-----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, BEHH3wLn3RAa103ffhqmwrigyQE0Lxl0aBqExXhb0ozJJkMCLP98zbldonLRTxeK C862t+Cg899hVk0kFipD6w== 0000893220-97-000036.txt : 19970114 0000893220-97-000036.hdr.sgml : 19970114 ACCESSION NUMBER: 0000893220-97-000036 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19970113 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-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-07272 FILM NUMBER: 97504966 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-K/A 1 FORM 10-K/A KERR GROUP, INC. 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K/A AMENDMENT NO. 1 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1995 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 Number) 1840 Century Park East, Los Angeles, California 90067 (Address of principal executive office) (Zip Code) Registrant's telephone number, including area code: (310) 556-2200 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange Title of each class on which registered - ------------------- ------------------- Common Stock New York Stock Exchange $1.70 Class B Cumulative Convertible Preferred Stock, Series D New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None 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 [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] The aggregate market value of the voting stock held by non-affiliates of the Registrant, as of March 15, 1996, was $25,927,179. The number of shares of the Registrant's Common Stock, $.50 par value, outstanding as of March 15, 1996, was 3,933,095. -Continued- 2 DOCUMENTS INCORPORATED BY REFERENCE Part(s) Into Document Which Incorporated -------- ------------------ (1) Proxy Statement to be used in Part III connection with the Annual Meeting of Stockholders to be held on April 30, 1996. With the exception of the pages of the Proxy Statement specifically incorporated by reference herein, the Proxy Statement is not deemed to be filed as a part of this Form 10-K. 2 3 Item 7 of Part I of the Form 10-K of Kerr Group, Inc. for the fiscal year ended December 31, 1995 (the "1995 Form 10-K") is hereby amended and restated in its entirety as stated below: ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS -- 1995 COMPARED TO 1994 Net sales of the Registrant decreased to $138,995,000 in 1995 from $139,156,000 in 1994. Net sales of the Plastic Products Business increased 2.2% to $109,187,000 in 1995 from 1994 due primarily to the pass through of resin price increases. The Registrant's plastic products manufacturing facilities operated at approximately 64% of capacity during 1995. The Plastic Products Business manufactures a variety of plastic closures, prescription packaging products, bottles and jars. Although unit sales of these products have generally increased in recent years, sales and profitability of these products are affected by the availability and pricing of resin. During the first half of 1995 and the full year 1994, the average cost per pound of polypropylene, the primary resin used by the Plastic Products Business, increased 28% and 31%, respectively. Under industry practice, the Plastic Products Business is generally able to pass on resin cost increases for all products except for prescription packaging products. However, since resin costs increased substantially, the results of the Plastic Products Business were adversely affected because the Plastic Products Business was not able to obtain general price increases from customers due to the resin price increases. In addition, not all resin increases were passed on because of competitive pricing. Resin prices have declined in the second half of 1995 and early 1996. Net sales of the Consumer Products Business decreased 7.9% to $29,808,000 in 1995 compared to 1994 due primarily to lower unit sales as a result of adverse growing conditions in 1995. During August 1994, the Registrant completed the relocation of its home canning cap and lid manufacturing operations to Jackson, Tennessee from Chicago, Illinois. The new facility was expected to generate improved efficiencies and cost reductions of approximately $3,000,000 pre-tax per year ($1,836,000 after-tax, or 50 cents per common share per year). In anticipation of the relocation, the Registrant produced home canning caps and lids in excess of normal requirements. As a result, the Registrant did not expect to realize significant earnings improvement from the relocation until 1996, when inventories and production volume would approach normal levels. During 1995, the Consumer Products Business cap and lid manufacturing facility operated at approximately 33% of capacity, partially as a result of the Registrant reducing its cap and lid inventory. Cost of sales of the Registrant increased to $108,964,000 in 1995 compared to $96,356,000 in 1994 primarily due to higher resin costs in the Plastic Products Business and the sale of higher cost inventory in the Consumer Products Business. Gross profit as a percent of net sales decreased to 21.6% for 1995 as compared to 30.8% for 1994 due to substantially higher resin costs and competitive pricing in the Plastic Products Business, and the sale of higher cost inventory produced during 1994 and higher customer rebates in the Consumer Products Business. Selling, warehouse, general and administrative expenses decreased $398,000 or 1.2% during 1995, as compared to 1994. 3 4 Segment earnings of the Plastic Products Business decreased $7,213,000 to $4,842,000 in 1995 compared to $12,055,000 in 1994 primarily due to substantially higher resin costs and competitive pricing. Segment earnings of the Consumer Products Business decreased to a loss of $1,590,000 in 1995 compared to earnings of $3,213,000 in 1994 primarily due to the sale of higher cost inventory produced during 1994, higher customer rebates and lower sales volume due to adverse weather conditions. In 1995, the Registrant incurred a $1,000,000 unusual loss related to the write-down in the book value of land formerly used by the Registrant as a glass container manufacturing plant. Such write-down was necessitated by additional declines in the market value of commercial real estate in Southern California during 1995. Earnings before interest and income taxes decreased $13,371,000 to a loss of $3,006,000 in 1995 compared to earnings of $10,365,000 in 1994 due primarily to lower earnings in both the Consumer Products and Plastic Products Businesses. Net interest expense increased $1,203,000 during 1995 compared to 1994 due to higher levels of debt and interest charged on advances under the Accounts Receivable Agreement. The decrease in the income tax provision in 1995 compared to 1994 is due to lower pre-tax earnings. Due to competitive pressures, there are occasions when the Registrant is unable to pass on to customers cost increases. Other than the inability on all occasions to pass on cost increases, inflation and changes in prices did not have a material effect on the Registrant's results of operations. Subsequent Event On March 15, 1996, the Registrant sold certain assets of the Consumer Products Business for a purchase price of approximately $14,500,000 and announced a restructuring which will include the relocation of the Registrant's principal executive office and the consolidation of certain manufacturing facilities. The Registrant also expects to receive approximately $16,500,000, primarily during the remainder of 1996, from the Registrant's sale to consumer products customers of the inventory of the Consumer Products Business and from the collection of the accounts receivable of the Consumer Products Business. These proceeds will be utilized for working capital, to reduce debt, including $3,500,000 of debt secured by liens on certain machinery and equipment of the Registrant, and to fund costs of the restructuring. In connection with the sale of Consumer Products Business assets, the Registrant will report in the first quarter of 1996 a one-time pretax gain of approximately $2,900,000 ($1,740,000 after-tax or $0.44 per common share). Also during the first quarter of 1996, the Registrant will report a one-time pretax loss of approximately $7,700,000 ($4,620,000 after-tax or $1.17 per common share) associated with the restructuring. The loss on the restructuring includes provisions for severance costs and related benefits, net loss on subleases, write-off of fixed assets and certain intangible assets, and legal and professional fees. In addition to the loss recorded on the restructuring, the Registrant will incur additional non-recurring pretax losses during 1996 and early 1997 associated with the restructuring of $2,400,000 ($1,440,000 after-tax or $0.37 per common share) primarily related to equipment and personnel relocation costs, inefficiences related to the relocation of operations and start-up costs which accounting rules require to be expensed as incurred. The restructuring is expected to result in annualized cost savings of approximately $6,500,000 primarily from reduced employment costs, lease costs, offices expenses, manufacturing overhead and freight. These cost savings will be substantially realized in 1997. 