<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE FISCAL YEAR ENDED MARCH 31, 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
ZERO CORPORATION
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(Exact name of registrant as set forth in its charter)
Delaware 95-1718077
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(State or other jurisdiction of incorporation or (I.R.S. Employer
organization) Identification Number)
444 South Flower Street, Ste. 2100, Los Angeles, CA 90071-2922
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 213/629-7000
------------
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
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Common Stock, $.01 Par Value New York Stock Exchange
Pacific Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: NONE
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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of the registrant's voting common stock held by non-
affiliates was $229,256,000 as of June 16, 1995 (based upon the closing sale
price of $14.63 per share of such stock on the New York Stock Exchange on June
16, 1995).
Common stock outstanding as of June 16, 1995 -- 15,987,505 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Only those portions of Registrant's Annual Report for the year ended March 31,
1995 attached hereto as Exhibit 13 and specifically incorporated by reference
herein (the "1995 Annual Report") and the Proxy Statement for its annual meeting
to be held July 26, 1995 (the "1995 Proxy Statement"), which are specifically
referred to in Part I - Items 1 and 3, Part II - Items 5, 6, 7, and 8 and Part
III - Items 10, 11 and 12, are incorporated herein by reference.
1
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PART I
ITEM 1. BUSINESS.
ZERO Corporation (the "Company", ZERO, or "Registrant") was incorporated in
Delaware in 1988 as a successor in interest to a California corporation of the
same name that was originally incorporated in 1952. Its executive offices are
located at 444 South Flower Street, Suite 2100, Los Angeles, CA 90071-2922,
telephone (213) 629-7000.
The Company considers itself a leading designer, manufacturer and marketer of
engineered solutions to enclose, cool and carry electronic equipment. The
Company's system packaging business designs and integrates standard and custom
electronic enclosures and cabinets, and related components such as card cages
for printed circuit boards, backplanes, power supplies and thermal management
systems. Over seventy percent of ZEROs net sales in fiscal 1995 were linked to
the electronics industry, primarily through customers doing business in the
telecommunications, data processing and instrumentation markets. ZEROs
engineered cases include custom and standard deep drawn aluminum ZERO boxes; the
ZERO Halliburton(R) luggage, carrying cases and attaches; thermoformed and
rotationally molded plastic cases and enclosures; other standard and custom
fabricated cases (marketed under the Anvil(R) Cases brand name); and specialized
case hardware. The Company is also a designer, manufacturer and marketer of
various products used in the airline/air cargo industry including specialized
aluminum, polycarbonate and fiberglass air cargo containers; patented
telescoping baggage/cargo systems; air cargo restraint systems and hardware; and
transit cases engineered to meet specifications of the Air Transport
Association.
ZERO's operations are classified under two business segments: Enclosures and
Accessories, and Other. Information about ZERO's business segments is set forth
in Note 8 "Segment Information" on page 24 of the 1995 Annual Report, which is
incorporated herein by reference.
During the three years ended March 31, 1995, the Company did not derive a
material portion of its sales or net income from its foreign operations nor has
the Company been dependent upon a single customer, or a few customers, the loss
of which would have a material adverse effect on its operations.
Patents, licenses, franchises and concessions are not an important factor in
ZERO's overall production process and are not material to its results of
operation.
Research and development activities are not a significant part of the Company's
business. During the year ended March 31, 1995, the Company spent less than 1%
of net sales on research and development activities.
Acquisitions
ZERO is committed to enhance its growth through acquisitions that would
complement the existing business. Prior to June 16, 1995, the Company acquired
the assets of Electro-Mechanical Imagineering, Inc. (EMI), a manufacturer of
products to encase, protect and mount closed-circuit television security devices
that generated annual revenues of approximately $4.5 million. In addition, as of
June 16, 1995, the Company has signed letters of intent outstanding to acquire
two other companies, which, when combined with EMI, have combined sales of
approximately $16 million. Negotiations of definitive agreements and diligence
reviews are currently being performed and the Company expects to complete these
acquisitions in the summer of 1995. These companies' product lines complement
existing operations and markets.
Market Trends
Three trends have increased ZERO's sales activity within the rapidly growing
electronics marketplace. One trend is the miniaturization of electronic
products, which has increased the demand for highly specialized systems
packaging and thermal management solutions. A second trend is lower-priced
electronic products, which has increased both unit sales and the size of the
markets ZERO serves. A third trend is the worldwide growth in
telecommunications, which has greatly expanded the opportunity to enclose and
cool products globally.
ZERO's sales in the telecommunications, data processing and instrumentation
markets increased to $115 million from $100 million for the years ended
March 31, 1995 and 1994, respectively. This is due to the strength in the
telecommunications industry as well as the demand for products to cool machine
tool controls, cellular antennae equipment and other electronics that are
located in inclement environments. Increased activity within the data processing
market was greatly influenced by a price performance curve which accelerated the
sale of mid-range computers requiring sophisticated cooling and packaging.
ZERO's increased sales within the electronics markets more than offset the lower
volumes in the air cargo market which decreased in sales to $22 million from
$26 million and government/military markets which decreased in sales to $16
million from $21 million for the years ended March 31, 1995 and 1994,
respectively.
Marketing
ZERO employs manufacturers' representatives, direct sales people and some
distributors to market its non-consumer products worldwide. Technical support is
provided by engineering personnel from ZERO's various plants. The Company's
standard enclosures products and accessories are sold through catalogs,
advertisements, trade journals and independent distributors. Nonstandard or
specialized enclosure products and accessories are marketed through
manufacturers' representatives and direct sales people. ZERO's consumer oriented
products are marketed worldwide through catalogs, advertisements, telemarketing
programs and trade journals, and are distributed through established independent
dealers.
Competition
While reliable statistics are not available to permit the Company to accurately
estimate its share of the total market for each of its business segments, the
Company believes it has a significant share of the enclosures and accessories
market that it serves. ZERO competes with a number of other larger and smaller
companies. The degree and type of competition that ZERO encounters varies for
both of its business segments.
2
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The Company believes it effectively competes in both of its business segments by
providing engineering expertise, innovative design, superior quality and on-time
delivery at a competitive price. ZERO's ability to successfully compete in the
Enclosures and Accessories segment is also attributable to its broad range of
standard products. Approximately 2,000 dies, capable of producing over 75,000
standard deep drawn aluminum enclosures, provide ZERO with both a cost and
service advantage in a large portion of its metal case and enclosure business.
