-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NgEkuAGEDnkePHiJ6yuw1oE7W614MzjDTMiyPTa8Io7k049qb6pNcoXTq4IPF5rG 90NJd9r4IeN1SWCmC295Lg== 0000893220-96-001839.txt : 19961115 0000893220-96-001839.hdr.sgml : 19961115 ACCESSION NUMBER: 0000893220-96-001839 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961113 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: KERR GROUP INC CENTRAL INDEX KEY: 0000055454 STANDARD INDUSTRIAL CLASSIFICATION: PLASTICS PRODUCTS, NEC [3089] IRS NUMBER: 950898810 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-07272 FILM NUMBER: 96660659 BUSINESS ADDRESS: STREET 1: 500 NEW HOLLAND AVENUE CITY: LANCASTER STATE: PA ZIP: 17602 BUSINESS PHONE: 3105562200 MAIL ADDRESS: STREET 1: 1840 CENTURY PARK EAST CITY: LOS ANGELES STATE: CA ZIP: 90067 FORMER COMPANY: FORMER CONFORMED NAME: KERR GLASS MANUFACTURING CORP DATE OF NAME CHANGE: 19920518 10-Q 1 FORM 10-Q KERR GROUP, INC. 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 September 30, 1996 ( ) 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.) 500 New Holland Avenue, Lancaster, PA 17602 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (717) 299-6511 1840 Century Park East, Los Angeles, CA 90067 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 October 31, 1996 was 3,933,095. - 1 - 2 KERR GROUP, INC. INDEX Page No. -------- Part I. Financial Information Item 1. Financial Statements Consolidated Balance Sheets - September 30, 1996 and December 31, 1995 3 - 4 Condensed Consolidated Statements of Earnings (Loss) - Three Months and Nine Months Ended September 30, 1996 and 1995 5 Condensed Consolidated Statements of Cash Flows - Nine Months Ended September 30, 1996 and 1995 6 Notes to Condensed Consolidated Financial Statements 7 - 9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10 - 12 Part II. Other Information 13 - 2 - 3 KERR GROUP, INC. Consolidated Balance Sheets As of September 30, 1996 and December 31, 1995 (in thousands except per share data)
(Unaudited) (As Restated) September 30, December 31, Assets 1996 1995 - ------ ------------- ------------- Current assets Cash and cash equivalents $ 3,564 $ 3,904 Receivables-primarily trade accounts, less allowance for doubtful accounts of $425 at September 30, 1996 and $212 at December 31, 1995 11,195 7,154 Inventories Raw materials and work in process 6,311 7,815 Finished goods 8,769 9,933 --------- --------- Total inventories 15,080 17,748 Prepaid expenses and other current assets 2,605 3,106 Current net assets related to discontinued operations 4,710 12,847 --------- --------- Total current assets 37,154 44,759 --------- --------- Property, plant and equipment, at cost 104,279 105,725 Accumulated depreciation and amortization (64,099) (58,907) --------- --------- Net property, plant and equipment 40,180 46,818 --------- --------- Deferred income taxes 8,299 8,057 Goodwill and other intangibles, net of amortization of $2,580 at September 30, 1996 and $2,247 at December 31, 1995 6,727 6,983 Other assets 7,364 8,026 Non-current net assets related to discontinued operations 0 4,854 --------- --------- $ 99,724 $ 119,497 ========= =========
See accompanying notes to condensed consolidated financial statements. - 3 - 4 KERR GROUP, INC. Consolidated Balance Sheets As of September 30, 1996 and December 31, 1995 (in thousands except per share data)
(Unaudited) (As Restated) September 30, December 31, Liabilities and Stockholders' Equity 1996 1995 - ------------------------------------ ------------- ------------- Current liabilities Note payable to bank $ 5,856 $ 6,500 Senior debt due 1997 through 2003 classified as current 45,044 50,000 Accounts payable 7,499 9,739 Accrued expenses 7,385 8,858 Restructuring reserves 2,950 0 --------- --------- Total current liabilities 68,734 75,097 --------- --------- Accrued pension liability 13,175 18,318 Other long-term liabilities 4,451 2,175 Stockholders' equity Preferred Stock, 487 shares authorized and issued, liquidation value of $20.85 per share at September 30, 1996 and $20 per share at December 31, 1995 9,748 9,748 Common Stock, $ .50 par value per share, 20,000 shares authorized, 4,226 shares issued 2,113 2,113 Additional paid-in capital 27,239 27,239 Retained earnings (accumulated deficit) (10,200) 1,860 Treasury Stock, 293 shares at cost (6,913) (6,913) Excess of additional pension liability over unrecognized prior service cost, net of tax benefits (8,623) (10,140) --------- --------- Total stockholders' equity 13,364 23,907 --------- --------- $ 99,724 $ 119,497 ========= =========
See accompanying notes to condensed consolidated financial statements. - 4 - 5 KERR GROUP, INC. Condensed Consolidated Statements of Earnings (Loss) for the Three Months and Nine Months Ended September 30, 1996 and 1995 (in thousands except per share data)
(Unaudited) (Unaudited) Three Months Nine Months Ended September 30, Ended September 30, ------------------------ ------------------------ 1996 1995 1996 1995 -------- -------- -------- -------- Net sales $ 28,024 $ 28,240 $ 80,488 $ 81,791 Cost of sales 20,746 22,436 64,772 63,958 -------- -------- -------- -------- Gross profit 7,278 5,804 15,716 17,833 Selling, warehouse, general and administrative expense 5,665 5,997 17,964 17,671 Loss on restructuring 0 0 7,500 0 Other costs associated with restructuring 1,280 0 1,936 0 Financing costs 0 0 245 0 Interest expense 1,241 1,180 3,812 3,501 Interest and other income (78) (53) (268) (138) -------- -------- -------- -------- Loss from continuing operations before income taxes (830) (1,320) (15,473) (3,201) Provision (benefit) for income taxes 3,668 (534) (2,189) (1,304) -------- -------- -------- -------- Loss from continuing operations $ (4,498) $ (786) $(13,284) $ (1,897) Discontinued operations: Gain on sale of discontinued operations 0 0 1,564 0 Earnings (loss) from discontinued operations 0 (313) (133) 126 -------- -------- -------- -------- Net earnings (loss) related to discontinued operations 0 (313) 1,431 126 -------- -------- -------- -------- Net loss (4,498) (1,099) (11,853) (1,771) Preferred stock dividends 207 207 621 621 -------- -------- -------- -------- Net loss applicable to common stockholders $ (4,705) $ (1,306) $(12,474) $ (2,392) ======== ======== ======== ======== Net earnings (loss) per common share, primary and fully diluted: From continuing operations $ (1.20) $ (0.25) $ (3.54) $ (0.66) From discontinued operations 0.00 (0.08) 0.37 0.03 -------- -------- -------- -------- Net loss $ (1.20) $ (0.33) $ (3.17) $ (0.63) ======== ======== ======== ========
See accompanying notes to condensed consolidated financial statements. - 5 - 6 KERR GROUP, INC. Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 1996 and 1995 (in thousands)
