<PAGE>   1


                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                  FORM 10-Q/A
                                AMENDMENT NO. 1

[X]  QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
     OF 1934

               For the Quarterly Period Ended September 30, 1996


[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

                 For the transition period from  _____ to _____

                           Commission File No. 1-7272

                                KERR GROUP, INC.
             (Exact name of registrant as specified in its charter)

         Delaware                                             95-0898810
(State or other jurisdiction of                            (I.R.S. Employer
incorporation or organization)                           Identification No.)

500 New Holland Avenue, Lancaster, PA                            17602
(Address of principal executive offices)                       (Zip Code)

Registrant's telephone number, including area code           (717) 299-6511

                 1840 Century Park East, Los Angeles, CA 90067
 Former name, former address and former fiscal year, if changed since last year.

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.          Yes X  No [ ]

The number of shares of the Registrant's Common Stock, $.50 par value,
outstanding as of October 31, 1996 was 3,933,095.
<PAGE>   2
Item 1 of Part I of the Form 10-Q of Kerr Group, Inc. for the quarterly period
ended September 30, 1996 (the "Form 10-Q") is hereby amended and restated in
its entirety as stated below:

ITEM 1.  FINANCIAL STATEMENTS





                                       2
<PAGE>   3
                                        
                                KERR GROUP, INC.

                          Consolidated Balance Sheets
                 As of September 30, 1996 and December 31, 1995
                      (in thousands except per share data)



<TABLE>
<CAPTION>
                                                                  (Unaudited)              (As Restated)
                                                                  September 30,            December 31,
Assets                                                                1996                     1995  
                                                                    ---------                ---------
<S>                                                                 <C>                      <C>
Current assets
    Cash and cash equivalents                                       $   3,564                 $  3,904
    Receivables-primarily trade accounts, less allowance
         for doubtful accounts of $425 at September 30, 1996
         and $212 at December 31, 1995                                 11,195                    7,154
    Inventories
         Raw materials and work in process                              6,311                    7,815
         Finished goods                                                 8,769                    9,933
                                                                    ---------                ---------
               Total inventories                                       15,080                   17,748

    Prepaid expenses and other current assets                           2,605                    3,106
    Current net assets related to discontinued operations               4,710                   12,847
                                                                    ---------                ---------

               Total current assets                                    37,154                   44,759
                                                                    ---------                ---------


Property, plant and equipment, at cost                                104,279                  105,725
Accumulated depreciation and amortization                             (64,099)                 (58,907)
                                                                    ---------                ---------
    Net property, plant and equipment                                  40,180                   46,818
                                                                    ---------                ---------


Deferred income taxes                                                   8,299                    8,057
Goodwill and other intangibles, net of
    amortization of $2,580 at September 30, 1996
    and $2,247 at December 31, 1995                                     6,727                    6,983
Other assets                                                            7,364                    8,026
Non-current net assets related to discontinued operations                   0                    4,854
                                                                    ---------                ---------
                                                                    $  99,724                $ 119,497
                                                                    =========                =========
</TABLE>





See accompanying notes to condensed consolidated financial statements.





                                       3
<PAGE>   4
                                        
                                KERR GROUP, INC.

                          Consolidated Balance Sheets
                 As of September 30, 1996 and December 31, 1995
                      (in thousands except per share data)



<TABLE>
<CAPTION>
                                                                 (Unaudited)              (As Restated)
                                                                 September 30,             December 31,
Liabilities and Stockholders' Equity                                 1996                      1995  
                                                                  ----------                ----------
<S>                                                               <C>                       <C>
Current liabilities
    Note payable to bank                                          $    5,856                $    6,500
    Senior debt due 1997 through 2003
         classified as current                                        45,044                    50,000
    Accounts payable                                                   7,499                     9,739
    Accrued expenses                                                   7,385                     8,858
    Restructuring reserves                                             2,950                         0
                                                                  ----------                ----------

               Total current liabilities                              68,734                    75,097
                                                                  ----------                ----------

Accrued pension liability                                             13,175                    18,318
Other long-term liabilities                                            4,451                     2,175

Stockholders' equity
    Preferred Stock, 487 shares authorized and issued,
         liquidation value of $20.85 per share at September 30,
         1996 and $20 per share at December 31, 1995                   9,748                     9,748
    Common Stock, $.50 par value per share, 20,000
         shares authorized, 4,226 shares issued                        2,113                     2,113
    Additional paid-in capital                                        27,239                    27,239
    Retained earnings (accumulated deficit)                          (10,200)                    1,860
    Treasury Stock, 293 shares at cost                                (6,913)                   (6,913)
    Excess of additional pension liability over
         unrecognized prior service cost, net of tax benefits         (8,623)                  (10,140)
                                                                  ----------                ----------

                     Total stockholders' equity                       13,364                    23,907
                                                                  ----------                ----------
                                                                  $   99,724                $  119,497
                                                                  ==========                ==========
</TABLE>





See accompanying notes to condensed consolidated financial statements.