4 5 Recently Issued Accounting Pronouncements During 1995, the Financial Accounting Standards Board issued Statement No. 121, Accounting for the Impairment of Long-Lived Assets (FASB No. 121), and Statement No. 123, Accounting for Stock-Based Compensation (FASB No.123). FASB No.121 establishes accounting standards for the impairment of long-lived assets, certain identifiable intangibles and goodwill. FASB No. 121 will be adopted during 1996 and is not expected to have a material effect on the Registrant's financial position or results of operations. FASB No.123 establishes a "fair value" method of accounting for the value of grants under stock-based compensation plans. As permitted under FASB No. 123, the Registrant will elect to continue to measure compensation expense related to employee stock option plans utilizing the intrinsic value method as prescribed by APB Opinion No. 25. However, beginning in 1996, the Registrant will disclose in the footnotes to its financial statements the proforma effect on net income and earnings per common share as if the fair value method of measuring compensation expense related to employee stock option plans was utilized as described in FASB No.123. RESULTS OF OPERATIONS -- 1994 COMPARED TO 1993 Net sales of the Registrant increased to $139,156,000 in 1994 from $127,372,000 in 1993. Net sales of the Plastic Products Business increased 8.4% to $106,792,000 in 1994 from 1993. The Registrant's plastic products manufacturing facilities operated at approximately 74% of capacity during 1994. Net sales of the Consumer Products Business increased 12.2% to $32,364,000 in 1994 compared to 1993 due primarily to higher unit sales as a result of favorable growing conditions in 1994. During August 1994, the Registrant completed the relocation of its home canning cap and lid manufacturing operations to Jackson, Tennessee from Chicago, Illinois. During August through December of 1994, the Registrant's cap and lid manufacturing facility operated at approximately 26% of capacity. This level of operations primarily resulted because the new plant was in its start-up phase. Cost of sales of the Registrant increased to $96,356,000 in 1994 compared to $88,922,000 in 1993 primarily due to higher unit sales and higher resin costs. Gross profit as a percent of net sales increased to 30.8% for 1994 as compared to 30.2% for 1993. Selling, warehouse, general and administrative expenses increased $2,340,000 or 7.8% during 1994, as compared to 1993, primarily due to higher selling expenses, additional employees and salary and wage increases. The Registrant recorded a pre-tax reserve of $4,500,000 in 1993 for the expected costs associated with the relocation of the home canning cap and lid manufacturing operations. The pre-tax loss consisted primarily of accruals for i) the early recognition of retiree health care and pension expense, severance, workers' compensation costs and insurance continuation costs of approximately $2,500,000, ii) asset retirement and related facility closing costs of approximately $1,000,000 and iii) moving and relocation costs of approximately $700,000. In 1994, the Registrant made cash payments related to such accruals for i) the early recognition of retiree health care and pension expense, severance, workers' compensation costs and insurance continuation costs of approximately $1,500,000, ii) asset retirement and related facility closing costs of approximately $600,000, iii) moving and relocation costs of approximately $600,000 and iv) other costs of approximately $300,000. In addition, during 1994, approximately $300,000 5 6 was charged against such accruals related to the book value of fixed assets retired. The remaining accruals primarily relate to retiree health costs and pensions which will be paid over a number of years. Segment earnings of the Plastic Products Business, increased $627,000 to $12,055,000 in 1994 compared to $11,428,000 in 1993 primarily due to higher sales. Segment earnings of the Consumer Products Business increased to $3,213,000 in 1994 compared to $1,793,000 in 1993, excluding the loss on plant relocation in 1993, due primarily to higher sales as a result of favorable growing conditions. Earnings before interest and income taxes increased $2,010,000 to $10,365,000 in 1994 compared to $8,355,000 in 1993, excluding the loss on plant relocation in 1993, due primarily to higher earnings in both the Consumer Products and Plastic Products Businesses. Net interest expense decreased $206,000 during 1994, as compared to 1993, as a result of a refinancing in 1993. The increase in the income tax provision in 1994 compared to 1993 is due to higher pre-tax earnings and the recognition in 1993 of an income tax benefit of $369,000 related to a reduction in the income tax valuation reserve. During 1993, the Registrant incurred an after-tax loss of $1,300,000 in connection with the refinancing on September 21, 1993 of its 13% Subordinated Notes and the termination of its revolving credit facility. The extraordinary loss included interest expense on the 13% Subordinated Notes from September 21, 1993 through December 15, 1993 (the date on which the Subordinated Notes were redeemed at par) and the write-off of unamortized debt fees and related costs. LIQUIDITY AND CAPITAL RESOURCES During 1995, the principal use of cash flow was to fund investing activities, primarily capital expenditures of $11,840,000. Cash flow was provided primarily through net advances on accounts receivable sold under the Registrant's Accounts Receivable Agreement of $7,700,000 and a $3,249,000 reduction in inventory. During 1994, the principal use of cash flow was to fund capital expenditures of $15,648,000. Cash flow was provided through the reduction of the Registrant's cash balances of $9,068,000 and cash from financing activities of $5,457,000. During 1994 and 1993, inventories increased by $6,258,000 and $5,712,000, respectively, due primarily to a) increases in inventories of home canning caps and lids in anticipation of the relocation of the home canning cap and lid plant and as a result of low sales levels in 1993, and b) increases in inventories of the Plastic Products Business due to higher quantities and costs of resin, and higher quantities of finished goods. During 1995, the Registrant 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 the Registrant's recorded pension liability by $1,891,000. Capital expenditures of approximately $6,000,000 are planned for 1996. Since the third quarter of 1990, the Registrant has not declared any dividends on its Common Stock. The Registrant's Senior Note Agreement limits the payment of dividends on Common Stock. Under the most restrictive covenant, the payment of Common Stock dividends is not permitted at December 31, 1995. 6 7 The ratio of current assets to current liabilities at December 31, 1995 and 1994 was 0.6 and 2.5, respectively. The decline in the ratio of current assets to current liabilities at December 31, 1995, compared to December 31, 1994, is due primarily to i) the classification of the Registrant's $50,000,000 of outstanding senior debt as short-term because the Registrant was in default of certain financial covenants and was currently unable to obtain waivers beyond May 15, 1996 and ii) advances on accounts receivable sold under the Accounts Receivable Agreement. At December 31, 1995 and 1994, the ratio of total debt to total capitalization was 70.3% and 62.7%, respectively. The increase in the ratio of total debt to total capitalization is primarily due to lower stockholders' equity. The Registrant has recorded deferred income tax assets of $9,808,000 on its Consolidated Balance Sheet as of December 31, 1995. In order to fully realize this deferred income tax asset, the Registrant will need to generate future taxable income of at least $35,000,000 prior to expiration of net operating loss carryforwards which will begin to expire in 2006. Based upon the Registrant's recent pre-tax earnings adjusted for significant nonrecurring items, the sale of certain assets of the Consumer Products Business and cost savings related to the restructuring announced March 15, 1996 and projections of future taxable income over the period in which the deferred income tax assets are deductible, management believes it is more likely than not that the Registrant will realize the benefit of the deferred income tax asset. There can be no assurance, however, that the Registrant will generate any specific level of continuing earnings. As of December 31, 1995, the Registrant had an Accounts Receivable Agreement (Receivable Agreement) maturing on January 18, 1997 to meet the seasonal working capital needs of the Registrant. The Receivable Agreement permits the Registrant to sell its trade accounts receivable on a nonrecourse basis. Under the Receivable Agreement, the maximum amount that can be advanced to the Registrant pursuant to the sale of trade accounts receivable at any time is $13,500,000, which amount is reduced on April 15, 1996 to $10,000,000. The reduction occurred because the sale of assets of the Consumer Products Business reduced the working capital needs of the Registrant. The Registrant retains collection and service responsibility, as agent for the purchaser, over any receivables sold. Advances under such Receivable Agreement are subject to certain limitations. As of December 31, 1995, receivables as shown on the accompanying Consolidated Balance Sheet have been reduced by net proceeds of $7,700,000 from advances pursuant to the sale of receivables under the Registrant's Receivable Agreement. The Receivable Agreement contains covenants identical to the Senior Notes. In addition, at December 31, 1995, the Registrant owed $6,500,000 under a note payable to a bank due April 15, 1996 with interest accrued at the prime rate (Unsecured Note Payable). The Unsecured Note Payable was originally related to a $10,000,000 bank line of credit, which effective October 24, 1995 was reduced by the lender to the then outstanding balance of $6,500,000 due to a decline in the Registrant's financial performance. The line of credit contains covenants identical to the Senior Notes. On January 5, 1996, the Registrant borrowed $3,500,000 from the same bank under a note payable secured by certain machinery and equipment (Secured Note Payable). On March 15, 1996, the Registrant used a portion of the proceeds from the sale of certain assets of the Consumer Products Business to pay the $3,500,000 Secured Note Payable, and to prepay $3,540,000 of Senior Notes and $460,000 of the Unsecured Note Payable. After the payment of the Secured Note Payable, the indebtedness of the Registrant was unsecured. 