(Unaudited) Nine Months Ended September 30, ------------------------ 1996 1995 -------- -------- Cash flows provided (used) by operations Continuing operations: Loss from continuing operations $(13,284) $ (1,897) Add (deduct) noncash items included in loss from continuing operations Expenses associated with restructuring, net of tax 5,662 0 Depreciation and amortization 7,197 6,339 Change in deferred income taxes 1,666 (664) Reduction in total pension liability, net (5,546) (94) Other, net 226 584 Changes in operating assets and liabilities Receivables (4,041) 3,328 Inventories 1,620 (1,105) Other current assets 110 345 Accounts payable (2,240) (3,878) Accrued expenses (1,074) 502 -------- -------- Cash flow provided (used) by continuing operations (9,704) 3,460 Cash flow provided by discontinued operations 8,026 4,986 -------- -------- Total cash flow provided (used) by operations (1,678) 8,446 -------- -------- Cash flows provided (used) by investing activities Continuing operations: Capital expenditures (1,488) (7,921) Payments associated with restructuring (4,064) 0 Other, net (271) (94) Discontinued operations: Capital expenditures (234) (848) Proceeds from sale of assets of Consumer Products Business 14,417 0 Other, net (970) (884) -------- -------- Cash flow provided (used) by investing activities 7,390 (9,747) -------- -------- Cash flows provided (used) by financing activities Repayment of Senior Notes and Note payable to bank (5,600) 0 Net repayments under lines of credit 0 (100) Dividends paid (207) (621) Other, net (245) 32 -------- -------- Cash flow used by financing activities (6,052) (689) -------- -------- Cash and cash equivalents Increase (decrease) during the period (340) (1,990) Balance at beginning of the period 3,904 2,261 -------- -------- Balance at end of the period $ 3,564 $ 271 ======== ======== Significant Non-Cash Transactions Contribution of 250,000 shares of Common Stock to pension plan $ 0 $ 1,891 ======== ========
See accompanying notes to condensed consolidated financial statements - 6 - 7 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 September 30, 1996, and the results of operations for the three months and nine months ended September 30, 1996 and 1995, and changes in cash flows for the nine months ended September 30, 1996 and 1995. The results of operations for the first nine months of 1996 are not necessarily indicative of the results to be expected for the full year. 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 Class B, Series D Preferred Stock and the elimination of the related dividends. The calculation of fully diluted net earnings (loss) per common share for the three months and the nine months ended September 30, 1996 and 1995 was not dilutive. The Company did not declare a dividend on its Class B, Series D Preferred Stock during the second or third quarters of 1996. The cumulative amount of undeclared dividends as of September 30, 1996 is $414,000. Under accounting rules, such dividends are not accrued until declared, however, for financial reporting purposes the amount of such dividends are shown on the face of the income statement as a deduction to arrive at net earnings (loss) applicable to common stockholders. Under the terms of an agreement with its lenders, the Company is not permitted to declare or pay any dividends on its preferred stock on or before December 9, 1996. 2) Discontinued Operations On March 15, 1996, the Company sold the manufacturing assets of the Consumer Products Business for a purchase price of $14,417,000. These proceeds were utilized for working capital, to reduce debt, including $3,500,000 of debt secured by liens on certain machinery and equipment of the Company, and to fund costs of the restructuring (see Note 3). From March 16, 1996 through September 30, 1996, the Company received $11,958,000 from the sale by the Company of the inventory of the Consumer Products Business and from the collection of the related accounts receivable. The Company expects to receive approximately $4,700,000 during the remainder of 1996 and 1997 from the sale of inventory and collection of accounts receivable of the Consumer Products Business. During the first quarter of 1996, the Company incurred a one-time pretax gain of $2,607,000 ($1,564,000 after-tax or $0.40 per common share) in connection with the sale of the manufacturing assets of the Consumer Products Business. This pretax gain has been reduced by $5,800,000 of reserves for i) retiree health care and pension expenses of $3,800,000, ii) severance and related costs of $1,000,000, iii) professional fees of $500,000, iv) asset retirements of $300,000, and v) other costs of $200,000. During the nine months ended September 30, 1996, the Company made cash payments related to such reserves for i) severance and related costs of $600,000, ii) professional fees of $500,000 and iii) other costs of $100,000. The assets and liabilities of the discontinued Consumer Products Business have been reclassified on the December 31, 1995 Consolidated Balance Sheet from the previously reported classification to separately identify them as current net assets and non-current net assets related to discontinued operations. These net assets consist of net working capital, net property, plant and equipment, other assets and intangible assets, less related liabilities. - 7 - 8 The results of the Consumer Products Business have been reported separately as a component of discontinued operations in the Condensed Consolidated Statements of Earnings (Loss). The presentation of this business as discontinued had no effect on net loss, net loss applicable to common stockholders or net loss per common share from the amounts previously reported. 3) Restructuring During the first quarter of 1996, the Company recorded an unusual loss of $7,500,000 ($4,500,000 after-tax or $1.14 per common share) for the expected costs associated with the restructuring of the Company, which included moving the corporate headquarters from Los Angeles, California to Lancaster, Pennsylvania and relocating the wide-mouth jar operations from Santa Fe Springs, California to Bowling Green, Kentucky. The pretax loss consisted of reserves for i) severance, workers' compensation and insurance continuation costs of $3,000,000, ii) costs associated with subleasing the two facilities of $2,300,000, iii) asset retirements of $1,600,000 and iv) other costs of $600,000. During the nine months ended September 30, 1996, the Company made cash payments related to such reserves for i) severance and related costs of $1,900,000 and ii) costs associated with subleasing facilities of $200,000. The relocation of the corporate headquarters and the wide-mouth jar manufacturing operations have been completed. The restructuring is expected to result in annualized pretax cost savings of approximately $6,500,000 primarily from reduced costs for employment, rentals, manufacturing overhead, utilities and freight. These cost savings are expected to be substantially realized in 1997. During the three month and nine month periods ended September 30, 1996, the Company incurred unusual pretax losses of $1,280,000 ($768,000 after-tax or $0.20 per common share) and $1,936,000 ($1,162,000 after-tax or $0.30 per common share), respectively, for restructuring costs primarily related to relocation of personnel and equipment. The Company expects to incur an additional $600,000 ($360,000 after-tax or $0.09 per common share) for restructuring costs during the remainder of 1996 and early 1997. Accounting rules require these costs to be expensed as incurred. 