SAN DIEGO — In its initial nine weeks, Kerr Group Inc.'s new management team reduced corporate staff by a third, sold a jar business and began evaluating potential acquisitions.
``When we looked at Kerr, we saw a company with great market positions in what I consider good markets,'' said Richard D. Hofmann, who was named president and chief executive officer in August. Kerr produces plastic packaging products, had 1996 sales of $107.4 million and projects $111 million this year.
``While it had problems, we viewed them as fixable with money, focus, direction and accountability,'' Hofmann said in an interview in San Diego. He was attending the Washington-based National Wholesale Druggists Association's annual convention.
Hofmann said Kerr's value-added, child-resistant closure business is ``growing rapidly,'' the pharmaceutical vial segment is growing but not as fast, and the distilled spirits line of tamper-evident closures is relatively flat in the United States.
Private investment fund Fremont Partners LP of San Francisco completed a $27.3 million tender offer Aug. 27, and now holds about 93 percent of Kerr's stock.
Fremont assumed Kerr debt of slightly more than $50 million and quickly reduced the debt obligations with its own funds. Now, Fremont's equity in Kerr approximates $50 million.
The corporate staff was cut to about 50 from 75.
``We did make some significant moves at the top to clear the decks for things we wanted to do,'' Hofmann said.
Senior executives were terminated, with Hofmann and incoming Chief Financial Officer Lawrence C. Caldwell picking up the reigns.
In 1996, Kerr added overhead to its Lancaster, Pa., organization in moving corporate headquarters there from Los Angeles, Hofmann said. ``I think they lost a big opportunity ... to restructure'' at that time.
``We have gotten quite a few of the corporate folks out without touching anything in product development or R&D or sales and marketing,'' he said, indicating a belief that ``you can effectively redirect those [corporate] resources to things that mean something to customers.''
One concept currently in development, for example, would bring closure technology to a finger or mechanical-trigger pump.
Hofmann decided Kerr should exit the wide-mouth jar, health-and-beauty-aid business, which has annual sales of about $8 million and was moved in 1996 to a new Bowling Green, Ky., plant from Santa Fe Springs, Calif. He termed the move a ``mistake.''
Kerr sold the line's machines, molds, decorating equipment and intellectual property Oct. 31 to the Waddington IP Jaycare unit of Leeds, England-based John Waddington plc. The buyer is relocating the jar business line, but no Kerr employees, to its facility in Saddlebrook, N.J.
Fremont's capital will fund cost reductions, product developments and productivity improvements.
``We are trying to sort through the opportunities,'' Hofmann said, and, for the moment, have a ``high degree of interest'' in three potential acquisitions in the closure and food business lines.
No transactions are imminent, but Hofmann is looking at opportunities involving distilled spirits packaging in Europe and South America and child-resistant closures in the United Kingdom and Germany.
Kerr injection molds child-resistant closures in Ahoskie, N.C., employing about 180, and food and distilled spirits packaging products in Bowling Green, employing about 135.
Kerr moved some food work to Bowling Green from Ahoskie. The North Carolina site is chockablock with closure jobs, including those to comply by Jan. 1 with new protocols under the Poison Prevention Packaging Act of 1970. A U.S. Consumer Product Safety Commission rule added adult-friendly provisions to the requirement for child-resistant closures.
The Lancaster plant employs about 125, all members of the United Steel Workers Union, and uses injection blow molding to make pharmaceutical bottles. A Jackson, Tenn., facility employs about 185 and uses a combination of processes to mold drug vials and caps that pharmacists use in fulfilling prescriptions.
The large, old Lancaster plant's future is in doubt because of high labor costs, work rules relating to overtime, necessary equipment upgrades and the structure's adaptability, Hofmann said. If the plant is insufficient ``for the long pull, then we will invest the money in a new facility somewhere else. As a first step, we will see what can be done to improve performance in the existing location.''
Hofmann entered the packaging business in 1963 with Continental Can Co. and served as the firm's president and chief operating officer for a year before resigning in 1987. Subsequently, he has consulted and invested within the packaging industry and continues as chairman of New Canaan Investments Inc. of Stamford, Conn.
At Kerr, Hofmann, 57, succeeded G. Gordon Strickland, who was CEO from March 1996 until the change in August. Strickland's predecessor, Roger W. Norian, became Kerr CEO in 1980. The company was known as Kerr Glass Manufacturing Corp. until 1992.
Fremont's investors want to use Kerr as a platform to build an organization that might have sales of $300 million to $500 million within five years, Hofmann said. The initial goal is to ``build a larger U.S.-based operation and then move into international fields.''
Licensing agreements exist with ``fine partners'' in Germany, South Korea and Australia, but that method of growth is too slow for Kerr.
Kerr expects to spend about $15 million per year to upgrade and expand facilities for the foreseeable future.
The acquisition path of AptarGroup Inc. is a possible model of how Kerr might grow, Hofmann said. Crystal Lake, Ill.-based Aptar makes consumer product dispensing systems. European operations accounted for 58 percent of $615.8 million in 1996 sales.