                                       4
<PAGE>   5
                                        
                                KERR GROUP, INC.

              Condensed Consolidated Statements of Earnings (Loss)
     for the Three Months and Nine Months Ended September 30, 1996 and 1995
                      (in thousands except per share data)



<TABLE>
<CAPTION>
                                                                  (Unaudited)                          (Unaudited)
                                                                  Three Months                         Nine Months
                                                               Ended September 30,                  Ended September 30,
                                                          ----------------------------           ------------------------
                                                             1996               1995               1996            1995
                                                          ---------           --------           --------         -------
<S>                                                       <C>                 <C>                <C>             <C>
Net sales                                                 $  28,024           $ 28,240           $ 80,488         $81,791
Cost of sales                                                20,746             22,436             64,772          63,958
                                                          ---------           --------           --------         -------
       Gross profit                                           7,278              5,804             15,716          17,833

Selling, warehouse, general and
  administrative expense                                      5,665              5,997             17,964          17,671
Loss on restructuring                                             0                  0              7,500               0
Other costs associated with restructuring                     1,280                  0              1,936               0
Financing costs                                                   0                  0                245               0
Interest expense                                              1,241              1,180              3,812           3,501
Interest and other income                                       (78)               (53)              (268)           (138)
                                                          ---------           --------           --------         -------
       Loss from continuing operations
          before income taxes                                  (830)            (1,320)           (15,473)         (3,201)

Provision (benefit) for income taxes                          3,668               (534)            (2,189)         (1,304)
                                                          ---------           --------           --------         -------

       Loss from continuing operations                    $  (4,498)          $   (786)          $(13,284)        $(1,897)

Discontinued operations:
       Gain on sale of discontinued operations                    0                  0              1,564               0
       Earnings (loss) from discontinued operations               0               (313)              (133)            126
                                                          ---------           --------           --------         -------
              Net earnings (loss) related to
                 discontinued operations                          0               (313)             1,431             126
                                                          ---------           --------           --------         -------

              Net loss                                       (4,498)            (1,099)           (11,853)         (1,771)

Preferred stock dividends                                       207                207                621             621
                                                          ---------           --------           --------         -------

              Net loss applicable to
                 common stockholders                      $  (4,705)          $ (1,306)          $(12,474)        $(2,392)
                                                          =========           ========           ========         =======

Net earnings (loss) per common share,
  primary and fully diluted:
       From continuing operations                         $   (1.20)          $  (0.25)          $  (3.54)        $ (0.66)
       From discontinued operations                            0.00              (0.08)              0.37            0.03
                                                          ---------           --------           --------         -------

             Net loss                                     $   (1.20)          $  (0.33)          $  (3.17)        $ (0.63)
                                                          =========           ========           ========         =======
</TABLE>


See accompanying notes to condensed consolidated financial statements.





                                       5
<PAGE>   6
                                KERR GROUP, INC.

                Condensed Consolidated Statements of Cash Flows
             for the Nine Months Ended September 30, 1996 and 1995
                                 (in thousands)
<TABLE>
<CAPTION>
                                                                                          (Unaudited)
                                                                                       Nine Months Ended
                                                                                         September 30,      
                                                                                 ---------------------------
                                                                                     1996             1995  
                                                                                 ------------     ----------
<S>                                                                              <C>              <C>
Cash flows provided (used) by operations
----------------------------------------
Continuing operations:
   Loss from continuing operations                                               $  (13,284)      $   (1,897)
   Add (deduct) noncash items included in
    loss from continuing operations
      Expenses associated with restructuring, net of tax                              5,662                0
      Depreciation and amortization                                                   7,197            6,339
      Change in deferred income taxes                                                 1,666             (664)
      Reduction in total pension liability, net                                      (5,546)             (94)
      Payments associated with restructuring                                         (4,064)               0
      Other, net                                                                       (689)            (198)
   Changes in operating assets and liabilities
      Receivables                                                                    (4,041)           3,328
      Inventories                                                                     1,620           (1,105)
      Other current assets                                                              110              345
      Accounts payable                                                               (2,240)          (3,878)
      Accrued expenses                                                               (1,074)             502
                                                                                 ----------       ----------
      Cash flow provided (used) by continuing operations                            (14,683)           2,678
   Cash flow provided by discontinued operations                                      8,026            4,986
                                                                                 ----------       ----------
      Total cash flow provided (used) by operations                                  (6,657)           7,664
                                                                                 ----------       ----------