7 8 In connection with the sale of certain assets of the Consumer Products Business, the Registrant obtained waivers of certain financial covenants through May 15, 1996 from the lenders under the Senior Notes, the lender under the Unsecured Note Payable and the purchaser under the Receivable Agreement (collectively referred to as "Lenders") and an extension of the maturity date of the Unsecured Note Payable to May 15, 1996. Discussions between the Lenders and the Registrant are continuing with respect to the further extension of the maturity of the Unsecured Note Payable, additional waiver of financial covenants and additional reduction of indebtedness. Although the Registrant has obtained waivers or amendments from the Lenders on three previous occasions, there can be no assurance that the Lenders will agree to further waivers. If additional waivers of financial covenants or the extension of the maturity date of the Unsecured Note Payable are not obtained, the Lenders would be entitled to exercise certain remedies, including the acceleration of the due date for payment of the Senior Notes or the Unsecured Note Payable, and the terminination of the Receivable Agreement. Based upon the past experience of the Registrant in obtaining waivers or amendments from its Lenders and because the Registrant expects to use a portion of the proceeds from the sale of inventory and collection of accounts receivables of the Consumer Products Business to further reduce debt, the Registrant believes that the Lenders will extend the due date of the Unsecured Note Payable, will not accelerate the due date for payment of the Senior Notes and will not terminate the Receivable Agreement. The accompanying consolidated financial statements have been prepared on the basis of such belief of the Registrant. At December 31, 1995, the Registrant had unused sources of liquidity consisting of cash and cash equivalents of $3,904,000, additional advances under the Receivable Agreement of $300,000, a tax net operating loss carryforward of $17,209,000, a minimum tax credit carryforward of $1,083,000 and other tax credit carryforwards of $75,000. The Registrant 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 satisfactory resolution of current discussions with the Lenders. 8 9 Item 8 of Part I of the 1995 Form 10-K is hereby amended and restated in its entirety as stated below: ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Page(s) ------- Independent Auditors' Report 10 Consolidated Balance Sheets - December 31, 1995 and 1994 11-12 Consolidated Statements of Earnings (Loss) - Three Years Ended December 31, 1995 13 Consolidated Statements of Cash Flows - Three Years Ended December 31, 1995 14 Consolidated Statements of Common Stockholders' Equity - Three Years Ended December 31, 1995 15 Notes to Consolidated Financial Statements 16-37
9 10 INDEPENDENT AUDITORS' REPORT To the Stockholders and Board of Directors of Kerr Group, Inc. We have audited the consolidated financial statements of Kerr Group, Inc. and subsidiaries as listed in the accompanying index. In connection with our audits of the consolidated financial statements, we have also audited the financial statement schedule as listed in the accompanying index. These consolidated financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Kerr Group, Inc. and subsidiaries as of December 31, 1995 and 1994, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 1995 in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basis consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein. KPMG PEAT MARWICK LLP Los Angeles, California March 15, 1996 10 11 CONSOLIDATED BALANCE SHEETS
Years Ended December 31, 1995 1994 --------- --------- (in thousands) ASSETS Current assets Cash and cash equivalents $ 3,904 $ 2,261 Receivables - primarily trade accounts, less allowance for doubtful accounts of $421 in 1995 and $170 in 1994 7,430 16,312 Inventories Raw materials and work in process 11,245 11,156 Finished goods 19,796 23,134 --------- --------- Total inventories 31,041 34,290 Prepaid expenses and other current assets 3,108 4,526 --------- --------- Total current assets 45,483 57,389 Property, plant and equipment, at cost Land 427 427 Buildings and improvements 13,589 12,577 Machinery and equipment 93,401 84,462 Furniture and office equipment 6,035 5,381 --------- --------- 113,452 102,847 Accumulated depreciation and amortization (61,937) (54,506) --------- --------- Net property, plant and equipment 51,515 48,341 Deferred income taxes 8,057 2,192 Goodwill and other intangibles, net of amortization of $2,291 in 1995 and $1,812 in 1994 7,140 6,622 Other assets 8,026 9,156 --------- --------- $ 120,221 $ 123,700 ========= =========
See accompanying notes to consolidated financial statements. 11 12 CONSOLIDATED BALANCE SHEETS (continued)
Years Ended December 31, 1995 1994 --------- --------- (in thousands, except per share amounts) LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Short-term debt $ 6,500 $ 5,500 Senior debt due 1997 through 2003 classified as current 50,000 -- Accounts payable 10,488 13,445 Accrued pension liability 3,777 70 Other current liabilities 5,056 3,792 --------- --------- Total current liabilities 75,821 22,807 Pension liability 18,318 15,230 Other long-term liabilities 2,175 2,610 Senior debt due 1997 through 2003 -- 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 in 1995 and 4,220 shares issued in 1994 2,113 2,110 Additional paid-in capital 27,239 27,210 Retained earnings 1,860 11,995 Treasury Stock, at cost, 293 shares in 1995 and 543 shares in 1994 (6,913) (12,803) Excess of additional pension liability over unrecognized prior service cost, net of tax benefits (10,140) (5,207) Total stockholders' equity 23,907 33,053 --------- --------- $ 120,221 $ 123,700 ========= =========
See accompanying notes to consolidated financial statements. 12 13 CONSOLIDATED STATEMENTS OF EARNINGS (LOSS)
Years Ended December 31, 1995 1994 1993 --------- --------- --------- (in thousands, except per share amounts) Net sales $ 138,995 $ 139,156 $ 127,372 Cost of sales 108,964 96,356 88,922 --------- --------- --------- Gross profit 30,031 42,800 38,450 Selling, warehouse, general and administrative expenses 32,037 32,435 30,095 Loss on plant relocation -- -- 4,500 Loss on revaluation of land 1,000 -- -- Interest expense 6,047 4,985 5,680 Interest and other income (228) (369) (858) --------- --------- --------- Earnings (loss) before income taxes (8,825) 5,749 (967) Provision (benefit) for income taxes (3,518) 2,345 (634) --------- --------- --------- Earnings (loss) before extraordinary loss (5,307) 3,404 (333) Extraordinary loss on retirement of debt, after applicable income tax benefit of $632 -- -- (1,300) --------- --------- --------- Net earnings (loss) (5,307) 3,404 (1,633) Preferred stock dividends 829 829 829 --------- --------- --------- Net earnings (loss) applicable to common stockholders $ (6,136) $ 2,575 $ (2,462) ========= ========= ========= Earnings (loss) per common share: Earnings (loss) per common share before extraordinary loss $ (1.60) $ 0.70 $ (0.32) Extraordinary loss per common share on retirement of debt -- -- (0.35) --------- --------- --------- Net earnings (loss) per common share $ (1.60) $ 0.70 $ (0.67) ========= ========= =========
See accompanying notes to consolidated financial statements. 13 14 CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 1995 1994 1993 -------- -------- -------- (in thousands) CASH FLOW PROVIDED (USED) BY OPERATIONS Earnings (loss) $ (5,307) $ 3,404 $ (333) Add (deduct) noncash items included in earnings (loss) Depreciation and amortization 9,016 7,731 7,364 Reserve for loss on plant relocation, net of tax -- -- 2,754 Change in deferred income taxes (2,482) 1,705 159 Increase (Decrease) in total pension liability, net 294 (266) (1,116) Collection of accounts receivable, and payment of accounts payable and accrued and other expenses related to discontinued operations (297) (2,598) (2,500) Payments associated with relocation of home canning cap and lid operations (205) (3,005) -- Other, net 1,420 62 (624) Changes in other operating working capital Receivables 8,882 (2,779) (2,186) Inventories 3,249 (6,258) (5,712) Other current assets 1,304 (133) (885) Accounts payable (2,957) 3,872 729 Accrued expenses 1,379 (913) (541) -------- -------- -------- Cash flow provided (used) by operations 14,296 822 (2,891) CASH FLOW PROVIDED (USED) BY INVESTING ACTIVITIES Capital expenditures (11,840) (15,648) (11,256) Proceeds from liquidation of long-term certificates of deposit 375 1,000 -- Other, net (982) (699) (1,338) -------- -------- -------- Cash flow provided (used) by investing activities (12,447) (15,347) (12,594) CASH FLOW PROVIDED (USED) BY FINANCING ACTIVITIES Net borrowings under lines of credit 1,000 5,500 -- Issuance of senior debt -- -- 50,000 Extinguishment of subordinated debt -- -- (41,131) Dividends paid (829) (829) (829) Other, net (377) 786 (477) -------- -------- -------- Cash flow provided (used) by financing activities (206) 5,457 7,563 CASH AND CASH EQUIVALENTS Increase (decrease) during the year 1,643 (9,068) (7,922) Balance at beginning of the year 2,261 11,329 19,251 -------- -------- -------- Balance at end of the year $ 3,904 $ 2,261 $ 11,329 ======== ======== ======== SIGNIFICANT NON-CASH TRANSACTIONS Contribution of 250,000 shares of Common Stock to Pension Plan $ 1,891 $ 0 $ 0 ======== ======== ========
See accompanying notes to consolidated financial statements. 14 15 CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS' EQUITY Years Ended December 31, 1995, 1994 and 1993
Excess Of Additional Number Of Pension Shares Of Liability Over Notes Common Additional Unrecognized Receivable Stock Common Paid-In Retained Treasury Prior From ESOP Outstanding Stock Capital Earnings Stock Service Cost Trusts ----------- ----- ------- -------- ----- ------------ ------ (in thousands) Balance, December 31, 1992 3,675 $2,105 $27,113 $ 11,882 $(12,737) $ -- $(1,647) Net loss -- -- -- (1,633) -- -- -- Dividends on Preferred Stock -- -- -- (829) -- -- -- Pension adjustment -- -- -- -- -- (6,835) -- Repayments on ESOP Trusts notes receivable -- -- -- -- -- -- 931 Purchase of common stock (8) -- -- -- (66) -- -- Restricted Stock Plan -- -- 32 -- -- -- -- ------ ------ ------- -------- -------- -------- ------- Balance, December 31, 1993 3,667 2,105 27,145 9,420 (12,803) (6,835) (716) Net earnings -- -- -- 3,404 -- -- -- Dividends on Preferred Stock -- -- -- (829) -- -- -- Pension adjustment -- -- -- -- -- 1,628 -- Repayments on ESOP Trusts notes receivable -- -- -- -- -- -- 716 Issuance of Common Stock under stock option plans 10 5 65 -- -- -- -- ------ ------ ------- -------- -------- -------- ------- Balance, December 31, 1994 3,677 2,110 27,210 11,995 (12,803) (5,207) -- Net loss -- -- -- (5,307) -- -- -- Dividends on Preferred Stock -- -- -- (829) -- -- -- Pension adjustment -- -- -- -- -- (4,933) -- Contribution of Treasury Stock to pension fund 250 -- -- (3,999) 5,890 -- -- Issuance of Common Stock under stock option plans 6 3 29 -- -- -- -- ------ ------ ------- -------- -------- -------- ------- Balance, December 31, 1995 3,933 $2,113 $27,239 $ 1,860 $ (6,913) $(10,140) $ -- ====== ====== ======= ======== ======== ======== =======
