<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1993
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM
________________ to _________________
Commission file number: 1-5260
Z E R O C o r p o r a t i o n
(Exact name of registrant as set forth in its charter)
Delaware 95-1718077
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
444 South Flower Street, Suite #2100, Los Angeles, CA 90071-2922
(Address of principal executive offices) (Zip Code)
(213)629-7000
(Registrant's telephone number, including area code)
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 [ ]
There were 16,074,371 shares of Registrant's Common Stock outstanding as
of January 31, 1994.
<PAGE>
PART I - FINANCIAL INFORMATION
Corporation for which information is given:
This report is filed for ZERO Corporation and its subsidiaries (hereafter
"Registrant" or "Company") for the quarterly period ended December 31, 1993.
Item 1. Financial Statements
a. The Statements of Consolidated Income required by Rule 10-01
of Regulation S-X are herewith filed as Exhibit Ia and are
incorporated herein by reference.
The Consolidated Balance Sheets required by Rule 10-01 of
Regulation S-X are herewith filed as Exhibit Ib and are
incorporated herein by reference.
The Statements of Consolidated Cash Flows required by Rule 10-01
of Regulation S-X are as follows:
<TABLE>
<CAPTION>
For The Nine Months Ended
December 31, December 31,
1993 1992
<S> <C> <C>
OPERATING ACTIVITIES:
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 9,150,000 $13,735,000
INVESTING ACTIVITIES:
DECREASE (INCREASE) IN SHORT-TERM INVESTMENTS 1,229,000 (3,376,000)
EXPENDITURES FOR PROPERTY, PLANT AND EQUIPMENT (2,995,000) (3,944,000)
PURCHASE OF NON-CASH ASSETS OF ACQUIRED BUSINESS
AND OTHER (1,779,000) 265,000
NET CASH REQUIRED BY INVESTING ACTIVITIES (3,545,000) (7,055,000)
FINANCING ACTIVITIES:
DIVIDENDS PAID (4,744,000) (4,715,000)
NET PAYMENTS ON LONG-TERM DEBT --- (1,165,000)
OTHER (INCLUDING EFFECT OF EXCHANGE RATE CHANGES) 555,000 232,000
NET CASH REQUIRED BY FINANCING ACTIVITIES (4,189,000) (5,648,000)
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS 1,416,000 1,032,000
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 9,546,000 13,310,000
CASH AND CASH EQUIVALENTS AT END OF PERIOD * $10,962,000 $14,342,000
These Statements of Consolidated Cash Flows for the nine months ended
December 31, 1993 and 1992 are unaudited but, in the opinion of
management, reflect all adjustments (consisting of normal recurring
adjustments) necessary to present fairly the results for the periods.
<F01>
* Cash and Cash Equivalents include liquid investments purchased with
maturities of three months or less. At December 31, 1993 and 1992
short-term investments with maturities longer than three months
totaled $19,636,000 and $13,765,000, respectively.
</TABLE>
<PAGE>
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operation
The following should be read in conjunction with the financial statements
included or incorporated herein by reference.
Results of Operation:
Net Sales for the three and nine month periods ended December 31, 1993
increased approximately 4% and 6%, respectively, when compared to the same
periods in the prior year. The increases were primarily attributable to
continued growth within the instrumentation/communications and data
processing/peripherals markets partially offset by weakness in the
government/military and consumer markets. Growth in revenue from the
airline/airborne cargo market during the first half of fiscal 1994 also
contributed to the year-to-date increase.
Cost of Sales, as a percent of Net Sales, remained virtually unchanged
when compared to the prior year's periods. Selling and Administrative
Expenses, as a percent of net Sales, decreased slightly during the fiscal
1994 periods due primarily to higher sales volumes and cost containment
efforts.
The Company has benefitted from the implementation of various cost
containment programs, and will continue to focus on opportunities to
reduce costs and improve margins.
