K Equity Advisers Mortgage
Income Fund Stock Fund Fund Fund Fund Total
Investments:
Common stock of Crompton
& Knowles Corporation -
2,034,175 shares at market
value (cost $16,360,444)
in 1996
$ - $39,157,869 $ - $ - $ - $39,157,869
Hartford Life Insurance
Company group annuity
contract
14,481,933 - 7,595,484 1,304,476 353,485 23,735,378
U S Treasury Note - 5.75%
due 9/30/97 at market value
(cost $1,949,115)
1,957,361 - - - - 1,957,361
Cash and short-term
investments at cost,
which approximates
market
688 25,266 510 210 26 26,700
Contribution receivable
from Crompton & Knowles
Corporation
62,986 266,818 47,978 17,223 5,413 400,418
Accrued income
28,706 - - - - 28,706
Plan Assets and Equity
including $429,560 payable
to participants
at 12/31/96
$16,531,674 $39,449,953 $ 7,643,972 $ 1,321,909 $ 358,924 $65,306,432
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
$ - $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
Accrued income
- - - - - -
Plan Assets and Equity
$17,949,661 $28,289,825 $ 3,231,084 $ 662,777 $ 317,149 $50,450,496
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, 1996, 1995 AND 1994
1996
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
$ 1,800 $ 578,701 $ 1,882 $ 572 $ 74 $ 583,029
Realized gain on sale
of investments and
withdrawals
- 1,978,007 - - - 1,978,007
Interest earned - US Treasury notes
34,539 - - - - 34,539
Interest earned - Hartford
Life Insurance Company
group annuity contract
1,026,153 - - - - 1,026,153
Net investment income
1,062,492 2,556,708 1,882 572 74 3,621,728
Increase (decrease) in unrealized
appreciation of investments
8,246 10,478,402 1,263,104 150,395 15,469 11,915,616
Contributions:
Em - - - - - -
Employees
842,652 1,522,889 529,652 202,809 73,913 3,171,915
Employer - Net of
forfeitures
- 2,018,734 - - - 2,018,734
Withdrawals and
Distributions
(2,469,946) (2,829,299) (409,757) (124,901) (38,154) (5,872,057)
Employee interfund
transfers
(861,431) (2,587,306) 3,028,007 430,257 (9,527) -
Net increase/(decrease) in Plan
Equity for the Year
(1,417,987) 11,160,128 4,412,888 659,132 41,775 14,855,936
Plan Equity at the beginning
of year
17,949,661 28,289,825 3,231,084 662,777 317,149 50,450,496
Plan Equity at the end of year
$ 16,531,674 $ 39,449,953 $ 7,643,972 $ 1,321,909 $ 358,924 $ 65,306,432
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 - US Treasury notes
- - - - - -
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:
Em 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 the beginning
of year
0 0 0 0 0 0
Plan Equity at the end of year
$ 2,885,397 $ (4,186,197)$ 819,349 $ 4,652 $ 77,614 $ (399,185)
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 - US Treasury notes
- - - - - -
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:
Em 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 the beginning
of year
13,629,715 42,681,600 1,817,646 482,592 208,979 58,820,532
Plan Equity at the end of year
$ 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
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 and 1995
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
Employee Stock Ownership Plan - Notes To Financial Statements
Page 2
effective annual rate of interest of 6.46% on, and after
January 1, 1996, (6.50% for the period January 1, 1995 through
December 31, 1995, and 6.885% for the period January 1, 1994
through December 31, 1994).
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:
12/31/96 12/31/95
Unit Value $158.091 $126.392
Total Units Held 48,045.124 25,293.156
The related cost of the Equity Fund at December 31, 1996 was
$5,448,269, and $2,245,895 at December 31, 1995.
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:
12/31/96 12/31/95
Unit Value $1.982 $1.708
Total Units Held 658,050.649 378,784.471
Employee Stock Ownership Plan - Notes To Financial Statements
Page 3
The related cost of the Advisers Fund at December 31, 1996 was
$1,061,099, and $531,228 at December 31, 1995.
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:
12/31/96 12/31/95
Unit Value $32.155 $30.764
Total Units Held 10,993.208 10,065.191
The related cost of the Mortgage Fund at December 31, 1996 was
$304,253, and $269,734 at December 31, 1995.
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, 1996 and 1995 the number of
participants by fund were as follows:
1996 1995
C&K Stock Fund 1,515 1,541
Fixed Income Fund 933 994
Equity Fund 607 503
Advisers Fund 274 225
Mortgage Fund 146 142
As of the first day of any month, but not more frequently than
once in any six-month period, a participant may elect to
Employee Stock Ownership Plan - Notes To Financial Statements
Page 4
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
Employee Stock Ownership Plan - Notes To Financial Statements
Page 5
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.
Employee Stock Ownership Plan - Notes To Financial Statements
Page 6
5. Investments
A. Unrealized appreciation in Crompton & Knowles
Corporation common stock:
12/31/96 12/31/95 12/31/94
Unrealized
apprec. at the
beginning of
the year $12,319,023 $19,773,208 $31,807,154
Unrealized
apprec. at the
end of the year 22,797,425 12,319,023 19,773,208
Increase/(decrease)
in unrealized
appreciation $10,478,402 $( 7,454,185)$(12,033,946)
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)
1996
No. of shares 165,334 241,842 ( 76,508)
Cost amount $2,569,042 $1,856,125 $( 712,917)
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
Employee Stock Ownership Plan - Notes to Financial Statements
Page 7
C. Gain on sale of investments and withdrawals of Crompton
& Knowles Common Stock:
1996 1995 1994
Aggregate
proceeds $3,834,132 $2,336,353 $1,727,888
Aggregate cost
(FIFO) 1,856,125 1,039,233 485,144
Net gain $1,978,007 $1,297,120 $1,242,744
6. Plan Expenses
Significant costs of Plan administration, which are payable
from the Trust or by the Corporation, are generally paid by the
Corporation.
<PAGE>
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, 1996 and 1995, and
the related statements of income and changes in plan equity for
each of the years in the three-year period ended December 31,
1996. 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, 1996 and 1995, and the
income and changes in plan equity for each of the years in the
three-year period ended December 31, 1996 in conformity with
generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
Stamford, Connecticut
March 20, 1997
Exhibit 99
INDEPENDENT AUDITORS' REPORT
Board of Directors
Uniroyal Chemical Corporation
We have audited the consolidated balance sheet of Uniroyal
Chemical Corporation and its subsidiaries as of October 1, 1995
and the related consolidated statements of operations,
stockholders' equity(deficit) and cash flows for the years ended
October 1, 1995 and October 2, 1994 (not presented separately
herein). Our audits also included the financial statement
schedule of valuation and qualifying accounts for the years ended
October 1, 1995 and October 2, 1994 (not presented separately
herein). These consolidated financial statements and financial
statement schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
consolidated financial statements and financial statement
schedule 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 consolidated 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 provided a reasonable basis for our
opinion.
In our opinion, such consolidated financial statements (not
presented separately herein) present fairly, in all material
respects, the financial position of Uniroyal Chemical Corporation
and its subsidiaries as of October 1, 1995, and the results of
their operations and their cash flows for the years ended October
1, 1995 and October 2, 1994, in conformity with generally
accepted accounting principles. Also, in our opinion, such
financial statement schedule (not presented separately herein),
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/Deloitte & Touche LLP
Deloitte & Touche LLP
Stamford, Connecticut
November 17, 1995