See accompanying notes to consolidated financial statements. 15 16 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis Of Presentation The consolidated financial statements include the accounts of Kerr Group, Inc., and its wholly owned subsidiary, collectively referred to as the Company. All material intercompany balances and transactions are eliminated in consolidation. Cash Equivalents Cash equivalents consist only of investments that have an original maturity of three months or less, are readily convertible to known amounts of cash and have insignificant risk of changes in value because of changes in interest rates. Inventories Inventories are valued at the lower of cost or market, determined by the use of the first-in, first-out method. Depreciation, Maintenance And Repairs Depreciation of property, plant and equipment is provided by the use of the straight-line method over the estimated useful lives of the assets. The principal estimated useful lives used in computing the depreciation provisions are as follows: Buildings and improvements 5 to 30 years Machinery and equipment 3 to 15 years Furniture and equipment 5 to 10 years The policy of the Company is to charge amounts expended for maintenance and repairs to expense and to capitalize expenditures for major replacements and betterments. Goodwill And Other Intangibles The excess of cost over net tangible assets of the business acquired during 1987 is amortized on a straight-line basis over 40 years. Other intangible assets are being amortized by the use of the straight-line method over their respective initial estimated lives ranging from 2 to 17 years. The Company periodically evaluates goodwill to assess recoverability based upon expectations of future nondiscounted operating earnings related to the acquired business. Based upon the most recent analysis, the Company believes that no impairment of goodwill exists at December 31, 1995. Revenue Recognition The Company recognizes revenue as product is shipped. A reserve is provided for estimated end-of-season returns of home canning supplies as sales are recorded. Pensions And Other Postretirement Benefits Financial Accounting Standards Board Statement No. 87 (FASB No. 87) requires that a company record an additional minimum pension liability to the extent that a company's accumulated pension benefit obligation exceeds the fair value of pension plan assets and accrued pension liabilities. This additional minimum pension liability is offset by an intangible asset, not to exceed prior service costs of the pension plan. Amounts in excess of prior service costs are reflected as a reduction in stockholders' equity, net of related tax benefits. 16 17 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Effective January 1, 1993, the Company adopted Financial Accounting Standards Board Statement No. 106, Employers' Accounting for Postretirement Benefits Other Than Pensions (FASB No. 106). As more fully described in Note 6, the Company has elected to amortize the impact of FASB No. 106 ratably over 20 years. Income Taxes In February 1992, the Financial Accounting Standards Board issued Statement No. 109, Accounting for Income Taxes (FASB No. 109). Under the asset and liability method of FASB No. 109, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under FASB No. 109, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Effective January 1, 1993, the Company adopted FASB No. 109. The cumulative and pro forma effect of the change in accounting was not material. Earnings (Loss) Per Common Share Primary net earnings (loss) per common share are based on the weighted average number of common shares outstanding and are after Preferred Stock dividends. Fully diluted net earnings (loss) per common share reflect when dilutive 1) the incremental common shares issuable upon the assumed exercise of outstanding stock options and 2) the assumed conversion of the Preferred Stock and the elimination of the related Preferred Stock dividends. Antidilution occurred in 1995, 1994 and 1993. Nature of Operations - Significant Use of Resin The Company's Plastic Products Business uses a significant amount of resin in its manufacturing process. From time to time, the Company has experienced substantial increases in the cost of resin. To the extent that the Company is unable to pass on resin cost increases, the cost increases could have a significant impact on the results of operations of the Company. Financial Statement Preparation And Presentation The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of December 31, 1995 and 1994, and the reported amounts of income and expenses for each of the three years ended December 31, 1995. Actual results could differ from those estimates. Included in other assets are certain assets held for sale consisting of real property and buildings. Management has obtained a recent appraisal to support the carrying value of such assets, however, the ultimate sales proceeds received by the Company could differ from the appraisal amount depending on changes in market conditions. Certain reclassifications have been made to prior years' financial statements to conform to the 1995 presentation. 17 18 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Recently Issued Accounting Pronouncements During 1995, the Financial Accounting Standards Board issued Statement No. 121, Accounting for the Impairment of Long-Lived Assets (FASB No. 121), and Statement No. 123, Accounting for Stock-Based Compensation (FASB No. 123). FASB No.121 establishes accounting standards for the impairment of long-lived assets, certain identifiable intangibles and goodwill. FASB No. 121 will be adopted during 1996 and is not expected to have a material effect on the Company's financial position or results of operations. FASB No.123 establishes a "fair value" method of accounting for the value of grants under stock-based compensation plans. As permitted under FASB No. 123, the Company will elect to continue to measure compensation expense related to employee stock option plans utilizing the intrinsic value method as prescribed by APB Opinion No. 25. However, beginning in 1996, the Company will disclose in the footnotes to its financial statements the proforma effect on net income and earnings per common share as if the fair value method of measuring compensation expense related to employee stock option plans was utilized as described in FASB No. 123. NOTE 2 - SUBSEQUENT EVENT - SALE OF ASSETS AND RESTRUCTURING On March 15, 1996, the Company sold certain assets of the Consumer Products Business for a purchase price of approximately $14,500,000 and announced a restructuring program which will include the relocation of the Company's principal executive office and the consolidation of certain manufacturing facilities. The Company also expects to receive approximately $16,500,000, primarily during the remainder of 1996, from the Company's sale to consumer products customers of the inventory of the Consumer Products Business and from the collection of the accounts receivable of the Consumer Products Business. These proceeds will be 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. In connection with the sale of Consumer Products Business assets, the Company will report in the first quarter of 1996 a one-time pretax gain of approximately $2,900,000 ($1,740,000 after-tax or $0.44 per common share). Also during the first quarter of 1996, the Company will report a pretax loss of approximately $7,700,000 ($4,620,000 after-tax or $1.17 per common share) associated with the restructuring. The loss on the restructuring includes provisions for severance costs and related benefits, net loss on subleases, write-off of fixed assets and certain intangible assets, and legal and professional fees. In addition to the loss recorded on the restructuring, the Company will incur additional non-recurring pretax losses during 1996 and early 1997 associated with the restructuring of $2,400,000 ($1,440,000 after-tax or $0.37 per common share) primarily related to equipment and personnel relocation costs, inefficiencies related to the relocation of operations and start-up costs which accounting rules require to be expensed as incurred. The accompanying financial statements do not reflect the discontinuance of the Consumer Products segment. 18 19 NOTE 3 - ISSUES AFFECTING LIQUIDITY On March 15, 1996, the Company used a portion of the proceeds from the sale of certain assets of the Consumer Products Business to pay the $3,500,000 Secured Note Payable (which was borrowed on January 5, 1996), and to prepay $3,540,000 of Senior Notes and $460,000 of the Unsecured Note Payable. After the payment of the Secured Note Payable, the indebtedness of the Company was unsecured. In connection with the sale of certain assets of the Consumer Products Business, the Company obtained waivers of certain financial covenants through May 15, 1996 from the lenders under the Senior Notes, the lender under the Unsecured Note Payable and the purchaser under the Receivable Agreement (collectively referred to as "Lenders") and an extension of the maturity date of the Unsecured Note Payable to May 15, 1996. Discussions between the Lenders and the Company are continuing with respect to the further extension of the maturity of the Unsecured Note Payable, additional waiver of financial covenants and additional reduction of indebtedness. Although the Company has obtained waivers or amendments from the Lenders on three previous occasions, there can be no assurance that the Lenders will agree to further waivers. If additional waivers of financial covenants or the extension of the maturity date of the Unsecured Note Payable are not obtained, the Lenders would be entitled to exercise certain remedies, including the acceleration of the due date for payment of the Senior Notes or the Unsecured Note Payable, and the terminination of the Receivable Agreement. Based upon the past experience of the Company in obtaining waivers or amendments from its Lenders and because the Company expects to use a portion of the proceeds from the sale of inventory and collection of accounts receivables of the Consumer Products Business to further reduce debt, the Company believes that the Lenders will extend the due date of the Unsecured Note Payable, will not accelerate the due date for payment of the Senior Notes and will not terminate the Receivable Agreement. The accompanying consolidated financial statements have been prepared on the basis of such belief of the Company. NOTE 4 - INCOME TAXES Total income tax provision (benefit) for the years ended December 31, 1995 and 1994 was allocated as follows:
1995 1994 ------- ------ (in thousands) Earnings (loss) $(3,518) $2,345 Stockholders' equity, related to excess of pension liability over unrecognized prior service costs (3,281) 878 ------- ------ $(6,799) $3,223 ======= ======
19 20 NOTE 4 - INCOME TAXES (continued) The provision (benefit) for income taxes for the years ended December 31, 1995, 1994 and 1993 consists of the following:
1995 1994 1993 ------- ------ ----- (in thousands) Current U.S. Federal $ -- $ 81 $ 119 State -- -- -- ------- ------ ----- Total current -- 81 119 Deferred U.S. Federal (2,755) 1,814 (637) State (763) 450 (116) ------- ------ ----- Total deferred (3,518) 2,264 (753) ------- ------ ----- Total provision (benefit) for income taxes $(3,518) $2,345 $(634) ======= ====== =====
The significant components of deferred income taxes (benefits) for the years ended December 31, 1995, 1994 and 1993 are as follows:
1995 1994 1993 ------- ------- ------- (in thousands) Reinstatement (reduction) of deferred income taxes attributable to recognition of alternative minimum tax credits and tax net operating loss carryforwards $(5,056) $ (541) $ 52 Temporary differences associated with the sales of discontinued operations (466) 1,531 1,051 Temporary differences associated with the loss on plant relocation 157 1,429 (1,368) Additional costs inventoried for tax purposes (44) 64 (245) Excess (deficit) of pension contributions paid over pension expense 1,513 46 448 Excess (deficit) of tax over book depreciation, including assets retired or sold 668 (19) (327) Other, net (290) (246) (364) ------- ------- ------- Total $(3,518) $ 2,264 $ (753) ======= ======= =======
20 21 NOTE 4 - INCOME TAXES (continued) Total provision (benefit) for income taxes for the years ended December 31, 1995, 1994 and 1993 differed from the amounts computed by applying the U.S. Federal income tax rate of 34% to earnings (loss) before income taxes as a result of the following:
1995 1994 1993 ------- ------ ----- (in thousands) Computed "expected" tax provision (benefit) $(3,002) $1,954 $(329) Increase (reduction) in provision resulting from: State income tax provision (benefit), net of Federal tax effect (524) 231 (47) Change in the valuation allowance for deferred tax assets -- -- (369) Other, net 8 160 111 ------- ------ ----- Actual tax provision (benefit) $(3,518) $2,345 $(634) ======= ====== =====
The tax effects of temporary differences that give rise to significant portions of the deferred income tax assets and liabilities at December 31, 1995 and 1994 are as follows:
1995 1994 -------- -------- (in thousands) Deferred income tax assets: Pension liabilities -- Excess of additional pension liability over unrecognized prior service cost $ 6,743 $ 3,462 Accrued pension liability -- 1,490 Accrued retiree health liability 551 630 Accrued reserves associated with discontinued operations 274 350 Inventory 675 722 Accrued vacation pay 461 383 Tax credit carryforwards 1,158 1,830 Net operating loss carryforwards 6,882 1,962 Other 670 1,120 -------- -------- Total gross deferred income tax assets 17,414 11,949 Less valuation allowance -- -- -------- -------- Deferred income tax assets, net of valuation allowance 17,414 11,949 Deferred income tax liabilities: Property, plant and equipment, principally due to differences in depreciation (5,744) (5,146) Excess of book basis over tax basis of land and buildings formerly used as a glass container manufacturing plant (1,252) (1,795) Other (610) (962) -------- -------- Total gross deferred income tax liabilities (7,606) (7,903) -------- -------- Net deferred income tax assets $ 9,808 $ 4,046 ======== ========
21 22 NOTE 4 - INCOME TAXES (continued) In order to fully realize the deferred income tax asset, the Company will need to generate future taxable income of at least $35,000,000 prior to expiration of net operating loss carryforwards which will begin to expire in 2006. Based upon the Company's recent pre-tax earnings adjusted for significant nonrecurring items, the sale of certain assets of the Consumer Products Business and cost savings related to the restructuring announced March 15, 1996 and projections of future taxable income over the period in which the deferred income tax assets are deductible, management believes it is more likely than not that the Company will realize the benefit of the deferred income tax asset. There can be no assurance, however, that the Company will generate any specific level of continuing earnings. At December 31, 1995, the Company had net operating loss carryforwards for Federal income tax purposes of $17,209,000 which are available to offset future Federal taxable income, expiring in the years 2006 through 2010. The Company also has an alternative minimum tax credit carryforward of $1,083,000 and other tax credit carryforwards (primarily investment tax credits) of $75,000, expiring in the years 1999 through 2009, which are available to reduce future Federal income taxes, if any. The total net cash payments related to income taxes, which primarily represent Federal alternative minimum taxes and state taxes, were $24,000, $761,000 and $470,000 for 1995, 1994 and 1993, respectively. NOTE 5 - OTHER CURRENT LIABILITIES At December 31, 1995 and 1994, other current liabilities were as follows:
1995 1994 ------ ------ (in thousands) Accrued wages and vacation pay $2,143 $1,879 Accrued interest 2,617 240 Other accrued expenses 296 1,673 ------ ------ Total accrued expenses $5,056 $3,792 ====== ======
NOTE 6 - RETIREMENT BENEFITS Pensions The Company has a defined benefit pension plan (the "Retirement Income Plan") and a defined contribution pension plan, which cover substantially all employees. The Retirement Income Plan generally provides benefits based on years of service and average final pay. The defined contribution plan provides benefits based on a fixed percent of pay for each year of service. The Company's policy is to fund amounts sufficient to satisfy the funding requirements of the Employee Retirement Income Security Act of 1974. During 1995 and 1994, the Company funded the Retirement Income Plan by $1,983,000 more than the accrued pension expense for the 1994 plan year. During 1994 and 1993, the Company funded the Retirement Income Plan by $800,000 more than the accrued pension expense for the 1993 plan year. 22 23 NOTE 6 - RETIREMENT BENEFITS (continued) During 1995, the Company contributed 250,000 shares of its Common Stock, at a price of $7.56 per share, to the Retirement Income Plan. The contribution reduced the Company's recorded pension liability by $1,891,000. During 1995, the Company adopted a Pension Restoration Plan which is an unfunded plan providing benefits to participants not payable by the Company's Retirement Income Plan because of the limitations on benefits imposed by the Internal Revenue Code of 1986, as amended. The aggregate annual accrued benefit for each participant under the combination of the Retirement Income Plan and the Pension Restoration Plan when expressed as a single-life annuity is limited to $200,000. Net pension expense for the years ended December 31, 1995, 1994 and 1993 included the following components:
1995 1994 1993 -------- ------- ------- (in thousands) Defined Benefit Plan: Service cost (benefit earned during period) $ 498 $ 564 $ 472 Interest cost on projected benefit obligation 7,364 7,018 6,941 Actual loss (return) on assets (16,080) 597 (7,843) Net amortization and deferral 9,460 (6,552) 1,619 -------- ------- ------- Defined Benefit Plan expense $ 1,242 $ 1,627 $ 1,189 ======== ======= ======= Defined Contribution Plan expense $ 15 $ 17 $ 21 ======== ======= =======
23 24 NOTE 6 - RETIREMENT BENEFITS (continued) The funded status of the defined benefit plans at December 31, 1995 and 1994 was as follows:
1995 1994 --------- -------- (in thousands) Actuarial present value Vested benefit obligation $ 99,237 $ 81,605 Nonvested benefit obligation 1,942 2,445 --------- -------- Accumulated benefit obligation 101,179 84,050 Effect of future salary increases 2,812 1,842 --------- -------- Projected benefit obligation 103,991 85,892 Plan assets at fair value (a) 79,084 68,750 --------- -------- Projected benefit obligation in excess of plan assets 24,907 17,142 Unrecognized net transition obligation (474) (553) Unrecognized prior service costs (936) (663) Unrecognized net loss (19,660) (10,511) --------- -------- Accrued pension liability before adjustment 3,837 5,415 Adjustment required to recognize additional minimum pension liability 18,258 9,885 Accrued pension liability related to the defined benefit plan $ 22,095 $ 15,300 ========= ======== Accrued pension liability related to the defined contribution plan $ 8 $ 17 ========= ========
(a) Plan assets include 368,200 shares of Company Common Stock at a value of $3,682,000 at December 31, 1995 and 118,200 shares of Company Common Stock at a value of $990,000 at December 31, 1994. In connection with recording the additional minimum pension liability pursuant to the provisions of FASB No. 87, the Company recorded a reduction in stockholders' equity of $10,140,000 at December 31, 1995, and $5,207,000 at December 31, 1994, and an intangible pension asset of $1,376,000 at December 31, 1995, and $1,216,000 at December 31, 1994. The majority of all pension plan assets are held by a master trust created for the collective investment of the plan's funds, as well as in private placement insurance contracts. At December 31, 1995, assets held by the master trust consisted primarily of cash, U.S. government obligations, corporate bonds and common stocks. The defined benefit plan assumptions as of December 31, 1995, 1994 and 1993 were as follows:
1995 1994 1993 ---- ---- ---- Discount rate 7.25% 8.75% 7.5% Increase in compensation rate 5% 5% 5% Long-term rate of return on assets 9.5% 9.5% 9.5%