In addition, ZERO offers thousands of sizes of fabricated cases and hundreds of
standard configurations for system packaging. The thermal management systems,
which cool or heat a wide range of electronics, includes products such as
blowers, fans, air conditioning systems and electronic controlling systems.
Competitive strength is also derived by the Company's ability to modify standard
products to satisfy a variety of applications and customer requirements.
Sales and Backlog
ZERO's backlog at March 31, 1995 and 1994 was $40,278,000 and $40,302,000,
respectively. Backlog is based on contracts which were signed as of the
respective dates set forth. The backlog at March 31, 1995 is scheduled for
delivery during fiscal 1996.
Certain contracts, particularly those with the United States Government and its
contractors, provide for cancellation for convenience of the customer. If such
cancellation occurs, the contractor is paid for costs incurred to date plus the
costs of settling and paying claims of terminated subcontractors, other
settlement expenses and a reasonable profit on its costs. During the five years
ended March 31, 1995, the aggregate amount of orders cancelled for the
convenience of the United States Government has not been material. However, no
assurance can be given that this pattern will continue in the future.
For the year ended March 31, 1995, approximately 9% of ZERO's sales were made to
the government/military market.
A majority of ZERO's sales orders are in amounts of less than $10,000 each.
These orders generally are delivered 1 to 6 weeks from the time the order is
booked. Larger orders and custom orders may take several weeks to over a year
depending on the delivery schedule set by the customer. Because of the large
number of customers served (in excess of 20,000), the relatively small size of
each order and the relatively short delivery cycles involved, the Company
believes the risk is low of any order being cancelled which would have a
significant adverse effect on operations.
Raw Materials
The principal raw materials used by ZERO in manufacturing its products are
aluminum and steel and, to a lesser extent, plastics. Such materials are
purchased under competitive bids at levels sufficient to meet foreseeable
production and delivery schedules from an adequate source of suppliers. Other
raw materials and supplies necessary for the production of ZERO's products are
purchased from a variety of suppliers. As of June 16, 1995, the Company was not
experiencing shortages in the supply of its raw materials. Based on market and
economic conditions at that date, ZERO believes that the supply and availability
of these materials will be adequate to support its level of operations projected
through March 31, 1996. However, the Company can make no assurances that such
materials will be available beyond that period, and any shortage of such
materials could have a significant and material adverse impact on the operations
of the Company.
Environmental Matters
The information regarding environmental matters relating to operations in prior
years is discussed in Note 7 - "Contingent Liabilities" on page 22 of the 1995
Annual Report addressing environmental matters in which ZERO has been named a
"potentially responsible party" is incorporated herein by reference.
ZERO has developed and implemented an environmental program to reduce or
eliminate the use of hazardous material in its current operations. Through
changes in production processes, capital expenditures, proper training and
the use of state-of-the-art treatment and monitoring equipment, the Company
believes its program is controlling the use and discharge of hazardous materials
and is in substantial compliance with applicable local, state and Federal
regulations. The Company does not expect that any assertions of noncompliance
with such laws relating to its current operations will materially adversely
affect its earnings or competitive position or will require any significant
capital expenditures during fiscal year 1996.
3
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Employees
As of May 31, 1995, ZERO employed approximately 1,800 persons. Employee
relations are considered good. Only certain employees at the Company's Samuel
Groves & Co. Limited subsidiary and ZERO Stantron Cabinets division are
represented by unions which are not affiliated with any national union.
ITEM 2. PROPERTIES.
As of June 16, 1995, ZERO used manufacturing plants, facilities and office
buildings containing an aggregate of approximately 1,483,000 square feet of
floor space. ZERO's plants and facilities are located in California (Camarillo,
Chino, City of Industry, El Monte, Pacoima, Rancho Dominguez and San Diego);
Utah (North Salt Lake); Massachusetts (Monson); New Jersey (Princeton Junction
and Windsor); Minnesota (Champlin); Connecticut (Hartford); Tijuana, Mexico; and
Birmingham, Feltham, and West Midlands, England. The plants located in
Camarillo, City of Industry, El Monte, Pacoima and San Diego, California; in
North Salt Lake, Utah; in Princeton Junction and Windsor, New Jersey; and in
Champlin, Minnesota, are used in the production of enclosures and accessories.
The remaining plants are used by both business segments.
ZERO owns all its plants and facilities, except for the following leased
properties:
<TABLE>
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PLANT SQUARE FOOTAGE LEASE EXPIRES
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<S> <C> <C>
Camarillo, CA 35,000 June 30, 1996*
Camarillo, CA 27,000 February 28, 1996*
Chino, CA 7,000 March 31, 1996
City of Industry, CA 63,000 November 30, 1996*
El Monte, CA 72,000 May 31, 2004
Hartford, CT 8,000 January 31, 1996
Hartford, CT 6,000 June 30, 1995
Pacoima, CA 114,000 August 5, 1999*
Rancho Dominguez, CA 30,000 December 1, 1995
Rancho Dominguez, CA 110,000 September 29, 1999*
Windsor, NJ 24,000 September 30, 1996*
Tijuana, Mexico 35,000 January 31, 1996*
Feltham, England 31,000 January 10, 2007
West Midlands, England 26,000 May 22, 2000
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588,000
TOTAL
</TABLE>
* Lease contains renewal option.
ZERO's plants and facilities used in operations are generally constructed of
concrete block, brick, concrete tilt-up, steel or a combination thereof. ZERO's
facilities and equipment are well maintained and are believed to be adequate to
support a substantial increase in its operations, assuming a comparable product
mix.
ITEM 3. LEGAL PROCEEDINGS.
Information concerning legal proceedings in Note 7 - "Contingent Liabilities" on
page 22 of the 1995 Annual Report is incorporated herein by reference.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Registrant submitted no matters to a vote of its security holders during the
fiscal quarter ended March 31, 1995.
