<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION

                              Washington, DC 20549

                                   Form 10-Q

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

                    For the Quarter Ended December 31, 1997
                    ----------------------------------------

                         Commission File Number 1-12476
                         ------------------------------

                           SUN COAST INDUSTRIES, INC.
                           --------------------------
                           (Exact name of Registrant)

         Delaware                                        #59-1952968
------------------------                       ---------------------------------
(State of Incorporation)                       (IRS Employer Identification No.)


                 2700 South Westmoreland Ave., Dallas, TX 75233
                 ----------------------------------------------
                    (Address of principal executive offices)


                                 (214) 373-7864
                        -------------------------------
                        (Registrant's telephone number)

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 the number of shares outstanding of each of the issuers' classes of 
common stock, as of February 10, 1998, the latest practicable date.

          Class                              Outstanding at February 10, 1998
          -----                              --------------------------------
Common stock $0.01 par value                             4,117,929


                                       1
<PAGE>   2
                           SUN COAST INDUSTRIES, INC.
                                     INDEX

<TABLE>
<S>                                                                <C>
Part I. Financial Information

Item I - Financial Statements

   Condensed Consolidated Balance Sheets --December 31, 1997
   and June 30, 1997                                               3

   Condensed Consolidated Statements of Operations - Six Months
   ended December 31, 1997 and 1996                                5

   Condensed Consolidated Statements of Operations - Three Months
   Ended December 31, 1997 and 1996                                6

   Condensed Consolidated Statements of Cash Flows -- Six  
   Months ended December 31, 1997 and 1996                         7

   Notes to Condensed Consolidated Financial Statements            8

Item II - Management's Discussion and Analysis of Financial
   Condition and Results of Operations                            13

Part II. Other Information

Items 1 through 6                                                 16

</TABLE>


                                       2
<PAGE>   3
PART I. FINANCIAL INFORMATION

Item I. FINANCIAL STATEMENTS

                           SUN COAST INDUSTRIES, INC.
                     CONDENSED CONSOLIDATED BALANCE SHEETS
                             (dollars in thousands)

<TABLE>
<CAPTION>
                                                  December 31, 
                                                     1997      June 30,
                                                  (unaudited)    1997
                                                  -----------  --------
<S>                                                 <C>        <C>
ASSETS

Current assets:
  Cash and cash equivalents                         $    248   $    324
  Accounts receivable, net of allowance for                 
     doubtful accounts of $120 and $170                7,279      8,273
  Inventories (Note 3)                                 5,054      4,358
  Other current assets                                   130        145
  Net assets of discontinued                                
    operations (Note 2)                                4,940      7,580
                                                    --------   --------

     Total current assets                             17,651     20,680

Property, plant and equipment, net of accumulated
  depreciation of $26,214 and $24,367                 21,242     22,466
Intangible assets                                        239        253
Deferred income taxes                                    339         96
Other assets                                           1,945      1,834
                                                    --------   --------

     Total assets                                   $ 41,416   $ 45,329
                                                    ========   ========
</TABLE>

     See accompanying notes to condensed consolidated financial statements.


                                       3
<PAGE>   4
                           SUN COAST INDUSTRIES, INC.
                     CONDENSED CONSOLIDATED BALANCE SHEETS
                    (dollars in thousands, except par value)

<TABLE>
<CAPTION>                                        
                                                   December 31,
                                                      1997      June 30,
LIABILITIES AND STOCKHOLDERS' EQUITY               (unaudited)   1997
                                                    ---------- --------
<S>                                                 <C>        <C>
Current liabilities:
  Accounts payable                                  $  3,669   $  5,485
  Accrued expenses                                     5,246      7,214
  Current portion
     of long-term debt (Note 4)                        6,987      5,864
                                                    --------   --------

     Total current liabilities                        15,902     18,563

Long-term debt (Note 4)                               11,248     13,455
Deferred income taxes                                  1,463      1,485
                                                    --------   --------

     Total liabilities                                28,613     33,503
                                                    --------   --------

Stockholders' equity:
  Common stock, $.01 par value; 40,000,000 
      shares authorized; 4,117,629
      and 4,117,629 respectively, issued and
      4,117,629 and 4,104,229, respectively, 
      outstanding                                         41         41
  Additional paid-in capital                          11,554     11,654
  Treasury stock, 13,400 shares at cost                   --       (153)
  Retained earnings                                    1,208        284
                                                    --------   --------
     Total stockholders' equity                       12,803     11,826
                                                    --------   --------
     Total liabilities and stockholders' equity     $ 41,416   $ 45,329
                                                    ========   ========
</TABLE>

     See accompanying notes to condensed consolidated financial statements.





