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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Quarterly Period Ended June 30, 1994
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to _____________
Commission File Number 1-7272
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KERR GROUP, INC.
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(Exact name of registrant as specified in its charter)
Delaware 95-0898810
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1840 Century Park East, Los Angeles, CA 90067
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number,
including area code (310) 556-2200
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_______________________________________________________________________________
Former name, former address and former fiscal year, if changed since last year.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ____
The number of shares of Registrant's Common Stock, $.50 par value, outstanding
as of July 29, 1994 was 3,677,095.
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KERR GROUP, INC.
INDEX
Page No.
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Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets -
June 30, 1994 and December 31, 1993 3 - 4
Condensed Consolidated Statements of Earnings (Loss) -
Three Months and Six Months Ended June 30, 1994 and 1993 5
Condensed Consolidated Statements of Cash Flows -
Six Months Ended June 30, 1994 and 1993 6
Notes to Condensed Consolidated Financial Statements 7 - 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9 - 10
Part II. Other Information 11
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KERR GROUP, INC.
Consolidated Balance Sheets
As of June 30, 1994 and December 31, 1993
(in thousands except per share data)
(Unaudited) (Audited)
June 30, December 31,
Assets 1994 1993
- - ------ --------- --------
Current assets
Cash and cash equivalents $ 3,640 $ 11,329
Receivables-primarily trade accounts,
less allowance for doubtful accounts
of $574 at June 30, 1994 and $578
at December 31, 1993 25,498 13,533
Inventories
Raw materials and work in process 10,438 8,906
Finished goods 21,985 19,126
-------- --------
Total inventories 32,423 28,032
Prepaid expenses 1,988 2,527
Deferred income taxes 1,854 0
-------- --------
Total current assets 65,403 55,421
-------- --------
Property, plant and equipment, at cost 94,955 90,652
Accumulated depreciation and amortization (53,507) (50,228)
-------- --------
Net property, plant and equipment 41,448 40,424
-------- --------
Deferred income taxes 3,672 6,629
Goodwill and other intangibles, net of
amortization of $2,302 at
June 30, 1994 and $2,122
at December 31, 1993 6,676 6,645
Other assets 3,984 4,201
Non-current assets related to discontinued operations 4,029 4,029
-------- --------
$125,212 $117,349
======== ========
See accompanying notes to condensed consolidated financial statements.
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KERR GROUP, INC.
Consolidated Balance Sheets
As of June 30, 1994 and December 31, 1993
(in thousands except per share data)
(Unaudited) (Audited)
June 30, December 31,
Liabilities and Stockholders' Equity 1994 1993
- - ------------------------------------ --------- --------
Current liabilities
Short-term debt $ 2,000 $ 0
Accounts payable 15,277 9,573
Accrued expenses 8,123 9,089
-------- --------
Total current liabilities 25,400 18,662
-------- --------
Accrued pension liability 18,124 18,321
Other long-term liabilities 1,749 2,302
Senior long-term debt 50,000 50,000
Stockholders' equity
Preferred Stock, 487 shares authorized
and issued, at liquidation value of
$20 per share 9,748 9,748
Common Stock, $.50 par value per share,
20,000 shares authorized, 4,220
shares issued 2,110 2,105
Additional paid-in capital 27,210 27,145
Retained earnings 10,868 9,420
Treasury Stock, 543 shares at cost (12,803) (12,803)
Excess of additional pension liability
over unrecognized prior service
cost, net of tax benefits (6,835) (6,835)
Notes receivable from ESOP Trusts (359) (716)
-------- --------
Total stockholders' equity 29,939 28,064
-------- --------
$125,212 $117,349
========= ========
See accompanying notes to condensed consolidated financial statements.
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KERR GROUP, INC.
