SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported): July 30, 1999
Crompton & Knowles Corporation
(Exact Name of Registrant as Specified in its Charter)
Massachusetts 1-4663 04-1218720
------------- ------ ----------
(State or other (Commission File (IRS Employer
jurisdiction of Number) Identification
incorporation) Number)
One Station Place, Metro Center, Stamford, Connecticut 06902
(Address of principal executive offices) (zip code)
(203) 353-5400
(Registrant's telephone number, including area code)
<PAGE>
Item 5. Other Events
Crompton & Knowles Corporation, a Massachusetts corporation, issued a
press release on July 30, 1999, announcing results for second quarter 1999 and
for the six months ended June 26, 1999. A copy of the press release is attached
as an exhibit hereto and in incorporated by reference herein.
<PAGE>
Item 7. Financial Statements and Exhibits
(a) Financial statements of businesses acquired.
- Not Applicable
(b) Pro forma financial information.
- Not Applicable
(c) Exhibits.
99.1 Press Release dated July 30, 1999.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunder duly authorized.
CROMPTON & KNOWLES CORPORATION
By: /s/ John T. Ferguson
----------------------------------
Name: John T. Ferguson II
Title: Secretary
Date: August 4, 1999
<PAGE>
EXHIBIT INDEX
99.1 Press Release dated July 30, 1999.
Exhibit 99.1
CONTACT: Robert Harwood Peter Barna
Director, Investor Relations Vice President-Finance and CFO
203-573-3441 203-353-5432
CROMPTON & KNOWLES SECOND QUARTER EARNINGS PER SHARE INCREASES 10 PERCENT BEFORE
EXTRAORDINARY ITEMS
Stamford, CT, July 30, 1999 -- Crompton & Knowles Corporation (NYSE: CNK)
announced today that second quarter diluted earnings per share before
extraordinary items increased to 57 cents per share ($38.0 million) from 52
cents per share ($39.8 million) in last year's second quarter. Extraordinary
items were losses on early extinguishment of debt of two cents per share ($1.1
million) in the second quarter of 1999 and 18 cents per share ($13.8 million) in
last year's second quarter. Net earnings per diluted share in the second quarter
of 1999 of 55 cents per share ($36.9 million) increased 62 percent from 34 cents
per share ($26.0 million) in the prior year. Earnings per share benefitted by
the company's stock buyback program as weighted average shares outstanding
decreased to 66.6 million diluted from 76.8 million diluted in the second
quarter of 1998.
Net sales for the second quarter of 1999 were down two percent to $409.2 million
from $417.7 million in the second quarter of 1998 as adjusted to exclude $56.7
million resulting from deconsolidated joint ventures and the sale of the
specialty ingredients business. The sales decline was primarily attributable to
lower second quarter sales in the Colors business.
"With our continuing emphasis on building shareholder value, we are pleased to
report another quarter of strong earnings per share growth" said Vincent A.
Calarco, chairman, president and chief executive officer. "We will continue our
focus on shareholder value as we move forward with the creation of CK Witco.
Upon approval of C&K and Witco shareholders on or about September 1, the new
company will provide excellent opportunities for revenue growth, market
expansion and improving results."
For the first half of 1999, diluted earnings per share before special items of
$1.04 per share ($70.4 million) increased 11 percent from $.94 per share ($71.7
million) in the prior year. Special items included an after-tax gain of 39 cents
per share diluted ($26.8 million) relating to the sale of the specialty
ingredients business in 1999 and extraordinary losses on early extinguishment of
debt of two cents per share ($1.1 million) in 1999 and 21 cents per share ($15.8
million) in 1998. Weighted average shares outstanding decreased to 67.9 million
diluted in 1999 from 76.6 million diluted in 1998. Net sales of $805.5 million
decreased two percent from $819.8 million in the first half of 1998 as adjusted
to exclude $131.7 million resulting from deconsolidated joint ventures and the
sale of the specialty ingredients business. The sales decline was primarily
attributable to lower first half sales in the Colors business.
