-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, XaStwsUy3T4HBKEzBMB4kiVvO2fL9YRxfqxk5/q4wojoOkZX4gykjUv/6QaXgoI8 nJ826dmbIUhIq12ufw6PDg== 0000950148-94-000162.txt : 19940615 0000950148-94-000162.hdr.sgml : 19940615 ACCESSION NUMBER: 0000950148-94-000162 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19931231 FILED AS OF DATE: 19940330 FILER: COMPANY DATA: COMPANY CONFORMED NAME: KERR GROUP INC CENTRAL INDEX KEY: 0000055454 STANDARD INDUSTRIAL CLASSIFICATION: 3221 IRS NUMBER: 950898810 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-07272 FILM NUMBER: 94518821 BUSINESS ADDRESS: STREET 1: 1840 CENTURY PARK EAST CITY: LOS ANGELES STATE: CA ZIP: 90067 BUSINESS PHONE: 310-556-2200 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 1 FORM 10-K FOR FISCAL YEAR ENDED DECEMBER 31, 1993 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1993 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
-Continued- 2 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. [X]. The aggregate market value of the voting stock held by non-affiliates of the Registrant, as of March 8, 1994, was $32,239,000. The number of shares of the Registrant's Common Stock, $.50 par value, outstanding as of March 8, 1994, was 3,666,695. DOCUMENTS INCORPORATED BY REFERENCE
Part(s) Into Document Which Incorporated -------- ------------------ (1) Annual Report to Stockholders Part I; Part II; for the fiscal year ended Part IV December 31, 1993. With the exception of the pages of the Annual Report to Stockholders specifically incorporated by reference herein, the Annual Report to Stockholders is not deemed to be filed as a part of this Form 10-K. (2) Proxy Statement to be used in Part III connection with the Annual Meeting of Stockholders to be held on April 26, 1994. 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.
(ii) 3 KERR GROUP, INC. Form 10-K Annual Report For The Fiscal Year Ended December 31, 1993 PART I ITEM 1. BUSINESS 1. General Kerr Group, Inc. (the "Registrant"), a Delaware corporation which was founded in 1903, currently operates in two business segments: the Plastic Products segment and the Consumer Products segment. Operations in the Plastic Products segment include the manufacture and sale of a variety of plastic products, including child- resistant closures, tamper-evident closures, prescription packaging products, jars, other closures and containers and the sale of glass prescription products (the "Plastic Products Business"). Operations in the Consumer Products segment include the manufacture and sale of caps and lids and the sale of glass jars and a line of pickling spice and pectin products for home canning (the "Home Canning Supplies Business"), which together with the sale of other related products, including iced tea tumblers and beverage mugs, constitutes the "Consumer Products Business." The Plastic Products Business and the Consumer Products Business are referred to herein as "Continuing Businesses". a. Principal Products and Markets; Sales and Customers The Plastic Products segment accounted for approximately 77% of the Registrant's total net sales in 1993. Plastic closures of the Plastic Products Segment are sold to customers in the pharmaceutical, food, distilled spirits, toiletries and cosmetics and household chemical industries. Plastic and glass prescription products are sold to drug wholesalers, drug chains and independent pharmacists. Plastic bottles and jars are sold to customers in the pharmaceutical and toiletries and cosmetics industries. Plastic products are sold nationally, principally by the Registrant's sales force. The Consumer Products Business accounted for approximately 23% of the Registrant's total net sales in 1993. The Home Canning Supplies Business represents substantially all 4 of the Consumer Products Business. The Consumer Products Business sells its products primarily through food brokers to grocery retailers, food wholesalers and mass merchandisers. No customer accounted for more than 10% of the Registrant's net sales in 1993. b. Competition Competition in the markets in which the Plastic Products Business operates is highly fragmented and the Registrant has a number of large competitors with respect to its Plastic Products Business who compete for sales on the basis of price, service and quality of product. The Registrant believes that it is one of the three largest manufacturers of child-resistant plastic closures. The Registrant has one major competitor in the prescription products business, who has substantially larger market share than the Registrant. The Registrant also believes it is the largest manufacturer of plastic closures incorporating a tamper-evident feature for the liquor market and that it is one of the leading suppliers of single and double walled jars to the personal care and cosmetic markets. The Registrant's one major competitor in the Home Canning Supplies Business is Alltrista Corporation. The Registrant believes it has a significant share of the market for home canning caps, lids and jars. c. Backlog The Registrant does not believe that recorded sales backlog is a significant factor in its business. d. Raw Materials and Supplies; Fuel and Energy Matters The primary raw materials used by the Registrant's Plastic Products Business are resins. The Registrant has historically been able to obtain adequate supplies of these items from a number of sources. However, since resins are derived from petroleum or fossil fuel, shortages of petroleum or fossil fuel could affect the supply of resins. From time to time, the Registrant has experienced increases in the cost of resins. To the extent that the Registrant is unable to reflect such price increases in the price for products manufactured by it, increases in the cost of resins could have a significant impact on the -2- 5 results of the Registrant's operations. Currently, a majority of the sales of Plastic Products are made pursuant to agreements that provide for increases in the cost of resin to be passed on to the customer. The Registrant purchases glass jars for its Home Canning Business from a single supplier under a multi-year contract. The Registrant believes that it could obtain adequate supplies of glass jars from alternate sources at reasonable prices if its current supply was interrupted. In addition to glass jars, the primary raw material used by the Registrant's Home Canning Supplies Business in the manufacture of its caps and lids is tin-plate. During 1993, the Registrant was able to obtain adequate supplies of these items from a number of sources. e. Product Development, Engineering, Patents and Licensing The Registrant 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, 1993, 1992 and 1991 were approximately $2,000,000, $1,400,000 and $1,300,000, respectively. Although the Registrant 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 Registrant has granted licenses on some of its patents, although the income from these sources is not material. f. Environmental Matters; Legislation Several states have enacted recycling laws which require consumers to recycle certain items including containers. These mandatory recycling laws are not expected to have an adverse effect on the Registrant's business. The Registrant is subject to laws and regulations governing the protection of the environment, disposal of waste, discharges into water and emissions into the atmosphere. The Registrant's expenditures for environmental control equipment in each of the last three years have not been material and the standards required by such regulations have not significantly affected the Registrant's operations. -3- 6 g. Employees As of December 31, 1993, the Registrant had approximately 1,100 employees, of which approximately 280 were office, supervisory and sales personnel. h. Seasonality The Registrant's sales and earnings are usually higher in the second and third calendar quarters and lower in the first and fourth calendar quarters. Most of the sales by the Home Canning Supplies Business occur in the second and third calendar quarters. In addition, substantially all returns of home canning supplies occur in the fourth calendar quarter of each year. Because of the foregoing factors, the Registrant generally records a low level of profitability in the first and fourth calendar quarters. Demand for home canning supplies is adversely affected by poor crop growing conditions, such as occurred in 1993. The Registrant's Home Canning Supplies Business normally manufactures its inventory of caps and lids in anticipation of expected orders, and, consistent with practice followed in the industry, grants extended payment terms to home canning customers and accepts the return of unsold home canning merchandise in the fourth calendar quarter of each year. i. Working Capital In general, the working capital practices followed by the Registrant are typical of the businesses in which it operates. The seasonal nature of the Registrant's Home Canning Supplies Business requires periodic short-term borrowing by the Registrant. As of December 31, 1993, the Registrant had two unsecured $6,000,000 lines of credit with two banks to provide for the seasonal working capital needs of the Company. One of the lines of credit is committed through October 28, 1994 with borrowings to bear interest at either the prime rate of the lender or, alternatively, Eurodollar rate plus 2%. In addition, a facility fee of 0.5% per annum is charged on the unused amount of the commitment. The other line of credit is committed through September 30, 1994 with borrowings to bear interest at the prime rate of the lender. A facility fee of 0.75% per annum is charged on the total amount of this commitment. The lines of credit provide the Registrant with a source of working capital which the -4- 7 Registrant believes will be sufficient to meet its anticipated needs. 2. The Discontinued Businesses a. The Metal Crown Business On December 11, 1992, the Registrant sold substantially all of its assets (the "Sale of the Metal Crown Assets") relating to the manufacture and sale of metal crowns for beer and beverage bottles (the "Metal Crown Business") to Crown Cork & Seal Company, Inc. ("Crown Cork") pursuant to the terms of an asset purchase agreement for approximately $7,200,000 in cash. Included among the assets of the Metal Crown Business sold to Crown Cork were essentially all of the assets of the Registrant's Arlington, Texas plant. The Sale of the Metal Crown Assets was more fully described in the Registrant's Current Report on Form 8-K dated December 11, 1992 filed with the Securities and Exchange Commission. As a result of the Sale of the Metal Crown Assets, the Registrant no longer operates its Metal Crown Business. b. The Commercial Glass Container Business On February 28, 1992, the Registrant consummated the sale of substantially all of its assets (the "Sale of the Glass Container Assets") relating to the manufacture and sale of glass containers (the "Commercial Glass Container Business") to Ball Corporation pursuant to the terms of an asset purchase agreement for approximately $68,000,000 in cash. The Sale of the Glass Container Assets was more fully described in the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1991 (the "1991 10-K"). As a result of the Sale of the Glass Container Assets, the Registrant no longer operates its Commercial Glass Container Business. 3. Segment Information The Registrant's 1993 Annual Report to Stockholders contains on pages 29 and 30 additional financial information regarding each of the Registrant's two industry segments for each of the last three fiscal years required by Item 1 and such information is incorporated herein by reference. The Registrant's 1993 Annual Report to Stockholders contains on -5- 8 pages 34 through 36 Management's Discussion and Analysis of Financial Condition and Results of Operations and such information is incorporated herein by reference. ITEM 2. PROPERTIES The Registrant's manufacturing activities with respect to its Continuing Businesses are conducted at the five facilities described in the following table.
Building Area Location Purpose of Facility (square feet) - - -------- ------------------- ------------- Lancaster, Pennsylvania Plastic Closure and 490,000 Container Plant; Warehouses Chicago, Illinois Home Canning Cap and 397,000 Lid Plant; Warehouses Santa Fe Springs, Plastic Jar and Closure 170,000 California Plant; Warehouse Ahoskie, North Carolina Plastic Closure Plant; 153,000 Warehouse Jackson, Tennessee Plastic Closure, Vial and 105,000 Bottle Plant; Warehouse
The Lancaster, Pennsylvania and Ahoskie, North Carolina facilities are owned by the Registrant. The Chicago, Illinois; Jackson, Tennessee and the Santa Fe Springs, California facilities are leased by the Registrant. The Registrant's principal executive offices are located at 1840 Century Park East, Los Angeles, California 90067, in approximately 26,000 square feet of leased space. In addition, the Registrant rents three area sales offices and one warehouse. During 1994, the Registrant will relocate its home canning cap and lid manufacturing operations from Chicago, Illinois to a new, leased 168,000 square foot manufacturing -6- 9 facility in Jackson, Tennessee and permanently cease operations in its leased facility in Chicago. In the opinion of the Registrant's management, its manufacturing facilities are suitable and adequate for the purposes for which they are being used. The Registrant owns land and buildings used in connection with a former glass container manufacturing plant that are being held for sale. In addition, pursuant to a sublease dated January 6, 1992, Fluidmaster, Inc., a California corporation, subleases a 28,000 square foot manufacturing facility located in Santa Fe Springs, California from a wholly-owned subsidiary of the Registrant. Prior to 1992, the Registrant manufactured custom molded plastic parts at this facility. In 1993, the Registrant's plastic products manufacturing facilities operated at approximately 83% of capacity, and the home canning cap and lid manufacturing facility operated at approximately 76% of capacity. ITEM 3. LEGAL PROCEEDINGS As the Registrant reported in its Quarterly Report on Form 10-Q for the quarter ended June 30, 1990, in February 1986, the Registrant was advised by the United States Environmental Protection Agency ("EPA") that Phoenix Closures, Inc. ("Phoenix") was one of several companies which disposed of wastes at the American Chemical Services ("ACS") site located near Griffith, Indiana. The EPA indicated that the wastes were disposed of by Phoenix's Chicago plant between 1955 and 1975. The Registrant has advised the EPA that it did not lease the Chicago plant during the period from 1955 to 1975. The Registrant has also advised Phoenix of its responsibilities with respect to environmental matters, including the environmental matters at the ACS site, under the lease relating to the Chicago plant. As the Registrant reported in its Quarterly Report on Form 10-Q for the quarter ended June 30, 1990, in March 1986, the Registrant and other parties were designated by the EPA as potentially responsible parties ("PRPs") responsible for the cleanup of certain hazardous wastes that have been disposed of at the Wayne Waste Oil ("WWO") site located near Columbia City, Indiana. In October 1986, the Registrant and other PRPs entered into a Consent Order with the EPA which allowed the PRPs to -7- 10 complete a Remedial Investigation and Feasibility Study ("RI/FS") for the WWO site. In March 1990, the EPA issued a Record of Decision ("ROD") for the site. The ROD documents the EPA's cleanup plan for the site, which includes capping the former municipal landfill, groundwater extraction and treatment, and soil vapor extraction. On July 20, 1992, a Consent Decree between the EPA and the PRPs at the site was entered in the United States District Court for the Northern District of Indiana, captioned United States v. Active Products Corp., No. F91-00247. Based upon the Registrant's percentage share of the total amount of wastes disposed of at the WWO site, the Registrant estimates its share of the costs under the Consent Decree will be approximately $109,000. A reserve has been established for such costs. As the Registrant reported in its Quarterly Report on Form 10-Q for the quarter ended June 30, 1990, on April 12, 1990, the State of New Jersey, Department of Environmental Protection and Energy ("NJDEPE"), filed a lawsuit in the United States District Court for the District of New Jersey against the Registrant, among others, entitled State of New Jersey, Department of Environmental Protection v. Gloucester Environmental Management Services, Inc., et al., No. 84-0152 (D.N.J.). The suit alleges that the Registrant was a "generator" of hazardous wastes and other hazardous substances which were disposed of at the Gloucester Environmental Management Services, Inc. ("GEMS") facility in the Township of Gloucester. The suit seeks cleanup costs, compensatory and treble damages, and a declaration that the Registrant and others are responsible for NJDEPE's past and future response costs at the GEMS site. On March 27, 1990, NJDEPE issued a Directive to the Registrant and other parties pursuant to the New Jersey Spill Compensation and Control Act, N.J.S.A. 58:10-23.11 et seq. Pursuant to the Directive, the Registrant and other parties have been ordered to undertake the second phase of remedial action at the site, including the construction and operation of a groundwater treatment system and operation of the remedial action performed in the first phase, and to reimburse NJDEPE's alleged past and future response costs. The estimated cost of second phase remedial action related to the GEMS site is approximately $20 million. The amount that the NJDEPE is seeking as reimbursement for past costs and damages is approximately $10 million. Notwithstanding the issuance of the Directive by the NJDEPE, the Registrant believes that it has no material liability with respect to the GEMS site because the only reason it has been named as a defendant (there are over 550 named defendants) is that a transporter that was used by the Registrant -8- 11 is known to have disposed of waste at the site. However, there is no evidence that any waste disposed of at the site by such transporter was waste of the Registrant and the Registrant has a motion for summary judgment pending in which it seeks dismissal from the case on these grounds. If such motion is granted, the Registrant would have a good faith basis to not comply with the Directive. The Registrant does not believe that any of its waste was disposed of at the site. One of the Registrant's insurance carriers has agreed to defend the current lawsuit and has funded the Registrant's participation in settlement efforts, which may result in the Registrant's dismissal from the lawsuit for a payment of approximately $100,000. Participation in the settlement will not be considered an admission of liability for the disposal of waste at the site. A reserve has been established for such costs. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. EXECUTIVE OFFICERS OF THE REGISTRANT Set forth below are the names, ages, positions and offices held, and a brief account of the business experience during the past five years of each executive officer of the Registrant.
