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
For the fiscal year ended December 31, 1998
OR
[ ] Transition report pursuant to Section 15 (d) of the
Securities Exchange Act of 1934
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
CROMPTON & KNOWLES CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN
Index to Financial Statements and Exhibit
Independent Auditors' Report
Statement of Net Assets Available for Plan Benefits as of
December 31, 1998 and 1997
Statements of Changes in Net Assets Available for Plan Benefits
as of December 31, 1998 and 1997
Notes to Financial Statements
Item 27(a) Schedule of Assets Held for Investment Purposes
as of December 31, 1998
Item 27(d) Schedule of 5% Reportable Transactions for the Year
Ended December 31, 1998
Signature
Exhibit 23 - Consent of KPMG LLP, Independent Auditors
CROMPTON & KNOWLES CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN
Financial Statements and Schedules
December 31, 1998 and 1997
(With Independent Auditors' Report Thereon)
CROMPTON & KNOWLES CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN
Index
Independent Auditors' Report
Statements of Net Assets Available for Plan Benefits as of
December 31, 1998 and 1997
Statements of Changes in Net Assets Available for Plan Benefits
for the Years Ended December 31, 1998 and 1997
Notes to Financial Statements
Schedule
Line 27(a) Schedule of Assets Held for Investment Purposes
as of December 31, 1998...................................... 1
Line 27(d) Schedule of 5% Reportable Transactions for the
Year Ended December 31, 1998................................. 2
Independent Auditors' Report
The Board of Directors
Crompton & Knowles Corporation:
We have audited the accompanying statements of net assets
available for plan benefits of Crompton & Knowles Corporation
Employee Stock Ownership Plan (the "Plan") as of December 31,
1998 and 1997, and the related statements of changes in net
assets available for plan benefits for the years then ended.
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 net assets
available for plan benefits as of December 31, 1998 and 1997, and
the changes in net assets available for plan benefits for the
years then ended, in conformity with generally accepted
accounting principles.
Our audits were performed for the purpose of forming an opinion
on the basic financial statements taken as a whole. The
supplemental schedules of Assets Held for Investment Purposes and
Reportable (5%) Transactions are presented for the purpose of
additional analysis and are not a required part of the basic
financial statements but are supplementary information required
by the Department of Labor's Rules and Regulations for Reporting
and Disclosure under the Employee Retirement Income Security Act
of 1974. These supplemental schedules are the responsibility of
the Plan's management. The fund information in the statements of
net assets available for plan benefits and the statements of
changes in net assets available for plan benefits is presented
for purposes of additional analysis rather than to present the
net assets available for plan benefits and changes in net assets
available for plan benefits of each fund. The supplemental
schedules and fund information have been subjected to the
auditing procedures applied in the audits of the basic financial
statements and, in our opinion, are fairly stated in all material
respects in relation to the basic financial statements taken as a
whole.
/s/KPMG LLP
June 4, 1999
CROMPTON & KNOWLES CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN
Statements of Net Assets Available for Plan Benefits
December 31, 1998
C&K Fixed Stable Galaxy
Stock Income Asset Asset Alloc.
Fund Fund Fund Fund
Investments:
Common stock of
Crompton & Knowles
Corporation -
2,073,848 shares
at market value
(cost $21,273,887)$ 43,291,577 $ - $ - $ -
Hartford Life
Insurance Co.
group annuity
contract - 9,176,919 - -
Fleet Stable
Asset Fund - - 5,598,455 -
Galaxy Asset
Allocation Fund - - - 2,172,425
Galaxy Growth &
Income Fund - - - -
Fidelity Advisor
Government
Investment Fund - - - -
George Putnam
Fund of Boston - - - -
Putnam Voyager
Fund - - - -
Putnam Inter-
national Fund - - - -
Ivesco Industrial
Income Fund - - - -
Galaxy Large
Company
Index Fund - - - -
Galaxy Small
Cap Value
Fund - - - -
Cash and short-term
investments at cost,
which approximates
market 5,669 - - -
Contributions
receivable
from participants 130,555 - 27,679 14,839
Contribution
receivable
from Crompton
& Knowles
Corporation 215,684 - - -
Accrued income 165 84,579 52,479 -
Plan assets
available for plan
benefits $ 43,643,650 $ 9,261,498 $ 5,678,613 $ 2,187,264
Galaxy Fidelity Putnam Putnam
Growth & Advisors of Boston Voyager
Income Fund Fund Fund Fund
Investments:
Common stock of
Crompton & Knowles
Corporation -
2,073,848 shares
at market value
(cost $21,273,887)$ - $ - $ - $ -
Hartford Life
Insurance Co.