Cash flows provided (used) by investing activities
--------------------------------------------------
Continuing operations:
   Capital expenditures                                                              (1,488)          (7,921)
   Other, net                                                                          (271)             (94)
Discontinued operations:
   Capital expenditures                                                                (234)            (848)
   Proceeds from sale of assets of Consumer Products Business                        14,417                0
   Other, net                                                                           (55)            (102)
                                                                                 ----------       ----------
           Cash flow provided (used) by investing activities                         12,369           (8,965)
                                                                                 ----------       ----------

Cash flows provided (used) by financing activities
--------------------------------------------------
   Repayment of Senior Notes and Note payable to bank                                (5,600)               0
   Net repayments under lines of credit                                                   0             (100)
   Dividends paid                                                                      (207)            (621)
   Other, net                                                                          (245)              32
                                                                                 ----------       ----------
           Cash flow used by financing activities                                    (6,052)            (689)
                                                                                 ----------       ----------

Cash and cash equivalents
-------------------------
   Increase (decrease) during the period                                               (340)          (1,990)
   Balance at beginning of the period                                                 3,904            2,261
                                                                                 ----------       ----------
      Balance at end of the period                                               $    3,564       $      271
                                                                                 ==========       ==========

Significant Non-Cash Transactions
---------------------------------
   Contribution of 250,000 shares of Common Stock to pension plan                $        0       $    1,891
                                                                                 ==========       ==========
</TABLE>

See accompanying notes to condensed consolidated financial statements





                                       6
<PAGE>   7
                                KERR GROUP, INC.

              Notes to Condensed Consolidated Financial Statements
                                  (Unaudited)
1)  General

    The condensed consolidated financial statements include the accounts of
    Kerr Group, Inc. and its wholly owned subsidiary (collectively referred to
    as the Company).  In the opinion of management, the accompanying condensed
    consolidated financial statements contain all adjustments (consisting of
    only normal recurring accruals and certain non-recurring accruals for
    restructuring charges as described below) necessary to present fairly the
    financial position of the Company as of September 30, 1996, and the results
    of operations for the three months and nine months ended September 30, 1996
    and 1995, and changes in cash flows for the nine months ended September 30,
    1996 and 1995.

    The results of operations for the first nine months of 1996 are not
    necessarily indicative of the results to be expected for the full year.

    Fully diluted earnings per common share reflect when dilutive, 1) the
    incremental common shares issuable upon the assumed exercise of outstanding
    stock options, and 2) the assumed conversion of the Class B, Series D
    Preferred Stock and the elimination of the related dividends.  The
    calculation of fully diluted net earnings (loss) per common share for the
    three months and the nine months ended September 30, 1996 and 1995 was not
    dilutive.

    The Company did not declare a dividend on its Class B, Series D Preferred
    Stock during the second or third quarters of 1996.  The cumulative amount
    of undeclared dividends as of September 30, 1996 is $414,000.  Under
    accounting rules, such dividends are not accrued until declared, however,
    for financial reporting purposes the amount of such dividends are shown on
    the face of the income statement as a deduction to arrive at net earnings
    (loss) applicable to common stockholders.  Under the terms of an agreement
    with its lenders, the Company is not permitted to declare or pay any
    dividends on its preferred stock on or before December 9, 1996.

2)  Discontinued Operations

    On March 15, 1996, the Company sold the manufacturing assets of the
    Consumer Products Business for a purchase price of $14,417,000.  These
    proceeds were utilized for working capital, to reduce debt, including
    $3,500,000 of debt secured by liens on certain machinery and equipment of
    the Company, and to fund costs of the restructuring (see Note 3).  From
    March 16, 1996 through September 30, 1996, the Company received $11,958,000
    from the sale by the Company of the inventory of the Consumer Products
    Business and from the collection of the related accounts receivable.  The
    Company expects to receive approximately $4,700,000 during the remainder of
    1996 and 1997 from the sale of inventory and collection of accounts
    receivable of the Consumer Products Business.

