<PAGE> 1
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 June 30, 1995
/ / 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.
(Exact name of registrant as specified in its charter)
Delaware 95-0898810
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1840 Century Park East, Los Angeles, CA 90067
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (310)556-2200
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 July 31, 1995 was 3,933,095.
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KERR GROUP, INC.
INDEX
<TABLE>
<CAPTION>
Page No.
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<S> <C>
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets -
June 30, 1995 and December 31, 1994 3 - 4
Condensed Consolidated Statements of Earnings (Loss) -
Three Months and Six Months Ended
June 30, 1995 and 1994 5
Condensed Consolidated Statements of Cash Flows -
Six Months Ended June 30, 1995 and 1994 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
</TABLE>
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KERR GROUP, INC.
Consolidated Balance Sheets
As of June 30, 1995 and December 31, 1994
(in thousands except per share data)
<TABLE>
<CAPTION>
(Unaudited) (Audited)
June 30, December 31,
Assets 1995 1994
- ------ ------------ ------------
<S> <C> <C>
Current assets
Cash and cash equivalents $ 1,263 $ 2,261
Receivables-primarily trade accounts, less allowance
for doubtful accounts of $115 at June 30, 1995
and $170 at December 31, 1994 18,227 16,312
Inventories
Raw materials and work in process 10,178 11,156
Finished goods 23,596 23,134
----------- -----------
Total inventories 33,774 34,290
Prepaid expenses and other current assets 4,618 4,526
----------- -----------
Total current assets 57,882 57,389
----------- -----------
Property, plant and equipment, at cost 107,977 102,847
Accumulated depreciation and amortization (58,271) (54,506)
----------- -----------
Net property, plant and equipment 49,706 48,341
----------- -----------
Deferred income taxes 2,215 2,192
Goodwill and other intangibles, net of
amortization of $2,032 at June 30, 1995
and $1,812 at December 31, 1994 6,926 6,622
Other assets 8,907 9,156
----------- -----------
$ 125,636 $ 123,700
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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KERR GROUP, INC.
Consolidated Balance Sheets
As of June 30, 1995 and December 31, 1994
(in thousands except per share data)
<TABLE>
<CAPTION>
(Unaudited) (Audited)
June 30, December 31,
Liabilities and Stockholders' Equity 1995 1994
- ------------------------------------ --------- ---------
<S> <C> <C>
Current liabilities
Short-term debt $ 5,200 $ 5,500
Accounts payable 18,631 13,445
Accrued expenses 2,855 3,862
--------- ---------
Total current liabilities 26,686 22,807
--------- ---------
Accrued pension liability 12,529 15,230
Other long-term liabilities 2,531 2,610
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, 4,226 shares issued at June 30, 1995
and 4,220 shares issued at December 31, 1994 2,113 2,110
Additional paid-in capital 27,239 27,210
Retained earnings 6,910 11,995
Treasury Stock at cost, 293 shares at June 30, 1995
and 543 shares at December 31, 1994 (6,913) (12,803)
Excess of additional pension liability over
unrecognized prior service cost, net of tax benefits (5,207) (5,207)
--------- ---------
Total stockholders' equity 33,890 33,053
--------- ---------
$ 125,636 $ 123,700
========= =========
</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 and Six Months Ended June 30, 1995 and 1994
(in thousands except per share data)
<TABLE>
<CAPTION>
(Unaudited) (Unaudited)
Three Months Six Months
Ended June 30, Ended June 30,
-------------------------- ---------------------------
1995 1994 1995 1994
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales $ 41,892 $ 41,004 $ 72,282 $ 70,384
Cost of sales 32,109 28,713 53,922 48,132
--------- --------- --------- ---------
Gross profit 9,783 12,291 18,360 22,252
Selling, warehouse, general and
administrative expense 8,724 8,380 16,557 16,778
Interest expense 1,580 1,249 3,026 2,464
Interest and other income (39) (118) (85) (231)
--------- --------- --------- ---------
Earnings (loss) before income taxes (482) 2,780 (1,138) 3,241
Provision (benefit) for income taxes (197) 1,181 (466) 1,379
--------- --------- --------- ---------
Net earnings (loss) $ (285) $ 1,599 $ (672) $ 1,862
Preferred stock dividends 207 207 414 414
--------- --------- --------- ---------
Net earnings (loss) applicable to
common stockholders $ (492) $ 1,392 $ (1,086) $ 1,448
========= ========= ========= =========
Net earnings (loss) per common share:
Primary $ (0.13) $ 0.38 $ (0.29) $ 0.39
========= ========= ========= =========
Fully diluted $ (0.13) $ 0.36 $ (0.29) $ 0.39
========= ========= ========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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<PAGE> 6
KERR GROUP, INC.