4
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EXECUTIVE OFFICERS OF THE REGISTRANT
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Information regarding the Company's officers as of June 16, 1995 is as follows:
<TABLE>
<CAPTION>
EXECUTIVE
NAME AGE POSITION OFFICER SINCE
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<S> <C> <C> <C>
Howard W. Hill 68 Chairman of the Board 1960
John B. Gilbert 74 Chairman Emeritus and Director 1952
Wilford D. Godbold Jr. 57 President, Chief Executive 1982
Officer and Director
George A. Daniels 57 Vice President and Chief 1987
Financial Officer
Bernard B. Heiler 49 Vice President of Marketing 1992
and Sales
James F. Hermanson 58 Vice President 1984
Michael D. LeRoy 47 Vice President of Corporate 1995
Development
Anita J. Cutchall 56 Director of Legal Affairs and 1992
Corporate Secretary
</TABLE>
None of the directors or executive officers are related to one another. All
executive officers except Messrs. Heiler and LeRoy and Ms. Cutchall have served
in their current capacities or in other managerial positions with the
Company for a minimum of five years. Mr Heiler has held his current position
with the Company since October 1992, prior to which he was Vice President of GTE
California, a telephone public utility, from 1984 through 1992, and President of
GTEL, a telecommunications integrator and a subsidiary of GTE, from 1986 through
1992. Mr. LeRoy has held his current position with the Company since January
1995, prior to which he was Chief Operating Office of Biner Ellison Packaging
Systems, Inc., a manufacturing company, from 1990 through 1994, and a private
investor from 1994 through 1995. Ms. Cutchall has held her current position with
the Company since August 1992, prior to which she held the same position with
Continental Graphics Corporation, a provider of specialty graphics, commercial
printing and film services, from 1990 through 1992.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The information under the caption "Market and Dividend Information" on page 28
of the 1995 Annual Report is incorporated herein by reference. On June 16, 1995
the Company had 6,176 stockholders of record.
ITEM 6. SELECTED FINANCIAL DATA.
The information under the caption "Five-Year Selected Financial Data" on page 27
of the 1995 Annual Report is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION.
The information under the caption "Management's Discussion and Analysis of
Results of Operations and Financial Condition" on page 9 of the 1995 Annual
Report is incorporated herein by reference.
5
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The following consolidated financial statements of the Registrant and its
subsidiaries included in the 1995 Annual Report (on the page numbers shown) are
incorporated herein by reference:
Statements of Consolidated Income--Years Ended March 31, 1995, 1994 and 1993.
(Page 11)
Consolidated Balance Sheets--March 31, 1995 and 1994. (Pages 12 and 13)
Statements of Consolidated Stockholders' Equity--Years ended March 31, 1995,
1994 and 1993. (Page 14)
Statements of Consolidated Cash Flows--Years Ended March 31, 1995, 1994 and
1993. (Page 15)
Notes to Consolidated Financial Statements. (Pages 16 to 24, inclusive)
Quarterly Results of Operations. (Page 27)
The independent auditors' report on page 25 and management's report on page 26
of the 1995 Annual Report covering ZERO's consolidated financial statements are
incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information under the caption "Election of Directors" in the 1995 Proxy
Statement is incorporated herein by reference.
Information concerning the Company's executive officers is included under the
caption "Executive Officers of the Registrant" following Part I, Item 4 of this
report.
ITEM 11. EXECUTIVE COMPENSATION.
The information under the captions "Meetings of the Board of Directors,
Committees of the Board and Directors' Fees" and "Executive Compensation" in the
1995 Proxy Statement is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information under the captions "General Information" and "Voting Securities
and Certain Stockholders" in the 1995 Proxy Statement is incorporated herein by
reference.
Registrant does not know of any arrangement, including any pledge by any person
of securities of Registrant, which may at a subsequent date result in a change
of control of Registrant.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Not applicable.
6
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a)(1). Financial Statements.
Reference is made to Item 8 in Part II of this report, where these statements
are listed.
(a)(2). Financial Statement Schedule.
The following consolidated financial statement schedule of Registrant is
included in Item 14(d) below:
Schedule II--Valuation and Qualifying Accounts for the years ended March
31, 1995, 1994 and 1993.
All other schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable, and therefore have been omitted.
(a)(3). Exhibits.
The following exhibits are part of this Form 10-K and are either incorporated by
reference to the prior filings indicated below or are filed herewith under
Item 14(c):
3.1 The Restated Certificate of Incorporation filed as Exhibit 3-(3)(a) of
the Company's Form 8-B filed on September 7, 1988.
3.2 Bylaws of ZERO Corporation, as amended on April 22, 1994 filed as
Exhibit 3.2 to the Company's Form 10-K for the year ended March 31, 1994.
4.2 Specimen form of certificate of common stock $0.01 par value per share
filed as Exhibit 3-(4) of the Company's Form 8-B filed on September 7,
1988.
10.1 Deferred Compensation Plan adopted by the Board of Directors on December
17, 1973 as amended by the Board of Directors on December 11, 1974 filed
as Exhibit 13.10 to the Company's Form 10-K for the year ended March 31,
1975.
10.2 Deferred Compensation Plan as amended through April 1, 1986 filed as
Exhibit 10.13 to the Company's Form 10-K for the year ended March 31,
1986.
10.3 Directors' Deferred Compensation Plan adopted by the Board of Directors
on October 20, 1993 filed as Exhibit 10.3 to the Company's Form 10-K for
the year ended March 31, 1994.
10.4 Executive Deferred Compensation Plan adopted by the Board of Directors
on October 20, 1993 filed as Exhibit 10.4 to the Company's Form 10-K for
the year ended March 31, 1994.
10.5 ZERO Corporation Management Bonus Plan adopted by the Board of Directors
on April 22, 1994 filed as Exhibit 10.5 to the Company's Form 10-K for
the year ended March 31, 1994.
7
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10.6 ZERO Corporation 1988 Stock Option Plan, as amended, filed on Form S-8
Registration Statements (File Nos. 33-44143 and 33-27929).
10.7 ZERO Corporation 1994 Stock Option Plan, filed on Form S-8 Registration
Statement (File No. 33-56175).
10.8 Description of ZERO Corporation Pension Restoration Plan
adopted by the Board of Directors on January 19, 1994 filed as Exhibit
10.9 to the Company's Form 10-K for the year ended March 31, 1994, as
amended.
10.9 Description of ZERO Corporation Contract and Joint Supplemental Life
Insurance Plan adopted by the Board of Directors on April 22, 1994 filed
as Exhibit 10.10 to the Company's Form 10-K for the year ended March 31,
1994.
13 Annual Report for the year ended March 31, 1995 (not deemed filed except
for those portions specifically incorporated by reference herein).
21 Listing of the Company's subsidiaries as of March 31, 1995.
23 Consent of Independent Auditors.
27 Financial Data Schedule.
(b). REPORTS ON FORM 8-K.
During the quarter ended March 31, 1995 the Company filed no reports on
Form 8-K.
(c). EXHIBITS.
See listing of exhibits filed herewith on page 12 of this report.
(d). FINANCIAL STATEMENT SCHEDULE.
The financial statement schedule listed in Item 14(a)(2) above is shown on
page 11 of this report. The report of the Registrant's independent
auditors, Deloitte & Touche LLP, is set forth on page 10 of this report.