    In connection with such sale, the Company recorded $5,800,000 of reserves
    consisting of i) retiree health care and pension expenses of $3,800,000,
    ii) severance and related costs of $1,000,000, iii) professional fees of
    $500,000, iv) asset retirements of $300,000, and v) other costs of
    $200,000.  After deductions for such reserves, the Company incurred in the
    first quarter of 1996 a one-time pre-tax gain of $2,607,000 ($1,564,000
    after-tax or $0.40 per common share) in connection with the sale of the
    manufacturing assets of the Consumer Products Business.

    During the nine months ended September 30, 1996, the Company made cash
    payments related to such reserves for i) severance and related costs of
    $600,000, ii) professional fees of $500,000 and iii) other costs of
    $100,000.





                                       7
<PAGE>   8
    The assets and liabilities of the discontinued Consumer Products Business
    have been reclassified on the December 31, 1995 Consolidated Balance Sheet
    from the previously reported classification to separately identify them as
    current net assets and non-current net assets related to discontinued
    operations.  These net assets consist of net working capital, net property,
    plant and equipment, other assets and intangible assets, less related
    liabilities.

    The results of the Consumer Products Business have been reported separately
    as a component of discontinued operations in the Condensed Consolidated
    Statements of Earnings (Loss).  The presentation of this business as
    discontinued had no effect on net loss, net loss applicable to common
    stockholders or net loss per common share from the amounts previously
    reported.

3)  Restructuring

    During the first quarter of 1996, the Company recorded an unusual loss of
    $7,500,000 ($4,500,000 after-tax or $1.14 per common share) for the
    expected costs associated with the restructuring of the Company, which
    included moving the corporate headquarters from Los Angeles, California to
    Lancaster, Pennsylvania and relocating the wide-mouth jar operations from
    Santa Fe Springs, California to Bowling Green, Kentucky.  The pretax loss
    consisted of reserves for i) severance, workers' compensation and insurance
    continuation costs of $3,000,000, ii) costs associated with subleasing the
    two facilities of $2,300,000, iii) asset retirements of $1,600,000 and iv)
    other costs of $600,000.  During the nine months ended September 30, 1996,
    the Company made cash payments related to such reserves for i) severance
    and related costs of $1,900,000 and ii) costs associated with subleasing
    facilities of $200,000.

    The relocation of the corporate headquarters and the wide-mouth jar
    manufacturing operations have been completed.  The restructuring is
    expected to result in annualized pretax cost savings of approximately
    $6,500,000 primarily from reduced costs for employment, rentals,
    manufacturing overhead, utilities and freight.  These cost savings are
    expected to be substantially realized in 1997.

    During the three month and nine month periods ended September 30, 1996, the
    Company incurred unusual pretax losses of $1,280,000 ($768,000 after-tax or
    $0.20 per common share) and $1,936,000 ($1,162,000 after-tax or $0.30 per
    common share), respectively, for restructuring costs primarily related to
    relocation of personnel and equipment.  The Company expects to incur an
    additional $600,000 ($360,000 after-tax or $0.09 per common share) for
    restructuring costs during the remainder of 1996 and early 1997.
    Accounting rules require these costs to be expensed as incurred.

4)  Receivables

    Receivables as of September 30, 1996 and December 31, 1995, as shown on the
    accompanying Consolidated Balance Sheets, have been reduced by net proceeds
    of $3,959,000 and $7,357,000, respectively, from advances pursuant to the
    sale of receivables under the Company's Accounts Receivable Agreement.  In
    addition, receivables as of December 31, 1995, related to discontinued
    operations, included in Current Net Assets Related to Discontinued
    Operations on the accompanying Consolidated Balance Sheets, have been
    reduced by net proceeds of $343,000 from advances pursuant to the sale of
    receivables under the Company's Accounts Receivable Agreement.

5)  Income Taxes

    During the quarter ended September 30, 1996, the Company recorded a charge
    of $4,000,000 (or $1.02 per common share) to provide a valuation reserve
    against its deferred income tax asset.  The valuation reserve was provided
    due to the amount of the restructuring charges recorded in 1996 and the
    projected time period needed to recover the deferred income tax asset.





