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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 1994
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to _____________
Commission File Number 1 - 7272
KERR GROUP, INC.
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(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Delaware 95-0898810
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1840 Century Park East, Los Angeles, CA 90067
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (310) 556-2200
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</TABLE>
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Former name, former address and former fiscal year, if changed since last year.
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
--- ---
The number of shares of Registrant's Common Stock, $.50 par value, outstanding
as of April 29, 1994 was 3,676,695.
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KERR GROUP, INC.
INDEX
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<CAPTION>
Page No.
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<S> <C>
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets -
March 31, 1994 and December 31, 1993 3 - 4
Condensed Consolidated Statements of Earnings (Loss) -
Three Months Ended March 31, 1994 and 1993 5
Condensed Consolidated Statements of Cash Flows -
Three Months Ended March 31, 1994 and 1993 6
Notes to Condensed Consolidated Financial Statements 7 - 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9 - 10
Part II. Other Information 11
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KERR GROUP, INC.
Consolidated Balance Sheets
As of March 31, 1994 and December 31, 1993
(in thousands except per share data)
<TABLE>
<CAPTION>
(Unaudited) (Audited)
March 31, December 31,
Assets 1994 1993
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<S> <C> <C>
Current assets
Cash and cash equivalents $ 3,681 $ 11,329
Receivables-primarily trade accounts,
less allowance for doubtful accounts
of $535 at March 31, 1994 and $578
at December 31, 1993 18,128 13,533
Inventories
Raw materials and work in process 8,383 8,906
Finished goods 22,643 19,126
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Total inventories 31,026 28,032
Prepaid expenses 1,986 2,527
Deferred income taxes 1,882 0
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Total current assets 56,703 55,421
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Property, plant and equipment, at cost 91,673 90,652
Accumulated depreciation and amortization (52,050) (50,228)
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Net property, plant and equipment 39,623 40,424
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Deferred income taxes 4,547 6,629
Goodwill and other intangibles, net of
amortization of $2,211 at
March 31, 1994 and $2,122
at December 31, 1993 6,629 6,645
Other assets 4,237 4,201
Non-current assets related to discontinued operations 4,029 4,029
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$115,768 $117,349
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</TABLE>
See accompanying notes to condensed consolidated financial statements.
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KERR GROUP, INC.
Consolidated Balance Sheets
As of March 31, 1994 and December 31, 1993
(in thousands except per share data)
<TABLE>
<CAPTION>
(Unaudited) (Audited)
March 31, December 31,
Liabilities and Stockholders' Equity 1994 1993
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<S> <C> <C>
Current liabilities
Accounts payable $ 9,544 $ 9,573
Accrued expenses 7,661 9,089
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Total current liabilities 17,205 18,662
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Accrued pension liability 18,321 18,321
Other long-term liabilities 1,944 2,302
Senior long-term debt 50,000 50,000
Stockholders' equity
Preferred Stock, 487 shares authorized
and issued, at liquidation value of
$20 per share 9,748 9,748
Common Stock, $ .50 par value per share,
20,000 shares authorized, 4,210
shares issued 2,105 2,105
Additional paid-in capital 27,145 27,145
Retained earnings 9,476 9,420
Treasury Stock, 543 shares at cost (12,803) (12,803)
Excess of additional pension liability
over unrecognized prior service
cost, net of tax benefits (6,835) (6,835)
Notes receivable from ESOP Trusts (538) (716)
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Total stockholders' equity 28,298 28,064
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$115,768 $117,349
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</TABLE>
See accompanying notes to condensed consolidated financial statements.
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KERR GROUP, INC.
Condensed Consolidated Statements of Earnings (Loss)
for the Three Months Ended March 31, 1994 and 1993
(in thousands except per share data)
<TABLE>
<CAPTION>
(Unaudited)
Three Months Ended
March 31,
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1994 1993
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<S> <C> <C>
Net sales $29,380 $26,674
Cost of sales 19,419 18,316
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Gross profit 9,961 8,358
Selling, warehouse, general and
administrative expenses 8,398 7,599
Interest expense 1,215 1,514
Interest and other income (113) (271)
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Earnings (loss) before income taxes 461 (484)
Provision (benefit) for income taxes 198 (189)
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Net earnings (loss) 263 (295)
Preferred stock dividends 207 207
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Net earnings (loss) applicable to
common stockholders $ 56 $ (502)
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Net earnings (loss) per common share,
primary and fully diluted $ 0.02 $ (0.14)
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</TABLE>
See accompanying notes to condensed consolidated financial statements.