Positions Held With Registrant and Periods Name and Age During Which Held ---------------------- ----------------- Roger W. Norian (50) Chairman, since 1983; President and Chief Executive Officer, since 1980 Norman N. Broadhurst (47) Senior Vice President, President, Consumer Products Division, since September 1992; Senior Vice President, General Manager, Consumer Products Division, since November 1988
-9- 12 Robert S. Reeves (64) Senior Vice President, Sales and Marketing, Plastic Products Division, since February 1992; Senior Vice President, General Manager, Commercial Glass Container Division, since 1985 D. Gordon Strickland (47) Senior Vice President, Finance and Chief Financial Officer, since 1986 J. Stephen Grassbaugh (40) Vice President, Controller, since 1988 John F. Thelen (45) Vice President, Employee Relations, since 1993
Business Experience Roger W. Norian has served in an executive capacity with the Registrant for more than the past five years. Norman N. Broadhurst joined the Registrant in 1988 as Senior Vice President, General Manager, Consumer Products. Prior to that time he was President and Chief Operating Officer of the Famous Amos Chocolate Chip Cookie Corporation and Vice President, Marketing, Beatrice Companies, Inc. Robert S. Reeves has served in an executive capacity with the Registrant for more than the past five years. D. Gordon Strickland has served in an executive capacity with the Registrant for more than the past five years. J. Stephen Grassbaugh has served in an executive capacity with the Registrant for more than the past five years. John F. Thelen joined the Registrant in 1993 as Vice President, Employee Relations. Prior to that time he was Vice President, Compensation, Benefits and Human Resource Information Systems of Mattel, Inc. -10- 13 PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Registrant's Annual Report to Stockholders for the year ended December 31, 1993, contains on page 12 the information required by Item 5 of Form 10-K and such information is incorporated herein by this reference. ITEM 6. SELECTED FINANCIAL DATA The Registrant's Annual Report to Stockholders for the fiscal year ended December 31, 1993, contains on pages 32 and 33 the information required by Item 6 of Form 10-K and such information is incorporated herein by this reference. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The Registrant's Annual Report to Stockholders for the fiscal year ended December 31, 1993, contains on pages 34 through 36 the information required by Item 7 of Form 10-K and such information is incorporated herein by this reference. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The Registrant's Annual Report to Stockholders for the fiscal year ended December 31, 1993, contains on pages 12 through 31 the information required by Item 8 of Form 10-K and such information is incorporated herein by this reference. ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. -11- 14 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Certain of the information required by Item 10 of Form 10-K is included in a separate item captioned "Executive Officers of the Registrant" in Part I of this Form 10-K. With respect to reports required to be filed pursuant to Section 16(a) of the Securities Exchange Act of 1934 regarding the Registrant's common stock, par value $.50 per share, the Registrant believes that, based solely on a review by the Registrant of copies of such reports received by it, during its fiscal year 1993, all filing requirements of Section 16(a) with respect to its common stock were complied with. The Registrant's Proxy Statement to be used in connection with the Annual Meeting of Stockholders to be held on April 26, 1994 contains on pages 2 through 6 the remaining information required by Item 10 of Form 10-K and such information is incorporated herein by this reference. ITEM 11. EXECUTIVE COMPENSATION The Registrant's Proxy Statement to be used in connection with the Annual Meeting of Stockholders to be held on April 26, 1994 contains on pages 7 through 10 the information required by Item 11 of Form 10-K, and such information is incorporated herein by this reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The Registrant's Proxy Statement to be used in connection with the Annual Meeting of Stockholders to be held on April 26, 1994 contains on pages 2 through 4 the information required by Item 12 of Form 10-K, and such information is incorporated herein by this reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The Registrant's Proxy Statement to be used in connection with the Annual Meeting of Stockholders to be held on April 26, 1994 contains on page 12 the information required by Item 13 of Form 10-K, and such information is incorporated herein by this reference. -12- 15 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K a. (i) Financial Statements The Financial Statements and related financial data contained in the Registrant's Annual Report to Stockholders for the year ended December 31, 1993, on pages 13 through 33 thereof and the Independent Auditors' Report on page 12 of the Registrant's Annual Report to Stockholders for the year ended December 31, 1993, are incorporated herein by reference. With the exception of information specifically incorporated by reference, however, the Registrant's Annual Report to Stockholders for the year ended December 31, 1993 is not to be deemed filed as a part of this report. Consolidated Financial Statements: Consolidated Statements of Earnings (Loss) for the years ended December 31, 1993, 1992 and 1991. Consolidated Balance Sheets as of December 31, 1993 and 1992. Consolidated Statements of Cash Flows for the years ended December 31, 1993, 1992 and 1991. Consolidated Statements of Common Stockholders' Equity for the years ended December 31, 1993, 1992 and 1991. Notes to Consolidated Financial Statements. In addition to such Consolidated Financial Statements and Independent Auditors' Report, the following are included herein: Independent Auditors' Report on Supporting Schedules, page 21. Schedules for the three years ended December 31, 1993: II - Amounts Receivable from Related Parties and Underwriters, Promoters and Employees other than Related Parties, page 22.
-13- 16 V - Property, Plant and Equipment, page 23. VI - Accumulated Depreciation and Amortization of Property, Plant and Equipment, page 24. VIII - Valuation and Qualifying Accounts, page 25. X - Supplementary Income Statement Information, page 26.
All other Schedules have been omitted as inapplicable, or not required, or because the required information is included in the Consolidated Financial Statements or the notes thereto. (ii) Exhibits 3.1 Restated Certificate of Incorporation of the Registrant is incorporated by reference to Exhibit 3.1 to Form 10-K for the fiscal year ended December 31, 1980. 3.2 Certificate of Retirement of Capital Stock of the Registrant is incorporated by reference to Exhibit 3.2 to Form 10-K for the fiscal year ended December 31, 1989. 3.3 Certificate of Amendment to the Restated Certificate of Incorporation of the Registrant is incorporated by reference to Exhibit 3.3 to Form 10-K for the fiscal year ended December 31, 1989. 3.4 By-laws of the Registrant, as amended effective June 15, 1993, is incorporated by reference to Exhibit 3.1 to Form 10-Q for the quarter ended June 30, 1993. 10.1 Restricted Stock Purchase Agreement between the Registrant and Roger W. Norian dated as of April 27, 1984 is incorporated by reference to Exhibit 4.4 of Registration Statement No. 2-92721. 10.2 Restricted Stock Purchase Agreement between the Registrant and Roger W. Norian dated as
-14- 17 of October 10, 1985 is incorporated by reference to Exhibit 4.4 to Registration Statement No. 33-3517. 10.3 Amendment to Restricted Stock Purchase Agreement, between the Registrant and Roger W. Norian, dated as of December 12, 1989 is incorporated by reference to Exhibit 10.3 to Form 10-K for the fiscal year ended December 31, 1989. 10.4 Amended and Restated Employment Agreement between the Registrant and Roger W. Norian dated as of October 10, 1985 is incorporated by reference to Exhibit 10.3 to Form 10-K for the fiscal year ended December 31, 1985. 10.5 Amendment to Amended and Restated Employment Agreement, between the Registrant and Roger W. Norian, dated as of December 12, 1989 is incorporated by reference to Exhibit 10.5 to Form 10-K for the fiscal year ended December 31, 1989. 10.6 Employment Agreement between the Registrant and D. Gordon Strickland dated as of June 16, 1986 is incorporated by reference to Exhibit 10.5 to Form 10-K for the fiscal year ended December 31, 1986. 10.7 Employment Agreement between the Registrant and Robert S. Reeves dated as of February 17, 1983 is incorporated by reference to Exhibit 10.6 to Form 10-K for the fiscal year ended December 31, 1983. 10.8 Employment Agreement between the Registrant and Norman N. Broadhurst dated as of December 8, 1988 is incorporated by reference to Exhibit 10.9 to Form 10-K for the fiscal year ended December 31, 1988. 10.9 Employment Agreement between the Registrant and J. Stephen Grassbaugh dated as of February 24, 1989 is incorporated by
-15- 18 reference to Exhibit 10.10 to Form 10-K for the fiscal year ended December 31, 1988. 10.10 1984 Stock Option Plan is incorporated by reference to Exhibit 4.7 to Registration Statement No. 2-92722. 10.11 1987 Stock Option Plan is incorporated by reference to Exhibit 10.12 to Form 10-K for the fiscal year ended December 31, 1986. 10.12 1993 Employee Stock Option Plan is incorporated by reference to Exhibit 10.1 to Form 10-Q for the fiscal quarter ended June 30, 1993. 10.13 1987 Stock Option Plan for Non-Employee Directors is incorporated by reference to Exhibit 10.17 to Form 10-K for the fiscal year ended December 31, 1987. 10.14 1993 Stock Option Plan for Non-Employee Directors is incorporated by reference to Exhibit 10.4 to Form 10-Q for the fiscal quarter ended June 30, 1993. 10.15 Form of Stock Option Agreement used in connection with the 1984 Stock Option Plan is incorporated by reference to Exhibit 4.11 to Registration Statement No. 2-92722. 10.16 Form of Stock Option Agreement used in connection with the 1987 Stock Option Plan is incorporated by reference to Exhibit 10.17 to Form 10-K for the fiscal year ended December 31, 1986. 10.17 Form of Stock Option Agreement used in connection with the 1993 Employee Stock Option Plan. 10.18 Form of Stock Option Agreement used in connection with the 1987 Stock Option Plan for Non-Employee Directors is incorporated by reference to Exhibit 10.23 to Form 10-K for the fiscal year ended December 31, 1987.