4) Receivables Receivables as of September 30, 1996 and December 31, 1995, as shown on the accompanying Consolidated Balance Sheets, have been reduced by net proceeds of $3,959,000 and $7,357,000, respectively, from advances pursuant to the sale of receivables under the Company's Accounts Receivable Agreement. In addition, receivables as of December 31, 1995, related to discontinued operations, included in Current Net Assets Related to Discontinued Operations on the accompanying Consolidated Balance Sheets, have been reduced by net proceeds of $343,000 from advances pursuant to the sale of receivables under the Company's Accounts Receivable Agreement. 5) Income Taxes During the quarter ended September 30, 1996, the Company recorded a charge of $4,000,000 (or $1.02 per common share) to provide a valuation reserve against its deferred income tax asset. The valuation reserve was provided due to the amount of the restructuring charges recorded in 1996 and the projected time period needed to recover the deferred income tax asset. 6) Financing During October 1996, the Company executed a commitment letter with The CIT Group/Business Credit, Inc. for $48,000,000 of financing secured by all of the Company's assets. The proceeds of the financing will permit the Company to restructure its existing indebtedness. In addition to paying the Company's Accounts Receivables Agreement, the financing permits the Company to pay $29,300,000 of the Company's $50,900,000 existing indebtedness. The Company has agreed to exchange the balance of the Company's existing debt for secured subordinated notes in the principal amount of $12,000,000 and convertible preferred stock with a liquidation preference of $13,000,000, and having no stated dividends. The subordinated notes will bear interest at the rate of 10% per annum, but will be "pay-in-kind" during the first three years. The preferred stock will be convertible into approximately - 8 - 9 748,000 shares of common stock. After the financial restructuring, the Company expects to have approximately $10,000,000 of additional borrowing availability. The Company expects to record an approximate $3,000,000 pretax gain ($1,800,000 after-tax or $0.46 per common share) related to the financial restructuring during the fourth quarter of 1996. The consummation of the restructuring will be subject to the execution and delivery of definitive loan agreements among The CIT Group/Business Credit, Inc., the holders of the existing institutional indebtedness and the Company. There can be no assurance that the restructuring will be consummated. In addition, the Company obtained an extension of waivers of certain financial covenants through December 9, 1996 for its existing institutional indebtedness and an extension of the maturity date of the unsecured Note to December 9, 1996. If the financial restructuring is not consummated and subsequent waivers of financial covenants or the extension of the maturity date of the unsecured Note are not obtained, the holders of the institutional indebtedness would be entitled to exercise certain remedies, including the acceleration of the due date for payment of the Senior Notes and the unsecured Note, and the termination of the Accounts Receivable Agreement. However, the Company believes that the financial restructuring will be consummated. The accompanying consolidated financial statements have been prepared on the basis of such belief of the Company. In connection with an amendment to the Company's Accounts Receivable Agreement effective September 30, 1996, the maximum amount that can be advanced to the Company pursuant to the sale of trade accounts receivable at any time is $8,500,000. - 9 - 10 KERR GROUP, INC. Computation of Earnings (Loss) Per Common Share (in thousands except per share data)
(Unaudited) (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, ------------------------ ------------------------ 1996 1995 1996 1995 -------- -------- -------- -------- Primary Net Earnings (Loss) Per Common Share Net loss $ (4,498) $ (1,099) $(11,853) $ (1,771) Less Preferred Stock dividends (207) (207) (621) (621) -------- -------- -------- -------- Net loss applicable to primary earnings per common share $ (4,705) $ (1,306) $(12,474) (2,392) ======== ======== ======== ======== Weighted average number of common shares outstanding 3,933 3,933 3,933 3,812 ======== ======== ======== ======== Primary net loss per common share $ (1.20) $ (0.33) $ (3.17) $ (0.63) ======== ======== ======== ======== Fully Diluted Net Earnings (Loss) Per Common Share Net loss applicable to primary earnings per common share $ (4,705) $ (1,306) $(12,474) $ (2,392) Add Preferred Stock dividends 207 207 621 621 -------- -------- -------- -------- Net loss applicable to fully diluted earnings per common share $ (4,498) $ (1,099) $(11,853) $ (1,771) ======== ======== ======== ======== Weighted average number of common shares outstanding 3,933 3,933 3,933 3,812 Common shares issuable upon assumed conversion of Preferred Stock 709 709 709 709 Incremental common shares issuable upon assumed exercise of outstanding stock options 0 3 3 20 -------- -------- -------- -------- Adjusted weighted average number of common shares outstanding 4,642 4,645 4,645 4,541 ======== ======== ======== ======== Fully diluted net loss per common share: As computed $ (0.97) $ (0.24) $ (2.55) $ (0.39) ======== ======== ======== ======== As reported (a) $ (1.20) $ (0.33) $ (3.17) $ (0.63) ======== ======== ======== ========