group annuity
contract - - - -
Fleet Stable
Asset Fund - - - -
Galaxy Asset
Allocation Fund - - - -
Galaxy Growth &
Income Fund 8,004,789 - - -
Fidelity Advisor
Government
Investment Fund - 902,208 - -
George Putnam
Fund of Boston - - 379,024 -
Putnam Voyager
Fund - - - 830,665
Putnam Inter-
national Fund - - - -
Ivesco Industrial
Income Fund - - - -
Galaxy Large
Company
Index Fund - - - -
Galaxy Small
Cap Value
Fund - - - -
Cash and short-term
investments at cost,
which approximates
market - - - -
Contributions
receivable
from participants 34,010 6,912 12,241 27,264
Contribution
receivable
from Crompton
& Knowles
Corporation - - - -
Accrued income - 6,510 - -
Plan assets
available for plan
benefits $ 8,038,799 $ 915,630 $ 391,265 $ 857,929
Putnam Invesco Galaxy Galaxy
International Industrial Large Co. Small Cap
Fund Income Fund Index Fund Value Fund
Investments:
Common stock of
Crompton & Knowles
Corporation -
2,073,848 shares
at market value
(cost $21,273,887)$ - $ - $ - $ -
Hartford Life
Insurance Co.
group annuity
contract - - - -
Fleet Stable
Asset Fund - - - -
Galaxy Asset
Allocation Fund - - - -
Galaxy Growth &
Income Fund - - - -
Fidelity Advisor
Government
Investment Fund - - - -
George Putnam
Fund of Boston - - - -
Putnam Voyager
Fund - - - -
Putnam Inter-
national Fund 525,025 - - -
Ivesco Industrial
Income Fund - 442,359 - -
Galaxy Large
Company
Index Fund - - 1,421,496 -
Galaxy Small
Cap Value
Fund - - - 565,416
Cash and short-term
investments at cost,
which approximates
market - - - -
Contributions
receivable
from participants 15,583 13,016 37,402 33,428
Contribution
receivable
from Crompton
& Knowles
Corporation - - - -
Accrued income - - - -
Plan assets
available for plan
benefits $ 540,608 $ 455,375 $ 1,458,898 $ 598,844
Total
Investments:
Common stock of
Crompton & Knowles
Corporation -
2,073,848 shares
at market value
(cost $21,273,887)$ 43,291,577
Hartford Life
Insurance Co.
group annuity
contract 9,176,919
Fleet Stable
Asset Fund 5,598,455
Galaxy Asset
Allocation Fund 2,172,425
Galaxy Growth &
Income Fund 8,004,789
Fidelity Advisor
Government
Investment Fund 902,208
George Putnam
Fund of Boston 379,024
Putnam Voyager
Fund 830,665
Putnam Inter-
national Fund 525,025
Ivesco Industrial
Income Fund 442,359
Galaxy Large
Company
Index Fund 1,421,496
Galaxy Small
Cap Value
Fund 565,416
Cash and short-term
investments at cost,
which approximates
market 5,669
Contributions
receivable
from participants 352,929
Contribution
receivable
from Crompton
& Knowles
Corporation 215,684
Accrued income 143,733
Plan assets
available for plan
benefits $ 74,028,373
See accompanying notes to financial statements
CROMPTON & KNOWLES CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN
Statements of Net Assets Available for Plan Benefits
December 31, 1997
C&K Fixed Stable Galaxy
Stock Income Asset Asset Alloc.