-16- 19 10.19 Form of Stock Option Agreement used in connection with the 1993 Stock Option Plan for Non-Employee Directors. 10.20 1993 Common Stock Purchase Plan for Non-Employee Directors is incorporated by reference to Exhibit 10.3 to Form 10-Q for the fiscal quarter ended June 30, 1993. 10.21 Letter of Credit dated January 26, 1990 in favor of Roger W. Norian is incorporated by reference to Exhibit 10.28 to Form 10-K for the fiscal year ended December 31, 1989. 10.22 Amendment dated December 3, 1992, to Letter of Credit dated January 26, 1990 in favor of Roger W. Norian is incorporated by reference to Exhibit 10.23 to Form 10-K for the fiscal year ended December 31, 1992. 10.23 Directors' Retirement Consulting Plan is incorporated by reference to Exhibit 10.22 to Form 10-K for the fiscal year ended December 31, 1984. 10.24 Key Executive Bonus Plan is incorporated by reference to Exhibit 10.2 to Form 10-Q for the fiscal quarter ended June 30, 1993. 10.25 Lease dated as of March 11, 1986 between Northrop Corporation and Registrant with respect to Registrant's principal executive offices, including related amendment to the Lease dated as of September 30, 1986 is incorporated by reference to Exhibit 10.24 to Registration Statement No. 33-08212. 10.26 Lease between the Industrial Development Board of the City of Jackson and Kerr Group, Inc., Dated as of May 14, 1993 is incorporated by reference to Exhibit 10.5 to Form 10-Q for the fiscal quarter ended June 30, 1993. 10.27 Asset Purchase Agreement dated as of November 25, 1991 by and between the
-17- 20 Registrant and Ball Corporation is incorporated by reference to Exhibit 1 to Form 8-K dated November 24, 1991. 10.28 Line of Credit between PNC Bank and Kerr Group, Inc. dated November 5, 1993 is incorporated by reference to Exhibit 10.6 to Form 10-Q for the fiscal quarter ended September 30, 1993. 10.29 Line of Credit between the Bank of Boston and Kerr Group, Inc. dated November 5, 1993 is incorporated by reference to Exhibit 10.7 to Form 10-Q for the fiscal quarter ended September 30, 1993. 10.30 Note Agreement dated as of September 15, 1993 between Kerr Group, Inc. and the Purchasers identified therein is incorporated by reference to Exhibit 2 to Form 8-K dated September 21, 1993. 10.31 Asset Purchase Agreement, dated as of December 11, 1992, by and between Crown Cork & Seal Company, Inc. and Kerr Group, Inc. is incorporated by reference to Exhibit 1 to Form 8-K dated December 11, 1992. 11.1 Statement re: Computation of Per Common Share Earnings (Loss). 13.1 Registrant's Annual Report to Stockholders for the fiscal year ended December 31, 1993, pages 12 through 36. 21.1 Subsidiaries 23.1 Consent of Independent Certified Public Accountants. 99.1 Undertaking is incorporated by reference to Exhibit 28.1 to Form 10-K for the year ended December 31, 1982.
The Registrant has no additional long-term debt instruments in which the total amount of securities authorized -18- 21 under any instrument exceeds 10% of total assets of the Registrant and its subsidiaries on a consolidated basis. The Registrant hereby agrees to furnish a copy of any such long-term debt instrument upon the request of the Securities and Exchange Commission. b. Reports on Form 8-K On October 19, 1993, the Registrant filed a Form 8-K Current Report announcing its intention to call for redemption on December 15, 1993 all of the Registrant's outstanding 13% Subordinated Notes Due December 15, 1996. -19- 22 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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. By: Roger W. Norian ------------------------------- Roger W. Norian, Chairman President and Chief Executive Officer Dated: March 29, 1994 Los Angeles, California Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. Gordon C. Hurlbert March 29, 1994 - - ----------------------------------- Gordon C. Hurlbert, Director Michael C. Jackson March 29, 1994 - - ----------------------------------- Michael C. Jackson, Director John D. Kyle March 29, 1994 - - ----------------------------------- John D. Kyle, Director James R. Mellor March 29, 1994 - - ----------------------------------- James R. Mellor, Director Roger W. Norian March 29, 1994 - - ----------------------------------- Roger W. Norian, Principal Executive Officer; Director Robert M. O'Hara March 29, 1994 - - ----------------------------------- Robert M. O'Hara, Director Harvey L. Sperry March 29, 1994 - - ----------------------------------- Harvey L. Sperry, Director D. Gordon Strickland March 29, 1994 - - ----------------------------------- D. Gordon Strickland Principal Financial Officer J. Stephen Grassbaugh March 29, 1994 - - ----------------------------------- J. Stephen Grassbaugh Principal Accounting Officer
-20- 23 INDEPENDENT AUDITOR'S REPORT To the Stockholders and Board of Directors of Kerr Group, Inc.: Under date of February 23, 1994, we reported on the consolidated balance sheets of Kerr Group, Inc. as of December 31, 1993 and 1992, and the related consolidated statements of earnings (loss), common stockholders' equity, and cash flows for each of the years in the three-year period ended December 31, 1993, as contained in the 1993 annual report to stockholders. These consolidated financial statements and our report thereon are incorporated by reference in the annual report on Form 10-K for the year 1993. In connection with our audits of the aforementioned consolidated financial statements, we also have audited the related supplementary financial statement schedules as listed in Item 14a(i). These supplementary financial statement schedules are the responsibility of the company's management. Our responsibility is to express an opinion on these supplementary financial statement schedules based on our audits. In our opinion, such supplementary financial statement schedules, when considered in relation to the basic consolidated financial statement taken as a whole, present fairly, in all material respects, the information set forth therein. KPMG Peat Marwick Los Angeles, California February 23, 1994 -21- 24 SCHEDULE II KERR GROUP, INC. Amounts Receivable From Related Parties and Underwriters, Promoters and Employees Other Than Related Parties Three years ended December 31, 1993 (in thousands)
Column A Column B Column C Column D Column E ---------- -------- -------- ----------------- ----------------- Balance at Deductions End of Period ------------------ ----------------- Balance (1) (2) (1) (2) at Beginning Amounts Amounts Non- Year Ended Name of Debtor of Period Additions Collected Written-Off Current Current - - ----------- -------------- --------- --------- --------- ----------- ------ ------- December 31, 1991: R. W. Norian $485 $ 38 $ - $ - $ - $523(a) D. G. Strickland 32 105 8 - 5 124(b) ==== ==== === ==== ==== ==== December 31, 1992: R. W. Norian $523 $ 5 $ - $528 $ - $ -(a) D. G. Strickland 129 8 - 15 - 122(b) ==== ==== === ==== ==== ==== December 31, 1993: D. G. Strickland $122 $ 9 $ 1 $ - $ - $130(b) ==== ==== === ==== ==== ====
(a) Includes both note receivable and related accrued interest. The loan accrued interest at an annual rate of 9.23%. On February 28, 1992, $400,000 of remaining principal and $128,319 of related accrued interest was forgiven by the Registrant. (b) Consists of two loans dated January 16, 1990 and June 11, 1991 in the original amount of $30,000 and $100,000, respectively, and related accrued interest. The principal of the loan dated January 16, 1990 is to be paid in six equal annual installments in 1991 through 1996, however, on January 1, 1992, $15,000 of principal was forgiven by the Registrant. This loan bears interest at 6% annually and accrued interest is paid annually. The principal and related accrued interest of the loan dated June 11, 1990 is to be paid in 1996. This loan bears interest at 7.76% per annum. -22- 25 SCHEDULE V KERR GROUP, INC. Property, Plant and Equipment Three years ended December 31, 1993 (in thousands)
Column A Column B Column C Column D Column F -------------- ---------- ---------- ---------- ---------- Balance Balance at Beginning Additions at End Classification of Period At Cost Retirements of Period -------------- ------------ ----------- ----------- ----------- Year Ended December 31, 1991: Land $ 436 $ - $ - $ 436 Buildings and Improvements 11,215 734 252 11,697 Machinery and Equipment 62,847 3,514 2,433 63,928 Furniture and Equipment 2,729 143 23 2,849 -------- -------- ------- -------- $77,227 $ 4,391 $ 2,708 $78,910 ======= ======= ======= ======= Year Ended December 31, 1992: Land $ 436 $ - $ - $ 436 Buildings and Improvements 11,697 842 4 12,535 Machinery and Equipment 63,928 7,267 3,230 67,965 Furniture and Equipment 2,849 250 75 3,024 -------- -------- ------- -------- $78,910 $ 8,359 $ 3,309 $83,960 ======= ======= ======= ======= Year Ended December 31, 1993: Land $ 436 $ - $ 9 $ 427 Buildings and Improvements 12,535 176 235 12,476 Machinery and Equipment 67,965 10,598 3,815 74,748 Furniture and Equipment 3,024 482 505 3,001 -------- --------- -------- -------- $83,960 $11,256 $ 4,564 $90,652 ======= ======= ======= =======
1.) Amounts for property, plant and equipment presented in the table above are related to continuing operations only. Property, plant and equipment associated with the Commercial Glass Container Business and Metal Crown Business of the Registrant in 1991 and 1992 has been reported as a component of net non-current assets related to discontinued operations in the Registrant's Consolidated Balance Sheets. 2.) As to Column E, which is omitted, the answers are "None". -23- 26 SCHEDULE VI KERR GROUP, INC. Accumulated Depreciation and Amortization of Property, Plant and Equipment Three years ended December 31, 1993 (in thousands)
Column A Column B Column C Column D Column F -------------- ---------- ---------- ---------- ---------- Additions Balance Charged to Balance at Beginning Costs and at End Classification of Period Expenses Retirements of Period -------------- ------------ ----------- ----------- --------- Year Ended December 31, 1991: Buildings and Improvements $ 5,792 $ 517 $ 66 $ 6,243 Machinery and Equipment 33,559 4,481 1,779 36,261 Furniture and Equipment 1,636 391 16 2,011 -------- -------- --------- -------- $40,987 $ 5,389 $ 1,861 $44,515 ======= ======= ======= ======= Year Ended December 31, 1992: Buildings and Improvements $ 6,243 $ 636 $ 4 $ 6,875 Machinery and Equipment 36,261 5,027 2,846 38,442 Furniture and Equipment 2,011 304 55 2,260 -------- -------- --------- -------- $44,515 $ 5,967 $ 2,905 $47,577 ======= ======= ======= ======= Year Ended December 31, 1993: Buildings and Improvements $ 6,875 $ 750 $ 174 $ 7,451 Machinery and Equipment 38,442 5,676 3,465 40,653 Furniture and Equipment 2,260 286 422 2,124 -------- -------- -------- -------- $47,577 $ 6,712 $ 4,061 $50,228 ======= ======= ======= =======
1.) Amounts for accumulated depreciation and amortization of property, plant and equipment presented in the table above are related to continuing operations only. Accumulated depreciation and amortization of property, plant and equipment associated with the Commercial Glass Container Business and Metal Crown Business of the Registrant in 1991 and 1992 has been reported as a component of net non- current assets related to discontinued operations in the Registrant's Consolidated Balance Sheets. 2.) See note 1 of notes to Consolidated Financial Statements for description of the Registrant's depreciation policy. 3.) As to Column E, which is omitted, the answers are "None". -24- 27 SCHEDULE VIII KERR GROUP, INC. Valuation and Qualifying Accounts Three years ended December 31, 1993 (in thousands)
Column A Column B Column C Column D Column E -------------- ---------- ------------------------- ---------- ---------- Additions ------------------------- (1) (2) Balance Charged Charged Deductions Balance at Beginning (Credited) to Other From at End Description of Period to Earnings Account Reserves(a) of Period ------------- ------------ ----------- --------- ----------- --------- Allowance for doubtful accounts, year ended: December 31, 1991 $337 $ 88 $ - $ 65 $360 ==== ==== ===== ===== ==== December 31, 1992 $360 $390 $ - $105 $645 ==== ==== ===== ==== ==== December 31, 1993 $645 ($ 42) $ - $ 25 $578 ==== ===== ===== ===== ====
Note: Allowance for doubtful accounts presented in the table above is related to continuing operations only. Allowance for doubtful accounts associated with the Commercial Glass Container Business and Metal Crown Business of the Registrant in 1991 and 1992 has been reported as a component of net current assets related to discontinued operations in the Registrant's Consolidated Balance Sheets. (a) These deductions represent uncollectible amounts charged against the reserve. -25- 28 SCHEDULE X KERR GROUP, INC. Supplementary Income Statement Information Three years ended December 31, 1993 (in thousands)
Column A Column B ------------ ---------------------------------------- Charged to Costs and Expenses ---------------------------------------- Item 1993 1992 1991 ----------- ------ ------ ------ Maintenance and repairs $7,904 $8,028 $7,428 Depreciation and amortization of intangible assets, preoperating costs and similar deferrals * * * Taxes, other than payroll and income taxes * * * Royalties * * * Advertising costs * * *
Note: Income statement information presented in the table above are for the Registrant's continuing operations. * Less than 1% of annual net sales from continuing operations. -26- 29 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 KERR GROUP, INC. FORM 10-K for year ended December 31, 1993 INDEX TO EXHIBITS FILED SEPARATELY WITH FORM 10-K
Exhibit No. Document - - ----------- -------- 10.17 Form of Stock Option Agreement used in connection with the 1993 Employee Stock Option Plan. 10.19 Form of Stock Option Agreement used in connection with the 1993 Stock Option Plan for Non-Employee Directors. 11.1 Statement re: Computation of Per Common Share Earnings (Loss). 13.1 Registrant's Annual Report to Stockholders for the fiscal year ended December 31, 1993, pages 12 through 36. 21.1 Subsidiaries 23.1 Consent of Independent Certified Public Accountants.