(a) The calculation of fully diluted net loss per common share for the three months and the nine months ended September 30, 1996 and 1995 was not dilutive. - 10 - 11 KERR GROUP, INC. Management's Discussion and Analysis of Financial Condition and Results of Operations for the Three Months and Nine Months Ended September 30, 1996 and 1995 Results of Operations Continuing Operations Net sales for the three months ended September 30, 1996 were $28,024,000 as compared to $28,240,000 for the three months ended September 30, 1995, a decrease of $216,000 or 1%. Net sales for the nine months ended September 30, 1996 were $80,488,000 as compared to $81,791,000 for the nine months ended September 30, 1995, a decrease of $1,303,000 or 2%. The decrease in net sales for the three and nine months ended September 30, 1996 over the comparable periods in 1995 was due primarily to lower unit sales of tamper-evident closures and wide mouth jars and closures. Cost of sales for the three months ended September 30, 1996 were $20,746,000 as compared to $22,436,000 for the three months ended September 30, 1995, a decrease of $1,690,000 or 8%. The decrease in cost of sales for the quarter was primarily due to sales of lower cost products, reduced unit costs due to increased production, lower costs resulting from the restructuring of the Company and lower unit sales. Cost of sales for the nine months ended September 30, 1996 were $64,772,000 as compared to $63,958,000 for the nine months ended September 30, 1995, an increase of $814,000 or 1%. The increase for the nine month period was due primarily to inefficiencies resulting from reduced production. Gross profit as a percent of net sales for the three months ended September 30, 1996 increased to 26% as compared to 21% for the three months ended September 30, 1995 due primarily to sales of higher margin products, reduced unit costs due to increased production and lower costs resulting from the restructuring of the Company. Gross profit as a percent of net sales for the nine months ended September 30, 1996 decreased to 20% as compared to 22% for the nine months ended September 30, 1995 primarily due to increased reserves for customer rebates and inventory obsolescence, and reduced production, all of which occurred in the first quarter of 1996. Selling, warehouse, general and administrative expenses decreased $332,000 or 6% during the three months ended September 30, 1996, as compared to the same period in 1995 due primarily to lower costs resulting from the restructuring of the Company. Selling, warehouse, general and administrative expenses increased $293,000 or 2% during the nine months ended September 30, 1996, as compared to the same period in 1995 due primarily to the start up of operations at the Company's new Bowling Green, Kentucky facility. During the first quarter of 1996, the Company recorded an unusual loss of $7,500,000 ($4,500,000 after-tax or $1.14 per common share) for the expected costs associated with the restructuring of the Company, which included moving the corporate headquarters from Los Angeles, California to Lancaster, Pennsylvania and relocating the wide-mouth jar operations from Santa Fe Springs, California to Bowling Green, Kentucky. The pretax loss consisted of reserves for i) severance, workers' compensation and insurance continuation costs of $3,000,000, ii) costs associated with subleasing the two facilities of $2,300,000, iii) asset retirements of $1,600,000 and iv) other costs of $600,000. During the nine months ended September 30, 1996, the Company made cash payments related to such reserves for i) severance and related costs of $1,900,000 and ii) costs associated with subleasing facilities of $200,000. - 11 - 12 The relocation of the corporate headquarters and the wide-mouth jar manufacturing operation have been completed. The restructuring is expected to result in annualized pretax cost savings of approximately $6,500,000 primarily from reduced costs for employment, rentals, manufacturing overhead, utilities and freight. These cost savings are expected to be substantially realized in 1997. During the three month and nine month periods ended September 30, 1996, the Company incurred unusual pretax losses of $1,280,000 ($768,000 after-tax or $0.20 per common share) and $1,936,000 ($1,162,000 after-tax or $0.30 per common share), respectively, for restructuring costs primarily related to relocation of personnel and equipment. The Company expects to incur an additional $600,000 ($360,000 after-tax or $0.09 per common share) for restructuring costs during the remainder of 1996 and early 1997. Accounting rules require these costs to be expensed as incurred. During the nine months ended September 30, 1996, the Company also incurred unusual expenses of $245,000 ($147,000 after-tax or $0.04 per common share) to reimburse its unsecured lenders for professional fees incurred in connection with the Company obtaining waivers of certain covenants and extension of the maturity date of an unsecured Note. Net interest expense decreased $36,000 during the three month period ended September 30, 1996 as compared to the same period in 1995. Net interest expense increased $181,000 during the nine month period ended September 30, 1996, as compared to the same period in 1995, primarily as a result of higher levels of short-term financing during the first quarter of 1996. The loss before income taxes decreased $490,000 during the three months ended September 30, 1996 as compared to the same period in 1995, due primarily to sales of higher margin products and increased production. The loss before income taxes increased $12,272,000 during the nine months ended September 30, 1996 as compared to the same period in 1995, due primarily to the impact of restructuring charges. The provision for income taxes increased $4,202,000 and decreased $885,000 during the three month and nine month periods ended September 30, 1996 as compared to the same periods in 1995, respectively, as a result of the Company recording a charge of $4,000,000 (or $1.02 per common share) to provide a valuation reserve against its deferred income tax asset. The valuation reserve was provided due to the amount of the restructuring charges recorded in 1996 and the projected time period needed to recover the deferred income tax asset. Discontinued Operations The Company had no net earnings from discontinued operations for the third quarter of 1996 as compared to $313,000 of net earnings from discontinued operations for the third quarter of 1995. The Company reported net earnings from discontinued operations of $1,431,000 for the first nine months of 1996 as compared to $126,000 for the first nine months of 1995. The net earnings in 1996 includes a pretax gain of $2,607,000 ($1,564,000 after-tax or $0.40 per common share) in connection with the sale of the manufacturing assets of the Consumer Products Business. This pretax gain has been reduced by $5,800,000 of reserves, for i) retiree health care and pension expenses of $3,800,000, ii) severance and related costs of $1,000,000, iii) professional fees of $500,000, iv) asset retirements of $300,000 and v) other costs of $200,000. During the nine months ended September 30, 1996, the Company made cash payments related to such reserves for i) severance and related costs of $600,000, ii) professional fees of $500,000 and iii) other costs of $100,000. - 12 - 13 Financial Condition During the first nine months of 1996, the principal source of cash was $14,417,000 received from the sale of the manufacturing assets of the Consumer Products Business and $8,026,000 of net cash flow related to the operations of the Consumer Products Business, which primarily relate to the liquidation of receivables and inventory. The principal uses of cash were to fund pretax losses, net debt retirements of $5,600,000, cash payments associated with the restructuring of $4,064,000 and a reduction in the net proceeds from the sale of receivables under the Company's Accounts Receivable Agreement of $3,398,000. During the first nine months of 1995, the principal source of cash was from operations, which includes $6,089,000 related to net proceeds from the sale of receivables under the Company's Accounts Receivable Agreement and $3,407,000 of proceeds from the seasonal reduction in receivables and inventories of the Consumer Products Business. The principal use of cash was to fund capital expenditures of $7,921,000. As of September 30, 1996, the Company expects to receive approximately $4,700,000 during the remainder of 1996 and 1997, from the sale to its customers of Consumer Products Business inventory and the collection of related accounts receivable. Such assets are presented as discontinued operations in the accompanying Consolidated Balance Sheets. 