                                       4
<PAGE>   5
                           SUN COAST INDUSTRIES, INC.
                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                  (UNAUDITED)
                 (dollars in thousands, except per share data)

<TABLE>
<CAPTION>
                                                Six Months Ended      
                                                 December 31, 
                                             --------------------
                                               1997         1996
                                             --------     -------
<S>                                          <C>          <C>         
Sales                                        $ 32,969     $31,581      
                                                                      
                                                                      
Costs and expenses:                                                   
  Cost of sales                                27,414      25,248      
  Selling, general and administrative           3,243       4,220      
  Interest, net                                   819         985      
                                             --------     -------      

                                               31,476      30,453      
                                             --------     -------      
                                                                      
Income before provision for income taxes        1,493       1,128      
Provision for income taxes                       (569)       (356)     
                                             --------     -------      
     Income from continuing 
       operations                                 924         772      

Discontinued operations: (Note 2)
  Loss from discontinued
    operations, net of income
    taxes of $145 for 1996                         --        (819)     

  Loss on disposal of discontinued
    operations, net of income taxes
    of $2,817 for 1996                             --      (5,025)     
                                             --------     -------      
  Net income (loss)                          $    924     $(5,072)     
                                             ========     =======      
Net income (loss) per common share:
  Basic and Diluted EPS:
  Continuing operations                      $   0.22     $  0.19      
  Discontinued operations                          --       (1.46)     
                                             --------     -------      
Net income (loss) per common share           $   0.22     $ (1.27)     
                                             ========     =======      
</TABLE>

     See accompanying notes to condensed consolidated financial statements.





                                       5
<PAGE>   6
                           SUN COAST INDUSTRIES, INC.
                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                  (UNAUDITED)
                 (dollars in thousands, except per share data)

<TABLE>
<CAPTION>
                                              Three Months Ended      
                                                 December 31, 
                                             ---------------------
                                              1997          1996    
                                             -------      --------
<S>                                          <C>          <C>         
Sales                                        $16,332      $ 15,585

Costs and expenses:
  Cost of sales                               13,049        12,533
  Selling, general and administrative          1,763         2,228
  Interest, net                                  416           488
                                             -------      --------

                                              15,288        15,249
                                             -------      --------

Income before provision for income taxes       1,104           336
Provision for income taxes                      (428)          (99)
                                             -------      --------
     Income from continuing
       operations                                676           237

Discontinued operations: (Note 2)
  Loss from discontinued
    operations, net of income taxes
    of $260 for 1996                              --          (474)

  Loss on disposal of discontinued
    operations, net of income taxes
    of $2,817 for 1996                            --        (5,025)
                                             -------      --------

  Net income (loss)                          $   676      $ (5,262)
                                             =======      ========

Net income (loss) per common share:
  Basic and Diluted EPS:
  Continuing operations                      $  0.16       $  0.06
  Discontinued operations                         --         (1.37)
                                             -------       -------
Net income (loss) per common share           $  0.16       $ (1.31)
                                             =======       =======
</TABLE>

     See accompanying notes to condensed consolidated financial statements.





                                       6
<PAGE>   7
                           SUN COAST INDUSTRIES, INC.
                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (UNAUDITED)
                             (dollars in thousands)

 
 
<TABLE>
<CAPTION>                                                            Six Months Ended 
                                                                        December 31,   
                                                                   -------------------- 
                                                                     1997         1996 
                                                                   -------       -------
<S>                                                                <C>          <C>         
Cash flows from operating activities:                              
  Net income  (loss)                                               $   924      $ (5,072)
  Adjustments to reconcile net income (loss):                          
     Loss from discontinued operations                                  --           819
     Loss from disposal of discontinued operations                      --         5,025
     Depreciation and amortization                                   2,313         2,653
     Loss (gain) on sale of property, plant and equipment                1           (44)
     Deferred income taxes                                            (265)          149                                    
     Credit for doubtful accounts                                      (50)           (1)
     Changes in assets and liabilities:                          
       Accounts receivable                                           1,044         1,438
       Inventories, net                                               (696)         (215)
       Other current assets                                             15           905
       Intangible and other assets                                    (301)         (781)
       Accounts payable and accrued expenses                        (3,731)          (74)
                                                                   -------      --------
          Net cash provided (used) by continuing operations           (746)        4,802            
          Net cash provided by discontinued operations               1,999           595
                                                                   -------      --------                                        
          Net cash provided by operating activities                  1,253         5,397
                                                                
Cash flows from investing activities:                          
  Capital expenditures                                                (886)       (1,183)
  Dispositions                                                          --            56
  Proceeds from disposal of discontinued operations                    641            --
                                                                   -------      --------
       Net cash used in investing activities                          (245)       (1,127)
                                                                
Cash flows from financing activity -                          
  Repayment of long-term debt                                       (1,084)       (2,374)
                                                                   -------      --------
Change in cash and cash equivalents                                    (76)        1,896
Cash and cash equivalents at beginning of period                       324         1,778
                                                                   -------      --------
Cash and cash equivalents at end of period                         $   248      $  3,674
                                                                   =======      ========
</TABLE>

    See accompanying notes to condensed consolidated financial statements. 