Condensed Consolidated Statements of Cash Flows
for the Six Months Ended June 30, 1995 and 1994
(in thousands)
<TABLE>
<CAPTION>
(Unaudited)
Six Months Ended
June 30,
--------------------------
1995 1994
--------- ---------
<S> <C> <C>
Cash flows provided (used) by operations
Net earnings (loss) $ (672) $ 1,862
Add (deduct) noncash items included in
net earnings (loss)
Depreciation and amortization 4,310 3,838
Reduction in accrued long-term pension liability (810) (197)
Other, net 542 1,170
Changes in other operating working capital
Receivables (1,915) (11,965)
Inventories 516 (4,391)
Prepaid expenses (201) 573
Accounts payable and accrued expenses 4,394 5,596
--------- ---------
Cash flows provided (used) by operations 6,164 (3,514)
--------- ---------
Cash flows provided (used) by investing activities
Capital expenditures (5,509) (4,715)
Collection of accounts receivable, and payment of accounts
payable and accrued and other expenses related to
discontinued operations (488) (933)
Other, net (483) (540)
--------- ---------
Cash flows used by investing activities (6,480) (6,188)
--------- ---------
Cash flows provided (used) by financing activities
Net borrowings (repayments) under lines of credit (300) 2,000
Dividends paid (414) (414)
Other, net 32 427
--------- ---------
Cash flows provided (used) by financing activities (682) 2,013
--------- ---------
Cash and cash equivalents
Decrease during the period (998) (7,689)
Balance at beginning of the period 2,261 11,329
--------- ---------
Balance at end of the period $ 1,263 $ 3,640
========= =========
Significant Non-Cash Transactions
Contribution of 250,000 shares of Common Stock to pension plan $ 1,891 $ 0
========= =========
</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 June 30, 1995, and the results of operations
for the three months and six months ended June 30, 1995 and 1994, and
changes in cash flows for the six months ended June 30, 1995 and 1994.
The results of operations for the first six months of 1995 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. The calculation of
fully diluted net earnings (loss) per common share for the three months
ended June 30, 1995 and the six months ended June 30, 1995 and 1994 was not
dilutive.
3) Receivables
Receivables as of June 30, 1995, as shown on the accompanying Consolidated
Balance Sheet, have been reduced by $4,919,000 of net proceeds from the
sale of receivables under the Company's Accounts Receivable Facility.
4) Debt and Accounts Receivable Facility
Effective June 30, 1995, a $5,000,000 line of credit of the Company
expired, which reduced the Company's short-term financing to a total of
$20,000,000. The Company's short-term financing includes: i) an Accounts
Receivable Facility maturing on January 18, 1997 under which the maximum
amount that can be advanced to the Company pursuant to the sale of trade
accounts receivable is $10,000,000 and ii) a $10,000,000 line of credit
committed through April 30, 1996.
5) Common Stock
During July 1995, the Company adopted a shareholders rights plan (Rights
Plan), pursuant to which a dividend distribution of one Right was made for
each outstanding share of Kerr Common Stock. Each Right entitles the holder
to purchase a unit consisting of one one-thousandth of a share of a new
issue of preferred stock, or, upon the occurrence of certain events, to
purchase Kerr Common Stock at a 50% discount to the then current market
price of the stock. The Rights Plan is intended to protect the interests of
the Company's stockholders in the event the Company is confronted with
coercive or unfair takeover tactics.
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KERR GROUP, INC.