Crompton & Knowles second quarter operating results from its reporting segments
are summarized below. Comparisons to the second quarter of 1998 reflect
adjustments to exclude the deconsolidated joint ventures and the sale of the
specialty ingredients business.
Specialty Chemicals
- -------------------
Performance Chemicals sales of $112.6 million decreased three percent from
$116.2 million in the second quarter of 1998. Rubber chemical sales were lower
by five percent primarily due to lower pricing, while specialty additive sales
were about equal to the prior year. Operating profit of $13.8 million was 14
percent below the $16.1 million in the prior year primarily as a result of lower
pricing in rubber chemicals.
<PAGE>
Crop Protection sales of $81.3 million increased four percent from an adjusted
$78.4 million in the second quarter of 1998. The increase in sales was achieved
despite the poor condition of the U.S. farm economy and poor April and May
weather conditions in California. Benefitting the quarter were increased exports
to China and the Middle East, new product registrations in Eastern Europe and
improved California weather in June. Operating profit of $30.1 million increased
13 percent from an adjusted $26.7 million in 1998 primarily as a result of
increased sales volume, lower manufacturing costs and improved product mix.
Colors sales of $53.8 million decreased 17 percent from $64.6 million in the
second quarter of 1998 as a result of continuing weakness in the US and European
textile dye markets. Lower selling prices in the quarter accounted for six
percent of the sales decline. Operating profit of $5.9 million decreased 27
percent from $8.1 million in 1998 primarily as a result of lower sales volume
and pricing.
Polymers and Polymer Processing Equipment
- -----------------------------------------
Polymer sales of $79.4 million increased three percent from an adjusted $77.3
million in the second quarter of 1998. EPDM sales were up four percent primarily
as a result of higher pricing, while urethane sales increased one percent over
the prior year. Operating profit of $22.7 million increased nine percent from an
adjusted $20.7 million in the second quarter of 1998 primarily as a result of
improved pricing and lower raw material costs, offset in part by lower equity
income from our nitrile rubber joint venture.
Polymer Processing Equipment sales of $82.1 million increased one percent from
$81.2 million in the prior year despite lower selling prices of approximately
five percent. New orders during the quarter were significantly below shipments
and backlog declined to $103 million from $118 million at the end of the first
quarter. With a down cycle in the plastics machinery market, orders for the
remainder of the year are expected to be weak. Operating profit of $5.5 million
decreased 44 percent from the $9.8 million in 1998 primarily as a result of
lower pricing and a shift in sales to lower margin systems. As previously
announced on July 1, the company acquired an extrusion systems business in
Germany with annual sales of approximately $10 million.
Crompton & Knowles Corporation is a global producer and marketer of specialty
chemicals, polymers and polymer processing equipment.