Financial Condition:
For the nine months ended December 31, 1993 cash and cash equivalents
increased $1,416,000 versus an increase of $1,032,000 in the fiscal 1993
period. The increase was primarily due to decreases in short-term
investments, capital expenditures and accounts receivable, offset by
decreases in current liabilities and the purchase of certain assets from
a case hardware manufacturer in August 1993.
The Company's working capital increased to $64,153,000 from $59,576,000 at
March 31, 1993 primarily as the result of higher Net Sales. Management
believes that cash from operations, together with the Company's short-term
investments and ability to obtain financing, will provide sufficient funds
to finance current and forecasted operations, including potential
acquisitions. The Company will continue to invest its available funds in
liquid, low risk investments.
Exhibit Ia - The Company's Statements of Consolidated Income for the
Three and Nine Months Ended December 31, 1993 and 1992.
Exhibit Ib - The Company's Consolidated Balance Sheets as of
December 31, 1993 and March 31, 1993.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
On January 10, 1994 a division of the Company received an administrative
subpoena from the U.S. Government, General Services Administrative (GSA),
Office of Inspector General, seeking documents related to certain GSA
contracts. The matter is in a preliminary stage and the Company
is unable to assess the situation further at this time; however, the Company
believes that the subpoena is directed towards an examination of freight
charges on the contracts. The Company is cooperating with the GSA.
In its September 1992 Form 10-Q, the Company reported that notice had been
received from the U.S. Environmental Protection Agency (EPA) that the Company
is considered by the EPA as a potentially responsible party relating to
certain property in Burbank, California referred to as the Glendale North
Operable Unit of the San Fernando Valley Superfund Site (the Site). In
November 1993 the Company joined a group of twenty-seven parties, also named
by the EPA as potentially responsible, formed for the purpose of cooperating
in negotiations with the EPA regarding the Site (the PRP Group). The PRP
Group is currently negotiating, without admission of fact or liability,
for the performance of the remedial design of a groundwater extraction and
treatment system for both the North Glendale and Glendale South Operable
Units, combined by the EPA for remediation purposes. Consultants to the PRP
Group estimate the cost of the remedial design phase will range from $2.5
to $3.5 million. On January 3, 1994 the Company received notice that another
consultant engaged by the PRP Group had made a preliminary assessment of
6.98% as the Company's interim allocable share of the costs to be incurred
for the remedial design. This percentage is subject to adjustment under
certain circumstances, including completion of an assessment by the Company
and its advisors of the nature and extent, if any, of its alleged
contribution to the contamination and the naming of additional responsible
parties. Published estimates by the EPA as of June 1993 for remediation only
are $36.4 and $25.0 million for the North and South Operable Units,
respectively. Negotiations between the Company and various of its
insurance carriers is on-going and, to the extent recovery is available,
the Company's liability will be decreased. The Company believes, based on
information currently available, any liability that may result from the
resolution of this matter will not have a material adverse effect on its
financial position.
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits - None
b. Reports on Form 8-K - None
<PAGE>
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.