8
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Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of Registrant
and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
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<S> <C> <C>
/s/ George A. Daniels Vice President and Chief Financial
__________________________ Officer June 28, 1995
George A. Daniels
DIRECTORS:
/s/ Gary M. Cusumano
__________________________ Director June 28, 1995
Gary M. Cusumano
/s/ Bruce J. DeBever
__________________________ Director June 28, 1995
Bruce J. DeBever
/s/ Clinton G. Gerlach
__________________________ Director June 28, 1995
Clinton G. Gerlach
/s/ John B. Gilbert
__________________________ Director June 28, 1995
John B. Gilbert
/s/ Wilford D. Godbold, Jr. Director and Chief
__________________________ Executive Officer June 28, 1995
Wilford D. Godbold, Jr.
/s/ Bernard B. Heiler
__________________________ Director June 28, 1995
Bernard B. Heiler
/s/ Howard W. Hill
__________________________ Director June 28, 1995
Howard W. Hill
/s/ Whitney A. McFarlin
__________________________ Director June 28, 1995
Whitney A. McFarlin
</TABLE>
9
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INDEPENDENT AUDITORS' REPORT
- ----------------------------
To the Stockholders of ZERO Corporation:
We have audited the consolidated financial statements of ZERO
Corporation and its subsidiaries (the "Company") as of March 31, 1995
and 1994, and for each of the three years in the period ended March 31,
1995, and have issued our report thereon dated May 11, 1995; such
financial statements and report are included in your 1995 Annual Report
to Stockholders and are incorporated herein by reference. Our audits
also included the financial statement schedule of the Company listed
in Item 14(a)(2). This financial statement schedule is the
responsibility of the Company's management. Our responsibility is to
express an opinion based on our audits. In our opinion, such financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
/s/ DELOITTE & TOUCHE LLP
Los Angeles, California
May 11, 1995
10
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SCHEDULE II
ZERO CORPORATION AND SUBSIDIARIES
---------------------------------
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED MARCH 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
Balance at Provision Doubtful Balance at
Beginning Charged to Accounts End of
of Year Income Written Off (1) Year
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<S> <C> <C> <C> <C>
Allowance for doubtful accounts:
April 1, 1994 to March 31, 1995 $829,000 $208,000 ($313,000) $724,000
April 1, 1993 to March 31, 1994 $886,000 $489,000 ($546,000) $829,000
April 1, 1992 to March 31, 1993 $871,000 $609,000 ($594,000) $886,000
</TABLE>
(1) Net of recoveries
11
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ZERO CORPORATION AND SUBSIDIARIES
FORM 10K, ITEM 14(c)
EXHIBITS FILED HEREWITH
13 Annual Report for the year ended March 31, 1995 (not deemed filed
except for those portions specifically incorporated by reference
herein).
21 Subsidiaries of Registrant as of March 31, 1995.
23 Consent of Independent Auditors.
27 Financial Data Schedule.
12
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EXHIBIT 13
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
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RESULTS OF OPERATIONS
For the years ended March 31, 1995, 1994 and 1993, Net Income was
$14,825,000, $12,851,000 and $11,635,000 and Earnings Per Share were $.93, $.81
and $.74, respectively.
Net Sales in fiscal 1995 grew 4.6% over the amount reported in fiscal 1994.
This compares to a sales growth of 7.1% in 1994 when compared to 1993. The
increase in 1995 was primarily attributable to higher sales applicable to the
telecommunications/instrumentation and data processing markets, partially offset
by declines in the air cargo and government/military markets. In fiscal 1994,
growth in the telecommunications/instrumentation, data processing and air cargo
markets as well as the acquisition of a case hardware business in August 1993,
was partially offset by weakness in government/military markets. Interest income
was higher in 1995 due to higher level of investments, higher interest rates and
reduced investments in municipal bonds.
Cost of sales, as a percentage of Net Sales, was 64.0% in 1995 versus 65.2%
in 1994 and 64.8% in 1993. In 1995, the cost of sales as a percentage of Net
Sales was lower than the prior year primarily due to favorable product mix,
higher volume and cost-containment efforts, partially offset by increased
material and supply costs. In fiscal 1994, cost-containment efforts and stable
material costs were offset by changes in product mix and competitive pricing.
Selling and administrative expenses, as a percentage of Net Sales, was
21.2% in 1995, 20.9% in 1994 and 21.6% in 1993. The percentage in 1995 was
higher than 1994 despite higher sales volumes primarily as a result of
expenditures related to environmental matters and a facility reorganization.
Increased sales and cost-containment efforts in 1994 resulted in a lower
percentage than 1993.
EFFECT OF INFLATION - Price increases by ZERO have not contributed
significantly to increases in the Company's Net Sales. The impact of rising
costs of labor, materials and supplies, and equipment has been mitigated, in
part, by changes in product design, overall manufacturing and purchasing
efficiencies, and effective management and control of operating expenses.
<PAGE>
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION (cont.)
- --------------------------------------------------------------------------------
LIQUIDITY AND CAPITAL RESOURCES - At March 31, 1995, the Company's primary
source of liquidity was $37,034,000 of cash and short-term investments. Working
capital increased to $73,531,000 from $66,980,000 at March 31, 1994 as a result
of higher earnings and cash flow.
Cash provided by operating activities was $18,141,000 in 1995, $14,817,000
in 1994 and $19,299,000 in 1993. Such cash generated from operating activities
during those years was invested primarily in property additions and the purchase
of certain assets of a small business in 1993. The higher property additions in
1995 resulted primarily from the construction of a new manufacturing plant. Cash
utilized in financing activities was primarily for the payment of dividends.
Management believes 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 cash reserves in liquid,
lower-risk investments.
CONTINGENCIES - The Company has been notified by certain governmental
agencies or third party litigants that it is, or may be, potentially responsible
for costs associated with the investigation and remediation of six sites where
soil and/or groundwater contamination is alleged. The Company is working with
the governmental agencies and other parties to resolve these matters. The
Company has provided reserves to cover those costs which can be reasonably
estimated at this time. Refer to Note 7 of Notes to Consolidated Financial
Statements for further discussion of environmental and other contingencies.
