SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of The Securities Exchange Act of 1934
For Quarter Ended September 30, 1995 Commission file number 0-14825
SEALRIGHT CO., INC.
(Exact name of registrant as specified in its charter)
Delaware 16-0876812
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
7101 College Boulevard, Overland Park, Kansas 66210-1891
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 913-344-9000
_________________________________________________________________
Former name, former address and former fiscal year, if changed
since last report.
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.
(1) Yes X No (2) Yes X No
As of September 30, 1995, Sealright Co., Inc. had 11,071,991 shares
of Common Stock outstanding. The market value of stock held by
non-affiliates is approximately $79,050,000.
SEALRIGHT CO., INC. AND SUBSIDIARIES
FORM 10-Q
November 6, 1995
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
INTRODUCTORY COMMENTS
The Consolidated Financial Statements included herein have been
prepared by Management, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to
such rules and regulations, although Management believes that the
disclosures are adequate to enable a reasonable understanding of
the information presented. It is suggested that these Consolidated
Financial Statements be read in conjunction with the financial
statements and the notes thereto included in the Company's Annual
Report on Form 10K, for the year ended December 31, 1994.
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SEALRIGHT CO., INC. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
FOR THE PERIODS ENDED September 30, 1995 and 1994
(In Thousands Except Per Share Data)
(Unaudited)
<CAPTION>
Nine Months
3rd Quarter Ended September 30
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Net Sales $76,151 $79,724 $230,824 $228,697
Cost of Sales 63,237 61,550 187,109 175,717
Gross Profit 12,914 18,174 43,715 52,980
Selling, General & Admin. Expense 9,561 9,596 27,043 28,745
Operating Income 3,353 8,578 16,672 24,235
Interest Expense 1,243 654 3,743 2,462
Other 365 456 1,148 1,244
Income Before Income Taxes 1,745 7,468 11,781 20,529
Provision for Income Taxes 698 2,976 4,695 8,224
NET INCOME $ 1,047 4,492 $ 7,086 $ 12,305
NET INCOME PER SHARE $ 0.09 $ 0.41 $ 0.64 $ 1.11
AVERAGE NUMBER OF COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING 11,072 11,070 11,095 11,068
</TABLE>
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<TABLE>
SEALRIGHT CO., INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, 1995 and December 31, 1994
(In Thousands)
(Unaudited)
<CAPTION>
September 30, 1995 December 31, 1994
ASSETS
<S> <C> <C>
Current Assets
Cash $ 708 $ 1,057
Accounts Receivable 29,569 25,281
Inventories (Note 3) 50,171 46,969
Other Current Assets 2,293 2,003
Total Current Assets 82,741 75,310
Property, Plant & Equipment 247,552 232,233
Less: Accumulated Depreciation 95,858 83,685
Total Property, Plant and Equipment 151,694 148,548
Intangibles 15,842 17,516
TOTAL ASSETS $250,277 $241,374
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current Liabilities
Current Maturities of Long-Term Debt $ 6,375 $ 6,791
Accounts Payable 18,205 15,929
Accrued Vacation 3,603 3,306
Accrued Workers' Compensation Reserve 2,111 2,473
Accrued Income Taxes 3,973 1,684
Accrued Liabilities 4,071 5,225
Total Current Liabilities 38,338 35,408
Long-Term Debt 76,341 74,135
Deferred Income Taxes 16,654 16,212
Post-Retirement Benefits 2,270 2,215
Pension Liability 512 512
Stockholders' Equity
Common Stock, Par Value $.10
Authorized 20,000,000 shares;
issued and outstanding 11,071,991
and 11,063,127 as of September 30,
1995 and December 31, 1994,
respectively 1,107 1,106
Paid-In Capital 14,911 14,747
Retained Earnings 100,144 97,039
Total Stockholders' Equity 116,162 112,892
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $250,277 $241,374
</TABLE>
<TABLE>
SEALRIGHT CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED September 30, 1995 and September 30, 1994
(In Thousands)
(Unaudited)
<CAPTION>
1995 1994
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income $ 7,086 $ 12,305
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities:
Depreciation & Amortization 14,697 13,072
Deferred Tax Provision 3,127 2,868
LIFO Reserve Provision 1,366 273
Changes in Assets and Liabilities:
Accounts Receivable, Net (4,288) (11,482)