* * *
<PAGE>
<TABLE>
<CAPTION>
UNAUDITED
---------
CROMPTON & KNOWLES CORPORATION AND SUBSIDIARIES
Consolidated Statements of Earnings
Second quarter and six months ended 1999 and 1998
(In thousands, except for share data)
Second Quarter Six Months
------------------------------------ ------------------------------------
Adjusted Adjusted
1999 1998 1998 (a) 1999 1998 1998 (a)
------------------------------------ ------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Sales $409,174 $474,337 $417,655 $805,466 $951,556 $819,816
Cost of products sold 248,582 292,091 257,218 495,877 594,556 513,477
Selling, general and admin. 60,066 66,074 57,917 120,656 133,347 116,171
Depreciation and amortization 18,666 20,394 18,901 37,503 40,487 37,482
Research and development 11,278 13,200 11,052 22,586 26,363 21,820
Equity income (2,379) - (3,750) (9,434) - (10,469)
------ ------ ------ ------ ------ -------
Operating profit 72,961 82,578 $76,317 138,278 156,803 $141,335
------ -------
Interest expense 12,953 20,505 26,107 44,118
Other expense (income) (b) 451 (1,258) (40,255) (1,547)
------ ------ ------ ------
Earnings before income taxes
and extraordinary loss 59,557 63,331 152,426 114,232
Income taxes 21,588 23,536 55,254 42,494
------ ------ ------ ------
Earnings before
extraordinary loss 37,969 39,795 97,172 71,738
Extraordinary loss on early
extinguishment of debt (1,085) (13,843) (1,085) (15,794)
------ ------ ------ ------
Net earnings $36,884 $25,952 $96,087 $55,944
------ ------ ------ ------
Basic earnings per common share
Earnings before
extraordinary loss $0.58 $0.53 $1.46 $0.96
------ ------ ------ ------
Net earnings $0.56 $0.35 $1.44 $0.75
------ ------ ------ ------
Weighted avg. shares
outstanding 65,488 74,430 66,603 74,267
------ ------ ------ ------
Diluted earnings per common share
Earnings before
extraordinary loss $0.57 $0.52 $1.43 $0.94
------ ------ ------ ------
Net earnings $0.55 $0.34 $1.41 $0.73
------ ------ ------ ------
Weighted avg. shares
outstanding 66,635 76,813 67,925 76,613
------ ------ ------ ------
</TABLE>
(a) Adjusted 1998 reflects the deconsolidation of the seed treatment and nitrile
rubber joint ventures and the sale of the specialty ingredients business.
(b) Other expense (income) for the six months of 1999 includes a gain of $42,060
($26,813 after-tax) from the sale of the specialty ingredients business.
<PAGE>
<TABLE>
<CAPTION>
UNAUDITED
---------
CROMPTON & KNOWLES CORPORATION AND SUBSIDIARIES
Segment Sales and Operating Profit
Second quarter and six months ended 1999 and 1998
(In thousands of dollars)
Second Quarter Six Months
------------------------------------ ------------------------------------
Adjusted Adjusted
1999 1998 1998 (a) 1999 1998 1998 (a)
------------------------------------ ------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Sales
Specialty Chemicals
Performance Chemicals $112,567 $116,228 $116,228 $226,081 $229,500 $229,500
Crop Protection 81,340 100,545 78,385 147,058 208,388 146,511
Colors 53,765 64,610 64,610 103,943 125,710 125,710
Other - 23,346 - - 48,151 -
------ ------ ------ ------ ------ -------
247,672 304,729 259,223 477,082 611,749 501,721
------ ------ ------ ------ ------ -------
Polymers & Polymer
Processing Equipment
Polymers 79,410 88,456 77,280 158,145 175,046 153,334
Polymer Processing
Equip. 82,092 81,152 81,152 170,239 164,761 164,761
------ ------ ------ ------ ------ -------
161,502 169,608 158,432 328,384 339,807 318,095
------ ------ ------ ------ ------ -------
Total net sales $409,174 $474,337 $417,655 $805,466 $951,556 $819,816
------ ------ ------ ------ ------ -------
Operating Profit
Specialty Chemicals
Performance Chemicals $13,847 $16,121 $16,121 $26,849 $30,348 $30,348
Crop Protection 30,131 30,079 26,709 52,245 58,358 48,366
Colors 5,860 8,063 8,063 10,562 14,937 14,937
Other - 2,510 - - 4,998 -
------ ------ ------ ------ ------ -------
49,838 56,773 50,893 89,656 108,641 93,651
------ ------ ------ ------ ------ -------
Polymers & Polymer
Processing Equipment
Polymers 22,686 21,126 20,745 44,093 39,476 38,998
Polymer Processing
Equip. 5,511 9,832 9,832 16,323 20,198 20,198
------ ------ ------ ------ ------ -------
28,197 30,958 30,577 60,416 59,674 59,196
------ ------ ------ ------ ------ -------
General corporate expense (5,074) (5,153) (5,153) (11,794) (11,512) (11,512)
------ ------ ------ ------ ------ -------
Total operating profit $72,961 $82,578 $76,317 $138,278 $156,803 $141,335
------ ------ ------ ------ ------ -------
</TABLE>
(a) Adjusted 1998 reflects the deconsolidation of the seed treatment and
nitrile rubber joint ventures and the sale of the specialty ingredients
business.