================================================================================
<PAGE>
================================================================================
STATEMENTS OF CONSOLIDATED INCOME
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<TABLE>
<CAPTION>
Year Ended March 31, 1995 1994 1993
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Sales $179,694,000 $171,821,000 $160,466,000
Interest Income 1,703,000 984,000 902,000
Other Income 1,344,000 1,078,000 1,204,000
- ------------------------------------------------------------------------------------------------
Total Revenue 182,741,000 173,883,000 162,572,000
================================================================================================
Costs and Expenses
Cost of sales (exclusive of depreciation) 115,068,000 111,985,000 104,044,000
Selling and administrative expenses 38,143,000 35,984,000 34,635,000
Depreciation 4,642,000 4,470,000 4,372,000
Interest expense 662,000 481,000 519,000
- ------------------------------------------------------------------------------------------------
Total Costs and Expenses 158,515,000 152,920,000 143,570,000
================================================================================================
Income Before Income Taxes 24,226,000 20,963,000 19,002,000
Income Taxes 9,401,000 8,112,000 7,367,000
- ------------------------------------------------------------------------------------------------
Net Income $ 14,825,000 $ 12,851,000 $ 11,635,000
================================================================================================
Earnings Per Common Share $0.93 $0.81 $0.74
- ------------------------------------------------------------------------------------------------
</TABLE>
================================================================================
The Notes to Consolidated Financial Statements are an integral part of these
statements.
<PAGE>
================================================================================
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
March 31, 1995 1994
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 17,132,000 $ 14,843,000
Short-term investments 19,902,000 18,525,000
Receivables (less allowances for doubtful accounts of
$724,000 in 1995 and $829,000 in 1994) 26,310,000 24,487,000
Inventories
Raw materials and supplies 15,028,000 12,000,000
Work in process 7,046,000 6,589,000
Finished goods 4,147,000 3,253,000
Other (including deferred tax benefits of $2,205,000
in 1995 and $2,979,000 in 1994) 3,327,000 4,216,000
- ---------------------------------------------------------------------------------------------
Total Current Assets 92,892,000 83,913,000
=============================================================================================
Net Property, Plant and Equipment 33,989,000 29,863,000
Goodwill (less accumulated amortization of $9,558,000
in 1995 and $8,533,000 in 1994) 29,624,000 30,649,000
Other Assets 15,019,000 14,309,000
- ---------------------------------------------------------------------------------------------
Total Assets $171,524,000 $158,734,000
=============================================================================================
</TABLE>
================================================================================
The Notes to Consolidated Financial Statements are an integral part of these
statements.
<PAGE>
================================================================================
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
March 31, 1995 1994
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES
Current Liabilities
Accounts payable $ 8,326,000 $ 6,039,000
Income taxes payable 192,000 384,000
Accrued liabilities
Other taxes 1,479,000 468,000
Wages and commissions 5,426,000 5,375,000
Workers' compensation 780,000 980,000
Other 3,158,000 3,687,000
- ----------------------------------------------------------------------------------------------------------------------
Total Current Liabilities 19,361,000 16,933,000
======================================================================================================================
Non-Current Liabilities (including deferred compensation of
$6,352,000 in 1995 and $4,846,000 in 1994) 6,569,000 5,324,000
STOCKHOLDERS' EQUITY
Preferred stock -- authorized 1,000,000 shares of $.01 par value; none issued
Common stock -- authorized 30,000,000 shares of $.01 par value;
outstanding shares, 16,124,144 in 1995 and 16,079,500 in 1994 161,000 161,000
Additional paid-in capital 31,079,000 30,605,000
Retained earnings 115,754,000 107,509,000
- ----------------------------------------------------------------------------------------------------------------------
146,994,000 138,275,000
Foreign currency translation adjustments 261,000 (124,000)
Treasury stock (160,888 shares in 1995 and
162,390 shares in 1994), at cost (1,661,000) (1,674,000)
- ----------------------------------------------------------------------------------------------------------------------
Total Stockholders' Equity 145,594,000 136,477,000
- ----------------------------------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $171,524,000 $158,734,000
======================================================================================================================
</TABLE>
================================================================================
The Notes to Consolidated Financial Statements are an integral part of these
statements.
<PAGE>
================================================================================
STATEMENTS OF CONSOLIDATED STOCKHOLDERS' EQUITY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOREIGN
ADDITIONAL CURRENCY
OUTSTANDING COMMON PAID-IN RETAINED TRANSLATION TREASURY
SHARES STOCK CAPITAL EARNINGS ADJUSTMENTS STOCK
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at March 31, 1992 15,875,287 $159,000 $27,236,000 $ 96,794,000 $553,000 $(1,677,000)
Net income for the year -- -- -- 11,635,000 -- --
Cash dividends declared --
$.40 per share -- -- -- (6,289,000) -- --
Exercise of stock options 77,916 1,000 1,037,000 (120,000) -- --
Foreign currency translation
adjustments -- -- -- -- (658,000) --
- ------------------------------------------------------------------------------------------------------------------------------
Balance at March 31, 1993 15,953,203 160,000 28,273,000 102,020,000 (105,000) (1,677,000)
Net income for the year -- -- -- 12,851,000 -- --
Cash dividends declared --
$.40 per share -- -- -- (6,340,000) -- --
Exercise of stock options and
issuance of treasury stock 126,297 1,000 2,332,000 (1,005,000) 3,000
Foreign currency translation
adjustments and other -- -- -- (17,000) (19,000) --
- ------------------------------------------------------------------------------------------------------------------------------
Balance at March 31, 1994 16,079,500 161,000 30,605,000 107,509,000 (124,000) (1,674,000)
Net income for the year -- -- -- 14,825,000 -- --
Cash dividends declared --
$.41 per share -- -- -- (6,533,000) -- --
Exercise of stock options and
issuance of treasury stock 44,644 -- 474,000 (42,000) -- 13,000
Foreign currency translation
adjustments and other -- -- -- (5,000) 385,000 --
- ------------------------------------------------------------------------------------------------------------------------------
Balance at March 31, 1995 16,124,144 $161,000 $31,079,000 $115,754,000 $261,000 $(1,661,000)
==============================================================================================================================
</TABLE>
================================================================================
The Notes to Consolidated Financial Statements are an integral part of these
statements.