Condensed Consolidated Statements of Earnings
for the Three Months and Six Months Ended June 30, 1994 and 1993
(in thousands except per share data)
(Unaudited) (Unaudited)
Three Months Six Months
Ended June 30, Ended June 30,
--------------------- ---------------------
1994 1993 1994 1993
------- ------- ------- -------
Net sales $41,004 $38,113 $70,384 $64,787
Cost of sales 28,713 26,742 48,132 45,058
------- ------- ------- -------
Gross profit 12,291 11,371 22,252 19,729
Selling, warehouse, general and
administrative expense 8,380 7,722 16,778 15,321
Interest expense 1,249 1,502 2,464 3,016
Interest and other income (118) (201) (231) (472)
------- ------- ------- -------
Earnings before income taxes 2,780 2,348 3,24 11,864
Provision for income taxes 1,181 950 1,379 761
------- ------- ------- -------
Net earnings $ 1,599 $ 1,398 $ 1,862 $ 1,103
Preferred stock dividends 207 207 414 414
------- ------- ------- -------
Net earnings applicable to
common stockholders $ 1,392 $ 1,191 $ 1,448 $ 689
======= ======= ======= =======
Net earnings per common share:
Primary $ 0.38 $ 0.32 $ 0.39 $ 0.19
======= ======= ======= =======
Fully diluted $ 0.36 $ 0.32 $ 0.39 $ 0.19
======= ======= ======= =======
See accompanying notes to condensed consolidated financial statements.
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KERR GROUP, INC.
Condensed Consolidated Statements of Cash Flows
for the Six Months Ended June 30, 1994 and 1993
(in thousands)
(Unaudited)
Six Months Ended
June 30,
---------------------------
1994 1993
------------ ----------
Cash flows provided (used) by operations
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Net earnings $ 1,862 $ 1,103
Add (deduct) noncash items included in
net earnings
Depreciation and amortization 3,838 3,586
Other, net 973 (693)
Changes in other operating working capital
Receivables (11,965) (7,490)
Inventories (4,391) (2,568)
Prepaid expenses 573 173
Accounts payable and accrued expenses 5,596 5
-------- --------
Cash flows used by operations (3,514) (5,884)
-------- --------
Cash flows provided (used) by investing activities
- - --------------------------------------------------
Capital expenditures (4,715) (3,097)
Collection of accounts receivable, and payment of
accounts payable and accrued and other expenses
related to discontinued operations (933) (2,374)
Other, net (540) (1,386)
-------- --------
Cash flows used by investing activities (6,188) (6,857)
-------- --------
Cash flows provided (used) by financing activities
- - --------------------------------------------------
Net borrowings under lines of credit 2,000 0
Retirement of long-term debt 0 (1,000)
Payments received on ESOP Trusts notes receivable 357 395
Dividends paid (414) (414)
Other 70 0
-------- --------
Cash flows provided (used) by financing activities 2,013 (1,019)
-------- --------
Cash and cash equivalents
- - -------------------------
Decrease during the period (7,689) (13,760)
Balance at beginning of the period 11,329 19,251
-------- --------
Balance at end of the period $ 3,640 $ 5,491
======== ========
See accompanying notes to condensed consolidated financial statements
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KERR GROUP, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1) General
The condensed consolidated financial statements include the accounts of
Kerr Group, Inc. and its wholly owned subsidiary (collectively referred to
as the Company). In the opinion of management, the accompanying condensed
consolidated financial statements contain all adjustments (consisting of
only normal recurring accruals) necessary to present fairly the financial
position of the Company as of June 30, 1994, the results of operations for
the three months and six months ended June 30, 1994 and 1993, and changes
in cash flows for the six months ended June 30, 1994 and 1993.
The results of operations for the first six months of 1994 are not
necessarily indicative of the results to be expected for the full year.
2) Earnings Per Share
Fully diluted earnings per common share reflect when dilutive, 1) the
incremental common shares issuable upon the assumed exercise of outstanding
stock options, and 2) the assumed conversion of the Preferred Stock and the
elimination of the related Preferred Stock dividends. Antidilution
occurred in the six months ended June 30, 1994 and 1993.