                                       7

<PAGE>   8
                           SUN COAST INDUSTRIES, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                              DECEMBER 31, 1997

NOTE 1 - THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Basis of Presentation

     The Company's (defined below) interim financial statements are unaudited
     and should be read in conjunction with the consolidated financial
     statements and notes thereto in its Form 10-K and Annual Report to
     Stockholders for the year ended June 30, 1997.

     In the opinion of management, the accompanying consolidated financial
     statements contain all adjustments, consisting only of those of a normal
     recurring nature, necessary for a fair statement of the results of
     operations for the interim periods presented.

     Description of Business

     Sun Coast Industries, Inc. (the "Company") manufactures and sells plastic
     closures and melamine and urea resins and compounds. The Specialty Resins
     and Compounds Division manufactures melamine and urea resins and
     compounds, which it supplies to other manufacturers. (See Note 5 on sale).
     The Closures Division manufactures linerless, foil or foam lined and
     tamper-evident plastic closures and lids. These closures are used in the
     U.S. for bottling and packaging of food, beverage, chemical and
     pharmaceutical products. The Consumer Products and Foodservice Divisions,
     which are being discontinued (see Note 2), manufacture compression molded
     melamine dinnerware and injection molded plastic drinkware and other
     houseware products, which the Company sells to U.S., Canadian and Mexican
     retail and commercial markets.
 
     Principles of Consolidation

     The consolidated financial statements include the accounts of the Company
     and its subsidiaries, all of which are wholly-owned. All significant
     intercompany balances and transactions have been eliminated in
     consolidation. The preparation of consolidated financial statements in
     conformity with generally accepted accounting principles requires
     management to make estimates and assumptions that affect the reported
     amounts of assets and liabilities at the date of the financial statements
     and the reported amounts of revenues and expenses during the period. 
     Actual results could differ from the estimates. Certain amounts in
     previously issued financial statements have been reclassified to conform
     with the current year financial statement presentation.

     Inventories

     Inventories are valued at the lower of cost or market, with cost
     determined utilizing the first-in, first-out (FIFO) method.

     Property, Plant and Equipment

     Property, plant and equipment are carried at cost and depreciated using
     the straight-line method over the estimated useful lives of the related
     assets. Lives assigned to asset categories are 5 to 15 years for machinery
     and equipment, 30 to 35 years for buildings and 5 years for molds.
     Machinery and equipment under capital leases are stated at the present
     value of minimum lease payments and amortized over 1 to 3 years. Renewals
     and improvements that significantly add to the productive capacity or 
     extend the useful life of an asset are capitalized.  Repairs and 
     maintenance are charged to expense as incurred.



                                       8
<PAGE>   9
                           SUN COAST INDUSTRIES, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               DECEMBER 31, 1997

NOTE 1 - THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
         (Cont'd)


     Goodwill

     Goodwill, which represents the excess of purchase price over fair value of
     net identifiable assets acquired, is amortized on a straight-line basis
     over the expected periods to be benefited, ranging from 5 - 20 years. The
     Company assesses the recoverability of this intangible asset by
     determining whether the amortization of the goodwill balance over its
     remaining life can be recovered through undiscounted future operating cash
     flows of the acquired operation. The amount of goodwill impairment, if
     any, is measured based on projected discounted future operating cash flows
     using a discount rate reflecting the Company's average cost of funds. The
     assessment of the recoverability of goodwill will be impacted if estimated
     future operating cash flows are not achieved.

     Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of

     The Company adopted the provisions of SFAS No. 121, Accounting for the
     Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
     Of, on July 1, 1996. This Statement requires that long-lived assets and
     certain identifiable intangibles be reviewed for impairment whenever
     events or changes in circumstances indicate that the carrying amount of an
     asset may not be recoverable. Recoverability of assets to be held and used
     is measured by a comparison of the carrying amount of an asset to future
     net cash flows expected to be generated by the asset. If such assets are
     considered to be impaired, the impairment to be recognized is measured by
     the amount by which the carrying amount of the assets exceed the fair value
     of the assets. Assets to be disposed of are reported at the lower of the
     carrying amount or fair value less costs to sell. Adoption of the
     Statement did not have a material impact on the Company's financial
     position, results of operations, or liquidity.

