<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1995 OR
[ ] 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 [ ]
Common stock outstanding as of September 30, 1995 -- 16,056,700 shares.
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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 September 30, 1995.
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 Six Months Ended
September 30,
1995 1994
<S> <C> <C>
OPERATING ACTIVITIES:
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 4,820,000 $ 9,682,000
INVESTING ACTIVITIES:
DECREASE (INCREASE) IN SHORT-TERM INVESTMENTS 16,937,000 (5,073,000)
EXPENDITURES FOR PROPERTY, PLANT AND EQUIPMENT (2,639,000) (1,945,000)
PURCHASE OF NON-CASH ASSETS OF ACQUIRED BUSINESSES (5,519,000)
PROCEEDS FROM SALE OF ASSETS 1,670,000
OTHER 140,000 9,000
NET CASH PROVIDED (REQUIRED) BY
INVESTING ACTIVITIES 10,589,000 (7,009,000)
FINANCING ACTIVITIES:
DIVIDENDS PAID (3,519,000) (3,184,000)
INCREASE IN NOTES PAYABLE 1,742,000
OTHER (INCLUDING EFFECT OF EXCHANGE RATE CHANGES) 787,000 520,000
NET CASH REQUIRED BY FINANCING ACTIVITIES (990,000) (2,664,000)
NET INCREASE IN CASH AND CASH EQUIVALENTS 14,419,000 9,000
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 17,132,000 14,843,000
CASH AND CASH EQUIVALENTS AT END OF PERIOD * $31,551,000 $14,852,000
These Statements of Consolidated Cash Flows for the six months ended
September 30, 1995 and 1994 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 September 30, 1995 and 1994
short-term investments with maturities longer than three months
totaled $2,965,000 and $23,598,000, respectively.
</TABLE>
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Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.
The following should be read in conjunction with the financial statements
included or incorporated herein by reference.
Results of Operations
Net sales for the three and six months ended September 30, 1995 increased 10.3%
and 10.7%, respectively, when compared to the prior year periods due primarily
to increased orders within the telecommunication/instrumentation and data
processing/peripherals markets partially offset by weakness in the air cargo
market.
Cost of sales, as a percent of net sales, decreased slightly in the three and
six months ended September 30, 1995 when compared to the same periods in the
prior year primarily as a result of higher sales, product mix and cost
containment efforts.
Selling and administrative expenses, as a percent of net sales, remained
relatively consistent in the first two quarters of fiscal 1996 when compared to
the same period in fiscal 1995.
Financial Condition
The financial condition of the Company remained strong at September 30, 1995.
Cash and short-term investments totaled $34,516,000 compared to $37,034,000 at
March 31, 1995. The Company's working capital increased to $82,122,000 from
$73,531,000 at March 31, 1995.
Net cash provided by operating activities for the six months ended
September 30, 1995 totaled $4,820,000, versus $9,682,000 during the fiscal 1995
period. The decrease was primarily attributable to increased levels of
accounts receivable and inventory resulting from increased net sales.
In June 1995, the Company acquired the assets of Electro-Mechanical
Imagineering Inc., a manufacturer of products to encase, protect and mount
closed-circuit television security devices. In July 1995, the Company
acquired the assets of G.W. Pearce & Sons Limited, a manufacturer of deep
drawn products for the food service industry.
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 Six Months Ended September 30, 1995 and 1994.
Exhibit Ib - The Company's Consolidated Balance Sheets as of
September 30, 1995 and March 31, 1995.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
Environmental Matters - In March 1994 the Company, along with twenty-three other
potentially responsible parties (PRPs), entered into a consent decree with the
U.S. Environmental Protection Agency (the EPA) relating to the remedial design
work for the Glendale North and South Operable Units of the San Fernando Valley
Superfund Site (the Site). On October 20, 1995 the Company, along with forty-
four other PRPs, received a Special Notice Letter from the EPA in connection
with the construction, operation and maintenance costs for the twelve year
interim remedy for the Site, and for response costs incurred by the government.
The PRP Group formed in connection with the EPA's initial remedial design notice
has commenced negotiations with the EPA for the formulation of a good faith
offer for the implementation of the interim remedy. The PRP Group is currently
involved in a process to allocate the costs for the interim remedy and to
determine the final allocation for the costs related to the remedial design
work.
The Company's ultimate liability related to the Site will be dependent upon the
outcome of the allocation process, as well as other factors including changes
in the design and/or costs of remediation systems. The Company has provided
for its share of the design costs. Because its share is not estimable at
this time, the Company has provided no reserves for its share of the
construction, operation and maintenance costs.
The Company has also been notified that it may be a PRP with respect to the
South El Monte Operable Unit of the San Gabriel Valley Superfund Site located
in the Los Angeles area. Because amounts cannot be estimated at this time,
no reserves have been established for the San Gabriel Valley Superfund Site.
Item 6. Exhibits and Reports on Form 8-K.
a. Exhibit - 27. Financial Data Schedule
b. Reports on Form 8-K - None.