EX-10.17 2 FORM OF STOCK OPTION AGREEMENT 1987 PLAN 1 EXHIBIT 10.17 Form of Stock Option Agreement used in connection with the 1993 Employee Stock Option Plan 2 KERR GROUP, INC. 1993 EMPLOYEE STOCK OPTION PLAN STOCK OPTION AGREEMENT ---------------------- AGREEMENT, dated as of the_____ day of ______, 1993 between KERR GROUP, INC., a Delaware corporation (the "Company"), and __________ (the "Optionee"). 1. The Company hereby grants to the Optionee, pursuant to the Company's _________________ Stock Option Plan (the "Option Plan"), a copy of which is annexed to this Agreement, a nonqualified stock option to purchase _________ shares (subject to adjustment as provided in paragraph 5 hereof) of Common Stock of the Company (the "Option Shares") at the price of $_________ per share on the terms and conditions set forth in the Option Plan, and hereinafter except to the extent that any such provision is inconsistent with the provisions of the Option Plan. The option price is equal to 100% of the mean between the high and low selling prices of a share of Common Stock of the Company on _________ , the date on which this option was granted by the Board of Directors of the Company. This option is not an "incentive stock option", within the meaning of Section 422(b) of the Internal Revenue Code of 1986, as amended. 2. This option shall be exercised not later than five years from the date hereof; provided, however, that (i) the option to purchase the first one-fifth of the Option Shares shall be exercisable from and after the date hereof, (ii) the option to purchase the next one-fifth of the Option Shares shall not be exercisable prior to __________, (iii) the option to purchase the next one-fifth of the Option Shares shall not be exercisable prior to _________, (iv) the option to purchase the next one-fifth of the Option Shares shall not be exercisable prior to ____________; and (v) the option to purchase the remaining one-fifth of the Option shares shall not be exercisable prior to ____________; further provided, however, that no part of the option granted hereunder shall be exercisable prior to the 10th consecutive trading day on which the closing price of the Common Stock of the Company is $__________ per share or higher. Notwithstanding the preceding sentence, if the Company liquidates or if the Company sells substantially all of its assets or is not the surviving - 1 - 3 corporation in any merger or consolidation and substitute options are not issued for this option, then during the ten (10) day period commencing on the date of such event, the Optionee may exercise this option as to all or any part of the Option Shares, including shares as to which this option would then not otherwise be exercisable, and receive upon such exercise the property into which the shares of Common Stock otherwise issuable upon such exercise would have been converted had they been outstanding at the time of such event. If a single stockholder or a group of stockholders who would be deemed to be a "person" within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934 acquires more than 50% of the shares of the Company's capital stock which are entitled to vote for the election of directors, then during the sixty (60) day period commencing after such event, the Optionee may exercise this option as to all or any part of the Option Shares, including shares as to which this option would not then otherwise be exercisable. If this option is exercised in accordance with the provisions of the immediately preceding sentence as to less than all of the Option Shares, this option shall be deemed to have been so exercised in inverse chronological order. Upon the expiration of such sixty (60) day period, the unexercised portion of any such portion shall be exercisable only to the extent it was exercisable prior to the occurrence of such event. Notwithstanding any provisions of this Agreement to the contrary, in no event may this option be exercised after five years from the date hereof. 3. This option and all rights hereunder to the extent such rights shall not have been exercised shall terminate and become null and void when the Optionee ceases to be an employee of the Company or any of its subsidiaries, except that: (i) in the event of the termination by the Company of the Optionee's employment other than for cause, this option may be exercised to the extent it was exercisable at the date of such termination, but only within a period of three months after the date of such termination; (ii) in the event of the retirement of the Optionee at an age at which he would be entitled to retirement benefits under the Company's pension plans as then in effect, this option may be exercised as to all of - 2 - 4 the Option Shares, but only within a period of three months after the date of such retirement; (iii) in the event of the death of the Optionee within the three month periods described in items (i) and (ii) above, the person or persons to whom the Optionee's rights under this option pass by will or the laws of descent or distribution shall be entitled to exercise this option within one year after the date of Optionee's death, but only to the extent the Optionee was otherwise entitled to exercise this option under items (i) and (ii); and (iv) in the event of the death of the Optionee while in the employ of the Company or any of its subsidiaries, the person or persons to whom the Optionee's rights under this option pass by will or the laws of descent or distribution shall be entitled to exercise this option within one year after the date of death for all the Option Shares with respect to which the option granted hereunder has not been previously exercised. Notwithstanding the foregoing, this option may in no event be exercised by anyone to any extent in the event of a merger or consolidation of the Company with or into another corporation in which the Company is not the surviving corporation, a sale of substantially all of the assets of the Company or a dissolution, liquidation or winding up of the affairs of the Company, after the close of business on the tenth day after the date of such event. 4. This option is exercisable with respect to all, or from time to time with respect to any portion, of the Option Shares then subject to such exercise, by delivering written notice of such exercise, in the form prescribed by the Stock Option and Compensation Committee, to the office of the Corporate Secretary of the Company at 1840 Century Park East, Los Angeles, California 90067 or at such other address as the Company may hereafter notify the Optionee. Each such notice shall be accompanied by a cash payment in full of the - 3 - 5 purchase price of such shares and of the cost of any applicable state documentary tax stamps. At the request of the Company, the Optionee promptly shall pay to the Company such amount as may be requested by the Company for the purpose of satisfying any liability to withhold Federal, State, local or foreign income or other taxes. 5. If there is any stock dividend, split-up or combination of shares of Common Stock of the Company or any other change in such Common Stock, whether by way of exchange, offering of subscription rights, recapitalization or otherwise, such adjustment, if any, shall be made in the number of Option Shares and the exercise price of this option as the Stock Option and Compensation Committee of the Company, in its sole discretion, may deem equitable. 6. This option shall, during the Optionee's lifetime, be exercisable by only him, and neither this option nor any right hereunder shall be transferable except by will or laws of descent and distribution, or be subject to attachment, execution or other similar process. In the event of any attempt by the Optionee to alienate, assign, pledge, hypothecate or otherwise dispose of this option or any right hereunder, except as provided for herein, or in the event of the levy of any attachment, execution or similar process on the rights or interest hereby conferred, the Company may terminate this option by notice to the Optionee and this option shall thereupon become null and void. 7. Neither the granting of this option nor the exercise thereof shall be construed as conferring upon the Optionee any right to continue in the employment of the Company or any of its subsidiaries, or as interfering with or restricting in any way the right of such corporations to terminate such employment at any time. 8. Neither the Optionee, nor any person entitled to exercise his rights in the event of his death, shall have any of the rights of a stockholder with respect to the Option Shares, except to the extent that certificates for such shares shall have been issued upon exercise of the option as provided for herein. 9. The inability of the Company to obtain, or any delay in obtaining, from each regulatory body having jurisdiction, all requisite authority to issue or transfer the Option Shares or the inability of the Company to comply with, or any delay in - 4 - 6 complying with, any laws, rules or regulations governing the issuance or transfer of the Option Shares (including but not limited to complying with the Securities Act of 1933, as amended (the "Act"), and all rules and regulations promulgated thereunder), the fulfillment of which conditions are deemed necessary by counsel for the Company to the lawful issuance or transfer of any such shares, shall relieve the Company of any liability for the nonissuance or nontransfer, or any delay in the issuance or transfer of such shares. At the time of exercise of this option, the Company may, if it shall deem it necessary or desirable in order to comply with the Act, require the Optionee to represent in writing to the Company that it is then his intention to acquire the Option Shares for his account, that the Optionee shall not sell, transfer or dispose of such shares except pursuant to an effective registration statement under the Act or an exemption therefrom, as determined by, or with approval of counsel satisfactory to the Company, and that the Optionee acknowledges that the Option Shares are unregistered under the Act and accordingly must be held indefinitely unless such shares are subsequently registered or an exemption from such registration is available. In such event a legend shall be placed on the stock certificate representing the Option Shares to reflect the transfer restrictions and stop transfer instructions shall be issued to the Company's transfer agent with respect to such shares. 10. This option shall be exercised in accordance with such administrative regulations as the Stock Option and Compensation Committee may from time to time adopt. All decisions of the Stock Option and Compensation Committee upon any question arising under the Option Plan or under this instrument shall be conclusive and binding upon the Optionee and all other persons. 11. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Delaware. - 5 - 7 IN WITNESS WHEREOF, the parties have executed this Agreement as of the day first hereinabove written. KERR GROUP, INC. By: _______________________________ Roger W. Norian President Optionee: _____________________ - 6 - EX-10.19 3 FORM OF STOCK OPTION AGREEMENT 1993 PLAN 1 EXHIBIT 10.19 FORM OF STOCK OPTION AGREEMENT USED IN CONNECTION WITH THE 1993 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS 2 KERR GROUP, INC. 1993 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS STOCK OPTION AGREEMENT AGREEMENT, dated as of the 27th day of April, 1993 between KERR GROUP, INC., a Delaware corporation (the "Company"), and _________________ (the "Optionee"). 1. The Company hereby grants to the Optionee, pursuant to the Company's 1993 Stock Option Plan for Non-Employee Directors (the "Option Plan"), a copy of which is annexed to this Agreement, a stock option (the "Option"), to purchase 10,000 shares (the "Option Shares") of the Company's common stock, par value $.50 per share (the "Common Stock") (subject to adjustment as provided in paragraph 5 hereof) at the price of $8.19 per share, on the terms and conditions set forth in the Option Plan, and hereinafter except to the extent that any such provision is inconsistent with the provisions of the Option Plan. The option price is equal to the fair market value of a share of Common Stock on the date hereof. 2. This Option may be exercised not earlier than six months following the date hereof, and not later than ten years following the date hereof. In addition, this Option may not be exercised unless, at any time after the date hereof and prior to such exercise, the closing price of Common Stock for ten consecutive days has been equal to or greater than $12.50. 3. This Option and all rights hereunder to the extent such rights shall not have been exercised shall terminate and become null and void if the Optionee ceases to be a director of the Company, except in the event of the death of - 1 - 3 the Optionee, the person or persons to whom the Optionee's rights under this Option pass by will or the laws of descent or distribution shall be entitled to exercise this Option within three months after the date of Optionee's death for all the Option Shares with respect to which the Option granted hereunder has not been previously exercised. 4. This Option is exercisable with respect to all, or from time to time with respect to any portion, of the Option Shares then subject to such exercise, by delivering written notice of such exercise in the form prescribed by the Stock Option and Compensation Committee (the "Committee"), to the office of the Secretary of the Company at 1840 Century Park East, Los Angeles, California 90067 or at such other address as the Company may hereafter notify the Optionee. Each such notice shall be accompanied by a cash payment in full of the purchase price of such shares and of the cost of any applicable state documentary tax stamps. At the request of the Company, the Optionee promptly will pay to the Company such amount as may be requested by the Company for the purpose of satisfying any liability to withhold federal, state, local or foreign income or other taxes. 5. If there is any stock dividend, split-up or combination of shares of Common Stock or any other change in such Common Stock, whether by way of exchange, offering of subscription rights, recapitalization or otherwise, an adjustment shall be made in the number of Option Shares and the exercise price of this Option so that the proportionate interest of the Optionee is maintained as before the occurrence of such event. 6. This Option shall, during the Optionee's lifetime, be exercisable only by him, and neither this Option nor any right hereunder shall be transferrable except by will or laws of descent and distribution, or be subject to attachment, execution or other similar process. In the event of any attempt by the Optionee to alienate, assign, pledge, hypothecate or otherwise dispose of this Option - 2 - 4 or any right hereunder, except as provided for herein, or in the event of the levy of any attachment, execution or similar process on the rights or interest hereby conferred, the Company may terminate this Option by notice to the Optionee and this Option shall thereupon become null and void. 7. Neither the Optionee, nor any person entitled to exercise his rights in the event of his death, shall have any of the rights of a stockholder with respect to the Option Shares, except to the extent that certificates for such shares shall have been issued upon exercise of the Option as provided for herein. 8. The inability of the Company to comply with, or any delay in complying with, any laws, rules or regulations governing the issuance or transfer of the Option Shares (including but not limited to complying with the Securities Act of 1933, as amended (the "Act") and all rules and regulations promulgated thereunder, the fulfillment of which condition is deemed necessary by counsel for the Company to the lawful issuance or transfer of any such shares, shall relieve the Company of any liability for the non-issuance or non-transfer, or any delay in the issuance or transfer of such shares. At the time of exercise of this Option, the Company may, if it shall deem it necessary or desirable in order to comply with the Act, require the Optionee to represent in writing to the Company that it is then his intention to acquire the Option Share for his account that the Optionee shall not sell, transfer or dispose of such shares except pursuant to an effective registration statement under the Act or an exemption therefrom, as determined by, or with approval of counsel satisfactory to the Company, and that the Optionee acknowledges that the Option Shares are unregistered under the Act and accordingly must be held indefinitely unless such shares are subsequently registered or an exemption from such registration is available. In such event a legend shall be placed on the stock certificate representing the Option - 3 - 5 Shares to reflect the transfer restrictions and stock transfer instructions shall be issued to the Company's transfer agent with respect to such shares. 9. This Option shall be exercised in accordance with such administrative regulations as the Stock Option and Compensation Committee (the "Committee") may from time to time adopt. All decisions of the Committee upon any question arising under the Option Plan or under this instrument shall be conclusive and binding upon the Optionee and all other persons. 10. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Delaware. IN WITNESS WHEREOF, the parties have executed this Agreement as of the day first herein above written. KERR GROUP, INC. By: _______________________________ _______________________________ [Name] - 4 - EX-11.1 4 STATEMENT RE: COMPUTATION OF PER COMMON SHARES 1 EXHIBIT 11.1 KERR GROUP, INC. Statement Re: Computation of Per Share Earnings (Loss)