     Income Taxes

     Deferred income taxes are provided for temporary differences between
     financial and tax reporting. Income taxes are provided for taxes currently
     payable based on taxable income.

     Stock Option Plan

     Prior to July 1, 1996, the Company accounted for its stock option plan in
     accordance with the provisions of Accounting Principles Board ("APB")
     Opinion No. 25, Accounting for Stock Issued to Employees, and related
     interpretations. As such, compensation expense would be recorded on the
     date of grant only if the current market price of the underlying stock
     exceeded the exercise price. On July 1, 1996, the Company adopted SFAS No.
     123, Accounting for Stock-Based Compensation, which permits entities to
     recognize as expense over the vesting period the fair value of all
     stock-based awards on the date of grant. Alternatively, SFAS No. 123 also
     allows entities to continue to apply the provisions of APB Opinion No. 25
     and provide pro forma net income and pro forma earnings per share
     disclosures for employee stock option grants made in fiscal 1996 and
     future years as if the fair-value-based method defined in SFAS No. 123 had
     been applied. The Company has elected to continue to apply the provisions
     of APB Opinion No. 25 and provide the pro forma disclosure provisions of
     SFAS No. 123.

     Environmental Costs

     A liability for environmental assessments and/or cleanup is accrued when
     it is probable a loss has been incurred and is estimable. No significant
     liabilities were in existence at December 31, 1997 and June 30, 1997.


                                       9
                                                                                
<PAGE>   10
                           SUN COAST INDUSTRIES, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               DECEMBER 31, 1997

NOTE 1 - THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
         (Cont'd)

     Net Income Per Common Share
     
     On December 31, 1997 the Company adopted Statement of Financial Accounting
     Standards No. 128 "Earnings per Share". This statement replaces the primary
     and fully diluted earnings per share computations with basic and diluted
     earnings per share. Basic earnings per share is computed by dividing net
     income by the weighted average number of common shares outstanding during
     the period. Diluted earnings per share is computed by dividing net income
     by weighted average number of common shares and dilutive securities
     outstanding during the period and must be presented in all cases with basic
     earnings per share. Dilutive securities consist of common stock options.


     The reconciliation of common shares outstanding to dilutive common shares
     outstanding is as follows:
<TABLE>
<CAPTION>
                              Six months          Six months          Three months        Three months
                            ended Dec. 31,       ended Dec. 31,      ended Dec. 31,      ended Dec. 31,
                                1997                 1996                1997                1996

     <S>                    <C>                  <C>                 <C>                 <C>
     Weighted average
     common shares
     Dilutive securities-     4,117,629           4,004,229            4,117,629          4,004,229
     common stock options        48,925                 903              140,997                969
     Weighted average         ---------           ---------            ---------          ---------
     common shares plus       4,166,554           4,005,132            4,258,626          4,005,198
     dilutive securities      =========           =========            =========          =========
  </TABLE>

     Revenue Recognition

     Sales are recognized when the product is shipped. Sales are shown net of
     returns and allowances.

     Research and Development

     Research and development costs associated with new product development,
     application and testing are expensed as incurred.

     Statement of Cash Flows

     For purposes of the statements of cash flows, the Company considers all
     highly liquid investments with original maturities of three months or less
     to be cash equivalents. Cash equivalents at December 31, 1997 and June 30,
     1997 were not significant.

NOTE 2 - DISCONTINUED OPERATIONS

     On December 6, 1996, the Company's Board of Directors adopted a formal
     plan to dispose of its Foodservice and Consumer Products Tableware
     Divisions including the Company's foreign subsidiary in Mexico and to
     consider strategic alternatives related to the on-going business. These
     divisions have been accounted for as discontinued operations in accordance
     with Accounting Principles Board Opinion No. 30.  Management believes this
     disposal will be carried out by June 30, 1998. In February 1997, the
     Company sold its Foodservice Division for cash proceeds of $2,104,000 and
     it has plans underway to exit the Consumer Products Division, either
     through sale or termination of operations.
        
     Based on management's assumptions used in determining the estimated gain
     or loss from the disposal of the tableware business, the Company recorded
     a provision of $4,855,000, net of income taxes, for the loss on disposal
     of the discontinued business in the fiscal year ended June 30, 1997. This
     loss on disposal of discontinued operations resulted from the  estimated
     net loss on the sale of the Foodservice Division and estimated net loss on
     the exit of the Consumer Products Tableware Division of approximately
     $3,997,000, net of income taxes, as well as estimated operating losses
     during the period required to dispose of the divisions of approximately    
     $858,000, net of income taxes. 