Computation of Earnings (Loss) Per Common Share
(in thousands except per share data)
<TABLE>
<CAPTION>
(Unaudited) (Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
------------------- -------------------
1995 1994 1995 1994
------- ------- ------- -------
<S> <C> <C> <C> <C>
Primary Net Earnings (Loss) Per Common Share
Net earnings (loss) $ (285) $ 1,599 $ (672) $ 1,862
Less Preferred Stock dividends (207) (207) (414) (414)
------- ------- ------- -------
Net earnings (loss) applicable to primary earnings
per common share $ (492) $ 1,392 $(1,086) $ 1,448
======= ======= ======= =======
Weighted average number of common
shares outstanding 3,826 3,675 3,752 3,671
======= ======= ======= =======
Primary net earnings (loss) per common share $ (0.13) $ 0.38 $ (0.29) $ 0.39
======= ======= ======= =======
Fully Diluted Net Earnings (Loss) Per Common Share
Net earnings (loss) applicable to primary earnings
per common share $ (492) $ 1,392 $(1,086) $ 1,448
Add Preferred Stock dividends 207 207 414 414
------- ------- ------- -------
Net earnings (loss) applicable to fully
diluted earnings per common share $ (285) $ 1,599 $ (672) $ 1,862
======= ======= ======= =======
Weighted average number of common
shares outstanding 3,826 3,675 3,752 3,671
Common shares issuable upon assumed
conversion of Preferred Stock 709 709 709 709
Incremental common shares issuable upon
assumed exercise of outstanding stock options 17 14 17 14
------- ------- ------- -------
Adjusted weighted average number of common
shares outstanding 4,552 4,398 4,478 4,394
======= ======= ======= =======
Fully diluted net earnings (loss) per common share:
As computed $ (0.06) $ 0.36 $ (0.15) $ 0.42
======= ======= ======= =======
As reported (a) $ (0.13) $ 0.36 $ (0.29) $ 0.39
======= ======= ======= =======
</TABLE>
(a) The calculation of fully diluted net earnings (loss) per common share for
the three months ended June 30, 1995 and the six months ended June 30, 1995
and 1994 was not dilutive.
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KERR GROUP, INC.
Management's Discussion and Analysis of Financial
Condition and Results of Operations for the
Three Months and Six Months Ended June 30, 1995 and 1994
Results of Operations
Net sales for the three months ended June 30, 1995 were $41,892,000 as compared
to $41,004,000 for the three months ended June 30, 1994, an increase of $888,000
or 2%. The increase in net sales for the three months ended June 30, 1995 over
the comparable period in 1994 was due primarily to higher sales in the
Plastic Products Business for prescription packaging, child-resistant closures
and plastic containers and the pass-through of a portion of resin cost
increases.
Net sales for the six months ended June 30, 1995 were $72,282,000 as compared to
$70,384,000 for the six months ended June 30, 1994, an increase of $1,898,000 or
3%. The increase in net sales for the six months ended June 30, 1995 over the
comparable period in 1994 was due primarily to higher sales in the Plastic
Products Business for prescription packaging and plastic containers and the
pass-through of a portion of resin cost increases and higher unit sales and
prices in the Consumer Products Business.
Cost of sales for the three months ended June 30, 1995 were $32,109,000 as
compared to $28,713,000 for the three months ended June 30, 1994, an increase of
$3,396,000 or 12%. Cost of sales for the six months ended June 30, 1995 were
$53,922,000 as compared to $48,132, 000 for the six months ended June 30, 1994,
an increase of $5,790,000 or 12%. The increase for both periods in 1995 over
comparable periods in 1994 was due primarily to higher resin costs in the
Plastic Products Business and the sale of higher cost inventory produced in
1994 in the Consumer Products Business.
Gross profit as a percent of net sales for the three months ended June 30, 1995
decreased to 23% as compared to 30% for the three months ended June 30, 1994.
Gross profit as a percent of net sales for the six months ended June 30, 1995
decreased to 25% as compared to 32% for the six months ended June 30, 1994. The
decrease in gross profit as a percent of net sales for both periods in 1995 over
the comparable periods in 1994 was attributed to lower-margin sales mix, higher
resin and other raw material costs, and competition-driven price reductions for
plastic jars in the Plastic Products Business and the sale of higher cost
inventory produced in 1994 in the Consumer Products Business.
Selling, warehouse, general and administrative expenses increased $344,000 or 4%
during the three months ended June 30, 1995, as compared to the same period in
1994. Selling, warehouse, general and administrative expenses decreased $221,000
or 1% during the six months ended June 30, 1995, as compared to the same period
in 1994.
Net interest expense increased $410,000 and $708,000 during the three month and
six month periods ended June 30, 1995, as compared to the same periods in 1994,
respectively, primarily as a result of higher levels of short-term financing and
higher interest rates.
Earnings before income taxes decreased $3,262,000 and $4,379,000 during the
three month and six month periods ended June 30, 1995 as compared to the same
periods in 1994, respectively, due primarily to lower earnings in the Plastic
Products and Consumer Products Businesses and higher interest expense. Earnings
in the Plastic Products Business were adversely impacted by a lower-margin sales
mix, higher resin and other raw material costs, and competition-driven price
reductions for plastic jars. Earnings in the Consumer Products Business declined
due primarily to the sale of higher cost inventory produced during 1994.
The provision for income taxes decreased $1,378,000 and $1,845,000 during the
three month and six month periods ended June 30, 1995 as compared to the same
periods in 1994, respectively, due to lower pretax earnings.