                                       8
<PAGE>   9
6)  Financing

    During October 1996, the Company executed a commitment letter with The CIT
    Group/Business Credit, Inc. for $48,000,000 of financing secured by all of
    the Company's assets.  The proceeds of the financing will permit the
    Company to restructure its existing indebtedness.  In addition to paying
    the Company's Accounts Receivables Agreement, the financing permits the
    Company to pay $29,300,000 of the Company's $50,900,000 existing
    indebtedness.  The Company has agreed to exchange the balance of the
    Company's existing debt for secured subordinated notes in the principal
    amount of $12,000,000 and convertible preferred stock with a liquidation
    preference of $13,000,000, and having no stated dividends.  The
    subordinated notes will bear interest at the rate of 10% per annum, but
    will be "pay-in-kind" during the first three years.  The preferred stock
    will be convertible into approximately

    748,000 shares of common stock.  After the financial restructuring, the
    Company expects to have approximately $10,000,000 of additional borrowing
    availability.  The Company expects to record an approximate $3,000,000
    pretax gain ($1,800,000 after-tax or $0.46 per common share) related to the
    financial restructuring during the fourth quarter of 1996.

    The consummation of the restructuring will be subject to the execution and
    delivery of definitive loan agreements among The CIT Group/Business Credit,
    Inc., the holders of the existing institutional indebtedness and the
    Company.  There can be no assurance that the restructuring will be
    consummated.

    In addition, the Company obtained an extension of waivers of certain
    financial covenants through December 9, 1996 for its existing institutional
    indebtedness and an extension of the maturity date of the unsecured Note to
    December 9, 1996.

    If the financial restructuring is not consummated and subsequent waivers of
    financial covenants or the extension of the maturity date of the unsecured
    Note are not obtained, the holders of the institutional indebtedness would
    be entitled to exercise certain remedies, including the acceleration of the
    due date for payment of the Senior Notes and the unsecured Note, and the
    termination of the Accounts Receivable Agreement.  However, the Company
    believes that the financial restructuring will be consummated.  The
    accompanying consolidated financial statements have been prepared on the
    basis of such belief of the Company.

    In connection with an amendment to the Company's Accounts Receivable
    Agreement effective September 30, 1996, the maximum amount that can be
    advanced to the Company pursuant to the sale of trade accounts receivable
    at any time is $8,500,000.





                                       9
<PAGE>   10
                                KERR GROUP, INC.

                Computation of Earnings (Loss) Per Common Share
                      (in thousands except per share data)



<TABLE>
<CAPTION>
                                                                   (Unaudited)                  (Unaudited)
                                                                Three Months Ended           Nine Months Ended
                                                                   September 30,                September 30,    
                                                              ---------------------        --------------------
                                                                1996        1995             1996        1995
                                                              --------    ---------        ---------    -------
<S>                                                           <C>         <C>              <C>          <C>
Primary Net Earnings (Loss) Per Common Share
--------------------------------------------
    Net loss                                                  $ (4,498)   $  (1,099)       $ (11,853)   $(1,771)

    Less Preferred Stock dividends                                (207)        (207)            (621)      (621)
                                                              --------    ---------        ---------    -------

    Net loss applicable to primary earnings
         per common share                                     $ (4,705)   $  (1,306)       $ (12,474)    (2,392)
                                                              ========    =========        =========    =======

    Weighted average number of common
         shares outstanding                                      3,933        3,933            3,933      3,812
                                                              ========    =========        =========    =======

    Primary net loss per common share                         $  (1.20)   $   (0.33)       $   (3.17)   $ (0.63)
                                                              ========    =========        =========    =======


Fully Diluted Net Earnings (Loss) Per Common Share
--------------------------------------------------
    Net loss applicable to primary earnings
         per common share                                     $ (4,705)   $  (1,306)       $ (12,474)   $(2,392)

    Add Preferred Stock dividends                                  207          207              621        621
                                                              --------    ---------        ---------    -------

    Net loss applicable to fully
         diluted earnings per common share                    $ (4,498)   $  (1,099)       $ (11,853)   $(1,771)
                                                              ========    =========        =========    =======

    Weighted average number of common
         shares outstanding                                      3,933        3,933            3,933      3,812

    Common shares issuable upon assumed
         conversion of Preferred Stock                             709          709              709        709

    Incremental common shares issuable upon
         assumed exercise of outstanding stock options               0            3                3         20
                                                              --------    ---------        ---------    -------

    Adjusted weighted average number of common
         shares outstanding                                      4,642        4,645            4,645      4,541
                                                              ========    =========        =========    =======

    Fully diluted net loss per common share:
         As computed                                          $  (0.97)   $   (0.24)       $   (2.55)   $ (0.39)
                                                              ========    =========        =========    =======
         As reported(a)                                       $  (1.20)   $   (0.33)       $   (3.17)   $ (0.63)
                                                              ========    =========        =========    =======
</TABLE>


(a) The calculation of fully diluted net loss per common share for the three
    months and the nine months ended September 30, 1996 and 1995 was not
    dilutive.