Fund Fund Fund Fund
Investments:
Common stock of
Crompton & Knowles
Corporation -
1,979,063 shares
at market value
(cost $17,239,682)$ 52,445,170 $ - $ - $ -
Hartford Life
Insurance Co.
group annuity
contract - 11,165,578 - -
Fleet Stable
Asset Fund - - 5,745,651 -
Galaxy Asset
Allocation Fund - - - 2,013,379
Galaxy Growth &
Income Fund - - - -
Fidelity Advisor
Government
Investment Fund - - - -
Cash and short-term
investments at cost,
which approximates
market 284,031 - 23,733 11,472
Contributions
receivable
from participants 142,413 - 30,856 15,444
Contribution
receivable
from Crompton
& Knowles
Corporation 233,579 - - -
Accrued income - 53,967 30,117 -
Plan assets
available for plan
benefits $ 53,105,193 $ 11,219,545 $ 5,830,357 $ 2,040,295
Galaxy Fidelity Putnam Putnam
Growth & Advisors of Boston Voyager
Income Fund Fund Fund Fund
Investments:
Common stock of
Crompton & Knowles
Corporation -
1,979,063 shares
at market value
(cost $17,239,682)$ - $ - $ - $ -
Hartford Life
Insurance Co.
group annuity
contract - - - -
Fleet Stable
Asset Fund - - - -
Galaxy Asset
Allocation Fund - - - -
Galaxy Growth &
Income Fund 9,863,013 - - -
Fidelity Advisor
Government
Investment Fund - 392,421 - -
Cash and short-term
investments at cost,
which approximates
market 31,883 4,707 9,846 21,219
Contributions
receivable
from participants 42,262 5,725 13,005 28,881
Contribution
receivable
from Crompton
& Knowles
Corporation - - - -
Accrued income - - - -
Plan assets
available for plan
benefits $ 9,937,158 $ 402,853 $ 22,851 $ 50,100
Putnam Invesco Galaxy Galaxy
International Industrial Large Co. Small Cap
Fund Income Fund Index Fund Value Fund
Investments:
Common stock of
Crompton & Knowles
Corporation -
1,979,063 shares
at market value
(cost $17,239,682)$ - $ - $ - $ -
Hartford Life
Insurance Co.
group annuity
contract - - - -
Fleet Stable
Asset Fund - - - -
Galaxy Asset
Allocation Fund - - - -
Galaxy Growth &
Income Fund - - - -
Fidelity Advisor
Government
Investment Fund - - - -
Cash and short-term
investments at cost,
which approximates
market 13,704 11,558 27,677 31,354
Contributions
receivable
from participants 18,340 15,077 36,866 42,166
Contribution
receivable
from Crompton
& Knowles
Corporation - - - -
Accrued income - - - -
Plan assets
available for plan
benefits $ 32,044 $ 26,635 $ 64,543 $ 73,520
Total
Investments:
Common stock of
Crompton & Knowles
Corporation -
1,979,063 shares
at market value
(cost $17,239,682)$ 52,445,170
Hartford Life
Insurance Co.
group annuity
contract 11,165,578
Fleet Stable
Asset Fund 5,745,651
Galaxy Asset
Allocation Fund 2,013,379
Galaxy Growth &
Income Fund 9,863,013
Fidelity Advisor
Government
Investment Fund 392,421
Cash and short-term
investments at cost,
which approximates
market 471,184
Contributions
receivable
from participants 391,035
Contribution
receivable
from Crompton
& Knowles
Corporation 233,579
Accrued income 84,084
Plan assets
available for plan
benefits $ 82,805,094
See accompanying notes to financial statements
CROMPTON & KNOWLES CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN
Statements of Changes in Net Assets Available for Plan Benefits
For the Years Ended December 31, 1998
C&K Fixed Stable Galaxy
Stock Income Asset Asset Alloc
Fund Fund Fund Fund
Investment income:
Cash dividends on
investment in common
stock of Crompton &
Knowles Corporation and
interest on short-term
investments $ 130,589 $ - $ - $ -
Realized gain (loss) on
sale of investments
and withdrawals 2,795,621 - - 17,807
Interest and
dividends earned - - 415,040 104,152
Interest earned
- Hartford Life
Insurance Company
group annuity
contract - 678,216 - -
Net investment income 2,926,210 678,216 415,040 121,959
Increase (decrease)
in unrealized
appreciation
of investments (13,187,797) - - 222,078
Contributions:
Employee Rollovers - - - -
Employee 1,335,752 - 312,618 145,163
Employer - Net of
forfeitures 2,106,708 - - -
Withdrawals and
Distributions (3,025,304) - (3,299,105) (138,629)
Employee interfund
transfers 382,888 (2,636,263) 2,419,703 (203,602)
Net increase/(decrease)(9,461,543) (1,958,047) (151,744) 146,969