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<PAGE> 10
The Company expects full year 1995 results will be substantially lower than
those of 1994.
Sales and earnings of the home canning supplies business are higher in the
second and third quarters and lower in the first and fourth quarters because of
the seasonal nature of the business.
Financial Condition
During the first six months of 1995, cash flow of $6,164,000 was provided by
operations, which includes cash flow of $4,919,000 related to net proceeds from
the sale of receivables under the Company's Accounts Receivable Facility. The
principal use of cash flow was to fund investing activities, primarily capital
expenditures of $5,509,000.
During the first six months of 1994, the principal uses of cash flow were to
fund investing activities, primarily capital expenditures of $4,715,000, and to
fund operations, which included increased working capital requirements of
$10,187,000, primarily as a result of the seasonal increase in receivables and
inventories related to the Consumer Products Business. Cash flow was provided
through the reduction of the Company's cash balances of $7,689,000 and net
borrowings under lines of credit of $2,000,000.
On May 10, 1995, the Company contributed 250,000 shares of its Common Stock, at
a price of $7.56 per share, to the Kerr Group, Inc. Retirement Income Plan. The
contribution reduced Kerr's pension liability by $1,891,000.
Since the third quarter of 1990, the Company has not declared any dividends on
its Common Stock. The Company's Senior Note Agreement, Accounts Receivable
Facility and line of credit limit the payment of dividends on Common Stock.
Under the most restrictive covenant of such agreements, $500,000 was available
for the payment of dividends on Common Stock as of June 30, 1995.
The ratio of current assets to current liabilities decreased to 2.2 at June 30,
1995 from 2.5 at December 31, 1994. The ratio of total debt to total
capitalization decreased to 62% at June 30, 1995 from 63% at December 31, 1994.
As of June 30, 1995, the Company had short-term financing of $20,000,000 which
includes: i) an Accounts Receivable Facility maturing on January 18, 1997 under
which the maximum amount that can be advanced to the Company pursuant to the
sale of trade accounts receivable is $10,000,000 and ii) a $10,000,000 line of
credit committed through April 30, 1996.
At June 30, 1995, the Company had unused sources of liquidity consisting of cash
and cash equivalents of $1,263,000, unused committed credit under a bank line of
credit of $4,800,000, of which $4,562,000 could be borrowed under the terms of
the Company's Senior Note Agreement, additional available net advances under the
Company's Accounts Receivable Facility of $5,081,000, tax net operating loss
carryforwards of $4,399,000 and certain tax credit carryforwards of $1,830,000.
The Company believes that its financial resources, including internally
generated funds and amounts available under its Accounts Receivable Facility and
line of credit, are adequate to meet its foreseeable needs.
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<PAGE> 11
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
An agency of the Canadian government has made a preliminary determination
of dumping of home canning supplies in Canada by U.S. exporters, which
includes Kerr. An inquiry is in process to determine whether Canadian
producers of home canning supplies were materially injured by the dumping.
If the Canadian producers cannot prove material injury, the proceedings
will be terminated. The Company believes that it has meritorious defenses
in the proceedings.
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
None
b. Reports on Form 8-K
There were no reports filed on Form 8-K for the three months ended June 30,
1995.
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.
August 10, 1995 By /s/ D. Gordon Strickland
-------------------------------
D. Gordon Strickland
Senior Vice President, Finance,
Chief Financial Officer
August 10, 1995 By /s/ J. Stephen Grassbaugh
------------------------------
J. Stephen Grassbaugh
Vice President, Controller,
Chief Accounting Officer
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S CONSOLIDATED STATEMENTS OF EARNINGS (LOSS) AND CONSOLIDATED BALANCE
SHEETS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 1,263
<SECURITIES> 0
<RECEIVABLES> 18,342
<ALLOWANCES> 115
<INVENTORY> 33,774
<CURRENT-ASSETS> 57,882
<PP&E> 107,977
<DEPRECIATION> 58,271
<TOTAL-ASSETS> 125,636
<CURRENT-LIABILITIES> 26,686
<BONDS> 50,000
<COMMON> 2,113
0
9,748
<OTHER-SE> 22,029
<TOTAL-LIABILITY-AND-EQUITY> 125,636
<SALES> 72,282
<TOTAL-REVENUES> 72,367
<CGS> 53,922
<TOTAL-COSTS> 53,922
<OTHER-EXPENSES> 16,557
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,026
<INCOME-PRETAX> (1,138)
<INCOME-TAX> (466)
<INCOME-CONTINUING> (672)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (672)
<EPS-PRIMARY> (0.29)
<EPS-DILUTED> (0.29)
</TABLE>