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 Notes, Accounts Receivable Agreement and unsecured Note limit the payment of dividends on Common Stock. Under the most restrictive covenant of such agreements, the payment of dividends on Common Stock is not permitted as of September 30, 1996. The Company did not declare a dividend on its Class B, Series D Preferred Stock during the second or third quarters of 1996. The cumulative amount of undeclared dividends as of September 30, 1996 is $414,000. Under accounting rules, such dividends are not accrued until declared. Under the terms of an agreement with its lenders, the Company is not permitted to declare or pay any dividends on its preferred stock on or before December 9, 1996. The ratio of current assets to current liabilities at September 30, 1996 and December 31, 1995 was 0.5 and 0.6, respectively. The ratio of current assets to current liabilities is less than 1.0 due to the classification of the Company's outstanding Senior Notes as a current liability because the Company was in default of certain financial covenants for which the Company has received waivers only through December 9, 1996. The ratio of total debt to total capitalization increased to 79% at September 30, 1996 from 70% at December 31, 1995 due to lower stockholders' equity. During October 1996, the Company executed a commitment letter with The CIT Group/Business Credit, Inc. for $48,000,000 of financing secured by all of the Company's assets. The proceeds of the financing will permit the Company to restructure its existing indebtedness. In addition to paying the Company's Accounts Receivables Agreement, the financing permits the Company to pay $29,300,000 of the Company's $50,900,000 existing indebtedness. The Company has agreed to exchange the balance of the Company's existing debt for secured subordinated notes in the principal amount of $12,000,000 and convertible preferred stock with a liquidation preference of $13,000,000, and having no stated dividends. The subordinated notes will bear interest at the rate of 10% per annum, but will be "pay-in-kind" during the first three years. The preferred stock will be convertible into approximately 748,000 shares of common stock. After the financial restructuring, the Company expects to have approximately $10,000,000 of additional borrowing availability. The Company expects to record an approximate $3,000,000 pretax gain ($1,800,000 after-tax or $0.46 per common share) related to the financial restructuring during the fourth quarter of 1996. - 13 - 14 The consummation of the restructuring will be subject to the execution and delivery of definitive loan agreements among The CIT Group/Business Credit, Inc., the holders of the existing institutional indebtedness and the Company. There can be no assurance that the restructuring will be consummated. In addition, the Company obtained an extension of waivers of certain financial covenants through December 9, 1996 for its existing institutional indebtedness and an extension of the maturity date of the unsecured Note to December 9, 1996. If the financial restructuring is not consummated and subsequent waivers of financial covenants or the extension of the maturity date of the unsecured Note are not obtained, the holders of the institutional indebtedness would be entitled to exercise certain remedies, including the acceleration of the due date for payment of the Senior Notes and the unsecured Note, and the termination of the Accounts Receivable Agreement. However, the Company believes that the financial restructuring will be consummated. The accompanying consolidated financial statements have been prepared on the basis of such belief of the Company. At September 30, 1996, the Company had unused sources of liquidity consisting of cash and cash equivalents of $3,564,000, additional advances available under the Accounts Receivable Agreement of approximately $2,000,000, a tax net operating loss carryforward of $17,256,000, a minimum tax credit carryforward of $812,000 and other tax credit carryforwards of $201,000. The Company believes that its financial resources, including proceeds from the sale of certain assets of the Consumer Products Business and other internally generated funds, are adequate to meet its foreseeable needs, subject to the consummation of the financial restructuring. Disclosure Regarding Forward Looking Statements Portions of the Quarterly Report on Form 10-Q include forward looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Although the Company believes that the expectations reflected in such forward looking statements are based upon reasonable assumptions, it can give no assurance that its expectations will be achieved. - 14 - 15 PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K a. Exhibits 10.2 Consent, Waiver and Amendment Agreement dated September 30, 1996 between PNC Bank, N.A., the Purchasers identified in the Note Agreement dated as of September 15, 1993, The First National Bank of Boston and the Company. b. Reports on Form 8-K There were no reports filed on Form 8-K for the three months ended September 30, 1996. 