     Sales of the divisions for the five months of fiscal 1997  prior to the
     December 6th Board's decision to discontinue these  operations were
     $7,678,000. Sales  for the six month periods ended December 31, 1997
     and 1996 were $2,935,000 and $9,171,000, respectively.

     The remaining reserve for loss on disposal is considered adequate at
     December 31, 1997 to cover estimated future costs of disposal of the
     Consumer Products Tableware Division.

                                       10

<PAGE>   11
     The net assets of discontinued operations are summarized as follows:

<TABLE>
<CAPTION>
                                            December 31,         June 30,    
                                                1997               1997      
                                            (unaudited)                      
                                            ------------         --------    
                                                     ($ in thousands)
           <S>                              <C>                  <C>         
           Current assets                      $ 2,769            $ 6,401    
           Plant, property and equipment         3,809              4,117    
           Intangible & other assets               489                503    
           Current liabilities                    (460)              (280)   
           Accrued expenses                       (208)              (870)   
           Long term debt                           --             (1,000)   
           Deferred taxes                          584              1,309    
           Foreign Currency Translation            737                737    
           Provision for estimated loss                                      
             on disposal                        (2,780)            (3,337)   
                                               -------            -------    
           Net assets of discontinued                                        
             operations                        $ 4,940            $ 7,580    
                                               =======            =======    
</TABLE>

NOTE 3 - INVENTORIES

<TABLE>
<CAPTION>
                                 December 31, 
                                     1997              June 30,
                                 (unaudited)            1997
                                 ------------         --------
                                        (in thousands)
<S>                               <C>                 <C>
Raw Materials                     $    2,182          $  2,169
Work-in-process                          333               384
Finished goods                         2,930             2,439
                                  ----------          --------
                                       5,445             4,992
Obsolescence reserve                    (391)             (634)
                                  ----------          --------
                                  $    5,054          $  4,358
                                  ==========          ========
</TABLE>




                                       11
<PAGE>   12
NOTE 4 - LONG TERM DEBT

<TABLE>
<CAPTION>
                                               December 31,    June 30,
                                                   1997          1997
                                               (unaudited)
                                               ------------    -------
                                                    (in thousands)
     <S>                                       <C>             <C>
     Term Loan                                   $12,520       $13,742
     Revolving credit line                         3,882         3,643
     Industrial development revenue bonds          1,950         2,025
     Capitalized lease obligations                   100           178
                                                 -------       -------
     Subtotal                                     18,452        19,588
                                                          
     Less: Debt issuance costs                      (217)         (269)
                                                 -------       -------
                                                  18,235        19,319
     Less: Current maturities on original                       
           maturity schedule                      (6,987)       (5,864)
                                                 -------       -------
                                                 $11,248       $13,455
                                                 =======       =======
</TABLE>

     On January 31, 1997, the Company refinanced its existing debt with a new
     lender to provide a total credit facility of $30 million in borrowings
     secured by substantially all the assets of the Company. The facility
     provides for borrowings under three separate arrangements - (i) a term loan
     in an aggregate principal amount of $10 million payable in monthly
     installments through January 31, 2000, (ii) a second term loan in an
     aggregate principal amount of $5 million payable in monthly installments
     beginning January 1, 1998 through January 31, 2000, and (iii) a $15 million
     revolving loan, due January 31, 2000. As of December 31, 1997, outstanding
     borrowings under the credit facility included $12.5 million under the two
     term loans, and $3.9 million under the revolving credit line. At December
     31, 1997, based on the Company's borrowing formula incremental borrowing
     availability was approximately $5.1 million under the revolving credit
     line. The credit facility provides for the issuance of up to $2.0 million
     of letters of credit, subject to the borrowing availability under the
     revolving credit line. The Loan agreement contains various covenants,
     including material maintaining certain financial ratios and tests,
     limitation on the issuance of debt and the amount of capital expenditures,
     capital leases, investments and dividends. The primary financial covenants
     include quarter end calculations of net worth, working capital and fixed
     charge coverage and a limitation on annual capital expenditures. In
     conjunction with the refinancing, the Company issued 100,000 shares of its
     common stock to the new lender.

     As the Company is currently in compliance with the loan covenants on its
     new debt, the company has classified its outstanding debt as current or
     long term based upon maturity obligations.

NOTE 5 - SUBSEQUENT EVENTS

     On February 6, 1998, the Company sold certain operating assets related to
     the Specialty Resins and Compounds Division of Plastics Manufacturing
     Company, a wholly owned subsidiary of Sun Coast Industries, Inc., for $13.8
     million, subject to certain adjustments. The purchaser assumed certain
     operating liabilities. No gain or loss is expected on the sale.