3) Debt
On May 2, 1994, the Company replaced its two existing unsecured $6,000,000
short-term lines of credit with two unsecured $10,000,000 short-term lines
of credit. The lines of credit provide for the seasonal working capital
needs of the Company. The $10,000,000 lines of credit are committed
through April 30, 1995. One of the $10,000,000 lines of credit provides
for borrowings to bear interest at either the prime rate of the lender or,
alternatively, Eurodollar rate plus 1.5% and charges a facility fee of 0.5%
per annum on the commitment. The other $10,000,000 line of credit provides
for borrowings to bear interest at the prime rate of the lender and charges
a facility fee of 0.75% per annum on the commitment. The lines of credit
contain covenants identical to the Senior Notes.
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KERR GROUP, INC.
Computation of Earnings (Loss) Per Common Share
(in thousands except per share data)
(Unaudited) (Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
--------------------- --------------------
1994 1993 1994 1993
-------- ------ ------ ------
Primary Net Earnings Per Common Share
- - -------------------------------------
Net earnings $1,599 $1,398 $1,862 $1,103
Less Preferred Stock dividends (207) (207) (414) (414)
------ ------ ------ ------
Net earnings applicable to primary earnings
per common share $1,392 $1,191 $1,448 $ 689
====== ====== ====== ======
Weighted average number of common
shares outstanding 3,675 3,668 3,671 3,671
====== ====== ====== ======
Primary net earnings per common share $ 0.38 $ 0.32 $ 0.39 $ 0.19
====== ====== ====== ======
Fully Diluted Net Earnings Per Common Share
- - -------------------------------------------
Net earnings applicable to primary earnings
per common share $1,392 $1,191 $1,448 $ 689
Add Preferred Stock dividends 207 207 414 414
------ ------ ------ ------
Net earnings applicable to fully
diluted earnings per common share $1,599 $1,398 $1,862 $1,103
====== ====== ====== ======
Weighted average number of common
shares outstanding 3,675 3,668 3,671 3,671
Common shares issuable upon assumed
conversion of Preferred Stock 709 709 709 709
Incremental common shares issuable upon
assumed exercise of outstanding stock options 14 9 14 6
------ ------ ------ ------
Adjusted weighted average number of common
shares outstanding 4,398 4,386 4,394 4,386
====== ====== ====== ======
Fully diluted net earnings per common share:
As computed $ 0.36 $ 0.32 $ 0.42 $ 0.25
====== ====== ====== ======
As reported(a) $ 0.36 $ 0.32 $ 0.39 $ 0.19
====== ====== ====== ======
(a) The calculation of fully diluted net earnings per common share for the six
months ended June 30, 1994 and 1993 was not dilutive.
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KERR GROUP, INC.
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Three Months and Six Months Ended June 30, 1994 and 1993
Results of Operations
Net sales for the three months ended June 30, 1994 were $41,004,000 as compared
to $38,113,000 for the three months ended June 30, 1993, an increase of
$2,891,000 or 7.6%. The increase in net sales for the three months ended June
30, 1994 over the comparable period in 1993 was due primarily to higher unit
sales in the Plastic Products and Consumer Products Businesses.
Net sales for the six months ended June 30, 1994 were $70,384,000 as compared
to $64,787,000 for the six months ended June 30, 1993, an increase of
$5,597,000 or 8.6%. The increase in net sales for the six months ended June
30, 1994 over the comparable period in 1993 was due primarily to higher unit
sales in the Plastic Products and Consumer Products Businesses.
Cost of sales for the three months ended June 30, 1994 were $28,713,000 as
compared to $26,742,000 for the three months ended June 30, 1993, an increase
of $1,971,000 or 7.4%. Cost of sales for the six months ended June 30, 1994
were $48,132,000 as compared to $45,058,000 for the six months ended June 30,
1993, an increase of $3,074,000 or 6.8%. The increase for both periods in 1994
over comparable periods in 1993 was due primarily to higher unit sales.
Gross profit as a percent of net sales for the three months ended June 30, 1994
increased to 30.0% as compared to 29.8% for the three months ended June 30,
1993. Gross profit as a percent of net sales for the six months ended June 30,
1994 increased to 31.6% as compared to 30.5% for the six months ended June 30,
1993.