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: November 13, 1995 /s/ D. N. KAJIKAMI
D. N. Kajikami, Controller
and Chief Accounting Officer
Date: November 13, 1995 /s/ G. A. DANIELS
G. A. Daniels, Vice President
and Chief Financial Officer
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ZERO CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
NET SALES $51,387,000 $46,583,000 $100,004,000 $90,299,000
INTEREST INCOME 467,000 392,000 932,000 760,000
OTHER INCOME 463,000 385,000 639,000 673,000
TOTAL 52,317,000 47,360,000 101,575,000 91,732,000
COST AND EXPENSES:
COST OF SALES 32,597,000 29,631,000 63,436,000 57,724,000
SELLING AND ADMIN. EXP. 10,647,000 9,848,000 21,507,000 19,415,000
DEPRECIATION 1,252,000 1,153,000 2,436,000 2,330,000
INTEREST EXPENSE 237,000 141,000 433,000 306,000
TOTAL 44,733,000 40,773,000 87,812,000 79,775,000
INCOME BEFORE TAXES 7,584,000 6,587,000 13,763,000 11,957,000
INCOME TAXES 3,034,000 2,559,000 5,506,000 4,651,000
NET INCOME $ 4,550,000 $ 4,028,000 $ 8,257,000 7,306,000
PRIMARY EARNINGS PER SHARE $0.28 $0.25 $0.51 $0.46
DIVIDENDS DECLARED PER SHARE $0.11 $0.10 $0.22 $0.20
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 16,210,000 15,982,000 16,152,000 15,976,000
</TABLE>
These Statements of Consolidated Income for the Three and Six Months
Ended September 30, 1995 and 1994 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.
Exhibit Ia
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ZERO CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, March 31,
1995 1995
<S> <C> <C>
ASSETS
CURRENT ASSETS
CASH AND SHORT-TERM INVESTMENTS $ 34,516,000 $ 37,034,000
ACCOUNTS RECEIVABLE (LESS ALLOWANCE FOR
DOUBTFUL ACCOUNTS OF $772,000 AND $724,000,
RESPECTIVELY) 30,787,000 26,310,000
INVENTORIES
RAW MATERIALS AND SUPPLIES 18,992,000 15,028,000
WORK IN PROCESS 7,295,000 7,046,000
FINISHED GOODS 4,379,000 4,147,000
OTHER 4,677,000 3,327,000
TOTAL CURRENT ASSETS 100,646,000 92,892,000
PROPERTY, PLANT AND EQUIPMENT 81,677,000 81,914,000
LESS ACCUMULATED DEPRECIATION AND AMORTIZATION (48,456,000) (47,925,000)
NET PROPERTY, PLANT AND EQUIPMENT 33,221,000 33,989,000
GOODWILL 30,098,000 29,624,000
OTHER ASSETS 15,483,000 15,019,000
TOTAL ASSETS $179,448,000 $171,524,000
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
ACCOUNTS PAYABLE $ 6,545,000 $ 8,326,000
ACCRUED WAGES AND COMMISSIONS 5,512,000 5,426,000
ACCRUED INCOME AND OTHER TAXES 1,427,000 1,671,000
OTHER 5,040,000 3,938,000
TOTAL CURRENT LIABILITIES 18,524,000 19,361,000
NOTES PAYABLE 1,480,000
OTHER NON-CURRENT LIABILITIES (PRIMARILY
DEFERRED COMPENSATION) 8,325,000 6,569,000
STOCKHOLDERS' EQUITY
PREFERRED STOCK $.01 PAR VALUE; NONE ISSUED
COMMON STOCK $.01 PAR VALUE 162,000 161,000
ADDITIONAL PAID-IN-CAPITAL 32,823,000 31,079,000
RETAINED EARNINGS 119,629,000 115,754,000
152,614,000 146,994,000
FOREIGN CURRENCY TRANSLATION ADJUSTMENTS 159,000 261,000
TREASURY STOCK (160,445 AND 160,888 SHARES,
RESPECTIVELY) AT COST (1,654,000) (1,661,000)
TOTAL STOCKHOLDERS' EQUITY 151,119,000 145,594,000
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $179,448,000 $171,524,000
</TABLE>
The Consolidated Balance Sheet as of September 30, 1995 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
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND STATEMENT OF CONSOLIDATED INCOME AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 31,551
<SECURITIES> 2,965
<RECEIVABLES> 31,559
<ALLOWANCES> 772
<INVENTORY> 30,666
<CURRENT-ASSETS> 100,646
<PP&E> 81,677
<DEPRECIATION> 48,456
<TOTAL-ASSETS> 179,448
<CURRENT-LIABILITIES> 18,524
<BONDS> 0
<COMMON> 162
0
0
<OTHER-SE> 150,957
<TOTAL-LIABILITY-AND-EQUITY> 179,448
<SALES> 51,387
<TOTAL-REVENUES> 52,317
<CGS> 32,597
<TOTAL-COSTS> 43,244
<OTHER-EXPENSES> 1,252
<LOSS-PROVISION> 14
<INTEREST-EXPENSE> 237
<INCOME-PRETAX> 7,584
<INCOME-TAX> 3,034
<INCOME-CONTINUING> 4,550
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,550
<EPS-PRIMARY> 0.28
<EPS-DILUTED> 0.28
</TABLE>