Net assets available
for plan benefits at the
beginning of the year 53,105,193 11,219,545 5,830,357 2,040,295
Net assets available
for plan benefits at the
end of the year $43,643,650 $ 9,261,498 $ 5,678,613 $ 2,187,264
Galaxy Fidelity Putnam Putnam
Growth & Advisors of Boston Voyager
Income Fund Fund Fund Fund
Investment income:
Cash dividends on
investment in common
stock of Crompton &
Knowles Corporation and
interest on short-term
investments $ - $ - $ - $ -
Realized gain (loss) on
sale of investments
and withdrawals (122,381) 9,947 (10,273) (8,581)
Interest and
dividends earned 522,516 31,492 27,846 57,284
Interest earned
- Hartford Life
Insurance Company
group annuity
contract - - - -
Net investment income 400,135 41,439 17,573 48,703
Increase (decrease)
in unrealized
appreciation
of investments 1,029,536 (2,414) (13,370) 22,111
Contributions:
Employee Rollovers - - - 7,120
Employee 405,738 62,208 136,593 267,141
Employer - Net of
forfeitures - - - -
Withdrawals and
Distributions (570,154) (46,852) (68,355) (38,584)
Employee interfund
transfers (3,163,614) 458,396 295,973 501,338
Net increase/(decrease)(1,898,359) 512,777 368,414 807,829
Net assets available
for plan benefits at the
beginning of the year 9,937,158 402,853 22,851 50,100
Net assets available
for plan benefits at the
end of the year $ 8,038,799 $ 915,630 $ 391,265 $ 857,929
Putnam Invesco Galaxy Galaxy
International Industrial Large Co. Small Cap
Fund Income Fund Index Fund Value Fund
Investment income:
Cash dividends on
investment in common
stock of Crompton &
Knowles Corporation and
interest on short-term
investments $ - $ - $ - $ -
Realized gain (loss) on
sale of investments
and withdrawals (3,885) (2,541) 2,829 (17,198)
Interest and
dividends earned 12,445 28,588 22,498 50,916
Interest earned
- Hartford Life
Insurance Company
group annuity
contract - - - -
Net investment income 8,560 26,047 25,327 33,718
Increase (decrease)
in unrealized
appreciation
of investments (7,485) (8,895) 97,844 (87,399)
Contributions:
Employee Rollovers - - 14,239 7,120
Employee 169,575 145,921 403,459 387,147
Employer - Net of
forfeitures - - - -
Withdrawals and
Distributions (83,617) (12,378) (147,656) (59,725)
Employee interfund
transfers 421,531 278,045 1,001,142 244,463
Net increase/(decrease) 508,564 428,740 1,394,355 525,324
Net assets available
for plan benefits at the
beginning of the year 32,044 26,635 64,543 73,520
Net assets available
for plan benefits at the
end of the year $ 540,608 $ 455,375 $ 1,458,898 $ 598,844
Total
Investment income:
Cash dividends on
investment in common
stock of Crompton &
Knowles Corporation and
interest on short-term
investments $ 130,589
Realized gain (loss) on
sale of investments
and withdrawals 2,661,345
Interest and
dividends earned 1,272,777
Interest earned
- Hartford Life
Insurance Company
group annuity
contract 678,216
Net investment income 4,742,927
Increase (decrease)
in unrealized
appreciation
of investments (11,935,791)
Contributions:
Employee Rollovers 28,479
Employee 3,771,315
Employer - Net of
forfeitures 2,106,708
Withdrawals and
Distributions (7,490,359)
Employee interfund
transfers -
Net increase/(decrease)(8,776,721)
Net assets available
for plan benefits at the
beginning of the year 82,805,094
Net assets available
for plan benefits at the
end of the year $74,028,373
See accompanying notes to financial statements
CROMPTON & KNOWLES CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN
Statements of Changes in Net Assets Available for Plan Benefits
For the Years Ended December 31, 1997
C&K Fixed
Stock Income Equity Advisers
Fund Fund Fund Fund
Investment income:
Cash dividends on
investment in common
stock of Crompton &
Knowles Corporation and
interest on short-term
investments $ 106,846 $ 16,710 $ 9,715 $ 1,265
Realized gain on sale
of investments and
withdrawals 2,169,766 4,885 - -
Interest and
dividends earned - 83,649 - -
Interest earned
- Hartford Life
Insurance Company
group annuity
contract - 668,839 - -
Net investment income 2,276,612 774,083 9,715 1,265
Increase (decrease)
in unrealized
appreciation