24 25 NOTE 6 - RETIREMENT BENEFITS (continued) The Company retained the pension benefit obligations for service prior to the date of the sale and the pension assets related to the Company's discontinued Commercial Glass Container and Metal Crown Businesses. In connection with the sale of the two businesses, the Company's pension plans had a combined curtailment loss of $4,664,000 pursuant to FASB Statement No. 88, Employers' Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits. During 1993, the Company recorded a curtailment loss of $232,000 related to the relocation of the Company's home canning cap and lid manufacturing operations. Such curtailment losses were included as components of the respective losses on the sale of the businesses and plant relocation. Retiree Health Care And Life Insurance The Company provides certain health care and life insurance benefits for retired employees and their spouses. The costs of such benefits are shared by retirees through one or more of the following: a) deductibles, b) copayments and c) retiree contributions. Salaried employees hired prior to September 1, 1992, and certain hourly employees may become eligible for those benefits if they reach retirement age while working for the Company. The Company will not provide retiree health care and life insurance benefits for salaried employees hired after September 1, 1992. Health care and life insurance benefits provided by the Company are not funded in advance, but rather are paid by the Company as the costs are actually incurred by the retirees. As discussed in Note 1, effective January 1, 1993, the Company adopted FASB No. 106, Employers' Accounting for Postretirement Benefits Other Than Pensions. FASB No. 106 requires a company to use an accrual method for recording retiree health care and life insurance benefits instead of the previously used pay-as-you-go method. The effect of this accounting change on 1993 results of operations was to increase retiree health care and life insurance expense by $640,000 from the amount that would have been recorded in 1993 under the previously used pay-as-you-go method. The adoption of FASB No. 106 at January 1, 1993, created a previously unrecognized accumulated postretirement benefit obligation of $13,195,000. As permitted under FASB No. 106, the Company has elected to amortize the $13,195,000 accumulated postretirement benefit obligation ratably over 20 years. Retiree health care and life insurance expense for the years ended December 31, 1995, 1994 and 1993 included the following components:
1995 1994 1993 ------ ------ ------ (in thousands) Retiree health care and life insurance expense: Service cost (benefit earned during period) $ 41 $ 54 $ 83 Interest cost on accumulated benefit obligation 855 1,082 1,187 Actual return on assets -- -- -- Net amortization and deferral 544 624 660 ------ ------ ------ $1,440 $1,760 $1,930 ====== ====== ======
25 26 NOTE 6 - RETIREMENT BENEFITS (continued) The funded status of the retiree health care and life insurance plans at December 31, 1995 and 1994 was as follows:
1995 1994 -------- -------- (in thousands) Actuarial present value of accumulated postretirement benefit obligation: Retirees $ 9,210 $ 9,083 Fully eligible active participants 735 1,428 Other active participants 1,055 739 Accumulated benefit obligation 11,000 11,250 Plan assets at fair value -- -- -------- -------- Accumulated benefit obligation in excess of plan assets 11,000 11,250 Unrecognized net transition obligation (10,612) (11,237) Unrecognized prior service costs -- -- Unrecognized net gain (loss) 992 1,563 -------- -------- Accrued postretirement benefit liability $ 1,380 $ 1,576 ======== ========
The retiree health care and life insurance plans assumptions are as follows:
December 31, December 31, December 31, 1995 1994 1993 ------------------- ------------------- ---------------- Discount rate 7.25% 8.75% 7.5% Health care cost trend rates -- Indemnity plans 8.75% trending down 8.75% trending down 9% trending down to 6% to 6% to 6% Managed care plans 6.75% trending down 6.75% trending down 7% trending down to 4% to 4% to 4%
The effect of a one percentage point annual increase in these assumed cost trend rates at December 31, 1995, would increase the postretirement benefit obligation by approximately $420,000 and would increase the service and interest cost components of the annual expense by approximately $40,000. 26 27 NOTE 7 - FINANCING At December 31, 1995 and 1994, the Company's debt consisted of $50,000,000 principal amount of Senior Notes payable to a group of insurance companies consisting of John Hancock Mutual Life Insurance Company, New York Life Insurance Company and Massachusetts Mutual Life Insurance Company and lines of credit with banks. The Senior Notes were issued on September 21, 1993, and consist of $41,000,000 of 10-year notes with an interest rate of 9.45% and $9,000,000 of 6-year notes with an interest rate of 8.99%. Sinking fund payments begin under the 10-year notes in 1998 and under the 6-year notes in 1997. The Senior Notes are unsecured. The Senior Notes contain various covenants including covenants relating to coverage of fixed charges, minimum level of tangible net worth, limitation on leverage and limitation on restricted payments, for which payments are defined to include Common Stock dividends. Under the most restrictive covenant related to the payment of dividends, the payment of Common Stock dividends is not permitted at December 31, 1995. As of December 31, 1995, the Company is not in compliance with certain of the financial covenants and has obtained waivers of such covenants through May 15, 1996. As of December 31, 1995, the Company's $50,000,000 of outstanding Senior Notes is classified as a current liability because the Company was in default of certain financial covenants for which the Company had received waivers only through May 15, 1996. See further discussion at Note 3 of notes to consolidated financial statements. The mandatory scheduled principal payments, as specified in the loan agreement, for the next five years on the Senior Notes outstanding at December 31, 1995, are as follows:
Years Ended December 31, - ------------------------ (in thousands) 1996 $ -- 1997 3,000 1998 9,833 1999 9,833 2000 6,833 2001 and thereafter 20,501
A portion of the proceeds from the sale of the Senior Notes was used to redeem all of the $40,000,000 principal amount of 13% Subordinated Notes on December 15, 1993, at par. During the third quarter of 1993, the Company incurred an after-tax loss of $1,300,000, or $0.35 per common share, in connection with the refinancing on September 21, 1993, of its 13% Subordinated Notes and the termination of its revolving credit facility. The extraordinary loss included interest expense on the 13% Subordinated Notes from September 21, 1993 through December 15, 1993 (the date on which the Subordinated Notes were redeemed at par) and the write-off of unamortized debt fees and related costs. 27 28 NOTE 7 - FINANCING (continued) As of December 31, 1995, the Company had an Accounts Receivable Agreement (Receivable Agreement) maturing on January 18, 1997 to meet the seasonal working capital needs of the Company. The Receivable Agreement permits the Company to sell its trade accounts receivable on a nonrecourse basis. Under the Receivable Agreement, the maximum amount that can be advanced to the Company pursuant to the sale of trade accounts receivable at any time is $13,500,000, which amount is reduced on April 15, 1996 to $10,000,000. The reduction occurred because the sale of assets of the Consumer Products Business reduced the working capital needs of the Company. The Company retains collection and service responsibility, as agent for the purchaser, over any receivables sold. Advances under such Receivable Agreement are subject to certain limitations. As of December 31, 1995, receivables as shown on the accompanying Consolidated Balance Sheet have been reduced by net proceeds of $7,700,000 from advances pursuant to the sale of receivables under the Company's Receivable Agreement. The Receivable Agreement contains covenants identical to the Senior Notes. In addition, at December 31, 1995, the Company owed $6,500,000 under a note payable to a bank due April 15, 1996 (which maturity date was extended to May 15, 1996) with interest accrued at the prime rate (Unsecured Note Payable). The Unsecured Note Payable was originally related to a $10,000,000 bank line of credit, which effective October 24, 1996 was reduced by the lender to the then outstanding balance of $6,500,000 due to a decline in the Company's financial performance. During 1994 and early 1995, the Company had an additional bank line of credit which was replaced by the Receivable Agreement. The line of credit contains covenants identical to the Senior Notes. During 1995 and 1994, the Company had maximum borrowings outstanding under its lines of credit of $12,000,000 and $5,500,000, respectively. During 1995 and 1994, the weighted average interest rate under its lines of credit was 8.7% and 7.3% and the weighted average borrowings outstanding under its lines of credit was $7,528,000 and $1,544,000, respectively. Total cash payments of interest during 1995, 1994 and 1993 were $3,440,000, $4,743,000 and $6,501,000, respectively. See discussion of issues affecting liquidity at Note 3 of notes to consolidated financial statements. NOTE 8 - FAIR VALUE OF FINANCIAL INSTRUMENTS During 1994, the Financial Accounting Standards Board issued Statement No. 107, Disclosure about Fair Value of Financial Instruments (FASB No. 107). FASB No. 107 requires the disclosure of the estimated fair values for all financial instruments for which it is practicable to estimate fair value. The fair value of cash, accounts receivable and payable, and advances pursuant to the sale of receivables under the Company's Receivable Agreement approximate their carrying amount because of their short maturity. The fair value of the line of credit approximates its carrying amount because such debt has a floating rate tied to the Prime rate. 28 29 NOTE 8 - FAIR VALUE OF FINANCIAL INSTRUMENTS (continued) The fair value of the Company's $50,000,000 principal amount of Senior Notes would be expected to be higher than the carrying amount because market interest rates have declined