Selling, warehouse, general and administrative expenses increased $658,000 or
8.5% during the three months ended June 30, 1994, as compared to the same
period in 1993. The increase for the three months was primarily due to
additional employees, higher bad debt expense and higher sales promotions.
Selling, warehouse, general and administrative expenses increased $1,457,000 or
9.5% during the six months ended June 30, 1994, as compared to the same period
in 1993. The increase for the six months was primarily due to higher bad debt
expense, additional employees and salary and wage increases.
Net interest expense decreased $170,000 and $311,000 during the three month and
six month periods ended June 30, 1994, respectively, as compared to the same
periods in 1993, as a result of the refinancing of the Company's long-term debt
on September 21, 1993.
Earnings before income taxes increased $432,000 during the three months ended
June 30, 1994, as compared to the same period in 1993. Earnings before income
taxes increased $1,377,000 during the six months ended June 30, 1994, as
compared to the same period in 1993. The increase in earnings for both periods
in 1994 over comparable periods in 1993 was due to higher earnings in the
Plastic Products and Consumer Products Businesses and lower interest expense as
a result of the refinancing of the Company's long-term debt on September 21,
1993.
The provision for income taxes increased $231,000 during the three months ended
June 30, 1994, as compared to the same period in 1993. The provision for
income taxes increased $618,000 during the six months ended June 30, 1994, as
compared to the same period in 1993. The increase for both periods in 1994
over comparable periods in 1993 was due primarily to higher pretax earnings.
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Financial Condition
Cash flow was used by operations in the six months ended June 30, 1994 in the
amount of $3,514,000 and in the six months ended June 30, 1993 in the amount of
$5,884,000 for increased working capital requirements, primarily related to the
Consumer Products Business.
Cash flow was used by investing activities in the six months ended June 30,
1994 in the amount of $6,188,000 and in the six months ended June 30, 1993 in
the amount of $6,857,000, primarily related to capital expenditures and cash
costs associated with the Company's discontinued operations.
Cash flow was provided by financing activities in the six months ended June 30,
1994 in the amount of $2,013,000 primarily attributable to borrowings under the
Company's working capital lines of credit. Cash flow was used by financing
activities in the six months ended June 30, 1993 in the amount of $1,019,000.
The ratio of current assets to current liabilities at June 30, 1994 and
December 31, 1993 was 2.6 and 3.0, respectively. The decrease in the ratio of
current assets to current liabilities during the first six months of 1994 is
due to higher levels of accounts payable and borrowings under the Company's
working capital lines of credit. The ratio of total debt to total
capitalization decreased to 63.5% at June 30, 1994 from 64.1% at December 31,
1993.
As of June 30, 1994, the Company had two unsecured $10,000,000 lines of credit
with two banks to provide for the seasonal working capital needs of the
Company. The lines of credit are committed through April 30, 1995. The lines
of credit provide the Company with a source of working capital which the
Company believes will be sufficient to meet its anticipated needs.
At June 30, 1994, the Company had unused sources of liquidity consisting of
cash and cash equivalents of $3,640,000, unused committed credit under bank
lines of credit of $18,000,000, of which $12,966,000 could be borrowed under
the terms of the Company's Senior Note Agreement, tax net operating loss
carryforwards of $1,854,000 and certain tax credit carryforwards of $1,975,000.
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PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
10.1 Line of Credit between PNC Bank and Kerr Group, Inc. dated May 2,
1994
10.2 Line of Credit between Bank of Boston and Kerr Group, Inc. dated
May 2, 1994
b. Reports on Form 8-K
There were no reports filed on Form 8-K for the three months ended June 30,
1994.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
KERR GROUP, INC.
August 9, 1994 By /s/ D. GORDON STRICKLAND
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D. Gordon Strickland
Senior Vice President,
Finance, Chief Financial
Officer
August 9, 1994 By /s/ J. STEPHEN GRASSBAUGH
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J. Stephen Grassbaugh
Vice President, Controller,
Chief Accounting Officer
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