of investments 12,408,062 (8,246) 1,954,918 275,655
Contributions:
Employee Rollovers - - - -
Employee 1,437,834 536,628 503,814 190,343
Employer - Net of
forfeitures 2,114,899 - - -
Withdrawals and
Distributions (3,294,729) (1,748,233) (911,604) (140,701)
Employee interfund
transfers (1,287,438) (4,866,361) (9,200,815) (1,648,471)
Net increase/(decrease)13,655,240 (5,312,129) (7,643,972) (1,321,909)
Net assets available
for plan benefits at the
beginning of the year 39,449,953 16,531,674 7,643,972 1,321,909
Net assets available
for plan benefits at the
end of the year $53,105,193 $11,219,545 $ - $ -
Stable Galaxy Galaxy
Mortgage Asset Asset Alloc Growth &
Fund Fund Fund Income Fun
Investment income:
Cash dividends on
investment in common
stock of Crompton &
Knowles Corporation and
interest on short-term
investments $ 250 $ 676 $ - $ -
Realized gain on sale
of investments and
withdrawals - - - -
Interest and
dividends earned - 55,344 159,953 1,561,371
Interest earned
- Hartford Life
Insurance Company
group annuity
contract - - - -
Net investment income 250 56,020 159,953 1,561,371
Increase (decrease)
in unrealized
appreciation
of investments 25,782 (126,453) (1,218,262)
Contributions:
Employee Rollovers - - - -
Employee 53,577 177,596 49,126 131,889
Employer - Net of
forfeitures - - - -
Withdrawals and
Distributions (42,258) (825) - -
Employee interfund
transfers (396,275) 5,597,566 1,957,669 9,462,160
Net increase/(decrease) (358,924) 5,830,357 2,040,295 9,937,158
Net assets available
for plan benefits at the
beginning of the year 358,924 - - -
Net assets available
for plan benefits at the
end of the year $ - $ 5,830,357 $ 2,040,295 $ 9,937,158
Fidelity Putnam Putnam Putnam
Advisors of Boston Voyager Internation
Fund Fund Fund Fund
Investment income:
Cash dividends on
investment in common
stock of Crompton &
Knowles Corporation and
interest on short-term
investments $ - $ - $ - $ -
Realized gain on sale
of investments and
withdrawals - - - -
Interest and
dividends earned 1,586 - - -
Interest earned
- Hartford Life
Insurance Company
group annuity
contract - - - -
Net investment income 1,586 - - -
Increase (decrease)
in unrealized
appreciation
of investments 2,000 - - -
Contributions:
Employee Rollovers - - - -
Employee 17,302 22,851 50,100 32,044
Employer - Net of
forfeitures - - - -
Withdrawals and
Distributions - - - -
Employee interfund
transfers 381,965 - - -
Net increase/(decrease) 402,853 22,851 50,100 32,044
Net assets available
for plan benefits at the
beginning of the year -
Net assets available
for plan benefits at the
end of the year $ 402,853 $ 22,851 $ 50,100 $ 32,044
Invesco Galaxy Galaxy
Industrial Large Co. Small Cap
Income Fund Index Fund Value Fund Total
Investment income:
Cash dividends on
investment in common
stock of Crompton &
Knowles Corporation and
interest on short-term
investments $ - $ - $ - $ 135,462
Realized gain on sale
of investments and
withdrawals - - - 2,174,651
Interest and
dividends earned - - - 1,861,903
Interest earned
- Hartford Life
Insurance Company
group annuity
contract - - - 668,839
Net investment income - - - 4,840,855
Increase (decrease)
in unrealized
appreciation
of investments - - - 13,313,456
Contributions:
Employee Rollovers - - - -
Employee 26,635 64,543 73,520 3,367,802
Employer - Net of
forfeitures - - - 2,114,899
Withdrawals and
Distributions - - - (6,138,350)
Employee interfund
transfers - - - -
Net increase/(decrease) 26,635 64,543 73,520 17,498,662
Net assets available
for plan benefits at the
beginning of the year - 65,306,432
Net assets available
for plan benefits at the
end of the year $ 26,635 $ 64,543 $ 73,520 $82,805,094
See accompanying notes to financial statements
CROMPTON & KNOWLES CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 and 1997
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 following
description of the Plan provides only general information. For complete
information see the Plan document. The Plan is a defined contribution plan and
is subject to the provisions of the Employee Retirement Income Security Act of
1974 (ERISA).