Years Ended December 31, --------------------------------------------------------------------- 1993 1992 1991 1990 1989 -------- -------- -------- -------- -------- (in thousands, except per share data) Primary Net Earnings (Loss) Per Common Share Net earnings (loss) ($1,633) ($2,697) ($2,579) ($1,252) $281 Less Preferred Stock dividends (829) (829) (829) (829) (829) ------- ------- ------- ------- ------ Net loss applicable to primary loss per common share ($2,462) ($3,526) ($3,408) ($2,081) ($548) ------- ------- ------- ------- ------ Weighted average number of common shares outstanding 3,669 3,675 3,675 3,675 3,666 ======= ======= ======= ======= ====== Primary net loss per common share ($0.67) ($0.96) ($0.93) ($0.57) ($0.15) ======= ======= ======= ======= ====== Fully Diluted Net Earnings (Loss) Per Common Share Net loss applicable to primary loss per common share ($2,462) ($3,526) ($3,408) ($2,081) ($548) Add Preferred Stock dividends 829 829 829 829 829 ------- ------- ------- ------- ------ Net earnings (loss) applicable to fully diluted earnings (loss) per common share ($1,633) ($2,697) ($2,579) ($1,252) $281 ======= ======= ======= ======= ====== Weighted average number of common shares outstanding 3,669 3,675 3,675 3,675 3,666 Common shares issuable from assumed conversion of Preferred Stock 709 709 709 709 709 Incremental common shares issuable upon assumed exercise of outstanding stock options 6 3 - 1 5 ------- ------- ------- ------- ------ Adjusted weighted average number of common shares outstanding 4,384 4,387 4,384 4,385 4,380 ======= ======= ======= ======= ====== Fully diluted net earnings (loss) common share: As computed ($0.37) ($0.61) ($0.59) ($0.29) $0.06 ======= ======= ======= ======= ======= As reported (a) ($0.67) ($0.96) ($0.93) ($0.57) ($0.15) ======= ======= ======= ======= =======
(a) Fully diluted net earnings (loss) per common share are anti-dilutive for all years. EX-13.1 5 ANNUAL REPORT TO SHAREHOLDERS PAGES 12-36 1 EXHIBIT 13.1 PRICE RANGE AND DIVIDENDS OF COMMON STOCK AND PREFERRED STOCK The Company's Common Stock and Preferred Stock are both listed on the New York Stock Exchange. As of February 23, 1994, there were approximately 1,135 and 188 holders of record of the Company's Common Stock and Preferred Stock, respectively. The following table summarizes the prices of the Common Stock and Preferred Stock on the New York Stock Exchange Composite Tape and quarterly cash dividends:
Common Stock Preferred Stock -------------------------------- --------------------------------- Cash Cash Calendar Year High Low Dividends High Low Dividends - - ------------- ------ ------ --------- ------- ------ --------- 1993 First Quarter $8 7/8 $6 1/2 $ -- $21 1/4 $18 3/4 $.425 Second Quarter 9 1/4 6 3/4 -- 21 1/2 19 7/8 .425 Third Quarter 8 3/4 6 3/8 -- 22 3/8 20 .425 Fourth Quarter 9 1/4 7 7/8 -- 22 3/8 20 1/4 .425 ------ ------ ----- ------- ------- ----- 1992 First Quarter $7 3/4 $6 1/4 $ -- $19 $16 1/2 $.425 Second Quarter 6 3/4 4 3/4 -- 18 1/2 16 3/4 .425 Third Quarter 5 1/2 4 3/8 -- 18 1/2 16 .425 Fourth Quarter 6 3/4 4 1/2 -- 20 17 1/8 .425 ====== ====== ===== ======= ======= =====
The annual cumulative Preferred Stock dividend requirement as of December 31, 1993, was $829,000. The payment of Common Stock dividends is restricted by the Company's Senior Note agreement. Under the most restrictive covenant of such agreement, $500,000 was available for the payment of dividends on Common Stock as of December 31, 1993. INDEPENDENT AUDITORS' REPORT To the Stockholders and Board of Directors of Kerr Group, Inc.: We have audited the accompanying consolidated balance sheets of Kerr Group, Inc. (Kerr) as of December 31, 1993 and 1992, and the related consolidated statements of earnings (loss), common stockholders' equity and cash flows for each of the years in the three-year period ended December 31, 1993. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements 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 at December 31, 1993 and 1992, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 1993, in conformity with generally accepted accounting principles. As discussed in Notes 1 and 3 to the consolidated financial statements, the Company changed its method of accounting for postretirement benefits other than pensions and income taxes in 1993, and new machine repair parts in 1991. KPMG PEAT MARWICK - - ------------------------------------ Los Angeles, California February 23, 1994 12 2 FINANCIAL REVIEW CONSOLIDATED STATEMENTS OF EARNINGS (LOSS)
Years Ended December 31, 1993 1992 1991 - - ------------------------ --------- -------- -------- (in thousands, except per share amounts) Net sales $ 127,372 $126,610 $125,598 Cost of sales 88,922 88,730 91,192 --------- -------- -------- Gross profit 38,450 37,880 34,406 Selling, warehouse, general and administrative expenses 30,095 28,945 29,093 Loss on plant relocation 4,500 -- -- Interest expense 5,680 5,815 5,086 Interest and other income (858) (1,293) (867) --------- -------- -------- Earnings (loss) from continuing operations before income taxes (967) 4,413 1,094 Provision (benefit) for income taxes (634) 1,826 700 --------- -------- -------- Earnings (loss) from continuing operations (333) 2,587 394 Loss from discontinued operations, after applicable income tax benefit of $2,104 in 1992, and $1,607 in 1991 -- (5,284) (2,973) Extraordinary loss on retirement of debt, after applicable income tax benefit of $632 (1,300) -- -- --------- -------- -------- Net loss (1,633) (2,697) (2,579) Preferred stock dividends 829 829 829 --------- -------- -------- Net loss applicable to common stockholders $ (2,462) $ (3,526) $ (3,408) ========= ======== ======== Earnings (loss) per common share: Earnings (loss) per common share from continuing operations $ (0.32) $ 0.48 $ (0.12) Loss per common share from discontinued operations -- (1.44) (0.81) Extraordinary loss per common share on retirement of debt (0.35) -- -- --------- -------- ------- Net loss per common share $ (0.67) $ (0.96) $ (0.93) ========= ======== ========
See accompanying notes to consolidated financial statements. 13 3 CONSOLIDATED BALANCE SHEETS
Years Ended December 31, 1993 1992 -------- -------- (in thousands) ASSETS Current assets Cash and cash equivalents $ 11,329 $ 19,251 Receivables -- primarily trade accounts, less allowance for doubtful accounts of $578 in 1993 and $645 in 1992 13,533 11,347 Inventories Raw materials and work in process 8,906 6,485 Finished goods 19,126 15,835 -------- -------- Total inventories 28,032 22,320 Prepaid expenses and other current assets 2,527 2,081 -------- -------- Total current assets 55,421 54,999 -------- -------- Property, plant and equipment, at cost Land 427 436 Buildings and improvements 12,476 12,535 Machinery and equipment 74,748 67,965 Furniture and office equipment 3,001 3,024 -------- -------- 90,652 83,960 Accumulated depreciation and amortization (50,228) (47,577) -------- -------- Net property, plant and equipment 40,424 36,383 Deferred income taxes 6,629 -- Goodwill and other intangibles, net of amortization of $2,122 in 1993 and $3,454 in 1992 6,645 7,064 Other assets 4,201 2,477 Non-current net assets related to discontinued operations 4,029 4,309 -------- -------- $117,349 $105,232 ======== ========
See accompanying notes to consolidated financial statements. 14 4 CONSOLIDATED BALANCE SHEETS (continued)
Years Ended December 31, 1993 1992 -------- -------- (in thousands, except per share amounts) LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Current maturities of long-term debt $ -- $ 1,000 Accounts payable 9,573 8,844 Accrued expenses 9,089 9,517 -------- -------- Total current liabilities 18,662 19,361 -------- -------- Pension liability 18,321 7,919 Other long-term liabilities 2,302 1,488 Senior long-term debt 50,000 -- Subordinated long-term debt -- 40,000 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, 4,210 shares issued 2,105 2,105 Additional paid-in capital 27,145 27,113 Retained earnings 9,420 11,882 Treasury Stock, at cost, 543 shares in 1993 and 535 shares in 1992 (12,803) (12,737) Excess of additional pension liability over unrecognized prior service cost, net of tax benefits (6,835) -- Notes receivable from ESOP Trusts (716) (1,647) -------- -------- Total stockholders' equity 28,064 36,464 -------- -------- $117,349 $105,232 ======== ========
See accompanying notes to consolidated financial statements. 15 5 CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 1993 1992 1991 ------- -------- ------- (in thousands) CASH FLOW PROVIDED (USED) BY OPERATIONS Continuing operations: Earnings (loss) from continuing operations $ (333) $ 2,587 $ 394 Add (deduct) noncash items included in earnings (loss) from continuing operations Depreciation and amortization 7,364 6,651 6,209 Reserve for loss on plant relocation, net of tax 2,754 -- -- Change in deferred income taxes 159 (225) (293) Reduction in accrued long-term pension liability, net (1,116) (2,413) (844) Other, net (624) (355) (26) Changes in other operating working capital Receivables (2,186) (555) 180 Inventories (5,712) 1,422 2,189 Prepaid expenses (885) (1,279) (60) Accounts payable 729 1,384 (2,640) Accrued expenses (541) (508) (930) ------- ------- ------- Cash flow provided (used) by continuing operations (391) 6,709 4,179 Cash flow provided (used) by discontinued operations -- (3,121) 14,237 ------- ------- ------- Total cash flow provided (used) by operations (391) 3,588 18,416 ------- ------- ------- CASH FLOW PROVIDED (USED) BY INVESTING ACTIVITIES Continuing operations: Capital expenditures (11,256) (8,359) (4,391) Proceeds from liquidation of long-term certificate of deposit -- 5,000 -- Other, net (1,338) 256 (226) Discontinued operations: Proceeds from the sale of the Commercial Glass Container Business -- 67,719 -- Proceeds from the sale of the Metal Crown Business -- 7,208 -- Collection of accounts receivable, and payment of accounts payable and accrued and other expenses (2,500) (7,974) -- Capital expenditures -- (2,510) (10,607) Other, net -- (43) (16) ------- ------- ------- Cash flow provided (used) by investing activities (15,094) 61,297 (15,240) ------- ------- ------- CASH FLOW PROVIDED (USED) BY FINANCING ACTIVITIES Issuance of senior debt 50,000 -- -- Extinguishment of subordinated debt (41,131) -- -- Borrowings (repayments) under Bank Credit Agreements, net -- (53,000) 4,600 Other long-term debt retirements (1,000) (3,207) (1,536) Payments received on ESOP Trusts notes receivable 931 1,560 1,536 Dividends paid (829) (829) (829) Other, net (408) (717) (250) ------- ------- ------- Cash flow provided (used) by financing activities 7,563 (56,193) 3,521 ------- ------- ------ CASH AND CASH EQUIVALENTS Increase (decrease) during the year (7,922) 8,692 6,697 Balance at beginning of the year 19,251 10,559 3,862 ------- ------- ------- Balance at end of the year $11,329 $19,251 $10,559 ======= ======= =======
See accompanying notes to consolidated financial statements. 16 6 CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS' EQUITY
Years Ended December 31, 1993, 1992 and 1991 Excess of Additional Pension Number Of Liability Shares Of 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, 1990 3,675 $ 2,105 $ 26,902 $18,816 $(12,737) $ -- $ (4,743) Net loss -- -- -- (2,579) -- -- -- Dividends on Preferred Stock -- -- -- (829) -- -- -- Repayments on ESOP Trusts notes receivable -- -- -- -- -- -- 1,536 Restricted Stock Plan -- -- 119 -- -- -- -- ----- ------- -------- ------- -------- ------- --------- Balance, December 31, 1991 3,675 2,105 27,021 15,408 (12,737) -- (3,207) ----- ------- -------- ------- -------- -------- -------- Net loss -- -- -- (2,697) -- -- -- Dividends on Preferred Stock -- -- -- (829) -- -- -- Repayments on ESOP Trusts notes receivable -- -- -- -- -- -- 1,560 Restricted Stock Plan -- -- 92 -- -- -- -- ----- ------- -------- ------- -------- ------- -------- 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) ===== ======= ======== ======= ======== ======= ========
See accompanying notes to consolidated financial statements. 17 7 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., formerly Kerr Glass Manufacturing Corporation, 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 primarily 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 2 to 15 years Furniture and equipment 3 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 5 to 10 years. 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. Postretirement Benefits Other Than Pensions Prior to 1993, the Company accounted for retiree health care and life insurance benefits on a pay-as-you-go basis. 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. The Company previously used the asset and liability method for accounting for income taxes under FASB No. 96. 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 1993, 1992 and 1991. 18 8 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Financial Statement Reclassification And Presentation Certain reclassifications have been made to prior years' financial statements to conform to the 1993 presentation. NOTE 2 - 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) for the expected costs 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 consists 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. The relocation of the home canning cap and lid operations is expected to be completed by the end of 1994. NOTE 3 - DISCONTINUED OPERATIONS On December 11, 1992, the Company sold its Metal Crown Business for a cash payment of approximately $7,200,000. The sale of the Metal Crown Business resulted in a pre-tax loss of $3,000,000 ($2,600,000 after-tax or $0.71 per common share). On February 28, 1992, the Company sold its Commercial Glass Container Business for a cash payment of approximately $68,000,000. The sale of the Commercial Glass Container Business resulted in a pre-tax loss of $4,859,000 ($2,982,000 after-tax or $0.81 per common share). The results of the discontinued operations have been reported separately in the Consolidated Statements of Earnings (Loss). Summarized results of the discontinued operations are as follows:
Years Ended December 31, 1993 1992 1991 - - ----------------------- ------ ------- -------- (in thousands) Net sales $ -- $37,690 $167,970 Costs and expenses -- 41,352 164,365 Allocated interest expense -- 726 4,764 ------ ------- -------- Loss before income taxes -- (4,388) (1,159) Benefit for income taxes -- (1,704) (282) ------ ------- -------- Loss from discontinued operations -- (2,684) (877) Loss on sale of Metal Crown Business -- (2,600) -- Loss on sale of Commercial Glass Container Business -- -- (2,982) Cumulative effect of change in accounting related to Commercial Glass Container Business -- -- 886 ------ ------- -------- Total loss related to discontinued operations $ -- $(5,284) $ (2,973) ====== ======= ========
Effective January 1, 1991, the Company changed its method of accounting for new machine repair parts related to the discontinued Commercial Glass Container Business. The cumulative effect of this change increased pre-tax earnings of the discontinued operations for the year ending December 31, 1991, by $1,438,000 ($886,000 after-tax or $0.24 per common share). Interest expense was allocated to the Commercial Glass Container Business based upon the ratio of the Commercial Glass Container Business net assets to total Company net assets. The remaining assets of the discontinued Commercial Glass Container Business consist primarily of land and buildings, used in connection with a former glass container manufacturing plant, that are being held for sale. Such assets are recorded at their estimated net realizable value. 19 9 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE 4 - INCOME TAXES As discussed in Note 1, the Company adopted FASB No. 109, Accounting for Income Taxes, effective January 1, 1993. The cumulative effect of such change in the method of accounting for income taxes was not material. Total income tax benefit for the year ended December 31, 1993 was allocated as follows:
(in thousands) Loss from continuing operations $ (634) Extraordinary item (632) Stockholders' equity, related to excess of pension liability over unrecognized prior service costs (4,340) ------- $(5,606) =======
The provision (benefit) for income taxes related to continuing operations consists of the following:
Years Ended December 31, 1993 1992 1991 - - ------------------------ ------- ------- ------- (in thousands) Current U.S. Federal $ 119 $1,426 $ 2,288 State -- 493 362 ------ ------ ------- Total current 119 1,919 2,650 ------ ------ ------- Deferred U.S. Federal (637) 88 (1,700) State (116) (181) (250) ------ ------ ------- Total deferred (753) (93) (1,950) ------ ------ ------- Total provision (benefit) for income taxes $ (634) $1,826 $ 700 ====== ====== =======
The significant components of deferred income taxes (benefits) related to continuing operations are as follows:
Years Ended December 31, 1993 1992 1991 - - ------------------------ ------- ------- -------- (in thousands) Reinstatement (reduction) of deferred income taxes attributable to recognition of alternative minimum tax credits and tax net operating loss carryforwards $ 52 $ 3,653 $ (1,397) Timing differences associated with the sales of discontinued operations 1,051 (3,483) (1,768) Timing differences associated with the loss on plant relocation (1,368) -- -- Additional costs inventoried for tax purposes (245) (175) 1,141 Excess (deficit) of pension contributions paid over pension expense 448 (312) 343 Excess (deficit) of tax over book depreciation, including assets retired or sold (327) 228 (742) Other, net (364) (4) 473 ------ ------- -------- Total $ (753) $ (93) $ (1,950) ====== ======= ========
Total provision (benefit) for income taxes related to continuing operations differed from the amounts computed by applying the U.S. Federal income tax rate of 34% to earnings (loss) from continuing operations before income taxes as a result of the following: 20 10 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE 4 - INCOME TAXES (continued)
Years Ended December 31, 1993 1992 1991 ------ ------ ------ (in thousands) Computed "expected" tax provision (benefit) $(329) $1,500 $ 372 Increase (reduction) in provision resulting from: State income tax provision (benefit), net of Federal income tax effect (47) 213 53 Change in the valuation allowance for deferred income tax assets (369) -- -- Other, net 111 113 275 ----- ------ ------ Actual tax provision (benefit) $(634) $1,826 $ 700 ===== ====== ======
The tax effects of temporary differences that give rise to significant portions of the deferred income tax assets and liabilities at December 31, 1993 are as follows:
(in thousands) Deferred income tax assets: Pension liabilities -- Excess of additional pension liability over unrecognized prior service cost $ 4,340 Accrued pension liability 1,495 Accrued reserves associated with plant relocation 1,368 Inventory 595 Accrued vacation pay 444 Tax credit carryforwards 1,975 Net operating loss carryforwards 720 Other 1,223 ------- Total gross deferred income tax assets 12,160 Less valuation allowance -- ------- Deferred income tax assets, net of valuation allowance 12,160 Deferred income tax liabilities: Property, plant and equipment, principally due to differences in depreciation (5,110) Other (421) ------- Total gross deferred income tax liabilities (5,531) ------- Net deferred income tax asset $ 6,629 =======
The valuation allowance for deferred income tax assets as of January 1, 1993 was $369,000. The net change in the valuation allowance during the year ended December 31, 1993 was a reduction of $369,000, or $0.10 per common share. In order to fully realize the deferred income tax asset, the Company will need to generate future taxable income of at least approximately $27 million in the aggregate 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, 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, 1993, the Company had net operating loss carryforwards for Federal income tax purposes of $1,854,000 which are available to offset future Federal taxable income, expiring in the years 2006 through 2008. 21 11 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE 4 - INCOME TAXES (continued) The Company also has an alternative minimum tax credit carryforward of $1,693,000 and other tax credit carryforwards (primarily investment tax credits) of $282,000, expiring in the years 1999 through 2006, which are available to reduce future Federal income taxes, if any. The Internal Revenue Service has completed an audit of the Company's Federal income tax returns through 1985. The total net cash payments related to income taxes, which primarily represent Federal alternative minimum taxes and state taxes, were $470,000, $347,000 and $808,000 for 1993, 1992 and 1991, respectively. NOTE 5 - ACCRUED EXPENSES At December 31, 1993 and 1992, accrued expenses from continuing operations were as follows:
1993 1992 ------- ------- (in thousands) Accrued wages and vacation pay $ 1,951 $1,915 Accrued pension benefits 46 592 Accrued expenses associated with plant relocation 3,523 -- Accrued expenses associated with the sales of discontinued operations 990 4,416 Other accrued expenses 2,579 2,594 ------- ------ Total accrued expenses $ 9,089 $9,517 ======= ======
NOTE 6 - RETIREMENT BENEFITS Pensions The Company has a defined benefit pension plan and defined contribution pension plan, which cover substantially all employees. The defined benefit plan 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 1993 and 1992, the Company funded $1,721,000 more than the accrued pension expense for the 1992 plan year. During 1992 and 1991, the Company funded $2,917,000 more than the accrued pension expense for the 1991 plan year. FASB Statement No. 87, Employers' Accounting for Pensions, requires that pension liabilities be discounted at an interest rate equal to the rate on longer-term, high-quality debt instruments. As a result of the downward trend in interest rates in 1993, the Company has lowered its assumed discount rate used for pension accounting from 9% at December 31, 1992 to 7.5% at December 31, 1993. This change in discount rate increased the Company's additional minimum pension liability to $12,710,000 at December 31, 1993 from $1,424,000 at December 31, 1992 and reduced stockholders' equity at December 31, 1993 by $6,835,000. The amount of this adjustment will be increased or decreased at the end of each year depending on future changes in interest rates. This adjustment did not have any effect on 1993 earnings. Intangible assets of $1,535,000 and $1,424,000 were recorded as of December 31, 1993 and 1992, respectively. Net pension expense related to continuing operations for the years ended December 31, 1993, 1992 and 1991, included the following components:
1993 1992 1991 ------- ------- ------ (in thousands) Defined Benefit Plan: Service cost (benefit earned during period) $ 472 $ 471 $ 468 Interest cost on projected benefit obligation 6,941 6,884 6,941 Actual return on assets (7,843) (5,383) (8,698) Net amortization and deferral 1,619 (427) 2,862 ------- ------- ------- Defined Benefit Plan expense $ 1,189 $ 1,545 $ 1,573 ------- ------- ------- Defined Contribution Plan expense $ 21 $ 30 $ 35 ======= ======= =======
22 12 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 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 both the Metal Crown Business and the Commercial Glass Container Business. 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 are included as a component of the respective losses on the sale of the businesses and plant relocation. The funded status of the defined benefit plans at December 31, 1993 and 1992, was as follows:
1993 1992 -------- ------- (in thousands) Actuarial present value Vested benefit obligation $ 89,848 $74,640 Nonvested benefit obligation 2,985 3,607 -------- ------- Accumulated benefit obligation 92,833 78,247 Effect of future salary increases 3,171 1,544 -------- ------- Projected benefit obligation 96,004 79,791 Plan assets at fair value (a) 74,492 69,733 -------- ------- Projected benefit obligation in excess of plan assets 21,512 10,058 Unrecognized net transition obligation (632) (818) Unrecognized prior service costs (903) (688) Unrecognized net loss (14,346) (1,462) -------- ------- Accrued pension liability before adjustment 5,631 7,090 Adjustment required to recognize additional minimum pension liability 12,710 1,424 -------- ------- Accrued pension liability related to the defined benefit plan $ 18,341 $ 8,514 -------- ------- Accrued pension liability related to the defined contribution plan $ 26 $ 30 ======== =======
(a) Plan assets include 118,200 shares of Company Common Stock at December 31, 1993 and December 31, 1992, at a value of $990,000 and $768,000, respectively. 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, 1993, 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, 1993, 1992 and 1991, were as follows:
1993 1992 1991 ----- ---- ---- Discount rate 7.5% 9% 9% Increase in compensation rate 5% 5% 5% Long-term rate of return on assets 9.5% 9.5% 10% ==== ==== ===
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. 23 13 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE 6 - RETIREMENT BENEFITS (continued) 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. Prior to 1993, the Company recognized the expense for the cost of retiree health care and life insurance benefits as paid. During 1992 and 1991, the cost of retiree health care and life insurance benefits with respect to both i) the retirees of continuing operations and ii) the retirees of discontinued operations, liability for which was retained by the Company, totalled $1,230,000 and $1,180,000, respectively. All such retiree costs were charged against continuing operations. Retiree health care and life insurance expense related to continuing operations for the year ended December 31, 1993, included the following components:
(in thousands) Retiree health care and life insurance plans: Service cost (benefit earned during period) $ 83 Interest cost on accumulated benefit obligation 1,187 Actual return on assets -- Net amortization and deferral 660 ------- Retiree health care and life insurance expense $ 1,930 =======
The funded status of the retiree health care and life insurance plans at December 31, 1993, was as follows:
(in thousands) Actuarial present value of accumulated postretirement benefit obligation: Retirees $ 11,400 Fully eligible active participants 1,400 Other active participants 700 -------- Accumulated benefit obligation 13,500 Plan assets at fair value -- -------- Accumulated benefit obligation in excess of plan assets 13,500 Unrecognized net transition obligation (11,790) Unrecognized prior service costs -- Unrecognized net loss (325) -------- Accrued postretirement benefit liability $ 1,385 ========
The retiree health care and life insurance plans assumptions are as follows:
December 31, 1993 January 1, 1993 ----------------- --------------- Discount rate 7.5% 9.0% Health care cost trend rates -- Indemnity plans 9% trending down to 6% 15% trending down to 7% Managed care plans 7% trending down to 4% 13% trending down to 5% ===================== ======================
The effect of a one percentage point annual increase in these assumed cost trend rates at December 31, 1993 would increase the postretirement benefit obligation by approximately $550,000 and would increase the service and interest cost components of the annual expense by approximately $45,000. 24 14 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE 7 - DEBT At December 31, 1993 and 1992, long-term debt consisted of the following:
1993 1992 ------- ------- (in thousands) Senior Notes $50,000 $ -- 13% Subordinated Notes, redeemed December 15, 1993 -- 40,000 12% Industrial Development Revenue Bonds, redeemed March 2, 1993 -- 1,000 ------- ------- 50,000 41,000 Less current maturities -- 1,000 ------- ------- $50,000 $40,000 ======= =======
On September 21, 1993, the Company sold $50 million principal amount of Senior Notes 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. The Senior Notes 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 these covenants, at December 31, 1993, $500,000 was available for the payment of Common Stock dividends. 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. The remaining proceeds are being used for working capital. 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 of its 13% Subordinated Notes and the termination of its $25,000,000 revolving credit facility. The extraordinary loss included interest expense on the 13% Subordinated Notes from September 21, 1993 through December 15, 1993 and the write-off of unamortized debt fees and related costs. The mandatory principal payments for the next five years on the outstanding long-term debt at December 31, 1993 are as follows:
Years Ended December 31, - - ----------------------- (in thousands) 1994 $ -- 1995 -- 1996 -- 1997 3,000 1998 9,833 1999 and thereafter 37,167 =======
On November 8, 1993, the Company entered into two $6,000,000 short-term lines of credit with two banks to provide for the seasonal working capital needs of the Company. One of the lines of credit is committed through October 28, 1994 with borrowings to bear interest at either the prime rate of the lender or, alternatively, Eurodollar rate plus 2%. In addition, a facility fee of 0.5% per annum is charged on the unused amount of the commitment. The other line of credit is committed through September 30, 1994 with borrowings to bear interest at the prime rate of the lender. A facility fee of 0.75% per annum is charged on the total amount of this commitment. The two short-term lines of credit contain covenants identical to the Senior Notes. During 1993, the Company had no borrowings under either its lines of credit or its revolving credit facility which was terminated on September 21, 1993. During 1992, the Company had maximum borrowings outstanding under the terminated revolving credit facility of $9,000,000 and under a previously existing revolving credit commitment of $65,000,000. During 1992, the weighted average interest rate under both credit agreements was 6.5% and the weighted average borrowings outstanding under both credit agreements was $11,143,000. 25 15 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE 7 - DEBT (continued) The Company redeemed on March 2, 1993, all $1,000,000 outstanding of the 12% Industrial Development Revenue Bonds. Total cash payments of interest (including duplicative interest related to the refinancing of the Subordinated Notes and interest allocated to discontinued operations) during 1993, 1992 and 1991 were $6,501,000, $6,358,000 and $10,324,000, respectively. NOTE 8 - PREFERRED STOCK Class B Preferred Stock At December 31, 1993 and 1992, 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, 1993 and 1992, 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 1/2% ($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, 1993, 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. NOTE 9 - 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 is repayable through 1994. ESOP I and ESOP II obtain the funds to repay loans primarily through the receipt of tax deductible contributions made by the Company. The Company funds 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 related to continuing operations was $633,000, $955,000 and $1,025,000 in 1993, 1992 and 1991, respectively. For financial statement purposes, the bank loans were reflected as a liability and the Company's loans to ESOP I and ESOP II are reflected as a reduction in stockholders' equity. 26 16 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE 9 - COMMON STOCK (continued) 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 10 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 during 1993 and 1992 provide that the Company's stock price must equal or exceed $12.50 and $10 per Common Share, respectively, for ten consecutive trading days for the options to be exercisable. The following tabulation summarizes changes under the Company's Stock Option Plans for employees during the years ended December 31, 1993, 1992 and 1991.