<PAGE>
================================================================================
STATEMENTS OF CONSOLIDATED CASH FLOWS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended March 31, 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Flow From Operating Activities
Net income $14,825,000 $12,851,000 $11,635,000
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation and amortization 5,667,000 5,466,000 5,366,000
Changes in operating assets and liabilities
net of effect of business acquisitions
Decrease (increase) in accounts receivable (1,823,000) (873,000) 394,000
Decrease (increase) in inventories (4,379,000) 226,000 1,801,000
Increase in other non-current assets (710,000) (1,162,000) (794,000)
Increase in accounts payable 2,287,000 985,000 1,035,000
Increase (decrease) in accrued liabilities 141,000 (4,021,000) 500,000
Increase (decrease) in other
non-current liabilities 1,245,000 711,000 (1,248,000)
Other 888,000 634,000 610,000
- ---------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 18,141,000 14,817,000 19,299,000
- ---------------------------------------------------------------------------------------------------------
Cash Flow From Investing Activities
(Purchases) sales of short-term investments, net (1,377,000) 2,010,000 (10,476,000)
Purchase of non-cash assets of acquired businesses -- (2,100,000) --
Expenditures for property, plant and equipment (8,561,000) (4,160,000) (5,236,000)
Other (215,000) 280,000 631,000
- ---------------------------------------------------------------------------------------------------------
Net cash required by investing activities (10,153,000) (3,970,000) (15,081,000)
- ---------------------------------------------------------------------------------------------------------
Cash Flow From Financing Activities
Cash dividends paid (6,533,000) (6,340,000) (6,289,000)
Payments of long-term debt -- (197,000) (2,149,000)
Exercise of stock options 432,000 1,331,000 918,000
Other (including effect of exchange rate changes) 402,000 (344,000) (462,000)
- ---------------------------------------------------------------------------------------------------------
Net cash required by financing activities (5,699,000) (5,550,000) (7,982,000)
- ---------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 2,289,000 5,297,000 (3,764,000)
Cash and cash equivalents at beginning of period 14,843,000 9,546,000 13,310,000
- ---------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $17,132,000 $14,843,000 $ 9,546,000
=========================================================================================================
</TABLE>
================================================================================
The Notes to Consolidated Financial Statements are an integral part of these
statements.
<PAGE>
================================================================================
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1 Significant Accounting Policies
Principles of Consolidation - The accompanying consolidated financial statements
include the accounts of the Company and its subsidiaries. All significant
intercompany balances and transactions have been eliminated.
Cash Equivalents - Cash equivalents include mutual funds and other highly liquid
investments purchased with maturities of three months or less. As of March 31,
1995 and 1994, the carrying values of cash equivalents approximated fair market
values.
Short-Term Investments - Short-term investments at March 31, 1995 and 1994
consisted primarily of treasury notes, treasury bills and municipal bonds which
are classified as securities available-for-sale. Market prices which
approximated cost at the balance sheet dates are reasonable estimates of the
portfolio's fair value.
Inventories - Inventories are stated at the lower of cost (first-in, first-out
or average) or market.
Property, Plant and Equipment - Property, plant and equipment is recorded at
cost. Depreciation is computed principally using the straight-line method over
the estimated useful lives of the assets. Capital leases and leasehold
improvements are amortized over the life of the related assets or the life of
the lease, whichever is shorter.
Intangible Assets - Costs in excess of the value of net assets acquired in
purchase transactions are being recorded as goodwill and amortized over periods
of up to 40 years. The Company reviews the recoverability of intangible assets
to determine if there has been any permanent impairment. Such review includes
operating performance and cash flows and future prospects of the business. If a
permanent impairment has occurred, a reserve for such impairment would be
recorded.
Earnings per Common Share - Earnings per common share are computed using the
weighted average number of shares of common stock and common stock equivalents
(stock options) outstanding, which for 1995, 1994 and 1993 was 16,020,063,
15,958,366 and 15,791,972, respectively.
Foreign Currency Translation - Assets and liabilities of foreign subsidiaries
are translated into U.S. dollars at the year-end exchange rate and gains and
losses are being accumulated in stockholders' equity. The related income
statement is translated at the average exchange rate for the year.
<PAGE>
================================================================================
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
- --------------------------------------------------------------------------------
Concentrations of Credit Risks - Financial instruments that potentially subject
a company to concentration of credit risk consist primarily of trade
receivables. Credit risk on trade receivables is minimized as a result of the
diverse nature of the Company's customer base. The Company performs ongoing
credit evaluations of its customers and maintains an allowance for potential
credit losses.
Supplemental Cash Flow Information - For the years ended March 31, 1995, 1994
and 1993 cash paid for income taxes was $8,333,000, $8,588,000 and $6,152,000,
respectively, and cash paid for interest was not material.
NOTE 2 Property, Plant and Equipment
Property, plant and equipment and accumulated depreciation and amortization
at March 31, 1995 and 1994 consisted of:
<TABLE>
<CAPTION>
ESTIMATED
USEFUL LIVES 1995 1994
---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Land $ 3,558,000 $ 2,780,000
Buildings/land improvements 10-40 years 19,327,000 16,465,000
Machinery/equipment 3-15 years 55,193,000 50,696,000
Leasehold improvements 5-9 years 3,836,000 3,725,000
---------------------------------------------------------------------------------------------
Total 81,914,000 73,666,000
Less accumulated depreciation and amortization 47,925,000 43,803,000
---------------------------------------------------------------------------------------------
Net property, plant and equipment $33,989,000 $29,863,000
=============================================================================================
</TABLE>
NOTE 3 Employee Benefits
The Company has a defined contribution pension plan and, as of January 1,
1995, a 401(k) plan which, except for employees covered by a collective
bargaining agreement at one plant, cover all employees who have completed at
least one year of service and are employed by U.S. divisions which have elected
to participate. The pension plan cost, which is fully funded on a current basis,
is based upon percentages of eligible employees' compensation. The Company's
contributions to the pension plan aggregated $1,507,000, $1,460,000 and
$1,253,000 in 1995, 1994 and 1993, respectively, and aggregated $95,000 to the
401(k) plan in 1995.
The Company has nonqualified deferred compensation plans covering key
employees who can elect to have a portion of their compensation deferred. The
amounts set aside earn interest at rates generally higher than the average prime
interest rate. Interest expense accrued on the participants' accounts totalled
$620,000, $463,000 and
<PAGE>
================================================================================
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
- --------------------------------------------------------------------------------
$356,000 in 1995, 1994 and 1993, respectively. Generally, payment of a
participant's account balance will be deferred until death, disability or
retirement.
NOTE 4 Common Stock
The Company has a stock option plan which provides for the granting to
directors, officers and other key employees of options to purchase shares of the
Company's stock at a price not less than the fair market value on the date of
grant. Options are granted for terms of five to eight years and are exercisable
in annual installments (generally one-third of the total grant) commencing one
year from date of grant, on a cumulative basis.