Fleet Bank (the "Trustee") has been selected by the Company as custodial
trustee. The Trustee has custodial responsibility for a trust fund on behalf
of the Plan and maintains accounting records for all Plan assets. These assets
and changes therein have been reported to the Plan administrator and certified
as complete and accurate by the trustee.
Eligibility
Employees of participating affiliates of the Company are eligible to
participate upon attaining the age of 18 and having worked for at least six
months.
Contributions and Vesting
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
Company to the Plan are made at an amount equal to 66 2/3% of each
participating employee's basic employee contribution to the Plan. If
participants are not eligible for any other defined contribution plan,
additional employee contributions in 1% increments up to 10% of compensation
can be made as supplemental employee contributions. Supplemental employee
contributions are not eligible for matching Company contributions.
A participant in the Plan is fully vested in his basic and supplemental
contributions. Employer contributions vest 100% over a five year period at a
rate of 40% after two years of service and an additional 20% per year
thereafter. Forfeitures are accumulated and used to reduce Company
contributions. There were $225,000 of forfeitures used for 1998 and none for
1997.
Withdrawals/Benefit Payments
Upon termination, death, or retiring, a participant's account shall be
distributed. However, funds can remain in the Plan after retirement
indefinitely with quarterly withdrawals permitted and as long as funds begin
to be distributed after the participant reaches the age of 70 1/2.
A participant may elect to make one withdrawal of his basic or supplemental
contributions in a 12 month period. Withdrawal of basic contributions will
cause a suspension of contributions for a three month period. A participant
who is fully vested and has withdrawn all of his basic and supplemental
contributions may also elect to withdraw all or part of his employer
contributions. Withdrawal of employer contributions will result in a
suspension of contributions for a six month period.
At December 31, 1998 and 1997 benefit payments due employees who terminated
prior to year end and requested distribution of their accounts totaled
approximately $1,600 and $276,000, respectively. This amount has not been
recorded in the financial statements but is included as benefit payments and
liabilities in the Plan's Form 5500.
Investments Options
The Company's contribution to the plan is invested in the Crompton &
Knowles Stock Fund (C&K Stock Fund). Prior to November 1, 1997 the Plan
provided for investment of employee contributions in the C&K Stock Fund and
among four investment funds maintained by The Hartford Life Insurance Company:
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. The market value of the common stock is based
on quotations from the New York Stock Exchange.
The Fixed Income Fund is a fund invested under an agreement with Hartford
Life Insurance Company (the "Hartford") pursuant to which the Hartford
guarantees the repayment of principal and the payment of interest on all
amounts on deposit at an effective annual rate of interest of 5.80% on, and
after January 1, 1997. Effective November 1, 1997 the agreement with Hartford
was terminated. Payout of the funds will commence in six equal annual
installments with the initial payment on November 1, 1997 and with the rate
of interest credited on the declining balance of 5.80%
The Equity Fund was a pooled separate account maintained by Hartford
with respect to a portion of its assets, in connection with the contract and
other similar contracts issued by the Hartford. This fund invested primarily
in equity securities such as common stocks and securities convertible into
common stock. The Equity Fund was valued based on a unit value as determined
by the fund manager.
The Advisers Fund was a pooled separate account maintained by Hartford
with respect to a portion of its assets, in connection with the contract and
other similar contracts issued by Hartford. This fund invested in common
stocks, debt securities, and money market instruments. The Advisers Fund was
valued based on a unit of value as determined by the fund manager.
The Mortgage Fund was a pooled separate account maintained by Hartford
with respect to a portion of its assets, in connection with the contract and
other similar contracts issued by Hartford. This fund invested in mortgage
related securities, including securities issued by the Government National
Mortgage Association. The Mortgage Fund was valued based on a unit value as
determined by the fund manager.