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KERR GROUP, INC.
Condensed Consolidated Statements of Cash Flows
for the Three Months Ended March 31, 1994 and 1993
(in thousands)
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<CAPTION>
(Unaudited)
Three Months Ended
March 31,
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1994 1993
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<S> <C> <C>
Cash flows provided (used) by operations
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Net earnings (loss) $ 263 $ (295)
Add (deduct) noncash items included in
net earnings (loss)
Depreciation and amortization 1,911 1,811
Other, net 204 (675)
Changes in other operating working capital
Receivables (4,595) (5,514)
Inventories (2,994) (4,012)
Prepaid expenses 541 354
Accounts payable and accrued expenses (1,148) 437
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Cash flows used by operations (5,818) (7,894)
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Cash flows provided (used) by investing activities
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Capital expenditures (1,020) (1,341)
Collection of accounts receivable, and payment of accounts payable
and accrued and other expenses related to discontinued operations (556) (1,683)
Other, net (225) 30
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Cash flows used by investing activities (1,801) (2,994)
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Cash flows provided (used) by financing activities
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Other long-term debt retirements 0 (1,000)
Payments received on ESOP Trusts notes receivable 178 395
Dividends paid (207) (207)
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Cash flows used by financing activities (29) (812)
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Cash and cash equivalents
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Decrease during the period (7,648) (11,700)
Balance at beginning of the period 11,329 19,251
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Balance at end of the period $ 3,681 $ 7,551
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</TABLE>
See accompanying notes to condensed consolidated financial statements
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KERR GROUP, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1) General
The condensed consolidated financial statements include the accounts
of Kerr Group, Inc. and its wholly owned subsidiary (collectively
referred to as the Company). In the opinion of management, the
accompanying condensed consolidated financial statements contain all
adjustments (consisting of only normal recurring accruals) necessary
to present fairly the financial position of the Company as of March
31, 1994, and the results of operations for the three months ended
March 31, 1994 and 1993, and changes in cash flows for the three
months ended March 31, 1994 and 1993.
The results of operations for the first three months of 1994 are not
necessarily indicative of the results to be expected for the full
year.
2) Earnings Per Share
Fully diluted earnings per common share reflect when dilutive, 1) the
incremental common shares issuable upon the assumed exercise of
outstanding stock options, and 2) the assumed conversion of the
Preferred Stock and the elimination of the related Preferred Stock
dividends. Antidilution occurred in the three months ended March 31,
1994 and 1993.
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KERR GROUP, INC.
Computation of Earnings (Loss) Per Common Share
(in thousands except per share data)
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<CAPTION>
(Unaudited)
Three Months Ended
March 31,
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1994 1993
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<S> <C> <C>
Primary Earnings (Loss) Per Common Share
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Net earnings (loss) $ 263 $ (295)
Less Preferred Stock dividends (207) (207)
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Net earnings (loss) applicable to primary
earnings per common share $ 56 $ (502)
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Weighted average number of common
shares outstanding 3,667 3,675
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Primary earnings (loss) per common share $ .02 $ (.14)
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Fully Diluted Earnings (Loss) Per Common Share
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Net earnings (loss) applicable to primary
earnings per common share $ 56 $ (502)
Add Preferred Stock dividends 207 207
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Net earnings (loss) applicable to fully
diluted earnings per common share $ 263 $ (295)
====== ======
Weighted average number of common
shares outstanding 3,667 3,675
Common shares issuable from assumed
conversion of Preferred Stock 709 709
Incremental common shares issuable upon
assumed exercise of outstanding stock
options 5 12
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Adjusted weighted average number of common
shares outstanding 4,381 4,396
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Fully diluted earnings (loss) per common share:
As computed $ .06 $ (.07)
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As reported (a) $ .02 $ (.14)
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</TABLE>
(a) Fully diluted earnings (loss) per common share for the three months ended
March 31, 1994 and 1993 are antidilutive
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KERR GROUP, INC.
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Three Months Ended March 31, 1994 and 1993
Results of Operations
Net sales for the three months ended March 31, 1994 were $29,380,000 as
compared to $26,674,000 for the three months ended March 31, 1993, an increase
of $2,706,000 or 10%. The increase in net sales for the three months ended
March 31, 1994 over the comparable period in 1993 was due primarily to higher
unit sales in the Plastic Products Business.
