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 March 31, 1996 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 March 31, 1996, Sealright Co., Inc. had 11,071,991 shares of
Common Stock outstanding. The market value of stock held by non-
affiliates is approximately $75,776,630.
SEALRIGHT CO., INC. AND SUBSIDIARIES
FORM 10-Q
MAY 10, 1996
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, 1995.
<PAGE>
SEALRIGHT CO., INC. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENT
FOR THE QUARTERS ENDED MARCH 31, 1996 and 1995
(In Thousands Except Per Share Data)
(Unaudited)
1996 1995
Net Sales $66,445 $ 70,614
Cost of Sales 57,525 57,494
Gross Profit 8,920 13,120
Selling, General & Admin. Expense 8,795 8,013
Other Expense 234 388
Restructuring Expense 1,629 --
Operating Income (Loss) (1,738) 4,719
Interest Expense 1,350 1,147
Income (Loss) Before Income Taxes (3,088) 3,572
Provision for Income Taxes (Benefit) (1,197) 1,485
NET INCOME (LOSS) $(1,891) $ 2,087
NET INCOME (LOSS) PER SHARE $ (0.17) $ 0.19
AVERAGE NUMBER OF COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING 11,072 11,096
<PAGE>
SEALRIGHT CO., INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
MARCH 31, 1996 and DECEMBER 31, 1995
(In Thousands)
(Unaudited)
March 31, 1996 December 31, 1995
ASSETS
Current Assets
Cash $ 570 $ 6,017
Accounts Receivable 30,722 22,591
Inventories (Note 3) 42,437 39,848
Income Taxes Receivable 4,488 --
Deferred Tax Asset 1,780 190
Other Current Assets 5,250 2,449
Total Current Assets 85,247 71,095
Property, Plant & Equipment 241,629 240,065
Less: Accumulated Depreciation 100,342 97,762
Total Property, Plant and Equipment 141,287 142,303
Intangibles 14,232 14,699
TOTAL ASSETS $240,766 $228,097
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Current Maturities of Long-Term Debt $ 6,200 $ 6,200
Accounts Payable 21,725 12,874
Accrued Vacation 3,311 3,253
Accrued Workers' Compensation Reserve 2,281 2,675
Restructuring Liability 2,701 3,259
Accrued Liabilities 3,728 1,989
Total Current Liabilities 39,946 30,250
Long-Term Debt 81,350 77,400
Deferred Income Taxes 16,867 14,168
Post-Retirement Benefits 2,287 2,241
Pension Liability 917 917
Restructuring Liability 600 1,105
Stockholders' Equity
Common Stock, Par Value $.10
Authorized 20,000,000 shares;
issued and outstanding 11,071,991
as of March 31, 1996 and December 31,
1995, respectively 1,107 1,107
Paid-In Capital 14,911 14,911
Retained Earnings 82,781 85,998
Total Stockholders' Equity 98,799 102,016
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $240,766 $228,097
SEALRIGHT CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE QUARTERS ENDED MARCH 31, 1996 and MARCH 31, 1995
(In Thousands)
(Unaudited)
1996 1995
Cash Flows from Operating Activities:
Net Income (Loss) $(1,891) $ 2,087
Adjustments to Reconcile Net Income (Loss)
to Net Cash Provided by Operating Activities:
Depreciation & Amortization 4,891 4,724
Deferred Tax Provision (1,216) 1,411
LIFO Reserve Provision 332 114
Changes in Assets and Liabilities:
Accounts Receivable, Net (8,132) (5,388)
Inventories (2,921) (7,145)
Accounts Payable 8,850 2,571
Other (3,061) (1,828)
Total Adjustments $(1,257) $(5,541)
Net Cash Used In Operating Activities $(3,148) $(3,454)
Cash Flows from Investing Activities:
Capital Expenditures $(4,920) $(4,626)
Proceeds from Disposal of Equipment -- 1
Net Cash Used in Investing Activities: $(4,920) $(4,625)
Cash Flows from Financing Activities:
Net Borrowings Under Revolving
Credit Agreement $ 5,500 $10,000
Proceeds from Common Stock Issued -- 140
Principal Payments of Long-Term Debt (1,550) (1,664)
Dividends Paid (1,329) (1,328)
Net Cash Provided by Financing Activities $ 2,621 $ 7,148
Net Decrease in Cash $(5,447) $ (931)
Cash, Beginning of Year 6,017 1,057
Cash, End of First Quarter $ 570 $ 126
<PAGE>
SEALRIGHT CO., INC. AND SUBSIDIARIES
10Q
MARCH 31, 1996
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - FINANCIAL STATEMENT PRESENTATION
The information included in these condensed consolidated
financial statements reflects all adjustments (consisting only of
normal recurring accruals) which, in the opinion of management, are
necessary for a fair statement of the results for the interim
periods presented.