<PAGE>
<TABLE>
<CAPTION>
June 26, 1999 UNAUDITED
-----------------------
CROMPTON & KNOWLES CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
June 26, 1999 and December 26, 1998
(In thousands of dollars)
<S> <C> <C>
June 26, June 27,
1999 1998
---------- ----------
ASSETS
CURRENT ASSETS
Cash $ 14,243 $ 12,104
Accounts receivable 199,368 173,668
Inventories 318,711 334,562
Other current assets 82,788 77,422
---------- ----------
Total current assets 615,110 597,756
---------- ----------
NON-CURRENT ASSETS
Property, plant and equipment 449,804 473,403
Cost in excess of acquired net assets 145,563 166,184
Other assets 170,715 171,550
---------- ----------
$1,381,192 $1,408,893
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $ 15,327 $ 17,305
Accounts payable 106,396 117,338
Accrued expenses 133,451 139,401
Income taxes payable 79,657 103,179
Other current liabilities 14,711 17,149
---------- ----------
Total current liabilities 349,542 394,372
---------- ----------
NON-CURRENT LIABILITIES
Long-term debt 668,975 646,857
Postretirement health care liability 142,995 142,727
Other liabilities 142,686 158,234
---------- ----------
STOCKHOLDERS' EQUITY
Common stock 7,733 7,733
Additional paid-in capital 240,884 238,615
Retained earnings (deficit) 76,830 (15,985)
Accumulated other comprehensive income (49,737) (37,571)
Treasury stock at cost (197,944) (125,246)
Deferred compensation (772) (843)
---------- ----------
Total stockholders' equity 76,994 66,703
---------- ----------
$1,381,192 $1,408,893
---------- ----------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
UNAUDITED
---------
CROMPTON & KNOWLES CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Six months ended June 26, 1999 and June 27, 1998
(In thousands of dollars)
<S> <C> <C>
June 26, June 27,
Increase (decrease) to cash 1999 1998
- --------------------------- ---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 96,087 $ 55,944
Adjustments to reconcile net earnings
to net cash provided by operations:
Gain on sale of specialty ingredients (42,060) -
Extraordinary loss on early debt
extinguishment 1,085 15,794
Depreciation and amortization 37,503 40,487
Equity income (9,434) -
Changes in assets and liabilities,
net (a) (85,078) 2,177
---------- ----------
Net cash provided (used) by operations (a) (1,897) 114,402
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of specialty ingredients 103,000 -
Capital expenditures (34,078) (21,341)
Acquisitions - (5,927)
Other investing activities (3,100) 235
---------- ----------
Net cash provided (used) by investing activities 65,822 (27,033)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Redemption of 11% and 12% notes - (352,802)
Proceeds on long-term borrowings 22,118 279,313
Proceeds (payments) on short-term borrowings (1,978) 1,174
Premium paid on early extinguishment of debt (1,437) (15,289)
Treasury stock acquired (74,596) -
Dividends paid (3,272) (3,721)
Other financing activities (3,121) 9,343
---------- ----------
Net cash used by financing activities (62,286) (81,982)
---------- ----------
CASH
Effect of exchange rates on cash 500 (1,163)
---------- ----------
Change in cash 2,139 4,224
Cash at beginning of period 12,104 10,607
---------- ----------
Cash at end of period $ 14,243 $ 14,831
---------- ----------
</TABLE>
(a) 1999 includes tax payment of $48 million relating to fourth quarter 1998
Gustafson gain and 1998 includes Gustafson cash flow of $14 million and
accounts receivable discounting of $20 million.