Cost of sales for the three months ended March 31, 1994 were $19,419,000 as
compared to $18,316,000 for the three months ended March 31, 1993, an increase
of $1,103,000 or 6%.
Selling, warehouse, general and administrative expenses increased $799,000 or
11% during the three months ended March 31, 1994, as compared to the same
period in 1993, due primarily to additional employees, increased bad debt
expense and salary and wage increases.
Net interest expense decreased $141,000 during the three months ended March 31,
1994 as compared to the same period in 1993 as a result of the refinancing of
the Company's long-term debt on September 21, 1993.
Earnings before income taxes increased $945,000 during the three months ended
March 31, 1994 as compared to the same period in 1993 due primarily to higher
earnings in both the Plastic Products and Consumer Products Businesses and
lower interest expense as a result of the refinancing of the Company's
long-term debt.
The provision for income taxes increased $387,000 during the three months ended
March 31, 1994 as compared to the same period in 1993 due to higher pretax
earnings.
Accounting for Benefit Plans
Accounting rules require that pension liabilities be discounted at an interest
rate equal to the rate on longer-term, high-quality debt instruments. The
Company selects an appropriate discount rate annually as of the end of each
year. The discount rate selected by the Company at December 31, 1993 was 7.5%
and resulted in a reduction in the Company's stockholders' equity of
$6,835,000. The amount of this adjustment will be increased or decreased at
the end of each year depending on future changes in interest rates. As of
March 31, 1994, comparable interest rates have increased approximately one-half
of one percent from December 31, 1993. Had the discount rate used by the
Company at December 31, 1993 been one-half of one percent higher, the unfunded
pension liability shown on the Company's Consolidated Balance Sheet at December
31, 1993 would have been reduced by approximately $4,600,000, the deferred
income tax asset would have been reduced by approximately $1,800,000 and
stockholders' equity would have been increased by approximately $2,800,000.
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Financial Condition
Cash flow was used by operations in the three months ended March 31, 1994 and
1993 for increased working capital requirements, primarily related to the
Consumer Products Business.
The ratio of current assets to current liabilities at March 31, 1994 and
December 31, 1993 was 3.3 and 3.0, respectively. The ratio of total debt to
total capitalization decreased to 63.9% at March 31, 1994 from 64.1% at
December 31, 1993.
At March 31, 1994, the Company had unused sources of liquidity consisting of
cash and cash equivalents of $3,681,000, unused committed credit under bank
lines of credit of $12,000,000, of which $11,884,000 could be borrowed under
the terms of the Company's Senior Note Agreement, tax net operating loss
carryforwards of $1,854,000 and certain tax credit carryforwards of $1,975,000.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
On April 11, 1994, the Chicago regional office of the National Labor
Relations Board ("NLRB") filed an administrative complaint against the
Registrant in connection with its plans to relocate its home canning
cap and lid manufacturing operations from Chicago, Illinois to a new
manufacturing facility in Jackson, Tennessee. The complaint alleges
that the Registrant is required to bargain with the union that
represents the Chicago employees in connection with the Registrant's
decision to relocate to Jackson.
The administrative complaint was in response to a union charge and is
the first step in the administrative process. The Registrant has been
advised by its counsel that it is not required to bargain about the
decision to relocate. The Registrant intends to vigorously defend the
action and does not expect the NLRB proceeding to have any impact on
its current schedule to move to Jackson or have any material impact on
the Registrant's consolidated financial statements.
Item 4. Submission of Matters to a Vote of Security Holders
a. The Annual Meeting of Stockholders of the Company was held on April
26, 1994 in Los Angeles, California.
b. No proposals were submitted to a vote other than the election of
Directors.
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
None.
b. Reports on Form 8-K
On January 19, 1994, the Registrant filed a Form 8-K Current Report
with respect to the relocation of the Registrant's home canning cap
and lid operations.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
KERR GROUP, INC.
May 11, 1994 By /s/ D. Gordon Strickland
---------------------------------
D. Gordon Strickland
Senior Vice President, Finance,
Chief Financial Officer
May 11, 1994 By /s/ J. Stephen Grassbaugh
---------------------------------
J. Stephen Grassbaugh
Vice President, Controller,
Chief Accounting Officer
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