Inventories (4,568) (7,427)
Accounts Payable 2,276 4,658
Other (1,420) 4,311
Total Adjustments $ 11,190 $ 6,273
Net Cash Provided By Operating Activities $ 18,276 $ 18,578
Cash Flows from Investing Activities:
Capital Expenditures $(16,814) $(33,190)
Proceeds from Disposal of Equipment 157 35
Short-Term Investments -- 10,500
Net Cash Used in
Investing Activities: $(16,657) $(22,655)
Cash Flows from Financing Activities:
Net Borrowings Under Revolving
Credit Agreement $ 7,000 $ 12,000
Proceeds from Common Stock Issued 165 --
Principal Payments of Long-Term Debt (5,151) (5,033)
Dividends Paid (3,982) (3,817)
Net Cash Provided by/(Used In)
Financing Activities $ (1,968) $ 3,150
Net Decrease in Cash $ (349) $ (927)
Cash, Beginning of Year 1,057 2,289
Cash, End of Nine Months $ 708 $ 1,362
</TABLE>
<PAGE>
SEALRIGHT CO., INC. AND SUBSIDIARIES
10-Q
SEPTEMBER 30, 1995
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - FINANCIAL STATEMENT PRESENTATION
In the opinion of Management, the accompanying unaudited
consolidated financial statements contain normal interim
adjustments necessary to present fairly the financial position of
Sealright Co., Inc. and Subsidiaries as of September 30, 1995 and
December 31, 1994, and the results of their operations for the
quarters ended September 30, 1995 and 1994.
NOTE 2 - ACCOUNTING PRINCIPLES AND POLICIES
The accompanying financial statements have been prepared
consistent with the accounting principles and policies described
more fully in Note 1 of the Company's Annual Report for the year
ended December 31, 1994.
NOTE 3 - INVENTORIES
Inventories at September 30, 1995 and December 31, 1994, were:
<TABLE>
<CAPTION>
1995 1994
(In Thousands)
<S> <C> <C>
Inventories Carried on LIFO Basis
Raw Materials $19,559 $15,139
Work-In-Process 7,917 7,986
Finished Goods 17,368 17,139
$44,844 $40,264
LIFO Reserve (1,722) (355)
Inventories Carried on LIFO Basis $43,122 $39,909
Inventories Carried on Average or FIFO Basis 7,049 7,060
$50,171 $46,969
</TABLE>
Because the inventory determination under the LIFO method can only
be made at the end of each fiscal year based on the inventory
levels and costs at that time, interim LIFO determinations,
including those at September 30, 1995, must necessarily be based on
management's estimate of expected year-end inventory levels and
costs. Since estimates of future inventory levels and prices are
subject to many factors beyond the control of management, interim
financial results are subject to final year-end LIFO inventory
amounts. Accordingly, inventory components reported for the period
ended September 30, 1995, are estimates based on management's
knowledge of the Company's production cycle, the costs associated
with this cycle and the sales and purchasing volume of the Company.
NOTE 4 - STATEMENTS OF CASH FLOWS
Supplemental cash flow information is (in thousands):
1995 1994
Interest Paid (Net of Amount Capitalized) $ 3,548 $ 1,785
Income Taxes Paid 1,530 5,106
<PAGE>
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS
AND FINANCIAL CONDITION
Results of Operations
Net sales for the third quarter of 1995 were $76.2 million, a
decrease of 4.5% from the third quarter 1994. Net sales decreased
in the Rigid Packaging Group by 3.5%, and by 11.5% in the Flexible
Packaging Group of the Company. The decrease is due to lost
business and key customer volume shortfalls in one of the three
rigid paper packaging plants, the rigid plastics plant and to
volume shortfalls in all three flexible converting plants.
The 5.8 percentage point decrease in the gross profit margin
is due to increased raw material costs and a less profitable
product mix of business. Due to contractual agreements with
certain customers, additional price rebates were given to those
customers during the quarter. In addition, the decrease in unit
volumes during the entire quarter resulted in lower levels of fixed
overhead cost coverage than in the prior year period.
Selling, general and administrative expense increased from
12.0% of net sales in the third quarter of 1994 to 12.6% of net
sales for the third quarter of 1995. The dollar increase quarter
to quarter is $35M, however with the lower net sales base, the
percentage has increased. There were increases in relocation
costs, bad debt expense and general administration costs. These
increases were offset by the non-recurrence of NLEA costs.