1993 1992 1991 ----------------------------- ------------------------------ --------------------------------- Number Of Number Of Number Of Options Price Range Options Price Range Options Price Range --------- ----------- --------- ----------- --------- ----------- Options Outstanding: Beginning of year 198,850 $5 3/8 - 11 7/16 127,750 $7 1/8 - 11 7/16 112,250 $ 8 1/4 - 14 15/16 Granted 157,500 8 - 8 5/16 90,000 5 3/8 48,000 7 1/8 Exercised -- -- -- Cancelled (36,000) 5 3/8 - 10 3/4 (8,900) 5 3/8 - 11 7/16 (2,500) 11 7/16 Expired (46,350) 5 3/8 - 11 7/16 (10,000) 10 1/16 (30,000) 13 13/16 - 14 15/16 ------- ---------------- ------- ---------------- ------- -------------------- End of year 274,000 5 3/8 - 8 5/16 198,850 5 3/8 - 11 7/16 127,750 7 1/8 - 11 7/16 ------- ---------------- ------- ---------------- ------- -------------------- Exercisable at end of year: Currently exercisable 28,800 77,450 72,400 Exercisable if Common Stock trades at $10 per share or above 27,400 18,001 -- Exercisable if Common Stock trades at $12.50 per share or above 31,500 -- -- ------- ------- ------- Total 87,700 95,451 72,400 ------- ------- ------- Available for grant at end of year 20,100 13,250 92,350 ======= ======= =======
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. 27 17 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE 9 - 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, 1993, 1992 and 1991.
1993 1992 1991 ------------------------ ---------------------- ----------------------- Number Of Number Of Number Of Options Price Range Options Price Range Options Price Range --------- ----------- --------- ----------- --------- ----------- Options Outstanding: Beginning of year 60,000 $ 11 5/16 60,000 $ 11 5/16 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 11 5/16 60,000 11 5/16 ------- --------- ------ --------- ------ --------- Exercisable at end of year: Currently exercisable -- 60,000 60,000 Exercisable if Common Stock trades at $12.50 per share or above 60,000 -- -- ------- ------ ------ Total 60,000 60,000 60,000 ------- ------ ------ Available for grant at end of year 80,000 20,000 20,000 ======= ====== ======
The aggregate option price for all outstanding options at December 31, 1993, 1992 and 1991 was $2,508,000, $2,129,000 and $1,845,000, 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, 1993, 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, 1992 and 1991, total shares of 15,000, 16,000 and 28,000, respectively, were released from restriction. NOTE 10 - 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 related to continuing operations under these agreements was $3,008,000, $2,864,000 and $3,242,000 in 1993, 1992 and 1991, respectively. 28 18 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE 10 - RENTAL EXPENSE AND LEASE COMMITMENTS (continued) At December 31, 1993, the Company was obligated under various noncancelable leases. Calendar year minimum rental commitments under the leases related to the Company's continuing operations are as follows:
Total Real Personal Years Ended December 31, Commitment Property Property - - ------------------------ ---------- -------- -------- (in thousands) 1994 $3,439 $2,812 $627 1995 3,263 2,711 552 1996 2,655 2,456 199 1997 1,581 1,522 59 1998 1,503 1,502 1 1999 through 2008 5,865 5,865 -- ====== ====== ====
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. In addition, rental expense will increase in connection with the Company's relocation of its home canning cap and lid manufacturing operations and expansion of its Jackson, Tennessee plastic products plant. NOTE 11 - COMMITMENTS AND CONTINGENCIES At December 31, 1993, the Company was contingently liable for outstanding letters of credit in the amount of $1,000,000, which were fully collateralized by certificates of deposit and secure the Company's obligations under an officer's employment agreement. In connection with the Company's Workers' Compensation insurance programs, the Company has pledged a certificate of deposit in the amount of $900,000 to secure a surety bond. 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. As of December 31, 1993, the Company has accrued a reserve of approximately $2,100,000 for the expected costs associated with environmental remediation described above and in connection with its current manufacturing plants. The amount of this 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 12 - INDUSTRY SEGMENT INFORMATION The Company operates in two industry segments, Plastic Products and Consumer Products. 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 from continuing operations in 1993, 1992 or 1991. Segment earnings is income from continuing operations before general corporate expenses, interest expense, interest and other income and provision (benefit) for income taxes. 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, certificates of deposit and certain intangible assets. 29 19 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE 12 - INDUSTRY SEGMENT INFORMATION (continued) A summary of the Company's operations by industry segment follows:
Years Ended December 31, 1993 1992 1991 - - ------------------------ --------- -------- -------- (in thousands) Net sales: Plastic Products $ 98,533 $ 92,557 $ 93,449 Consumer Products 28,839 34,053 32,149 -------- -------- -------- Total $127,372 $126,610 $125,598 ======== ======== ======== Segment earnings (loss): Plastic Products $ 11,428 $ 9,165 $ 9,077 Consumer Products (a) (2,707) 4,982 1,804 -------- -------- -------- Total 8,721 14,147 10,881 General corporate expenses 4,866 5,212 5,568 -------- -------- -------- Earnings from continuing operations before interest and income taxes 3,855 8,935 5,313 Interest expense 5,680 5,815 5,086 Interest and other income (858) (1,293) (867) -------- -------- -------- Earnings (loss) from continuing operations before income taxes $ (967) $ 4,413 $ 1,094 ======== ======== ========
(a) The 1993 segment loss for Consumer Products includes a $4,500,000 pre-tax loss for the expected costs associated with the relocation of the Company's home canning cap and lid manufacturing operations. See Note 2 of notes to consolidated financial statements for further information. Identifiable assets, depreciation and amortization and capital expenditures for each segment are as follows:
Years Ended December 31, 1993 1992 1991 - - ------------------------ -------- -------- -------- (in thousands) Identifiable Assets: Plastic Products $ 69,834 $ 64,306 $ 64,204 Consumer Products 20,403 12,370 11,469 Corporate 23,083 24,196 24,189 Discontinued operations 4,029 4,360 66,021 -------- -------- -------- Total $117,349 $105,232 $165,883 ======== ======== ======== Continuing operations - depreciation and amortization: Plastic Products $ 6,600 $ 5,839 $ 5,037 Consumer Products 197 204 496 Corporate 567 608 676 -------- -------- -------- Total $ 7,364 $ 6,651 $ 6,209 ======== ======== ======== Continuing operations - capital expenditures (b): Plastic Products $ 8,587 $ 6,853 $ 4,084 Consumer Products 1,920 601 198 Corporate 749 905 109 -------- -------- -------- Total $ 11,256 $ 8,359 $ 4,391 ======== ======== ========
(b) During 1991, in addition to the capital expenditures shown above, the Company entered into long-term operating leases for manufacturing equipment costing $1,623,000, primarily in the Plastic Products segment. 30 20 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE 13 - CONDENSED QUARTERLY DATA FOR 1993 AND 1992 (UNAUDITED)
Three Months Ended March 31 June 30 Sept. 30 Dec. 31 - - ------------------ -------- ------- -------- ------- (in thousands, except per share amounts) 1993 Net sales $26,674 $38,113 $34,448 $28,137 Gross profit 8,358 11,371 9,832 8,889 Earnings (loss) from continuing operations (a) (295) 1,398 552 (1,988) Extraordinary loss on retirement of debt (b) -- -- (1,300) -- ------- ------- ------- ------- Net earnings (loss) (295) 1,398 (748) (1,988) Preferred stock dividends 207 207 207 208 ------- ------- ------- ------- Net earnings (loss) applicable to common stockholders $ (502) $ 1,191 $ (955) (2,196) ======= ======= ======= ======= Earnings (loss) per common share: Earnings (loss) per common share from continuing operations (a) $ (0.14) $ 0.32 $ 0.09 $ (0.60) Extraordinary loss per common share on retirement of debt (b) -- -- (0.35) -- ------- ------- ------- ------- Net earnings (loss) per common share $ (0.14) $ 0.32 $ (0.26) $ (0.60) ======= ======= ======= ======= 1992 Net sales $24,736 $38,821 $36,813 $26,240 Gross profit 7,629 10,925 11,114 8,212 Earnings (loss) from continuing operations (393) 1,597 1,460 (77) Loss from discontinued operations (571) (818) (566) (3,329) ------- ------- ------- ------- Net earnings (loss) (964) 779 894 (3,406) Preferred stock dividends 207 207 207 208 ------- ------- ------- ------- Net earnings (loss) applicable to common stockholders $(1,171) $ 572 $ 687 (3,614) ======= ======= ======= ======= Earnings (loss) per common share: Earnings (loss) per common share from continuing operations $ (0.16) $ 0.38 $ 0.34 $ (0.08) Loss per common share from discontinued operations (0.16) (0.22) (0.15) (0.90) ------- ------- ------- ------- Net earnings (loss) per common share $ (0.32) $ 0.16 $ 0.19 $ (0.98) ======= ======= ======= =======
(a) The loss from continuing operations for the fourth quarter of 1993 includes a $4,500,000 pre-tax loss ($2,754,000 after-tax or $0.75 per common share) for the expected costs associated with the relocation of the Company's home canning cap and lid manufacturing operations and a tax benefit of $369,000 ($0.10 per common share) related to a reduction in the income tax valuation reserve. See Notes 2 and 4 of notes to consolidated financial statements for further information. (b) See Note 7 of notes to consolidated financial statements for information regarding the extraordinary loss on retirement of debt. 31 21 FIVE YEAR SUMMARY OF SELECTED FINANCIAL DATA
Years Ended December 31, 1993 1992 1991 1990 1989 - - ------------------------ --------- -------- -------- -------- -------- (in thousands, except per share amounts) Net sales $ 127,372 $126,610 $125,598 $122,168 $112,346 ========= ======== ======== ======== ======== Segment earnings (loss): Plastic Products $ 11,428 $ 9,165 $ 9,077 $ 8,121 $ 3,841 Consumer Products (a) (2,707) 4,982 1,804 (294) 3,694 --------- -------- -------- ------- -------- Total 8,721 14,147 10,881 7,827 7,535 General corporate expenses 4,866 5,212 5,568 6,484 5,934 --------- -------- -------- -------- -------- Earnings from continuing operations before interest and income taxes $ 3,855 $ 8,935 $ 5,313 $ 1,343 $ 1,601 ========= ======== ======== ======== ======== Earnings (loss) from continuing operations before income taxes (a) $ (967) $ 4,413 $ 1,094 $ (2,873) $ (2,360) Provision (benefit) for income taxes (b) (634) 1,826 700 (1,132) (913) --------- -------- -------- -------- -------- Earnings (loss) from continuing operations (333) 2,587 394 (1,741) (1,447) Earnings (loss) from discontinued operations (c) -- (5,284) (2,973) 489 1,728 Extraordinary loss on retirement of debt (d) (1,300) -- -- -- -- --------- -------- -------- -------- -------- Net earnings (loss) (1,633) (2,697) (2,579) (1,252) 281 Preferred stock dividends 829 829 829 829 829 --------- -------- -------- -------- -------- Net loss applicable to common stockholders $ (2,462) $ (3,526) $ (3,408) $ (2,081) $ (548) ========= ======== ======== ======== ======== Earnings (loss) per common share: Earnings (loss) per common share from continuing operations (a) (b) $ (0.32) $ 0.48 $ (0.12) $ (0.70) $ (0.62) Earnings (loss) per common share from discontinued operations (c) -- (1.44) (0.81) 0.13 0.47 Extraordinary loss per common share on retirement of debt (d) (0.35) -- -- -- -- --------- -------- -------- -------- -------- Net loss per common share $ (0.67) $ (0.96) $ (0.93) $ (0.57) $ (0.15) ========= ======== ======== ======== ======== Cash dividends per common share $ -- $ -- $ -- $ .33 $ .44 ========= ======== ======== ======== ========
(a) The 1993 segment loss for Consumer Products includes a $4,500,000 pre-tax loss ($2,754,000 after-tax or $0.75 per common share) for the expected costs associated with the relocation of the Company's home canning cap and lid manufacturing operations. See Note 2 of notes to consolidated financial statements for further information. (b) The benefit for income taxes for 1993 includes a tax benefit of $369,000 ($0.10 per common share) related to a reduction in the income tax valuation reserve. See Note 4 of notes to consolidated financial statements for further information. (c) See Note 3 of notes to consolidated financial statements for information regarding discontinued operations. (d) See Note 7 of notes to consolidated financial statements for information regarding the extraordinary loss on retirement of debt. 32 22 FIVE YEAR SUMMARY OF SELECTED FINANCIAL DATA (continued)