                                       10
<PAGE>   11

Item 2 of Part I of the Form 10-Q is hereby amended and restated in its
entirety as stated below:

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS





                                       11
<PAGE>   12
                                KERR GROUP, INC.

               Management's Discussion and Analysis of Financial
                  Condition and Results of Operations for the
         Three Months and Nine Months Ended September 30, 1996 and 1995

Results of Operations

Continuing Operations

Net sales for the three months ended September 30, 1996 were $28,024,000 as
compared to $28,240,000 for the three months ended September 30, 1995, a
decrease of $216,000 or 1%.  Net sales for the nine months ended September 30,
1996 were $80,488,000 as compared to $81,791,000 for the nine months ended
September 30, 1995, a decrease of $1,303,000 or 2%.  The decrease in net sales
for the three and nine months ended September 30, 1996 over the comparable
periods in 1995 was due primarily to lower unit sales of tamper-evident
closures and wide mouth jars and closures.

Cost of sales for the three months ended September 30, 1996 were $20,746,000 as
compared to $22,436,000 for the three months ended September 30, 1995, a
decrease of $1,690,000 or 8%.  The decrease in cost of sales for the quarter
was primarily due to sales of lower cost products, reduced unit costs due to
increased production, lower costs resulting from the restructuring of the
Company and lower unit sales.

Cost of sales for the nine months ended September 30, 1996 were $64,772,000 as
compared to $63,958,000 for the nine months ended September 30, 1995, an
increase of $814,000 or 1%.  The increase for the nine month period was due
primarily to inefficiencies resulting from reduced production.

Gross profit as a percent of net sales for the three months ended September 30,
1996 increased to 26% as compared to 21% for the three months ended September
30, 1995 due primarily to sales of higher margin products, reduced unit costs
due to increased production and lower costs resulting from the restructuring of
the Company.

Gross profit as a percent of net sales for the nine months ended September 30,
1996 decreased to 20% as compared to 22% for the nine months ended September
30, 1995 primarily due to increased reserves for customer rebates and inventory
obsolescence, and reduced production, all of which occurred in the first
quarter of 1996.

The increase in reserves for customer rebates is due to the completion of a
detailed analysis by the company in the first quarter of 1996 of the historical
amount and timing of customer deductions, and credit memos and other payments
issued by the Company, by customer category, which indicated an increase in the
required accrual.  The increase in reserves for inventory obsolescence is the
result of including certain additional types of closures in the calculation of
the reserve beginning in 1996, because the Company felt that it represented a
more accurate measure of such contingency.

Selling, warehouse, general and administrative expenses decreased $332,000 or
6% during the three months ended September 30, 1996, as compared to the same
period in 1995 due primarily to lower costs resulting from the restructuring of
the Company.

Selling, warehouse, general and administrative expenses increased $293,000 or
2% during the nine months ended September 30, 1996, as compared to the same
period in 1995 due primarily to the start up of operations at the Company's new
Bowling Green, Kentucky facility.





                                       12
<PAGE>   13
During the first quarter of 1996, the Company recorded an unusual loss of
$7,500,000 ($4,500,000 after-tax or $1.14 per common share) for the expected
costs associated with the restructuring of the Company, which included moving
the corporate headquarters from Los Angeles, California to Lancaster,
Pennsylvania and relocating the wide-mouth jar operations from Santa Fe
Springs, California to Bowling Green, Kentucky.  The pretax loss consisted of
reserves for i) severance, workers' compensation and insurance continuation
costs of $3,000,000, ii) costs associated with subleasing the two facilities of
$2,300,000, iii) asset retirements of $1,600,000 and iv) other costs of
$600,000.  During the nine months ended September 30, 1996, the Company made
cash payments related to such reserves for i) severance and related costs of
$1,900,000 and ii) costs associated with subleasing facilities of $200,000.

The relocation of the corporate headquarters and the wide-mouth jar
manufacturing operation have been completed.  The restructuring is expected to
result in annualized pretax cost savings of approximately $6,500,000 primarily
from reduced costs for employment, rentals, manufacturing overhead, utilities
and freight.  These cost savings are expected to be substantially realized in
1997.