     On January 28, 1998, the Company announced that a definitive merger
     agreement with Kerr Group, Inc. had been signed, pursuant to which Kerr
     will pay $10.75 in cash for each outstanding share of Sun Coast common
     stock. The cash tender offer commenced of February 3, 1998 and is expected
     to close March 1998.


                                       12
<PAGE>   13
Item II. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
         AND RESULTS OF OPERATIONS

     Three Months Ended December 31, 1997, Compared to the Three Months
               Ended December 31, 1996 for Continuing Operations

     Sales for the three months ended December 31, 1997, increased $747,000 or
     4.8%, when compared to the same period in 1996 due primarily to increased
     customer demand.

     Cost of sales as a percentage of net sales decreased to 79.9% from 80.4%.
     The improvement in gross margin was primarily the result of increased
     volume.

     Selling, general and administrative expense ("SG&A") decreased $465,000
     to 10.8% of sales for the three months ended December 31, 1997 as
     compared to 14.3% of sales for the three months ended December 31, 1996.
     This decrease is the result of certain expenses related to the refinancing 
     of bank debt and costs related to review of various strategic alternatives
     in the prior fiscal year.

     Interest expense has decreased $72,000 for the three months ended
     December 31, 1997 compared to the three months ended December 31, 1996
     due to the Company's effort to pay down the long-term debt facility offset
     by an increase in interest rates as a result of new bank financing
     completed in January 1997.

     Net income from continuing operations increased $439,000 from the 
     comparable prior fiscal period primarily due to the increased sales 
     volumes.


                                       13
<PAGE>   14
Item II. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
         AND RESULTS OF OPERATIONS

     Six Months Ended December 31, 1997, Compared to the Six Months
     Ended December 31, 1996 for Continuing Operations

     Sales for the six months ended December 31, 1997, increased $1,388,000
     or 4.4%, when compared to the same period in 1996 due primarily to
     increased customer demand.  

     Cost of sales as a percentage of net sales increased to 83.2% from 79.9%.
     The decrease in gross margin was primarily the result of volume decreases
     affecting absorption as well as certain price reductions in the Closure's
     division during the first quarter of fiscal 1998.  In the Chemical 
     division, a worldwide shortage of one of it's primary raw materials 
     resulted in cost increases that were not passed through until the second 
     quarter of fiscal 1998.
     
     Selling, general and administrative expense ("SG&A") decreased $977,000 to
     9.8% of sales for the six months ended December 31, 1997 as compared to
     13.4% of sales for the six months ended December 31, 1996. This decrease
     is primarily the result of nonrecurring legal expenses incurred in the
     comparable prior fiscal period.
     
     Interest expense has decreased $166,000 for the six months ended
     December 31, 1997 compared to the six months ended December 31, 1996
     primarily due to the Company's effort to pay down the long-term debt
     facility offset by an increase in interest rates as a result of the new 
     bank financing completed in January 1997.
     
     Net income from continuing operations increased $152,000 from the 
     comparable prior fiscal period primarily due to increased sales volumes.

     Discontinued Operations

     On December 6, 1996, the Company's Board of Directors adopted a formal
     plan to dispose of its Foodservice and Consumer Products Tableware
     Divisions including the Company's foreign subsidiary in Mexico and to
     consider strategic alternatives related to the on-going business. These
     divisions have been accounted for as discontinued operations in accordance
     with Accounting Principles Board Opinion No. 30.  Management believes this
     disposal will be carried out by June 30, 1998. In February 1997, the
     Company sold its Foodservice Division for cash proceeds of $2,104,000 and
     it has plans underway to exit the Consumer Products Division, either
     through sale or termination of operations.
        
     Based on management's assumptions used in determining the estimated gain
     or loss from the disposal of the tableware business, the Company recorded
     a provision of $4,855,000, net of income taxes, for the loss on disposal
     of the discontinued business in the fiscal year ended June 30, 1997. This
     loss on disposal of discontinued operations resulted from the  estimated
     net loss on the sale of the Foodservice Division and estimated net loss on
     the exit of the Consumer Products Tableware Division of    approximately
     $3,997,000, net of income taxes, as well as estimated operating losses
     during the period required to dispose of the divisions of approximately    
     $858,000, net of income taxes. 

     Sales of the divisions for the five months of fiscal 1997  prior to the
     December 6th Board's decision to discontinue these  operations were
     $7,678,000. Sales  for the six month periods ended December 31, 1997
     and 1996 were $2,935,000 and $9,171,000, respectively.