The Company's stock option plan provides for the granting of qualified and
nonqualified options as well as stock appreciation rights (SARs) in tandem with
options. The SARs entitle a holder to receive an amount equal to the excess of
the fair market value of the Company's common stock on the date of exercise over
the option price. The exercise of SARs automatically cancels an equal number of
related options. Compensation expense recognized in connection with SARs during
the years ended March 31, 1995, 1994 and 1993 was not material.
<PAGE>
================================================================================
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
- --------------------------------------------------------------------------------
Changes in the number of shares subject to options during the three years
ended March 31, 1995, are summarized as follows:
<TABLE>
<CAPTION>
1995 1994 1993
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Outstanding at beginning of year 772,000 793,593 689,388
Options granted
(1995, $12.63 to $12.88 per share;
1994, $13.56 to $13.75 per share;
1993, $11.31 to $11.81 per share) 272,600 219,800 245,700
Options exercised
(1995, $10.38 to $13.75 per share;
1994, $10.38 to $15.25 per share;
1993, $10.38 to $12.24 per share) (44,644) (195,626) (86,280)
Options cancelled as a result of SARs exercised
(1995, none; 1994, $12.24
per share; 1993, none) (1,142)
Options cancelled or expired
(1995, $11.31 to $17.50 per share; 1994
and 1993, $10.38 to $17.50 per share) (133,908) (44,625) (55,215)
- ----------------------------------------------------------------------------------------------
Outstanding at end of year
($10.38 to $14.50 per share) 866,048 772,000 793,593
==============================================================================================
</TABLE>
Of the total outstanding options at March 31, 1995 and 1994, options for 399,685
and 320,750 shares, respectively, were exercisable; and options for 221,559,
155,569 and 89,235 shares will become exercisable during the fiscal years ending
March 31, 1996 through 1998, respectively. As of March 31, 1995, options for
482,300 shares remained available for future grants.
<PAGE>
================================================================================
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
- --------------------------------------------------------------------------------
NOTE 5 Income Taxes
Effective April 1, 1993, the Company adopted SFAS No. 109, "Accounting for
Income Taxes". The adoption of SFAS 109 changed the Company's method of
accounting for income taxes from the deferred approach (APB 11) to an asset and
liability approach. The asset and liability approach requires the recognition of
deferred tax assets and liabilities for the expected future tax consequences of
temporary differences between the financial reporting basis and tax basis of
assets and liabilities. Financial statements for prior years have not been
restated and the cumulative effect of the accounting change was not material.
The provision for income taxes is summarized as follows:
<TABLE>
<CAPTION>
1995 1994 1993
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current
Federal $7,867,000 $6,451,000 $5,744,000
State 1,580,000 1,332,000 1,552,000
Other -- (48,000) (105,000)
Deferred
Federal -- Plant relocation -- -- 209,000
Other reserves and accruals (578,000) 54,000 (210,000)
Other 540,000 221,000 53,000
State (8,000) 102,000 19,000
Other -- -- 105,000
- ------------------------------------------------------------------------------------------
Total $9,401,000 $8,112,000 $7,367,000
==========================================================================================
</TABLE>
<PAGE>
================================================================================
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
- --------------------------------------------------------------------------------
Deferred tax assets and liabilities were comprised of the following as of
March 31,
<TABLE>
<CAPTION>
1995 1994
- ------------------------------------------------------------------------------------------------------
DEFERRED TAX DEFERRED TAX DEFERRED TAX DEFERRED TAX
ASSETS LIABILITIES ASSETS LIABILITIES
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Depreciation/amortization $ -- $2,346,000 -- $2,300,000
Provision for estimated expenses 1,008,000 -- 1,597,000 --
Employee benefit plans 3,782,000 -- 3,210,000 --
State and foreign taxes 441,000 -- 391,000 --
Other -- 1,209,000 -- 1,065,000
- ------------------------------------------------------------------------------------------------------
Total $5,231,000 $3,555,000 $5,198,000 $3,365,000
======================================================================================================
</TABLE>
A reconciliation between the income taxes computed at the Federal statutory
rate and the provision for income taxes is as follows:
<TABLE>
<CAPTION>
1995 1994 1993
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Income taxes computed at the
Federal statutory rate $8,479,000 $7,337,000 $6,461,000
State income taxes net of
Federal income tax benefit 1,022,000 932,000 1,037,000
Tax exempt income (152,000) (244,000) (154,000)
Other 52,000 87,000 23,000
- ------------------------------------------------------------------------------
Total provision $9,401,000 $8,112,000 $7,367,000
==============================================================================
Effective income tax rate 38.8% 38.7% 38.8%
- ------------------------------------------------------------------------------
</TABLE>
<PAGE>
================================================================================
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
- --------------------------------------------------------------------------------
NOTE 6 Commitments
Future minimum lease payments under operating leases at March 31, 1995 are
summarized as follows:
<TABLE>
<CAPTION>
Year Ending March 31,
<S> <C>
1996 $1,556,000
1997 1,444,000
1998 1,444,000
1999 1,266,000
2000 889,000
Thereafter 2,331,000
----------------------------------
Total $8,930,000
==================================
</TABLE>
Rental expense under operating leases was $2,049,000, $2,141,000 and
$2,390,000 for 1995, 1994 and 1993, respectively. Obligations under capital
leases at March 31, 1995 were not material.
NOTE 7 Contingent Liabilities
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 necessary for implementing a groundwater extraction and treatment system
for the Glendale North and South Operable Units of the San Fernando Valley
Superfund Site (the Site). The current estimate to complete the remedial design
work is approximately $2,000,000 of which the Company's current estimate of its
share is approximately $180,000.
In addition, the Company has been named as a third party defendant in
certain lawsuits brought by the EPA and the State of California against certain
parties in the North Hollywood Operable Unit. The Company is vigorously
defending itself in these actions. Also, the Company is engaged in remediation
and/or environmental monitoring at three locations, has been named by the State
of California as potentially responsible at one location, and
<PAGE>
================================================================================
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
- --------------------------------------------------------------------------------
was named as a third party defendant at an additional location.
The Company has provided reserves for its share of the remedial design
costs for the Site to the extent they could be reasonably estimated at this
time. However, the Company's ultimate liability related to environmental matters
at the Site will be dependent upon a variety of factors including changes in the
designs and costs of remediation systems, as well as the allocation of those
costs among the participants including any additional PRPs. In addition, the
Company has provided for the cleanup costs associated with five other sites
discussed above to the extent they could be reasonably estimated at this time.
The Company has commenced litigation against certain of its insurance
carriers for the recovery of expenditures related to the Site but has not
anticipated any insurance recoveries in its estimate.
