FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest
event reported): August 1, 1994
Zenith Electronics Corporation
(Exact name of registrant as specified in its charter)
Delaware 1-4115 36-1996520
(State or jurisdiction (Commission File (IRS Employer
of incorporation) Number) identification No.)
1000 Milwaukee Avenue
Glenview, Illinois 60025
(Address of principal executive offices) (Zip Code)
Registrant's telephone number,
including area code (708) 391-7000
Not applicable
(Former name or former address, if changed since last report)
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Item 5. Other Events.
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On August 1, 1994, Zenith Electronics Corporation issued a
First-Half 1994 Report, which is attached as Exhibit 20 hereto
and is incorporated by reference herein.
Item 7. Financial Statements, Pro forma Financial Information and Exhibits.
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(c) The following exhibits are included as part of this report:
Exhibit 20 - Zenith Electronics Corporation First-Half 1994 Report
dated August 1, 1994.
SIGNATURES
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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 hereunto duly authorized.
ZENITH ELECTRONICS CORPORATION
By: /s/ David S. Levin
--------------------------
David S. Levin, Secretary
Date: August 1, 1994
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Exhibit Index
Exhibit
Number Exhibit Description
- ------- -----------------------------------------------
20 First-Half 1994 Report dated August 1, 1994
Exhibit 20
ZENITH ELECTRONICS CORPORATION
FIRST-HALF 1994 REPORT
Message to Stockholders
While we still have a lot of work to do, we are pleased to report that we
have made substantial progress in the first half of 1994 as we narrowed
our losses by $26 million.
For the first six months, Zenith reported a net loss of $20.3 million,
or 51 cents per share, compared with a net loss of $46.5 million, or $1.51
per share, in the first half of 1993. For the second quarter, results
improved by $16 million to a net loss of $8.4 million, or 20 cents per
share, in 1994 from a net loss of $24.7 million, or 79 cents per share,
in 1993. First-quarter results improved by $10 million to a net loss of
$11.9 million, or 32 cents per share, in 1994 from a net loss of $21.8
million, or 72 cents per share, last year.
Contributing to the improved first-half results were higher sales in
Zenith's core business, lower costs resulting largely from new re-engineering
programs and a substantial reduction in losses from non-core business areas
that have been sold or downsized.
Cost reductions achieved in the first half were on plan as we continued
to implement major re-engineering actions in the core Consumer Electronics
and Network Systems business. These actions should benefit the second half
of the year as well.
First-half sales were $596 million in 1994 and $565 million in 1993.
Second-quarter sales were $299 million in 1994, up from $275 million
in 1993, and first-quarter sales were $297 million in 1994 and $290
million in 1993.
Sales for the core Consumer Electronics and Network Systems business
increased by $71 million in the first half, even after absorbing $20 million
of lower consumer electronics selling prices from the same period a year
ago. Non-core business revenues declined by $40 million in the first six
months of 1994.
Driving the increase in Consumer Electronics sales were higher Zenith
color TV unit sales to dealers compared with the year-earlier period,
reflecting the excellent acceptance of our new color TV line, the growing
strength of the Zenith brand name and increased industry sales.
As we continue to de-emphasize the poor-performing non-core business
areas, we completed the sale of our switch mode power supply magnetics
business. Non-core business areas represented less than 3 percent of
first-half 1994 revenues, versus about 10 percent a year earlier.
We completed the sale of the 1.7-million-square-foot Springfield, Mo.,
plant in the second quarter. That brings the amount of plant and office
space sold in the first half to 2.6 million square feet. Another 500,000-
square-foot building is under contract for sale. The completed transactions
did not have a material effect on earnings.
Financing activities continued in the first half. Investors purchased
senior convertible subordinated debentures in a private placement and,
pursuant to shelf offerings, purchased common stock on the open market.
And, we extended through June 1996 our $90 million revolving credit
agreement, which was to expire at year-end 1994. Short-term debt of $49
million at the end of the first half (compared with $46 million a year
earlier) financed increased receivables and planned higher inventory levels
to support seasonal demand in the second half.
As we said at the annual meeting, we are setting the stage for what we
believe will be significant improvement for full-year 1994. First-half
performance improvements are a good indication of the direction that we
are headed as we enter the traditionally stronger second half of the
year.
/s/ Jerry Pearlman
Jerry K. Pearlman
Chairman and Chief Executive Officer
/s/ Albin Moschner
Albin F. Moschner
President and Chief Operating Officer
July 25, 1994
<PAGE>
Annual Meeting Report
As difficult as 1993 was for Zenith, the company "made progress and set the
stage for what we believe can be significant improvement in 1994," Chairman
Jerry Pearlman told stockholders at the April 26 annual stockholders meeting.
He discussed results for 1993 and the first quarter of 1994 and looked ahead,
saying, "Momentum is building for Zenith as we refocus and re-engineer our
core business, Consumer Electronics and Network Systems products."
After the formal business of the annual meeting, Mr. Pearlman answered
questions from stockholders. A summary follows:
HDTV. Several stockholders asked about high-definition television (HDTV).