     The remaining reserve for loss on disposal is considered adequate at
     December 31, 1997 to cover estimated future costs of disposal of the
     Consumer Products Tableware Division.

     Liquidity and Capital Resources

     Management reviews the Company's working capital, accounts receivable and
     relationship of debt to equity on a continuing basis. The Company's growth
     has been financed through long-term debt financing and cash generated from
     operations. During the six months ended December 31, 1997, the Company
     repaid net borrowings by $1,084,000. Cash flow used in continuing 
     operations was $746,000.

     Capital expenditures for the six months ended December 31, 1997 were
     $886,000.  Anticipated future capital additions should approximate less
     than $3 million for the remainder of fiscal 1998.

     In January 1997, the Company refinanced its existing debt with a new lender
     to provide a total credit facility of $30 million in borrowings secured by
     substantially all the assets of the Company. The facility provides for
     borrowings under three separate arrangements - (i) a term loan in an
     aggregate principal amount of $10 million payable in monthly installments
     through January 31, 2000, (ii) a second term loan in an aggregate 




                                       14
<PAGE>   15
     principle amount of $5 million payable in monthly installments beginning
     January 1, 1998 through January 31, 2000, and (iii) a $15 million revolving
     loan, due January 31, 2000. As of December 31, 1997, outstanding borrowings
     under the credit facility included $12.5 million under the two term loans
     and $3.9 million under the revolving credit line. At December 31, 1997,
     based on the Company's borrowing formula incremental borrowing availability
     was approximately $5.1 million under the revolving credit line. The credit
     facility provides for the issuance of up to $2.0 million of letters of
     credit, subject to the borrowing availability under the revolving credit
     line. The loan agreement contains various covenants, including maintaining
     certain financial ratios and tests, limitation on the issuance of debt and
     the amount of capital expenditures, capital leases, investments and
     dividends. The primary financial covenants include quarter end calculations
     of net worth, working capital and fixed charge coverage and a limitation on
     annual capital expenditures.

     On February 6, 1998 the Company sold certain operating assets related to
     the Specialty Resins and Compounds Division.  The cash proceeds of $13.8
     million were applied to the Company's outstanding borrowings.  As of
     February 6, 1998 outstanding borrowings under the credit facility included
     $2.1 million under the two term loans.

     The Company's Mexican subsidiary, included in discontinued operations, is 
     subject to currency risk to the extent its net assets, denominated in 
     pesos, devalues against the U.S. dollar. 

     Disclosures Regarding Forward-Looking Statements

     This report on Form 10-Q includes "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. All
     statements other than statements of historical facts included in this Form
     10-Q, including, without limitation, statements contained in this
     "Management's Discussion and Analysis of Financial Condition and Result of
     Operations" regarding the Company's financing alternatives, financial
     position, business strategy, plans and objectives of management of the
     Company for future operations, and industry conditions, are
     forward-looking statements. Although the Company believes that the
     expectations reflected in any such forward-looking statements are
     reasonable, it can give no assurance that such expectations will prove to
     have been correct. Any forward-looking statements herein are subject to
     certain risks and uncertainties in the Company's business, including but
     not limited to, the intense competition in its markets, its recent
     experience of increasing raw material prices, the absence of assurance of
     strategic and financing alternatives, Mexican currency fluctuations and
     its reliance on certain key customers; all of which may be beyond the
     control of the Company. Any one or more of these factors could cause
     actual results to differ materially from those expressed in any forward-
     looking statement. All subsequent written and oral forward-looking
     statements attributable to the Company or person acting on its behalf are
     expressly qualified in their entirety by the cautionary statements
     disclosed in this paragraph and otherwise in this report.





                                       15
<PAGE>   16
                           SUN COAST INDUSTRIES, INC.
                               December 31, 1997

PART II - OTHER INFORMATION

     Item 1 - Legal Proceedings

     None.

     Item 2 - Changes in Securities

     None.

     Item 3 - Defaults Upon Senior Securities

     None.

     Item 4 - Submission of Matters to a Vote of Security Holders

     None.

     Item 5 - Other Information

        On February 6, 1998, the Company sold to Borden Chemical, Inc.
     substantially all the assets of the Speciality Resins and Compounds
     Division for $13.8 million, subject to certain adjustments.  The purchaser
     assumed certain operating liabilities.