Years Ended December 31, 1993 1992 1991 1990 1989 - - ------------------------ --------- -------- -------- -------- -------- (in thousands) Net property, plant and equipment - continuing operations $ 40,424 $ 36,383 $ 34,395 $ 36,240 $ 34,995 Depreciation and amortization - continuing operations 7,364 6,651 6,209 6,208 5,857 Capital expenditures - continuing operations (e) 11,256 8,359 4,391 6,980 6,919 Total assets 117,349 105,232 165,883 165,614 177,912 Senior long-term debt 50,000 -- 55,647 52,607 51,690 Subordinated long-term debt -- 40,000 40,000 40,000 40,000 ========= ======== ======== ======== ======== Stockholders' equity before pension adjustment $ 34,899 $ 36,464 $ 38,338 $ 40,091 $ 41,375 Excess of additional pension liability over unrecognized prior service cost, net of tax benefits (6,835) -- -- -- -- --------- -------- -------- -------- -------- Stockholders' equity $ 28,064 $ 36,464 $ 38,338 $ 40,091 $ 41,375 ========= ======== ======== ======== ======== Weighted average number of common shares outstanding 3,669 3,675 3,675 3,675 3,666 ========= ======== ======== ======== ========
(e) During 1991 and 1990, in addition to the capital expenditures shown above, the Company entered into long-term operating leases for manufacturing equipment costing $1,623,000 and $1,331,000, respectively. 33 23 MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF CONTINUING OPERATIONS -- 1993 COMPARED TO 1992 Net sales of the Company increased to $127,372,000 in 1993 from $126,610,000 in 1992. Net sales of the Plastic Products segment increased 6.5% to $98,533,000 in 1993 from 1992. The Company's plastic products manufacturing facilities operated at approximately 83% of capacity during 1993. The Plastic Products segment 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 could be affected in the future by the availability and pricing of resin. Net sales of the Consumer Products segment decreased 15.3% to $28,839,000 in 1993 compared to 1992 due primarily to lower unit sales as a result of adverse weather conditions in many areas of the country where the Company markets home canning supplies. The cap and lid manufacturing facility of the Consumer Products Business operated at approximately 76% of capacity in 1993. In 1994 the Company will relocate its home canning cap and lid manufacturing operations from Chicago, Illinois to a new manufacturing facility in Jackson, Tennessee and permanently cease operations in its leased facility in Chicago. The Company expects that this relocation will result in improved efficiencies and cost reductions of approximately $3,000,000 pre-tax per year. Relocation to Jackson is expected to be completed by the end of 1994, with partial savings to be realized in 1995. Full savings are expected to be realized in 1996. Home canning supplies sales of the Consumer Products Business are dependent upon favorable growing conditions for fruits and vegetables. Thus, unfavorable growing conditions such as occurred in 1993 will reduce sales of home canning supplies.In addition, the Company believes that the demand for home canning supplies has declined in recent years. If this decline were to increase materially, it could have an adverse effect on the Company. Cost of sales of the Company increased slightly to $88,922,000 in 1993 compared to $88,730,000 in 1992. Selling, warehouse, general and administrative expenses increased 4.0% to $30,095,000 in 1993 compared to $28,945,000 in 1992. The Company recorded a pre-tax reserve in 1993 for the expected costs associated with the relocation of the home canning cap and lid manufacturing operations of $4,500,000. The pre-tax loss consists 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. Primarily all these costs will ultimately require cash payments. Approximately $3,000,000 of these costs are expected to require cash payments during 1994. Earnings from continuing operations before the loss on relocation, interest and income taxes decreased $580,000 to $8,355,000 in 1993 from $8,935,000 in 1992, due primarily to lower earnings in the Consumer Products Business. Segment earnings of the Plastic Products Business, the larger of the Company's two businesses, increased 25% to a record $11,428,000 in 1993, compared to $9,165,000 in 1992, primarily due to higher sales. Segment earnings of the Consumer Products Business excluding the loss on plant relocation declined to $1,793,000 in 1993, compared to $4,982,000 in 1992, due primarily to lower sales as a result of adverse weather conditions in many areas of the country where the Company markets home canning supplies. The decrease in the income tax provision in 1993 compared to 1992 is due to lower pre-tax earnings and the recognition of an income tax benefit of $369,000 related to a reduction in the income tax valuation reserve. During 1993, the Company 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 and the write-off of unamortized debt fees and related costs. Due to competitive pressures, there are occasions when the Company is unable to pass through to customers the full extent of 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 Company's results of operations. 34 24 MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) RESULTS OF CONTINUING OPERATIONS -- 1992 COMPARED TO 1991 Net sales of the Company increased to $126,610,000 in 1992 from $125,598,000 in 1991. Net sales of the Plastic Products segment decreased 1.0% to $92,557,000 in 1992 from 1991. The Company's plastic products manufacturing facilities operated at approximately 84% of capacity during 1992. Net sales of the Consumer Products segment increased 5.9% to $34,053,000 in 1992 compared to 1991 due primarily to increased sales of home canning supplies. The cap and lid manufacturing facility of the Consumer Products Business operated at approximately 50% of capacity in 1992. Cost of sales of the Company decreased 2.7% to $88,730,000 in 1992 compared to 1991. Selling, warehouse, general and administrative expenses decreased slightly to $28,945,000 in 1992 from $29,093,000 in 1991. Earnings from continuing operations before interest and income taxes increased $3,622,000 in 1992 from 1991, due primarily to higher sales and earnings in the Consumer Products Business. Earnings of the Plastic Products Business improved slightly in 1992 compared to 1991. The increase in the income tax provision in 1992 compared to 1991 is due to higher pre-tax earnings. RESULTS OF DISCONTINUED OPERATIONS -- 1992 COMPARED TO 1991 The Metal Crown Business was sold in late 1992. The after-tax loss from the operations of the discontinued Metal Crown Business increased in 1992 to $2,684,000 compared to $2,540,000 in 1991. The sale of the Metal Crown Business resulted in a pre-tax loss of $3,000,000 ($2,600,000 after-tax or $0.71 per common share). The amount of the tax benefit that could be immediately recognized against the pre-tax loss was limited under accounting rules. The discontinued Commercial Glass Container Business which was sold in early 1992 had no effect on earnings in 1992. During 1991, the after-tax earnings of the discontinued Commercial Glass Container Business were $1,663,000, the after-tax loss on sale of the Commercial Glass Container Business was $2,982,000 and the cumulative effect of a change in method of accounting for machine repair parts related to the Commercial Glass Container Business resulted in after-tax earnings of $886,000. LIQUIDITY AND CAPITAL RESOURCES On September 21, 1993, the Company sold $50 million principal amount of unsecured Senior Notes to a group of insurance companies. The Senior Notes 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. A portion of the proceeds from that sale was used to redeem all of the $40,000,000 principal amount of 13% Subordinated Notes on December 15, 1993 at par. The remaining proceeds are being used for working capital. During February 1992, the Company sold its Commercial Glass Container Business for a cash payment of approximately $68,000,000. The proceeds from the sale of the Commercial Glass Container Business were used to repay all amounts outstanding under the Company's then-existing bank credit agreements and ESOP bank loan agreements, and such agreements were terminated. During December 1992, the Company sold its Metal Crown Business for a cash payment of approximately $7,200,000. During 1993 and 1992, collection of accounts receivable and payment of accounts payable and accrued and other expenses associated with the discontinued operations used cash of $2,500,000 and $7,974,000, respectively. 35 25 MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Cash flow provided by financing activities was a significant source of liquidity during 1993. Cash flow provided by continuing operations was a significant source of liquidity during 1992 and 1991. Cash flow from continuing operations in 1993 was reduced by increased working capital requirements. The Company's continuing operations spent $11,256,000, $8,359,000 and $4,391,000 on capital expenditures in 1993, 1992 and 1991, respectively. During 1991, in addition to these capital expenditures, the Company entered into long-term operating leases for manufacturing equipment costing $1,623,000. Capital expenditures of approximately $17,000,000 are planned for continuing operations in 1994. Since the third quarter of 1990, the Company has not declared any dividends on its Common Stock. The Company's Senior Note Agreement limits the payment of dividends on Common Stock. On November 8, 1993, the Company entered into two $6,000,000 short-term lines of credit with two banks to provide for working capital. The Company had no borrowings outstanding under its working capital credit facilities as of December 31, 1993 or 1992. During 1991, the Company increased by $4,600,000 its borrowings under its then-existing bank credit agreement. The Company previously maintained a $5,000,000 letter of credit fully collateralized by a certificate of deposit to secure the obligations of the Company to indemnify its Directors and Officers. During 1992, the Company terminated the letter of credit and liquidated the related long- term certificate of deposit, resulting in cash proceeds of $5,000,000 to the Company. During 1993, the Company redeemed $1,000,000 of Industrial Development Revenue Bonds. The ratio of current assets to current liabilities at December 31, 1993 and 1992 was 3.0 and 2.8, respectively. At December 31, 1993 and 1992, the ratio of total debt to total capitalization was 64.1% and 52.9%, respectively. The increase in the ratio of total debt to total capitalization at December 31, 1993 compared to December 31, 1992 was due primarily to the reduction in stockholders' equity relating to pensions and the sale of $50 million principal amount of senior notes. Accounting rules require that pension liabilities be discounted at an interest rate equal to the rate on longer-term, high-quality debt instruments. As a result of the downward trend in interest rates in 1993, the Company has lowered its assumed discount rate used for pension accounting from 9% at December 31, 1992 to 7.5% at December 31, 1993. This change in discount rate increased the Company's pension liability by $11,286,000 and reduced stockholders' equity by $6,835,000. The amount of this adjustment will be increased or decreased at the end of each year depending on future changes in interest rates. This adjustment did not have any effect on 1993 earnings. The Company has recorded a deferred income tax asset of $6,629,000 on its Consolidated Balance Sheet as of December 31, 1993. In order to fully realize this deferred income tax asset, the Company will need to generate future taxable income of at least approximately $27 million in the aggregate 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, 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, 1993, the Company had unused sources of liquidity consisting of cash and cash equivalents of $11,329,000, unused committed credit under the bank lines of credit of $12,000,000 of which $9,738,000 could be borrowed under the terms of the Company's Senior Note Agreement, a tax net operating loss carryforward of $1,854,000, a minimum tax credit carryforward of $1,693,000 and other tax credit carryforwards of $282,000. 36 EX-21.1 6 SUBSIDIARIES 1 EXHIBIT 21.1 Subsidiaries
Name State of Incorporation - - ---- ---------------------- Santa Fe Plastic Corporation California
EX-23.1 7 CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT 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 February 23, 1994 relating to the consolidated balance sheets of Kerr and subsidiaries as of December 31, 1993 and 1992 and the related consolidated statements of earnings (loss), common stockholders' equity and cash flow and related schedules for each of the years in the three-year period ended December 31, 1993, which is incorporated by reference in the December 31, 1993 annual report on Form 10-K of Kerr. KPMG Peat Marwick Los Angeles, California March 28, 1994 -----END PRIVACY-ENHANCED MESSAGE-----