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. November 13, 1996 By /s/ D. Gordon Strickland ---------------------------------- D. Gordon Strickland President, Chief Executive Officer November 13, 1996 By /s/ Geoffrey A. Whynot ---------------------------------- Geoffrey A. Whynot Vice President, Finance Chief Financial Officer - 15 - EX-10.2 2 CONSENT, WAIVER & AMENDMENT AGREEMENT 1 EXHIBIT 10.2 2 WAIVER AGREEMENT Waiver Agreement (this "Agreement"), dated as of September 30, 1996, by and among Kerr Group, Inc., a Delaware corporation (the "Company"), PNC Bank, National Association ("PNC"), John Hancock Mutual Life Insurance Company ("John Hancock"), New York Life Insurance Company ("New York Life"), Massachusetts Mutual Life Insurance Company ("Massachusetts Mutual"), Massmutual/Carlson CBO, N.V. ("Massmutual" and, together with John Hancock, New York Life and Massachusetts Mutual, the "Note Purchasers"), and The First National Bank of Boston ("Bank of Boston" and, together with PNC and the Note Purchasers, the "Lenders"). R E C I T A L S: WHEREAS, PNC and the Company entered into that certain Receivables Purchase Agreement, dated as of January 1, 1995 (as amended, the "Receivables Purchase Agreement"); and WHEREAS, the Note Purchasers (or their predecessors in interest) and the Company entered into certain Note Agreements, each dated as of September 15, 1993, providing for the issuance and sale of $41,000,000 aggregate principal amount of the Company's 9.45% Series A Senior Notes due September 15, 2003 (the "Series A Senior Notes")and $9,000,000 aggregate principal amount of the Company's 8.99% Series B Senior Notes due September 15, 1999 (collectively with the Series A Senior Notes, the "Senior Notes")(as amended, the "Note Agreements"); and WHEREAS, Bank of Boston and the Company entered into that certain Letter Agreement, dated February 9, 1995 pursuant to which Bank of Boston extended certain financial accommodations to the Company, including a loan in the maximum principal amount of $10,000,000 evidenced by a promissory note dated February 1, 1995 to Bank of Boston in the original principal amount of $10,000,000 (collectively, the "Letter Agreement"); and WHEREAS, Bank of Boston and the Company further entered into that certain Amended and Restated Loan and Security Agreement, dated as of January 5, 1996, pursuant to which Bank of Boston amended and restated the financial accommodations extended to the Company under the Letter Agreement, which are presently evidenced by an amended and restated commercial promissory note dated January 5, 1996 to Bank of Boston in the original principal amount of $10,000,000 (collectively, the "Restated Loan Agreement"); and WHEREAS, pursuant to a certain Agreement, dated as of January 5, 1996 (the "January Consent"), PNC waived certain provisions of the Receivables Purchase Agreement, the Note Purchasers waived certain provisions of the Note Agreements and Bank of Boston waived certain provisions of the Letter Agreement; and 3 WHEREAS, pursuant to a certain Amendment Agreement, dated as of January 5, 1996 (the "Amendment Agreement"), the Note Purchasers and the Company amended certain provisions of the Note Agreements; and WHEREAS, in consideration of Bank of Boston entering into the Restated Loan Agreement, the Company granted to Bank of Boston liens on and security interests in certain of its assets, which liens and security interests were consented to by PNC and the Note Purchasers in accordance with the terms of the January Consent; and WHEREAS, in further consideration of Bank of Boston entering into the Restated Loan Agreement, Santa Fe Plastics Corporation, a California corporation ("Santa Fe"), executed and delivered to Bank of Boston a Continuing Guaranty, dated as of January 5, 1996 (the "Santa Fe Guaranty"), pursuant to which Santa Fe guaranteed the payment of the Additional Obligations (as such term is defined in the Restated Loan Agreement) to Bank of Boston; and WHEREAS, on March 15, 1996, the Company sold to Alltrista Corporation, an Indiana corporation ("Alltrista"), substantially all of its equipment, contract rights (other than those relating to the sale of finished home canning inventory), trademarks, and licenses used by Kerr in its consumer products/home canning business, and retained Alltrista as its sales agent for its finished home canning inventory (the "Alltrista Transaction"); and WHEREAS, in connection with the Alltrista Transaction, pursuant to a certain Agreement dated as of March 15, 1996 (the "March Consent"), PNC agreed to waive certain provisions, and to amend certain other provisions, of the Receivables Purchase Agreement, the Note Purchasers agreed to waive certain provisions of the Note Agreements, and Bank of Boston agreed to waive certain provisions, and to amend certain other provisions, of the Restated Loan Agreement, such waivers having been extended by subsequent agreements, dated, respectively, as of May 15, 1996 (the "May Consent"), as of June 10, 1996 (the "June Consent"), as of July 1, 1996 (the "July Consent"), as of July 31, 1996 (the "August Consent"), and as of August 30, 1996 (the "September Consent," and collectively with the January Consent, the March Consent, the May Consent, the June Consent, the July Consent, and the August Consent, the "Consents"), to and including September 30, 1996; and WHEREAS, the Company now further requests that PNC waive certain provisions of the Receivables Purchase Agreement, the Note Purchasers waive certain provisions of the Note Agreements, and Bank of Boston waive certain provisions, and amend certain other provisions, of the Restated Loan Agreement; and 2 4 WHEREAS, the Note Purchasers and the Bank of Boston have reached an agreement in principal (subject to negotiation of definitive documentation) to restructure (the "Restructuring") the existing indebtedness of the Company to such Lenders on the terms set forth on Exhibit A attached hereto. NOW, THEREFORE, in consideration of the foregoing premises and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereby agree as follows: SECTION 1. Waiver. Subject to the further provisions of this Agreement: (a) the Note Purchasers (i) waive from and including March 30, 1996 through and including December 9, 1996 any Default or Event of Default (each as defined in the Note Agreements) solely arising out of the Company's failure to comply with the provisions of Section 10.1 or 10.9 of the Note Agreements, (ii) waive from and including March 1, 1996 through and including December 9, 1996 any Default or Event of Default solely arising out of the Company's failure to comply with the provisions of Section 10.8 or 10.16 of the Note Agreements, and (iii) waive from and including September 30, 1996 any Default or Event of Default solely arising out of the Company's failure to pay the September Interest (as defined in Section 3(a) hereof) to Bank of Boston and the Note Purchasers on September 30, 1996; (b) PNC (i) waives from and including March 30, 1996 through and including December 9, 1996 any default or Termination Event (each as defined in the Receivables Purchase Agreement) solely arising out of the Company's failure to comply with Section 10.1 or 10.9 of the Note Agreements, including without limitation any default or Termination Event arising under Section 6.17 of the Receivables Purchase Agreement to the extent such default or Termination Event solely relates to Section 10.1 or 10.9 of the Note Agreements, (ii) waives from and including March 1, 1996 through and including December 9, 1996 any default or Termination Event solely arising out of the Company's failure to comply with Section 10.8 or 10.16 of the Note Agreements, including