        On January 28, 1998, the Company entered into an Agreement and Plan of
     Merger (the "Merger Agreement") with Kerr Group, Inc. ("Kerr") and Saffron
     Acquisition Corp., a wholly-owned subsidiary of Kerr (the "Purchaser"),
     pursuant to which the Purchaser has commenced a tender offer (the "Offer")
     to purchase all of the outstanding shares of the Company's common stock,
     par value $0.01 per share (the "Shares"), for a cash price of $10.75 per
     Share. The Offer is conditioned upon, among other things, the tender of at
     least a majority of the Shares outstanding on a fully diluted basis. The
     Merger Agreement provides that following consummation of the Offer, the
     Purchaser will be merged (the "Merger") with and into the Company and
     those Shares that are not acquired in the Offer will be converted into the
     right to receive $10.75 per Share in cash.

        The Board of Directors of the Company has unanimously approved the
     Merger Agreement, the Offer and the Merger and determined that the shares
     of the offer and the Merger are fair to, and in the best interest of,
     the Company and the holders of the Shares. The Company has filed with the
     Securities and Exchange Commission a Schedule 14D-9, describing the
     factors considered by the Board in arriving at its recommendation.

     Item 6 - Exhibits and Reports in Form 8K

        (a)   Exhibits:

      Exhibit 2.1   Agreement and Plan of Merger, dated as of January 28, 1998,
                    among Sun Coast Industries, Inc., Kerr Group, Inc. and
                    Saffron Acquisition Corp. (filed as Exhibit 1 to the
                    Company's Schedule 14D-9 filed on February 3, 1998 and
                    incorporated herein by reference).

      Exhibit 2.2   Company Option Agreement, dated as of January 28, 1998 among
                    Sun Coast Industries, Inc. and Kerr Group, Inc. (filed as
                    Exhibit 2 to the Company's Schedule 14D-9 filed on February
                    3, 1998 and incorporated herein by reference).

      Exhibit 2.3   Guarantee, dated as of January 28, 1998, between Sun Coast
                    Industries, Inc. and Fremont Partners, L.P. (filed as
                    Exhibit 3 to the Company's Schedule 14D-9 filed on February
                    3, 1998 and incorporated herein by reference). 

      Exhibit 2.4   Stockholder Agreement, dated as of January 28, 1998, between
                    Kerr Group, Inc. and James M. Hoak, Jr. (filed as Exhibit 4
                    to the Company's Schedule 14D-9 filed on February 3, 1998
                    and incorporated herein by reference).

      Exhibit 10.1  Rights Agreement, dated as of June 6, 1995, between Sun
                    Coast Industries, Inc. and American Stock Transfer & Trust
                    Company (filed as Exhibit 5 to the Company's Schedule 14D-9
                    filed on February 3, 1998 and incorporated herein by
                    reference).

      Exhibit 10.2  Amendment No. 2 to the Rights Agreement, dated as of January
                    28, 1998, between Sun Coast Industries, Inc. and American
                    Stock Transfer & Trust Company (filed as Exhibit 6 to the
                    Company's Schedule 14D-9 filed on February 3, 1998 and
                    incorporated herein by reference).

      Exhibit 10.3  Purchase and Sale Agreement dated as of December 22, 1997
                    between Sun Coast Industries, Inc., Sun Coast Holdings, Inc.
                    and Plastics Manufacturing Company, and Borden Chemical,
                    Inc. (filed as Exhibit 10 to the Company's Schedule 14D-9
                    filed on February 3, 1998 and incorporated herein by
                    reference).

      Exhibit 10.4  Confidentiality Agreement dated November 14, 1997, between
                    the Company and Fremont Partners, L.P. (filed as Exhibit 11
                    to the Company's Schedule 14D-9 filed on February 3, 1998
                    and incorporated herein by reference).

      Exhibit 10.5  Confidentiality Agreement dated January 8, 1998, among the
                    Company, Fremont Partners, L.P. and Kerr Group, Inc. (filed
                    as Exhibit 12 to the Company's Schedule 14D-9 filed on
                    February 3, 1998 and incorporated herein by reference).

      b.  On February 6, 1998, the Company filed a Form 8-K to report the
          disposition of assets of its Speciality Resins and Compound Division,
          as further described in Item 5 hereof.
     
      27     Financial Data Schedule





                                       16
<PAGE>   17
                                   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.

                         Sun Coast Industries, Inc.
                         ------------------------------------------------------
                         Registrant

2/13/98                  By: /s/ EDDIE M. LESOK
--------                     --------------------------------------------------
 Date                        Eddie M. Lesok, Chief Executive Officer 
                             and President

2/13/98                  By: /s/ CYNTHIA R. MORRIS
--------                     --------------------------------------------------
 Date                        Cynthia R. Morris, CFO, Secretary and Treasurer



                                       17
<PAGE>   18
                               INDEX TO EXHIBITS

EXHIBIT
NUMBER            EXHIBIT
-------           -------

  27              Financial Data Schedule