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, 1995.
NOTE 3 - INVENTORIES
Inventories at March 31, 1996 and December 31, 1995, were:
1996 1995
(In Thousands)
Inventories Carried on LIFO Basis
Raw Materials $15,742 $13,395
Work-In-Process 6,397 9,163
Finished Goods 16,503 12,714
$38,642 $35,272
LIFO Reserve (1,798) (1,466)
Inventories Carried on LIFO Basis $36,844 $33,806
Inventories Carried on Average or FIFO Basis 5,593 6,042
$42,437 $39,848
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 March 31, 1996, 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
ending March 31, 1996, 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 - STATEMENT OF CASH FLOWS
Supplemental cash flow information is (in thousands):
1996 1995
Interest Paid (Net of Amount Capitalized) $ 1,359 $ 940
Income Taxes Paid 25 71
<PAGE>
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS
AND FINANCIAL CONDITION
Results of Operations
Net sales for the first quarter of 1996 were $66.4 million, a
decrease of 5.9% from the previous year's first quarter.
Significant growth in key strategic businesses such as sleeve
labeling and paperboard food packaging was offset by expected
decreases in three other areas: flexible packaging, primarily for
condiments, because of heavy orders during the prior year's quarter
as customers built inventory ahead of price increases; nonstrategic
businesses such as diaper bags because of the Company's planned
exit from those areas; and some lines of frozen dairy dessert
packaging, because of the Company's mid-1995 loss of business from
two large customers.
Gross profit margins of 13.4% were down from the same quarter
of 1995 by 5.2 percentage points due primarily to the
inefficiencies resulting from the shut-down of paperboard packaging
operations in the DeSoto, Kansas plant and the related transfer of
equipment and business to the Fulton, New York and Los Angeles,
California plants. Additionally, low volumes and manufacturing
inefficiencies negatively affected the operations in the Los
Angeles rigid plastic packaging plant and the San Leandro,
California flexible packaging plant.
First quarter SG&A expenses of $8.8 million were $800 thousand
or 9.8% above the prior year due to reorganization expenses ($278
thousand) and Information Systems implementation costs ($141
thousand), as well as increased expenses related to expansion of
international business ($20 thousand), increased bad debt reserves
($119 thousand) and workers' compensation expense ($242 thousand).
Interest expense for the quarter of $1.3 million was $200
thousand above the prior year due to reduced levels of interest
capitalization.
The Restructuring Expense in the first quarter of $1.6 million
consisted primarily of costs associated with the relocation of
equipment and transfer of business from the DeSoto, Kansas plant to
the Fulton, New York plant. The DeSoto facility closure
represented the first phase of the Company's facilities
consolidation plan with a significant amount of the costs
associated with this phase occurring in the first quarter.
Liquidity and Capital Resources
During the first quarter the net loss of $1.9 million as well
as the seasonal increases in inventories and accounts receivable
were the primary factors in the $3.1 million use of cash by
operating activities. Capital expenditures of $4.9 million were
directed primarily at plant consolidation activities, cost saving
initiatives and the Company's new Information System.
At March 31, 1996, the Company had borrowed $5.5 million against
its $30 million bank line of credit, at an average interest rate of
5.8%. It is anticipated that additional borrowings on the line of
credit will be required to meet short term working capital needs.
During the first quarter, the Company made a scheduled principal
repayment of $1.55 million on outstanding senior notes. In the
opinion of management, the $30 million line of credit is adequate
to meet working capital and investment needs for the balance of the
year.
<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
Form 8-K was filed April 4, 1996, related to the
change of certifying accountants from Arthur Andersen LLP to KPMG
Peat Marwick LLP.
<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: May 13, 1996 /s/ Charles F. Marcy
By: Charles F. Marcy
President & C.E.O.
Date: May 13, 1996 /s/ John T. Carper
By: John T. Carper
Senior Vice President
Finance & C.F.O.
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