without limitation any default or Termination Event arising under Section 6.17 of the Receivables Purchase Agreement to the extent such default or Termination Event solely relates to Section 10.8 or 10.16 of the Note Agreements, and (iii) waives from and including September 30, any default or Termination Event solely arising out of the Company's failure to pay the September Interest to Bank of Boston and the Note Purchasers on September 30, 1996; and (c) Bank of Boston (i) waives from and including March 30, 1996 through and including December 9, 1996 any default or Event of Default (each as defined in the Restated Loan Agreement) solely arising out of the Company's failure to comply with 3 5 Section 10.1 or 10.9 of the Note Agreements, (ii) waives from and including March 1, 1996 through and including December 9, 1996 any default or Event of Default solely arising out of the Company's failure to comply with Section 10.8 or 10.16 of the Note Agreements, and (iii) waives from and including September 30, 1996 any default or Event of Default solely arising out of the Company's failure to pay the September Interest to Bank of Boston and the Note Purchasers on September 30, 1996. SECTION 2. Amendment to Restated Loan Agreement. (a) Amendment to Restated Loan Agreement. Bank of Boston and the Company hereby agree that the definition of "Maturity Date" in the Restated Loan Agreement is amended by deleting "September 30, 1996" and inserting therefor "December 9, 1996." (b) Amendment to Receivables Purchase Agreement. PNC and the Company hereby agree that the term "Maximum Purchaser's Net Investment" set forth in Section 1.1 of the Receivables Purchase Agreement is amended and restated to read as follows: "Maximum Purchaser's Net Investment" means $8,500,000.00 SECTION 3. Conditions to Waiver. (a) Payments. The Company will pay to Bank of Boston and the Note Purchasers the interest due to them respectively under the terms of the Restated Loan Agreement and the Note Agreements on September 30, 1996 (the "September Interest"), which payment shall be made in immediately available funds on or before the third business day following the date on which this Agreement shall have been executed and delivered by all parties hereto. (b) Default under this Section. Notwithstanding the provisions of Section 1 hereof, if the Company fails to make the payments to Bank of Boston and the Note Purchasers, respectively, due under the terms of clause (a) of this Section 3 and Section 5 or if the Company is advised by The CIT Group that it will not be able to complete a financing prior to December 9, 1996 on substantially the terms set forth in the CIT Commitment Letter (as defined below) as modified to permit the Restructuring, the consents, waivers and amendments granted and agreed to in this Agreement shall immediately be revoked, and this Agreement shall immediately terminate without further notice to the Company and shall have no further force or effect. (c) Between the date hereof and December 9, 1996 the Company shall use best efforts to complete a financing with The CIT Group on substantially the terms set forth in the commitment letter dated August 28, 1996 (the "CIT Commitment Letter") as modified to permit the Restructuring. 4 6 SECTION 4. Representations, Warranties and Covenants. (a) Corporate Power and Authority. Each party hereto represents that it has all requisite corporate power and authority to enter into and perform its obligations under this Agreement. The execution, delivery and performance of this Agreement have been duly authorized by all necessary corporate action on the part of each such party. (b) Compliance with Other Instruments, etc. The Company represents that the consummation of the transactions contemplated by this Agreement will not result in any breach of, or constitute a default under, or result in the creation of any mortgage, lien, pledge, charge, security interest or other encumbrance in respect of any property of the Company under, any indenture, mortgage, deed of trust, bank loan or credit agreement, corporate charter, by-law, or other agreement or instrument to which the Company is a party or by which the Company or any of its properties may be bound or affected, or violate any existing law, governmental rule or regulations, or any order of any court, arbitrator or governmental body, applicable to the Company or any of its properties. (c) Governmental Consent. The Company represents that no consent, approval or authorization of, or registration, filing or declaration with, any governmental authority is required for the validity of the execution and delivery by the Company of this Agreement or the consummation of the transactions contemplated hereby or thereby. (d) Principal Payments. The Company covenants, and each of the Note Purchasers and Bank of Boston hereby agree, that until December 9, 1996, the Company shall not (unless each of the Note Purchasers and Bank of Boston jointly give notice to the Company to the contrary) make any payments in addition to those required by Section 3 hereof on the outstanding principal amounts of the obligations under the Note Agreements and the Restated Loan Agreement (whether by regularly scheduled payment or mandatory or optional prepayment). (e) Dividends. The Company shall not declare or pay any dividends on its preferred stock on or before December 9, 1996. SECTION 5. Expenses. Without limiting the generality of any provision of the Receivables Purchase Agreement (as amended), the Note Agreements (each as amended), the Letter Agreement, the Restated Loan Agreement (as amended) or the Letter Agreement, dated April 12, 1996, among Nightingale & Associates, Inc., the Note Purchasers and Bank of Boston, the Company agrees that it will pay the reasonable fees, expenses and client charges of counsel for each of the Lenders and of Nightingale & Associates, Inc., for any services rendered in connection with the transactions contemplated hereby and with respect to this 5 7 Agreement and any other document delivered pursuant to this Agreement, and the Company further agrees that it will hereafter promptly pay any additional reasonable fees, expenses and client charges of counsel for the Lenders, for any services rendered in connection with the transactions contemplated hereby and with respect to this Agreement and any other document delivered pursuant to this Agreement. SECTION 6. Effectiveness. This Agreement shall become effective upon the delivery to the Company of a copy of this Agreement executed by each of the Lenders. SECTION 7. Counterparts; Separate Agreements. This Agreement may be executed simultaneously in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. SECTION 8. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to conflicts of law principles. SECTION 9. Headings. The headings of the several sections of this Agreement are inserted for convenience only and shall not in any way affect the meaning or construction of this Agreement. SECTION 10. No Other Changes. (a) Except as expressly stated herein, the Receivables Purchase Agreement (as amended), the Note Agreements (each as amended), the Restated Loan Agreement (as amended), and the Consents are unaffected hereby and shall remain in full force and effect in accordance with the respective terms thereof. (b) Except as expressly set forth herein, the Lenders do not waive (i) any breaches or defaults under the Note Agreements (each as amended), the Receivables Purchase Agreement (as amended), the Restated Loan Agreement (as amended), or any of the Consents, as the case may be, or any other agreements executed concurrently therewith or pursuant thereto, whether known or unknown, previously or hereafter arising, or of any nature or character whatsoever, or (ii) any of their respective rights or remedies thereunder or under applicable law, including (but not limited to) any Make-Whole Premium (as such term is defined in the Note Agreements) to which the Note Purchasers may be entitled pursuant to the terms of Section 9 of the Note Agreements on account of the payments due under the terms of (A) Section 4(a) and Schedule 1 to the March Consent, (B) Section 3 and Schedule 1 to the June Consent, (C) Section 3 and Schedule 1 to the July Consent, (D) Section 3 and Schedule 1 to the August Consent, and (E) Section 3 hereof and Schedule 1 to the September Consent. 6 8 SECTION 11. Reaffirmation. The Company hereby represents and warrants to the applicable Lender that each of the representations and warranties contained in the Restated Loan Agreement, the Note Agreements or the Receivables Purchase Agreement, as the case may be, were true and correct in all material respects when made and, except to the extent (a) that a particular representation or warranty by its terms expressly applies only to an earlier date, or (b) the Company has previously advised such Lender in writing as contemplated under the respective agreement, are true and correct in all material respects as of the date of this Agreement. 7 9 SECTION 12. Conflict of Terms. In the event of any inconsistency between the provisions of this Agreement and any provision of the Note Agreements (each as amended), the Receivables Purchase Agreement (as amended), the Letter Agreement or the Restated Loan Agreement (as amended), as the case may be, the terms and provisions of this Agreement shall govern and control. [The rest of this page left blank intentionally] 8 10 IN WITNESS WHEREOF, the parties hereto have signed, or caused their duly elected officer to sign on the date first written above. KERR GROUP, INC. By: /s/ D. G. Strickland -------------------------------- D. G. Strickland PNC BANK, NATIONAL ASSOCIATION By: /s/ Tom McCool -------------------------------- Senior Vice President JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY By: /s/ Stephen J. Blewitt -------------------------------- Stephen J. Blewitt NEW YORK LIFE INSURANCE COMPANY By: /s/ Karen A. Hiniker -------------------------------- Karen A. Hiniker MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY By: /s/ Michael I. Hanson -------------------------------- Michael I. Hanson Managing Director MASSMUTUAL/CARLSON CBO, N.V. /s/ Ruby Cato By: MEESPIERSON TRUST (CURACAO) N.V. -------------------------------- Ruby Cato Managing Director 9 11 THE FIRST NATIONAL BANK OF BOSTON By: /s/ W. Douglas Vannah, V.P. -------------------------------- W. Douglas Vannah, V.P. 12 EXHIBIT A KERR GROUP, INC. MODIFIED RESTRUCTURING PROPOSAL ASSUMPTIONS - New CIT Credit Facility provides $10mm immediate borrowing ability, pays off PNC Line - New CIT Credit Facility provides $29.3 mm net cash for debt paydown - Existing Sr. Notes and Bank of Boston claims exchanged for cash and new Secured Subordinated Notes and Convertible Preferred Stock which shall be shared by the Noteholders and Bank of Boston on a pro rata basis based upon the respective principal amount of their notes/loans outstanding at the closing and shall be evidenced by separate debt and equity instruments for each lender RESTRUCTURING PROPOSAL - $50.9 mm principal of Unsecured Debt Exchanged for: 1. Cash in the amount of $29.3 mm 2. Secured Subordinated Notes (subordinated only to CIT credit facility and permitted refinancings thereof which are not in excess of the then outstanding principal amount of the CIT credit facility) - New Secured Subordinated Notes of $12 mm - "Silent" second lien on all CIT collateral (including after acquired and replacement collateral) - Interest at 10%, payable quarterly, in arrears (PIK option for first three years) - Amortization as follows: $2 mm in year 5, balance due in equal installments in years 6, 7 and 8 13 - Pre-payable without penalty at any time - Cross acceleration with CIT loan documents - No dividends or distributions of any kind (including distributions of any equity securities) to be permitted on preferred or common stock until Secured Subordinated Notes are paid in full except that (i) the existing public preferred stock may continue to accrue dividends in accordance with their terms and (ii) the Company may redeem the existing public preferred stock in exchange for either (but not both of) common stock or new preferred stock having terms no more advantageous to the holders thereof than the existing public preferred stock 3. Class B Preferred Stock - Liquidation preference of $13.0 million - Pari Passu in right of payment and liquidation with all existing and outstanding preferred stock - No voting rights, except as required by law - Dividend participation with common stock - Convertible into 19% of the currently outstanding common stock (approximately 748,000 shares), at any time, at the option of the holder. Convertible into 19% of the then outstanding common stock (on a fully diluted basis) at any time prior to the third anniversary of the closing date, at the option of the Company, if on or prior to the date of such conversion all shares of any other class or series of preferred stock have converted into common stock or common stock warrants without any other consideration therefor - Demand and piggyback registration rights of common stock issuable upon conversion of preferred stock into common stock - Optional redemption of Preferred Stock, at any time prior to conversion to common stock at a redemption price equal to the liquidation preference - Payment of all accrued interest and expenses as of the Closing Date -2- EX-27 3 FINANCIAL DATA SCHEDULE
5 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. 1,000 9-MOS DEC-31-1996 JAN-01-1996 SEP-30-1996 3,564 0 11,620 425 15,080 37,154 104,279 64,099 99,724 68,734 0 0 9,748 2,113 1,503 99,724 80,488 80,756 64,772 64,772 27,645 0 3,812 (15,473) (2,189) (13,284) 1,431 0 0 (11,853) (3.17) (3.17)
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