Effective November 1, 1997 the Hartford Life Insurance Company funds were
terminated and replaced with the following separate investment options under a
program administered by Fleet Investment Management:
Fleet Stable Asset Fund This fund invests primarily in guaranteed
investment contracts issued by highly rated life insurance companies.
Fidelity Advisor Government Fund This fund invests primarily in
obligations issued or guaranteed by the U.S. Government or any of its agencies
or instrumentalities.
George Putnam Fund of Boston (Class M shares) This fund's primary
objective is to provide a diversified portfolio of stocks and bonds that will
provide both capital growth and income.
Putnam Voyager Fund (Class M shares) This fund's objective is to
provide capital appreciation by investing in stocks of companies with above
average growth potential.
Putnam International Growth Fund Class M shares This fund objective
is to invest in equity securities of companies located outside the United
States.
Invesco Industrial Income Fund This fund's objective is to provide
income with secondary consideration to capital appreciation by investing in
stocks, bonds and mortgages.
Galaxy Growth and Income Fund This fund's objective is to provide
high total returns through long-term capital appreciation and income by
investing primarily in common stock.
Galaxy Asset Allocation Fund This fund's objective is to provide a
high total return with a combination of income and long term growth in assets
held by investing in equity securities, fixed income securities and cash
equivalents.
Galaxy Large Company Index Fund This fund's objective is to provide
investment results that mirror investment results of U.S. common stocks with
large stock market capitalizations as represented by the Standard & Poor's 500
Index.
Galaxy Small Cap Value Fund This fund's objective is to provide
long-term capital appreciation by investing in companies that have market
capitalization of up to $1 billion.
At November 1, 1997 amounts invested with Hartford were automatically
invested in similar funds provided by Fleet Investment Management. The Fleet
system was responsive to employee fund selection in February 1998.
Assets in any of the 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 funds in 1% increments (10% prior to November 1, 1997).
Prior to November 1, 1997 fund transfers as of the first day of any
month, were permitted but not more frequently than once in any six-month
period. A participant could elect to transfer any part of the value of his
basic employee account or his supplemental employee account to any of the
other funds except the Fixed Income Fund to the Mortgage Fund in minimum
increments of 5%. Fund transfer after November 1, 1997 (implemented February
1998) can be made on a daily basis in a minimum of 1% increments.
3. Income Taxes
The Internal Revenue Service has determined and has informed the Company
by a letter dated November 16, 1994 that the Plan and related trust are
designed in accordance with applicable sections of the Internal Revenue Code
(the "IRC"). The Plan has been amended since receiving the determination
letter. However, the Plan administrator and the Plan's tax counsel believe
that the Plan is designed and is currently being operated in compliance with
the applicable requirements of the IRC.
4. Investments
The following presents the fair value of investments at December 31,
1998 and 1997. Investments that represent more than 5% of net assets for
either year are separately stated.
1998 1997
Crompton & Knowles Corp.
common stock $43,291,577 $52,445,170
Hartford Life Ins. Co.
Group Annuity Contract 9,176,919 11,165,578
Fleet Stable Asset Fund 5,598,455 5,745,651
Galaxy Growth and Income
Fund 8,004,789 9,863,013
Other 7,244,287 2,405,800
Total Investments $73,316,027 $81,625,212
5. Plan Expenses
Significant costs of Plan administration, which are payable from the
Trust or by the Corporation, are generally paid by the Corporation.
6. Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires the Plan to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported changes in net assets available for plan benefits
during the reporting period. Actual results could differ from those estimates
7. Party-in-Interest Transactions
The Fleet Bank and Hartford are parties-in-interest as defined in
Section 3 (14) of the Employee Retirement Income Security Act of 1974. During
the years 1998 and 1997 there were no prohibited party-in-interest
transactions.
8. Priorities Upon Termination of the Plan
The Board of Directors of the Company shall have the right from time to
time to add to, modify or amend the Plan, and the Board of Directors shall
have the right to terminate the Plan. The Board of Directors may also
authorize the inclusion in any contract entered into by the Company with the
union or unions representing employees, or with any group or groups of
employees, of a provision or provisions having the effect of limiting or
foregoing any such rights. Further, no addition to, modification, amendment
or termination of the Plan shall have the effect of reducing the entitlement
of any participant's benefit accrued under the Plan or of diverting any part
of the assets of the Trust Fund for purposes other than provided in the Plan.