Mr. Pearlman said HDTV will be the next significant evolution of the TV
industry, "as dramatic as the change from black-and-white to color TV."
The chairman said that the Digital HDTV Grand Alliance system, to which
Zenith is making major technical contributions, "is significantly ahead of
the rest of the world with all-digital technology." The Grand Alliance hopes
that a "fair amount of our technology will be used in HDTV systems in other
parts of the world," he said.
He explained the timetable for HDTV tests and the launch: "Zenith's
VSB transmission subsystem is being field tested beginning in April. The
full Grand Alliance HDTV system will be laboratory-tested in the fourth
quarter. More field tests and standard adoption by the FCC are expected in
1995. The first HDTV broadcasts should be launched in the second half of 1996."
In response to another HDTV question, Mr. Pearlman said digital VCRs
(with future use for HDTV) should be available in the industry as early as
next year. Camcorders will take the longest; it's a question of reducing the
cost of technology to capture images in HDTV resolution.
Mexico operations. Several people asked questions about Zenith operations
in Mexico. On environmental and safety issues, the chairman said Zenith
is proud of its plants in Mexico and that the company works to "meet and
beat EPA and OSHA standards in Zenith plants wherever they are." In addition,
while Zenith isn't a major chemical user, chemicals are labeled in Spanish
and training has been increased regarding proper handling of chemicals.
On re-engineering in Mexico, he cited "a very substantial amount of
change" underway at plants in Mexico. "We're blending productivity and
efficiency with improved safety and operating conditions." He discussed
new equipment and processes in Juarez and Matamoros as examples.
Consumer Electronics. In response to a question about Zenith's main business,
color television, Mr. Pearlman said, "While we operate in a very difficult
environment, we are very optimistic about the business. Zenith has a superior
price position, earned with superior products and superior quality."
Responding to a question about how that relates to employment levels at
Zenith, the chairman said, "The nature of technology change and the competitive
nature of the industry means that every manufacturer is always finding new
ways to reduce costs. The TVs in the industry today use many fewer parts
versus 10-15 years ago, and that means fewer people are required to assemble
them.
"It's an industry-wide reality, however, that while technology and
efficiency reduce employment, volume growth increases employment," Mr.
Pearlman said. "New technologies such as HDTV as well as expanded sales
both in the U.S. and in Latin American should be positive for Zenith."
International sales. Asked if Zenith has plans to expand its sales beyond
North America, Mr. Pearlman explained that Zenith's consumer electronics
focus is on the Americas. Central and South America "represent new business
opportunities to expand our sales volume." Excluding Mexico, the Latin
American TV market is approaching 10 million TV units annually - almost 40
percent of the size of the U.S. market. "We are aggressively pursuing the
Mexican and Latin American markets. We are rolling out new products in
Argentina and Brazil."
Network Systems. "We have refocused our product line and internal
organization," the chairman said in response to a question about Zenith's
plans in the Network Systems (cable and data communications products) area.
"We believe that we are very well positioned in the business today with
our analog boxes and digital features, and tomorrow, thanks to our HDTV
work and technical skills, in digital boxes.
"This is a core business that can make a real long-term contribution to
Zenith as the digital TVs and cable boxes of the future merge," Mr. Pearlman
said. He told stockholders that the industry opportunities are very large -
potentially tens of millions of boxes in the next 10 years. "We are actively
seeking licensees for our digital transmission technology to help establish
it as an industry standard. If successful, it will mean a nice stream of
royalties paid to Zenith."
Another stockholder asked about Zenith's computer modem technology that
should be attractive to cable operators who want to deliver data to home
computers on cable. "We are enthusiastic about this product, which is
rolling out this summer."
Stockholder Actions
Stockholders elected 10 individuals to one-year terms on the board of
directors at the annual meeting.
A new director elected was Ilene S. Gordon, vice president of operations
for Houston-based Tenneco Inc. Ms. Gordon, 40, brings to Zenith excellent
qualifications in total quality management (TQM), line management and
strategic planning. Most recently, she was senior vice president of
TQM/Corporate Development at Packaging Corp. of America, a Tenneco subsidiary.
The nine directors re-elected were: Harry G. Beckner, management
consultant and retired chief operating officer, H.E. Butt Grocery Company;
T. Kimball Brooker, president, Barbara Oil Company; David H. Cohen, provost,
Northwestern University; Charles Marshall, retired vice chairman of the board,
AT&T; Gerald M. McCarthy, Zenith executive vice president, sales and marketing,
and president, Zenith Sales Company division; Andrew McNally IV, chairman
and chief executive officer, Rand McNally & Company; Albin F. Moschner,
Zenith president and chief operating officer; Jerry K. Pearlman, Zenith
chairman and chief executive officer; and Peter S. Willmott, chairman of
the board, MacFrugal's Bargains Close-Outs Inc., and chairman and chief
executive officer, Willmott Services Inc.
Stockholders also ratified the selection of Arthur Andersen & Co. as the
company's independent auditors for 1994, and defeated a stockholder proposal
on cumulative voting.