During the three month and nine month periods ended September 30, 1996, the
Company incurred unusual pretax losses of $1,280,000 ($768,000 after-tax or
$0.20 per common share) and $1,936,000 ($1,162,000 after-tax or $0.30 per
common share), respectively, for restructuring costs primarily related to
relocation of personnel and equipment.  The Company expects to incur an
additional $600,000 ($360,000 after-tax or $0.09 per common share) for
restructuring costs during the remainder of 1996 and early 1997.  Accounting
rules require these costs to be expensed as incurred.

During the nine months ended September 30, 1996, the Company also incurred
unusual expenses of $245,000 ($147,000 after-tax or $0.04 per common share) to
reimburse its unsecured lenders for professional fees incurred in connection
with the Company obtaining waivers of certain covenants and extension of the
maturity date of an unsecured Note.

Net interest expense decreased $36,000 during the three month period ended
September 30, 1996 as compared to the same period in 1995.  Net interest
expense increased $181,000 during the nine month period ended September 30,
1996, as compared to the same period in 1995, primarily as a result of higher
levels of short-term financing during the first quarter of 1996.

The loss before income taxes decreased $490,000 during the three months ended
September 30, 1996 as compared to the same period in 1995, due primarily to
sales of higher margin products and increased production.

The loss before income taxes increased $12,272,000 during the nine months ended
September 30, 1996 as compared to the same period in 1995, due primarily to the
impact of restructuring charges.

The provision for income taxes increased $4,202,000 and decreased $885,000
during the three month and nine month periods ended September 30, 1996 as
compared to the same periods in 1995, respectively, as a result of the Company
recording a charge of $4,000,000 (or $1.02 per common share) to provide a
valuation reserve against its deferred income tax asset.  The valuation reserve
was provided due to the amount of the restructuring charges recorded in 1996
and the projected time period needed to recover the deferred income tax asset.

Discontinued Operations

The Company had no net earnings from discontinued operations for the third
quarter of 1996 as compared to $313,000 of net earnings from discontinued
operations for the third quarter of 1995.





                                       13
<PAGE>   14
The Company reported net earnings from discontinued operations of $1,431,000
for the first nine months of 1996 as compared to $126,000 for the first nine
months of 1995.  The net earnings in 1996 includes a pretax gain of $2,607,000
($1,564,000 after-tax or $0.40 per common share) in connection with the sale of
the manufacturing assets of the Consumer Products Business.  This pretax gain
has been reduced by $5,800,000 of reserves, for i) retiree health care and
pension expenses of $3,800,000, ii) severance and related costs of $1,000,000,
iii) professional fees of $500,000, iv) asset retirements of $300,000 and v)
other costs of $200,000.  During the nine months ended September 30, 1996, the
Company made cash payments related to such reserves for i) severance and
related costs of $600,000, ii) professional fees of $500,000 and iii) other
costs of $100,000.

Financial Condition

During the first nine months of 1996, the principal source of cash was
$14,417,000 received from the sale of the manufacturing assets of the Consumer
Products Business and $8,026,000 of net cash flow related to the operations of
the Consumer Products Business, which primarily relate to the liquidation of
receivables and inventory.  The principal uses of cash were to fund pretax
losses, net debt retirements of $5,600,000, cash payments associated with the
restructuring of $4,064,000 and a reduction in the net proceeds from the sale
of receivables under the Company's Accounts Receivable Agreement of $3,398,000.

During the first nine months of 1995, the principal source of cash was from
operations, which includes $6,089,000 related to net proceeds from the sale of
receivables under the Company's Accounts Receivable Agreement and $3,407,000 of
proceeds from the seasonal reduction in receivables and inventories of the
Consumer Products Business.  The principal use of cash was to fund capital
expenditures of $7,921,000.

As of September 30, 1996, the Company expects to receive approximately
$4,700,000 during the remainder of 1996 and 1997, from the sale to its
customers of Consumer Products Business inventory and the collection of related
accounts receivable.  Such assets are presented as discontinued operations in
the accompanying Consolidated Balance Sheets.

On May 10, 1995, the Company contributed 250,000 shares of its Common Stock, at
a price of $7.56 per share, to the Kerr Group, Inc. Retirement Income Plan.
The contribution reduced Kerr's pension liability by $1,891,000.