Upon any terminations of the Plan, or complete and permanent
discontinuance of contributions of all participants, the value of each of the
participant's account, if not already vested, shall vest fully and all amounts
in all accounts of each participant shall be delivered and paid as soon as
practicable in accordance with the Plan Document.
Schedule 1 (Form 5500)
CROMPTON & KNOWLES CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN
LINE 27(a) SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
DECEMBER 31, 1998
IDENTITY OF ISSUE, DESCRIPTION OF INVESTMENT INCLUDING
BORROWER, LESSOR MATURITY DATE, RATE OF INTEREST, CURRENT
OR SIMILAR PARTY COLLATERAL, PAR OR MATURITY VALUE COST VALUE
GALAXY MONEY MARKET TRUST - 5,668.84 UNITS $ 5,669 $ 5,669
CROMPTON & KNOWLES
CORPORATION COMMON STOCK - 2,073,848 SHARES 21,273,887 43,291,577
GALAXY GROWTH & INCOME FUND
- 513,456.64 UNITS 8,193,515 8,004,789
GALAXY ASSET ALLOCATION FUND
- 124,565.65 UNITS 2,076,799 2,172,425
FIDELITY ADVISOR GOVERNMENT INVESTMENT
FUND 90,856.79 UNITS 902,621 902,208
FLEET STABLE ASSET FUND - 559,845.46 UNITS 5,598,455 5,598,455
PUTNAM INVESTMENTS PUTNAM VOYAGER FUND - 38,816.1 UNITS 808,554 830,665
PUTNAM INVESTMENTS GEORGE PUTNAM FUND - 21,174.51 UNITS 392,394 379,024
PUTNAM INVESTMENTS PUTNAM INTERNATIONAL GROWTH
FUND - 27,473.82 UNITS 532,510 525,025
INVESCO FUNDS INVESCO INDUSTRIAL INCOME
GROUP INC. FUND - 29,373.12 451,254 442,359
GALAXY GALAXY LARGE COMPANY INDEX
FUND - 40,417.86 1,323,652 1,421,496
GALAXY GALAXY SMALL CAP VALUE
FUND - 42,672.88 UNITS 652,517 565,416
HARTFORD LIFE
INSURANCE COMPANY GROUP ANNUITY CONTRACT 5.80% 9,176,919 9,176,919
TOTAL INVESTMENTS $51,388,746 $73,316,027
* Party - in- interest - All parties listed above
Schedule 2 (Form 5500)
CROMPTON & KNOWLES CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN
Line 27 (d) Schedule of (5%) Reportable Transactions
Year Ended December 31, 1998
Cash
(paid) Realized
Description received Cost gain
Single Transactions:
None
Series of transactions :
Galaxy Money Market Trust
Purchases $ (5,836,317) $ 5,836,317 $ -
Sales 6,307,483 (6,307,483)
Crompton & Knowles Corporation
- - common stock
Purchases 283,440 shares (5,832,608) 5,832,608
Sales 168,440 shares
(incl. withdrawals) 4,386,443 (1,590,822) 2,795,621
SIGNATURE
The Plan. Pursuant to the requirements of the Securities and
Exchange Act of 1934, the trustees (or other persons who
administer the employee benefit plan) have duly caused this
annual report to be signed on its behalf by the undersigned
hereunto duly authorized.
CROMPTON & KNOWLES CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN
Date: June 30, 1999 By:/s/Peter Barna
Peter Barna
Vice President Finance &
Chief Financial Officer
EXHIBIT 23
Independent Auditors' Consent
The Board of Directors
Crompton & Knowles Corporation
We consent to incorporation by reference in the registration statement (Nos.
333-62429, 33-21246, and 2-57629) on Form S-8 of Crompton & Knowles
Corporation of our report dated June 4, 1999, relating to the statements of
net assets available for plan benefits of the Crompton & Knowles Corporation
Employee Stock Ownership Plan as of December 31, 1998, and 1997, and the
related statements of changes in net assets available for plan benefits for
the years then ended, and all related schedules, included in this annual
report on Form 11-K.
/s/KPMG LLP
Stamford, Connecticut
June 25, 1999