Interest expense for the third quarter of 1995, compared to
the third quarter of 1994, increased 90.1%. This increase is the
result of higher debt levels and significantly reduced levels of
capitalized interest. The increase in debt is attributable to an
increase in working capital requirements.
For the year-to-date, net sales have increased over 1994 by
$2.1 million, or .9%. Flexible packaging sales increased
moderately, primarily as a result of higher prices. Rigid
packaging sales are down slightly due to volume reductions and
competitive price pressures.
The gross profit margin decrease of 4.2 percentage points is
attributable to competitive forces and contract pricing primarily
in the Flexible Packaging Group, which delayed and limited the
Company's ability to pass on increased material costs. Reduced
unit volume in the Rigid Packaging Group also negatively affected
margins as well as the contractual price rebates given to certain
customers.
Selling, general and administrative expenses have decreased,
both in terms of dollars and as a percent of net sales. S.G.&A.
expenses as a percent of net sales, have decreased from 12.6% in
1994 to 11.7% in 1995. The significant decreases are reductions in
Incentive Compensation costs, workers' compensation expenses,
development costs, professional services and the non-recurrence of
NLEA costs. Additionally, ongoing efforts to control all other
selling, general and administrative costs have been effective.
Interest expense for the first nine months of 1995 has
increased $1.3 million over the comparable 1994 period. This
increase is attributable to higher debt combined with lower
capitalized interest of $.5 million.
The Company has been identified as a potentially responsible
party (PRP) at several locations by the Environmental Protection
Agency. The effect on Company operations is not expected to be
material due to the minimal quantities of the Company's wastes
involved at the sites and because other corporations included as
primary PRP's at each location have resources available to satisfy
their potential obligations.
Liquidity and Capital Resources
During the first nine months of 1995, cash provided by
operating activities was $18.3 million. Accounts receivable and
inventory levels rose 10.4% over December 31, 1994 necessitating
additional funding. Compared to the first nine months of 1994,
investment in new equipment and facilities has decreased
approximately 49% as the construction of the new DeSoto
manufacturing facility has been completed. Of the Company's $40
million line of credit $25.5 million has been drawn, leaving an
unused balance of $14.5 million as of September 30, 1995. On
October 17, 1995, the Company obtained a $75 million credit
facility from the Prudential Insurance Company of America and
issued $30 million of senior notes under this agreement. Part of
the proceeds were used to pay off the bank line of credit balance
of $25.5 million, and the balance will be used for general
corporate purposes.
<PAGE>
PART II - OTHER INFORMATION
Item 1.) Legal Proceeding
None
Item 2.) Changes in Securities
None
Item 3.) Defaults Upon Senior Securities
None
Item 4.) Submission of Matters to a Vote of Securities Holders
None
Item 5.) Other Materially Important Events
None
Item 6.) Exhibits and Reports on Form 8-K
Exhibit 27 Financial Data Schedule
<PAGE>
SALES OF UNREGISTERED SECURITIES
None
<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 thereunto duly authorized.
SEALRIGHT CO., INC.
Date: November 10, 1995 /s/ Charles F. Marcy
By: Charles F. Marcy
Chief Executive
Officer & President
Date: November 10, 1995 /s/ John T. Carper
By: John T. Carper
Chief Financial
Officer & Vice
President Finance
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000712964
<NAME> SEALRIGHT CO., INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 708
<SECURITIES> 0
<RECEIVABLES> 29,967
<ALLOWANCES> 398
<INVENTORY> 50,171
<CURRENT-ASSETS> 82,741
<PP&E> 247,552
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<CURRENT-LIABILITIES> 38,338
<BONDS> 76,341
<COMMON> 1,107
0
0
<OTHER-SE> 115,055
<TOTAL-LIABILITY-AND-EQUITY> 250,277
<SALES> 230,824
<TOTAL-REVENUES> 230,824
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<OTHER-EXPENSES> 27,925
<LOSS-PROVISION> 266
<INTEREST-EXPENSE> 3,743
<INCOME-PRETAX> 11,781
<INCOME-TAX> 4,695
<INCOME-CONTINUING> 7,086
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<NET-INCOME> 7,086
<EPS-PRIMARY> 0.64
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