Since the third quarter of 1990, the Company has not declared any dividends on
its Common Stock.  The Company's Senior Notes, Accounts Receivable Agreement
and unsecured Note limit the payment of dividends on Common Stock.  Under the
most restrictive covenant of such agreements, the payment of dividends on
Common Stock is not permitted as of September 30, 1996.

The Company did not declare a dividend on its Class B, Series D Preferred Stock
during the second or third quarters of 1996.  The cumulative amount of
undeclared dividends as of September 30, 1996 is $414,000.  Under accounting
rules, such dividends are not accrued until declared.  Under the terms of an
agreement with its lenders, the Company is not permitted to declare or pay any
dividends on its preferred stock on or before December 9, 1996.

The ratio of current assets to current liabilities at September 30, 1996 and
December 31, 1995 was 0.5 and 0.6, respectively.  The ratio of current assets
to current liabilities is less than 1.0 due to the classification of the
Company's outstanding Senior Notes as a current liability because the Company
was in default of certain financial covenants for which the Company has
received waivers only through December 9, 1996.  The ratio of total debt to
total capitalization increased to 79% at September 30, 1996 from 70% at
December 31, 1995 due to lower stockholders' equity.





                                       14
<PAGE>   15
During October 1996, the Company executed a commitment letter with The CIT
Group/Business Credit, Inc. for $48,000,000 of financing secured by all of the
Company's assets.  The proceeds of the financing will permit the Company to
restructure its existing indebtedness.  In addition to paying the Company's
Accounts Receivables Agreement, the financing permits the Company to pay
$29,300,000 of the Company's $50,900,000 existing indebtedness.  The Company
has agreed to exchange the balance of the Company's existing debt for secured
subordinated notes in the principal amount of $12,000,000 and convertible
preferred stock with a liquidation preference of $13,000,000, and having no
stated dividends.  The subordinated notes will bear interest at the rate of 10%
per annum, but will be "pay-in-kind" during the first three years.  The
preferred stock will be convertible into approximately 748,000 shares of common
stock.  After the financial restructuring, the Company expects to have
approximately $10,000,000 of additional borrowing availability.  The Company
expects to record an approximate $3,000,000 pretax gain ($1,800,000 after-tax
or $0.46 per common share) related to the financial restructuring during the
fourth quarter of 1996.

The consummation of the restructuring will be subject to the execution and
delivery of definitive loan agreements among The CIT Group/Business Credit,
Inc., the holders of the existing institutional indebtedness and the Company.
There can be no assurance that the restructuring will be consummated.

In addition, the Company obtained an extension of waivers of certain financial
covenants through December 9, 1996 for its existing institutional indebtedness
and an extension of the maturity date of the unsecured Note to December 9,
1996.

If the financial restructuring is not consummated and subsequent waivers of
financial covenants or the extension of the maturity date of the unsecured Note
are not obtained, the holders of the institutional indebtedness would be
entitled to exercise certain remedies, including the acceleration of the due
date for payment of the Senior Notes and the unsecured Note, and the
termination of the Accounts Receivable Agreement.  However, the Company
believes that the financial restructuring will be consummated.  The
accompanying consolidated financial statements have been prepared on the basis
of such belief of the Company.

At September 30, 1996, the Company had unused sources of liquidity consisting
of cash and cash equivalents of $3,564,000, additional advances available under
the Accounts Receivable Agreement of approximately $2,000,000, a tax net
operating loss carryforward of $17,256,000, a minimum tax credit carryforward
of $812,000 and other tax credit carryforwards of $201,000.  The Company
believes that its financial resources, including proceeds from the sale of
certain assets of the Consumer Products Business and other internally generated
funds, are adequate to meet its foreseeable needs, subject to the consummation
of the financial restructuring.

Disclosure Regarding Forward Looking Statements

Portions of the Quarterly Report on Form 10-Q include forward looking
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
Although the Company believes that the expectations reflected in such forward
looking statements are based upon reasonable assumptions, it can give no
assurance that its expectations will be achieved.





                                       15

<PAGE>   16


                                 ---------------

         Pursuant to the requirement of the Securities Exchange Act of 1934,
the Registrant has duly caused this amendment to be signed on its behalf by the
undersigned thereunto duly authorized.



                               KERR GROUP, INC.


Date:  January 10, 1997


                               By:  /s/     Geoffrey A. Whynot                
                                    -----------------------------------------
                                    Name:   Geoffrey A. Whynot
                                    Title:  Vice President, Chief Financial
                                            Officer





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