<PAGE>
Consolidated Financial Information (Unaudited)
In millions, except per share amounts
Three Months Ended Six Months Ended
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July 2, July 3, July 2, July 3,
Statements of Operations 1994 1993 1994 1993
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REVENUES Net sales $299.0 $274.7 $596.1 $565.2
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COSTS, EXPENSES Cost of products sold 270.1 265.7 546.4 544.2
AND OTHER Selling, general and
administrative 26.0 23.2 49.8 45.7
Engineering and research 11.4 11.6 22.8 24.5
Other operating expense
(income), net (3.6) (4.7) (9.5) (9.5)
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INCOME Operating income (loss) (4.9) (21.1) (13.4) (39.7)
Interest expense, net (3.5) (3.6) (6.9) (6.8)
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Income (loss) before
income taxes (8.4) (24.7) (20.3) (46.5)
Income taxes - - - -
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Net income (loss) $(8.4) $(24.7) $(20.3) $(46.5)
=====================================
Net income (loss) per
common share $( .20) $( .79) $( .51) $(1.51)
Average shares
outstanding 41.6 31.3 39.6 30.9
July 2, July 3,
Balance Sheets 1994 1993
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ASSETS Cash $ - $ -
Receivables, net 184 175
Inventories 304 223
Other 9 6
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Total current assets 497 404
Property, plant and equipment, net 153 175
Other 15 8
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Total assets $665 $587
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LIABILITIES AND Short-term debt $ 49 $ 46
STOCKHOLDERS' Accounts payable 116 87
EQUITY Other 119 127
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Total current liabilities 284 260
Long-term debt 182 149
Stockholders' equity 199 178
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Total liabilities and stockholders equity $665 $587
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<PAGE>
Broad New Color TV Line Introduced
Continuing its sweeping product enhancements, Zenith has introduced its
1994-95 color television line - including the industry's first TVs with
built-in capability to receive the unique "StarSight" interactive electronic
program guide. Announced in the second quarter, the new line offers a host of
new, easy-to-use features at every price point.
Advanced Video Imaging (AVI), Zenith's brilliant new picture technology
introduced last year and enhanced this year, brings to the line the richest,
sharpest, most vivid picture ever to wear the Zenith logo. Features include a
new set of on-screen menus using easily-identifiable icons and a new
Advanced Multiple Picture-in-Picture system.
Zenith's goal has been to combine its best picture in TV with high styling,
strong audio and more of the features that buyers want. The new 60-model
line includes direct-view models from 9 to 35 inches, rear-projection home
theater models with 46-, 52- and 60-inch screens. (Built-in Dolby Pro-Logic
surround sound is included in selected home theater models for the first
time.) One 13-inch and two 19-inch combination TV-VCRs round out the line.
Major New Set-Top Box Alliance Formed
In a major new alliance designed to expand Zenith's business opportunities in
set-top decoders, the company joined forces in mid-May with Philips Consumer
Electronics Company and Compression Labs Inc. (CLI). The companies agreed to
combine their complementary technologies, product development, and marketing
capabilities to design and manufacture digital video-on-demand and hybrid
digital/analog set-top terminals.
The Zenith-Philips-CLI "Media Access" products will allow cable operators
to operate with both digital and analog technology through open-architecture,
consumer-oriented decoders, and, for the first time, access a common integrated
network management and security system. The new jointly developed Media
Access family of products will allow cable operators to provide a wide range
of programming, such as video-on-demand, video games, home shopping and
other video services.
Zenith's collaboration with Philips and CLI comes as leading cable
operators, telephone companies and other network providers are selecting
the products they will deploy for revolutionary interactive entertainment
and information services. The launch of Media Access products also comes at
a time when Zenith and other consumer electronics manufacturers are preparing
for the ultimate migration of the features of set-top decoders into future
digital television sets and VCRs. This is of special interest to cable
operators seeking to reduce their long-term investments in hardware. As
digital building blocks of these set-top decoders are incorporated into
future HDTV sets, the decoders are expected to become less expensive,
smaller "set-back" boxes.
Network providers will benefit from the combination of the robust 16-level
Vestigial Sideband (16-VSB) transmission system and real-time two-way
technology from Zenith with MPEG-2 (Moving Picture Experts Group) world-
standard digital decoder technology from Philips and CLI. VSB and MPEG
are key features of the Digital HDTV Grand Alliance high-definition
television system expected to be adopted next year as the U.S. HDTV
broadcast standard by the Federal Communications Commission.
Watch Us
Dovetailing with the nationwide launch of the unique interactive on-screen
program guide provided by StarSight Telecast Inc., Zenith is offering
the first color TV sets with built-in circuitry to receive the service.
Zenith plans to begin rolling out StarSight capability in eight all-new
top-of-the-line models in Zenith's popular AVI line in July. These sets - two
27-, two 32- and two 35-inch direct-view models, plus 52- and 60-inch home
theater rear-projection models - are expected to further strengthen Zenith's
position in the large-screen color TV market.
Consumer benefits of the new StarSight feature include instant TV listing
information at the touch of a button; seven days of updated program schedule
information; a simple guide for direct tuning by title, theme and channel
number; and easy one-button VCR recording of selected programs.