ZERO Corporation
Date: February 15, 1994
/s/ G. A. Daniels
G. A. Daniels, Vice President
and Chief Financial Officer
/s/ E. A. Sand
E. A. Sand, Controller
and Chief Accounting Officer
<PAGE>
ZERO CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
December 31, December 31,
1993 1992 1993 1992
<S> <C> <C> <C> <C>
NET SALES $42,138,000 $40,558,000 $127,303,000 $119,545,000
INTEREST INCOME 298,000 244,000 778,000 730,000
OTHER INCOME 175,000 350,000 818,000 655,000
TOTAL 42,611,000 41,152,000 128,899,000 120,930,000
COST AND EXPENSES:
COST OF SALES 28,004,000 27,066,000 83,348,000 77,675,000
SELLING AND ADMIN. EXPENSES 8,577,000 8,347,000 26,373,000 25,791,000
DEPRECIATION 1,120,000 1,106,000 3,358,000 3,387,000
INTEREST EXPENSE 136,000 141,000 374,000 504,000
TOTAL 37,837,000 36,660,000 113,453,000 107,357,000
INCOME BEFORE TAXES 4,774,000 4,492,000 15,446,000 13,573,000
INCOME TAXES 1,889,000 1,788,000 6,109,000 5,333,000
NET INCOME $ 2,885,000 $ 2,704,000 $ 9,337,000 $ 8,240,000
PRIMARY EARNINGS PER SHARE $ 0.18 $ 0.17 $ 0.59 $ 0.52
DIVIDENDS DECLARED PER SHARE $ 0.10 $ 0.10 $ 0.30 $ 0.30
AVERAGE NUMBER OF SHARES
OUTSTANDING 16,039,000 15,813,000 15,941,000 15,762,000
</TABLE>
These Statements of Consolidated Income for the Three and Nine Months
Ended December 31, 1993 and 1992 are unaudited but, in the opinion of
management, reflect all adjustments (consisting of normal recurring
adjustments) necessary to present fairly the results for the periods.
The Company adopted a new statement on Accounting for Income Taxes
effective April 1, 1993 and elected not to restate prior years. The
cumulative effect of this accounting change was not material.
Exhibit Ia
<PAGE>
ZERO CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, March 31,
1993 1993
<S> <C> <C>
ASSETS
CURRENT ASSETS
CASH AND SHORT-TERM INVESTMENTS $ 30,598,000 $ 30,411,000
ACCOUNTS RECEIVABLE (LESS ALLOWANCE FOR
DOUBTFUL ACCOUNTS OF $848,000 AND $886,000,
RESPECTIVELY) 22,979,000 23,164,000
INVENTORIES
RAW MATERIALS AND SUPPLIES 12,421,000 11,657,000
WORK IN PROCESS 6,163,000 6,530,000
FINISHED GOODS 3,377,000 3,481,000
OTHER 5,570,000 4,829,000
TOTAL CURRENT ASSETS 81,108,000 80,072,000
PROPERTY, PLANT AND EQUIPMENT 71,674,000 70,721,000
LESS ACCUMULATED DEPRECIATION AND AMORTIZATION (41,975,000) (41,716,000)
NET PROPERTY, PLANT AND EQUIPMENT 29,699,000 29,005,000
GOODWILL 30,894,000 31,647,000
OTHER ASSETS 13,789,000 13,147,000
TOTAL ASSETS $155,490,000 $153,871,000
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
ACCOUNTS AND NOTES PAYABLE $ 5,689,000 $ 5,251,000
ACCRUED WAGES AND COMMISSIONS 4,576,000 6,542,000
ACCRUED INCOME AND OTHER TAXES 1,992,000 2,766,000
OTHER 4,698,000 5,937,000
TOTAL CURRENT LIABILITIES 16,955,000 20,496,000
OTHER NON-CURRENT LIABILITIES (PRIMARILY
DEFERRED COMPENSATION) 4,465,000 4,704,000
STOCKHOLDERS' EQUITY
PREFERRED STOCK $.01 PAR VALUE; NONE ISSUED
COMMON STOCK $.01 PAR VALUE 160,000 160,000
ADDITIONAL PAID-IN-CAPITAL 29,869,000 28,273,000
RETAINED EARNINGS 105,861,000 102,020,000
135,890,000 130,453,000
FOREIGN CURRENCY TRANSLATION ADJUSTMENTS (143,000) (105,000)
TREASURY STOCK (162,700 SHARES), AT COST (1,677,000) (1,677,000)
TOTAL STOCKHOLDERS' EQUITY 134,070,000 128,671,000
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $155,490,000 $153,871,000
</TABLE>
The Consolidated Balance Sheet as of December 31, 1993 is unaudited but, in
the opinion of management, reflects all adjustments (consisting of normal
recurring adjustments) necessary to present fairly the Company's financial
position.
Exhibit Ib