since such debt was incurred. However, since it is unlikely the Company could obtain similar unsecured financing at comparable rates today, determining a fair value of such debt is not appropriate. NOTE 9 - PREFERRED STOCK Class B Preferred Stock At December 31, 1995 and 1994, the Company was authorized to issue 1,302,300 shares of Class B Preferred Stock, par value $.50 per share, which may be issued in series from time to time at the discretion of the Board of Directors. Holders of all series of Class B Preferred Stock share ratably as to rights to payment of dividends and to amounts payable in event of liquidation, dissolution or winding up of the Company. No dividends or payments in liquidation may be made with respect to Common Stock or any other stock ranking junior as to dividends or assets to the Class B Preferred Stock unless all accumulated dividends and sinking fund payments on the Class B Preferred Stock have been paid in full and, in the event of liquidation, unless the accumulated dividends and the liquidation preference of the Class B Preferred Stock have been paid. Series D At December 31, 1995 and 1994, the Company had 487,400 shares of Class B Cumulative Convertible Preferred Stock, Series D (Preferred Stock), issued and outstanding. Holders of the Preferred Stock are entitled to a cumulative dividend, payable quarterly, at the annual rate of 8.5% ($1.70 per share). The Preferred Stock is redeemable at the option of the Company at any time, in whole or in part, at a price of $20.00 per share. No purchases or redemptions of or dividends on Common Stock may occur unless all accumulated dividends have been paid on the Preferred Stock. Each share of Preferred Stock has a liquidating value of $20.00 per share and is convertible into Common Stock at the rate of 1.4545 shares of Common Stock for each share of Preferred Stock (equivalent to a conversion price of $13.75 per common share), subject to adjustment under certain conditions. At December 31, 1995, a total of 708,923 shares of Common Stock was reserved for issuance upon conversion of the Preferred Stock. If six quarterly dividends on the Preferred Stock are unpaid, the holders of Preferred Stock shall have the right, voting as a class, to elect two additional persons to the Board of Directors of the Company until all such dividends have been paid. 29 30 NOTE 10 - COMMON STOCK Employee Stock Ownership Plans The Company has two employee stock ownership plans, the Kerr Group, Inc. Employee Incentive Stock Ownership Plan Trust formed in 1985 (ESOP I) and the Kerr Group, Inc. 1987 Employee Incentive Stock Ownership Plan Trust formed in 1987 (ESOP II). Both plans are for the benefit of employees of the Company. The Company borrowed funds from a group of banks, which in turn were loaned to the plans for the purpose of purchasing shares of the Company's Common Stock. The bank loans were repaid on February 28, 1992. The related Company loan to ESOP I was repaid during 1993 and the loan to ESOP II was repaid during 1994. ESOP I and ESOP II obtained the funds to repay loans primarily through the receipt of tax deductible contributions made by the Company. The Company funded such contributions primarily through the reduction of compensation and benefits, and deferral of salary increases which it would otherwise have provided to its employees. Total contribution expense for these plans was $472,000 and $633,000 in 1994 and 1993, respectively. For financial statement purposes, the bank loans were reflected as a liability and the Company's loans to ESOP I and ESOP II were reflected as a reduction in stockholders' equity. Stock Options Under the Company's Stock Option Plans for employees, options may be granted at a price determined by the Stock Option Committee of the Board of Directors, which may be less than market value. Options may be exercised during periods established by such Committee; however, in no event may any option be exercised more than ten years after the date of grant. All of the Company's currently outstanding options generally vest in cumulative installments of 20% per year commencing on the date of grant. Such options become exercisable in full upon the occurrence of certain enumerated events, including certain changes in control of the Company. The options granted beginning in 1992 provide that the Company's stock price must equal or exceed a triggering price per Common Share, which is higher than the exercise price of the option, for ten consecutive trading days for the options to be exercisable. The options granted during 1995, 1994 and 1993 had triggering prices of $12.50 per Common Share. The options granted during 1992 had triggering prices of $10 per Common Share, which requirement was met during 1994, and the options issued during 1992 are now exercisable. 30 31 NOTE 10 - COMMON STOCK (continued) The following tabulation summarizes changes under the Company's Stock Option Plans for employees during the years ended December 31, 1995, 1994 and 1993.
1995 1994 1993 ----------------------------- ----------------------------- ------------------------------ Number Of Number Of Number Of Options Price Range Options Price Range Options Price Range --------- ---------------- --------- ---------------- --------- ----------------- Options Outstanding: Beginning of year 252,100 $5 3/8 - 10 3/8 274,000 $5 3/8 - 8 5/16 198,850 $5 3/8 - 11 7/16 Granted 204,000 7 9/16 6,500 9 7/16-10 3/8 157,500 8-8 5/16 Exercised (6,000) 5 3/8 (10,400) 5 3/8 - 7 1/8 -- Cancelled (23,000) 5 3/8-8 5/16 (18,000) 5 3/8 - 8 5/16 (36,000) 5 3/8 - 10 3/4 Expired -- -- (46,350) 5 3/8 - 11 7/16 ------- --------------- ------- --------------- ------- ---------------- End of year 427,100 5 3/8-10 3/8 252,100 5 3/8-103/8 274,000 5 3/8-8 5/16 Exercisable at end of year: Currently exercisable 83,200 70,900 56,200 Exercisable if Common Stock trades at triggering price of $12.50 277,300 57,501 31,500 ------- ------- ------- Total 360,500 128,401 87,700 Available for grant at end of year 21,497 22,497 20,100
In addition, the 1988 Stock Option Plan for Non-Employee Directors (the 1988 Plan), consisting of 80,000 shares, and 1993 Stock Option Plan for Non-Employee Directors (the 1993 Plan), consisting of 60,000 shares, provide for the grant of options to purchase Common Stock to members of the Board of Directors of the Company who are not employees of the Company or any of its subsidiaries or affiliates. The option price of each option granted under these plans is the fair market value of Common Stock on the date of grant. Options under the 1988 Plan are immediately exercisable upon grant and will expire five years from the date of grant. Future grants of options under the 1988 Plan can only be made to Directors other than the Company's current Directors. Options under the 1993 Plan are exercisable six months after date of grant, provided that the Company's stock price equals or exceeds $12.50 per Common Share for ten consecutive trading days. Options under the 1993 Plan expire ten years from the date of grant. 31 32 NOTE 10 - COMMON STOCK (continued) The following tabulation summarizes changes under the Company's Stock Option Plans for Non-Employee Directors during the years ended December 31, 1995, 1994 and 1993.
1995 1994 1993 ----------------------- ------------------------ ----------------------- Number Of Number Of Number Of Options Price Range Options Price Range Options Price Range --------- ----------- --------- ----------- --------- ----------- Options Outstanding: Beginning of year 60,000 $8 3/16 60,000 $8 3/16 60,000 $11 5/16 Granted -- -- 60,000 8 3/16 Exercised -- -- -- Expired -- -- (60,000) 11 5/16 ------ ------ ------- End of year 60,000 8 3/16 60,000 8 3/16 60,000 8 3/16 Exercisable at end of year: Currently exercisable -- -- -- Exercisable if Common Stock trades at $12.50 per share or above 60,000 60,000 60,000 ------ ------ ------ Total 60,000 60,000 60,000 Available for grant at end of year 80,000 80,000 80,000
The aggregate option price for all outstanding options at December 31, 1995, 1994 and 1993 was $3,698,000, $2,359,000 and $2,508,000, respectively. At the time options are exercised, the common stock account is credited with the par value of the shares issued and additional paid-in capital is credited with the cash proceeds in excess of par value. The Company's Stock Option Plans permit the grant of both incentive stock options and nonstatutory stock options. Restricted Stock Plan In 1985 and 1984, the Company sold 65,000 shares and 75,000 shares, respectively, of Treasury Stock to an officer of the Company at a price of $1.00 per share. The shares were sold subject to forfeiture and restrictions on disposition under conditions as defined in the Restricted Stock Purchase Agreements between the Company and the officer. As of December 31, 1994, the restrictions on all 140,000 shares have been released. Compensation expense was recorded in the periods benefitted as the difference between the fair market value on the date of sale and the sale price. During 1993, total shares of 15,000 were released from restriction. 32 33 NOTE 11 - LOSS ON PLANT RELOCATION During the fourth quarter of 1993, the Company recorded a pre-tax loss of approximately $4,500,000 ($2,754,000 after-tax or $0.75 per common share) associated with the relocation of its home canning cap and lid manufacturing operations from Chicago, Illinois to a new manufacturing facility in Jackson, Tennessee. The pre-tax loss consisted primarily of accruals for i) the early recognition of retiree health care and pension expense, severance, workers' compensation costs and insurance continuation costs of approximately $2,500,000, ii) asset retirement and related facility closing costs of approximately $1,000,000, and iii) moving and relocation costs of approximately $700,000. In 1995, the Company made cash payments related to relocation costs of approximately $200,000. In 1994, the Company made cash payments related to such accruals for i) the early recognition of retiree health care and pension expense, severance, workers' compensation costs and insurance continuation costs of approximately $1,500,000, ii) asset retirement and related facility closing costs of approximately $600,000, iii) moving and relocation costs of approximately $600,000 and iv) other costs of approximately $300,000. In addition, during 1994, approximately $300,000 was charged against such accruals related to the book value of fixed assets retired. The remaining accruals primarily relate to retiree health costs and pensions which will be paid over a number of years. NOTE 12 - RENTAL EXPENSE AND LEASE COMMITMENTS The Company occupies certain manufacturing facilities, warehouse facilities and office space and uses certain automobiles, machinery and equipment under noncancelable lease arrangements. Rent expense under these agreements was $3,714,000, $3,085,000 and $3,008,000 in 1995, 1994 and 1993, respectively. At December 31, 1995, the Company was obligated under various noncancelable leases. Calendar year minimum rental commitments under the Company's leases are as follows:
Total Real Personal Years Ended December 31, Commitment Property Property ---------- -------- -------- (in thousands) 1996 $3,644 $3,256 $388 1997 3,517 3,253 264 1998 3,395 3,220 175 1999 3,311 3,200 111 2000 2,607 2,590 17 2001 through 2014 20,276 20,276 --
Real estate taxes, insurance and maintenance expenses are obligations of the Company. Generally, in the normal course of business, leases that expire will be renewed or replaced by leases on other properties. 33 34 NOTE 13 - COMMITMENTS AND CONTINGENCIES In connection with the Company's Workers' Compensation insurance programs, the Company has pledged a certificate of deposit in the amount of $500,000 to secure surety bonds. The Company's estimate of its ultimate liability relating to these programs has been reflected on the Company's consolidated balance sheet as a liability. The Company has been designated by the Environmental Protection Agency as a potentially responsible party to share in the remediation costs of several waste disposal sites. Pursuant to the sale of the Metal Crown Business, the Company has indemnified the buyer for certain environmental remediation costs. In addition, pursuant to the sale of the Commercial Glass Container Business, the Company has indemnified the buyer for certain environmental remediation costs and has retained ownership of certain real property used in the Commercial Glass Container Business which may require environmental remediation. The estimated ultimate liability of the environmental indemnities related to these businesses is not material to the consolidated results of operations or the consolidated balance sheet of the Company. During 1995, the Company made cash payments related to environmental remediation of $327,000. As of December 31, 1995, the Company has accrued a reserve of approximately $312,000 for the expected remaining costs associated with environmental remediation described above and in connection with its current manufacturing plants. The amount of the reserve was based in part on an environmental study performed by an independent environmental engineering firm. The Company believes that this reserve is adequate. NOTE 14 - INDUSTRY SEGMENT INFORMATION During 1995, the Company operated in two industry segments, Plastic Products and Consumer Products. The manufacturing assets of the Consumer Products segment were subsequently sold in 1996. Operations in the Plastic Products segment involve: 1) the manufacture and sale of a variety of plastic products including child-resistant closures, tamper-evident closures, prescription packaging products, jars and other plastic closures and containers; and 2) the sale of glass prescription products. Operations in the Consumer Products segment involve: 1) the manufacture and sale of caps and lids for home canning, and 2) the sale of glass jars and a line of pickling spice and pectin products for home canning, iced tea tumblers and beverage mugs. Intersegment sales are not material. No customer accounted for more than 10% of net sales in 1995, 1994 or 1993. The Company carries on a product development and engineering program with respect to its Plastic Products Business. Expenditures for such programs during the years ended December 31, 1995, 1994 and 1993 were approximately $3,300,000, $3,600,000 and $2,000,000, respectively. Although the Company owns a number of United States patents, including patents for its tamper-evident closures and certain of its child-resistant closures, it is of the opinion that no one or combination of these patents is of material importance to its business. The Company has granted licenses on some of its patents, although the income from these sources is not material. Segment earnings is income before unusual items not attributable to one of the segments, general corporate expenses, interest expense, interest and other income and provision (benefit) for income taxes. 34 35 NOTE 14 - INDUSTRY SEGMENT INFORMATION (continued) Identifiable assets by industry segment are those assets that are used in the Company's operations in each industry segment. Corporate assets are principally cash and cash equivalents, the deferred income tax asset, land and buildings formerly used as a glass container manufacturing plant that is being held for sale, certificates of deposit and certain intangible assets. A summary of the Company's operations by industry segment follows:
Years Ended December 31, 1995 1994 1993 --------- --------- --------- (in thousands) Net sales: Plastic Products $ 109,187 $ 106,792 $ 98,533 Consumer Products (b) 29,808 32,364 28,839 --------- --------- --------- Total $ 138,995 $ 139,156 $ 127,372 ========= ========= ========= Segment earnings (loss): Plastic Products $ 4,842 $ 12,055 $ 11,428 Consumer Products (a) (b) (1,590) 3,213 (2,707) --------- --------- --------- Total 3,252 15,268 8,721 Loss on revaluation of land 1,000 -- -- General corporate expenses 5,258 4,903 4,866 --------- --------- --------- Earnings (loss) before interest and income taxes (3,006) 10,365 3,855 Interest expense 6,047 4,985 5,680 Interest and other income (228) (369) (858) --------- --------- --------- Earnings (loss) before income taxes $ (8,825) $ 5,749 $ (967) ========= ========= =========
(a) The 1993 segment loss for Consumer Products includes a $4,500,000 pre-tax loss associated with the relocation of the Company's home canning cap and lid manufacturing operations. See Note 11 of notes to consolidated financial statements for further information. (b) The manufacturing assets of the Consumer Products segment were sold on March 15, 1996. 35 36 NOTE 14 - INDUSTRY SEGMENT INFORMATION (continued) Identifiable assets, depreciation and amortization and capital expenditures for each segment are as follows:
Years Ended December 31, 1995 1994 1993 (in thousands) Identifiable Assets: Plastic Products $ 79,367 $ 84,283 $ 69,834 Consumer Products (a) 18,981 22,782 20,403 Corporate 21,873 16,635 27,112 -------- -------- -------- Total $120,221 $123,700 $117,349 ======== ======== ======== Depreciation and amortization: Plastic Products $ 7,961 $ 6,946 $ 6,600 Consumer Products (a) 343 236 197 Corporate 712 549 567 -------- -------- -------- Total $ 9,016 $ 7,731 $ 7,364 ======== ======== ======== Capital expenditures: Plastic Products $ 10,604 $ 13,906 $ 8,587 Consumer Products (a) 976 1,472 1,920 Corporate 260 270 749 -------- -------- -------- Total $ 11,840 $ 15,648 $ 11,256 ======== ======== ========
(a) The manufacturing assets of the Consumer Products segment were sold on March 15, 1996. 36 37 NOTE 15 - CONDENSED QUARTERLY DATA FOR 1995 AND 1994 (UNAUDITED)
Three Months Ended March 31 June 30 Sept. 30 Dec. 31 -------- -------- -------- -------- (in thousands, except per share amounts) 1995 Net sales $ 30,390 $ 41,892 $ 39,021 $ 27,692 Gross profit 8,577 9,783 8,080 3,591 Net loss (a) (387) (285) (1,099) (3,536) Preferred stock dividends 207 207 207 208 -------- -------- -------- -------- Net loss applicable to common stockholders (a) $ (594) $ (492) $ (1,306) $ (3,744) ======== ======== ======== ======== Net loss per common share (primary and fully diluted) $ (0.16) $ (0.13) $ (0.33) $ (0.95)
(a) Net for the quarter ended December 31, 1995 includes a pre-tax loss of $1,000,000 ($0.15 per common share) related to the write-down in the book value of land formerly used by the Company as a glass container manufacturing plant.
Three Months Ended March 31 June 30 Sept. 30 Dec. 31 -------- -------- -------- -------- (in thousands, except per share amounts) 1994 Net sales $29,380 $41,004 $40,624 $28,148 Gross profit 9,961 12,291 12,007 8,541 Net earnings 263 1,599 1,310 232 Preferred stock dividends 207 207 207 208 ------- ------- ------- ------- Net earnings applicable to common stockholders $ 56 $ 1,392 $ 1,103 $ 24 ======= ======= ======= ======= Net earnings per common share: Primary $ 0.02 $ 0.38 $ 0.30 $ 0.01 Fully diluted $ 0.02 $ 0.36 $ 0.30 $ 0.01
37 38 ------------------------------------------ Pursuant to the requirement of the Securities Exchange Act of 1934, the Registrant has duly caused this amendment to be signed on its behalf by the undersigned thereunto duly authorized. KERR GROUP, INC. Date: January 10, 1997 By: /s/ Geoffrey A. Whynot -------------------------------- Name: Geoffrey A. Whynot Title: Vice President, Chief Financial Officer 38 39 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 KERR GROUP, INC. FORM 10-K/A for year ended December 31, 1995 INDEX TO EXHIBITS FILED SEPARATELY WITH FORM 10-K/A Exhibit No. Document 23.1 Consent of Independent Certified Public Accountants. EX-23.1 2 CONSENT OF INDEPENDENT ACCOUNTANTS 1 EXHIBIT 23.1 Consent of Independent Certified Public Accountants To the Board of Directors of Kerr Group, Inc.: We consent to the incorporation by reference in the Registration Statement No. 2-92721 on Form S-3, Registration Statement No. 33-3517 on Form S-3, Registration Statement No. 33-18463 on Form S-8 and Registration Statement No. 33-31347 on Forms S-3 and S-8 of Kerr Group, Inc. (Kerr) of our report dated March 15, 1996 relating to the consolidated balance sheets of Kerr and subsidiaries as of December 31, 1995 and 1994 and the related consolidated statements of earnings (loss), common stockholders' equity and cash flows and related schedule for each of the years in the three-year period ended December 31, 1995, which report appears in the December 31, 1995 annual report on Form 10-K/A of Kerr. KPMG Peat Marwick LLP Los Angeles, California January 10, 1997 -----END PRIVACY-ENHANCED MESSAGE-----