Other Matters - On January 4, 1994, the Company responded to an administrative
subpoena received from the U.S. Government General Services Administration
(GSA), Office of Inspector General, seeking documents related to certain GSA
contracts of a division of the Company. The Company has heard nothing further
from the GSA since that date and, therefore, is unable to accurately assess the
situation further at this time. The Company believes that the subpoena was
directed to an examination of freight charges under GSA contracts.
The Company is subject to other legal proceedings that arise in the
ordinary course of its business activities. In the opinion of management, any
liability that may result from the resolution of these matters will not have a
material adverse effect on its financial statements.
<PAGE>
================================================================================
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
- --------------------------------------------------------------------------------
NOTE 8 Segment Information
Business segment information as of and for the years ended March 31, 1995,
1994 and 1993 is as follows:
<TABLE>
<CAPTION>
1995 1994 1993
- ----------------------------------------------------------------------------------------------------------------------------------
ENCL. AND ENCL. AND ENCL. AND
(In $000s) ACCESSORIES OTHER TOTAL ACCESSORIES OTHER TOTAL ACCESSORIES OTHER TOTAL
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Sales $151,237 $28,457 $179,694 $141,754 $30,067 $171,821 $135,208 $25,258 $160,466
-------- ------- -------- -------- ------- -------- -------- ------- --------
Operating profit 25,537 2,270 27,807 21,380 2,001 23,381 19,181 2,018 21,199
-------- ------- -------- ------- -------- -------
General corporate
income (expenses), net (2,919) (1,937) (1,678)
Interest expense (662) (481) (519)
-------- -------- --------
Income before taxes $ 24,226 $ 20,963 $ 19,002
======== ======== ========
Identifiable assets $101,802 $17,979 $119,781 $ 93,907 $16,715 $110,622 $ 94,809 $16,772 $111,581
-------- ------- -------- ------- -------- -------
Corporate assets 51,743 48,112 42,290
-------- -------- --------
Total assets $171,524 $158,734 $153,871
======== ======== ========
Depreciation $ 3,703 $ 939 $ 4,642 $ 3,563 $ 907 $ 4,470 $ 3,479 $ 893 $ 4,372
-------- ------- -------- -------- ------- -------- -------- ------- --------
Capital expenditures $ 8,031 $ 530 $ 8,561 $ 3,811 $ 349 $ 4,160 $ 4,762 $ 474 $ 5,236
-------- ------- -------- -------- ------- -------- -------- ------- --------
</TABLE>
The Company's business primarily consists of enclosures and accessories
including the design, manufacture and sale of metal and plastic enclosures,
cabinets, instrument cases, aluminum luggage, camera cases, industrial carrying
cases, cargo enclosures, card cages for printed circuit boards, as well as
precision slides, blowers, fans, cooling systems and wire wrap services and
other similar products. The Company also manufactures and sells thermoformed
plastic parts, metal stampings, case hardware, aircraft cargo hardware, food
service containers and other custom metal products.
Sales under U.S. Government contracts and subcontracts accounted for
approximately 9%, 12% and 15% of total sales in 1995, 1994 and 1993,
respectively.
================================================================================
<PAGE>
================================================================================
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
To the Stockholders of ZERO Corporation:
We have audited the accompanying consolidated balance sheets of ZERO
Corporation and its subsidiaries as of March 31, 1995 and 1994, and the related
statements of consolidated income, stockholders' equity, and cash flows for each
of the three years in the period ended March 31, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of ZERO Corporation and its
subsidiaries at March 31, 1995 and 1994, and the results of their operations and
their cash flows for each of the three years in the period ended March 31, 1995
in conformity with generally accepted accounting principles.
/s/ DELOITTE & TOUCHE LLP
Los Angeles, California
May 11, 1995
================================================================================
<PAGE>
================================================================================
MANAGEMENT'S REPORT
- --------------------------------------------------------------------------------
The accompanying consolidated financial statements have been prepared by
management in accordance with generally accepted accounting principles and,
where appropriate, include amounts based on management's judgement and
estimates. The integrity of the financial statements and the other financial
information in the Annual Report is the responsibility of management. The
financial statements have been audited by Deloitte & Touche LLP, independent
auditors, appointed by the Board of Directors.
The Company maintains internal accounting control systems that are adequate
to provide reasonable, but not absolute, assurance that the assets are
safeguarded from loss or unauthorized use. These systems produce records
adequate for preparation of financial information. In establishing and
maintaining internal controls, the Company exercises judgment in determining
that the costs of such controls do not exceed the benefits to be derived.
The Board of Directors has an Audit Committee composed solely of directors
who are not officers or employees. The Committee meets regularly with
management, with the Company's internal audit staff, and with the independent
auditors. The independent auditors and the internal audit staff periodically
meet alone with the Audit Committee and have free access to the Audit Committee
at any time.
In management's opinion, the consolidated financial statements present
fairly, in all material respects, the financial position of ZERO Corporation and
its subsidiaries at March 31, 1995 and 1994, and the results of operations and
cash flows for each of the three years in the period ended March 31, 1995 in
conformity with generally accepted accounting principles.
/s/ Wilford D. Godbold, Jr. /s/ George A. Daniels
Wilford D. Godbold, Jr. George A. Daniels
President and Vice President and
Chief Executive Officer Chief Financial Officer
================================================================================
<PAGE>
================================================================================
FIVE-YEAR SELECTED FINANCIAL DATA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(In $000s except per share data)
Year Ended March 31, 1995 1994 1993 1992 1991
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Sales $179,694 $171,821 $160,466 $160,279 $189,479
Net Income 14,825 12,851 11,635 9,695 10,761
Working Capital 73,531 66,980 59,576 56,223 56,544
Total Assets 171,524 158,734 153,871 150,479 156,680
Long-term Debt -- -- -- 1,172 2,429
Per Share Data:
Earnings $0.93 $0.81 $0.74 $0.62 $0.68
Dividends Paid 0.41 0.40 0.40 0.40 0.40
===============================================================================================
</TABLE>
================================================================================
QUARTERLY RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOTAL GROSS INCOME BEFORE NET EARNINGS PER
Quarter Ended REVENUE PROFIT INCOME TAXES INCOME COMMON SHARE
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1995
March 31, 1995 $45,219,000 $16,152,000 $6,424,000 $3,969,000 $0.25
December 31, 1994 45,790,000 16,369,000 5,845,000 3,550,000 0.22
September 30, 1994 47,360,000 16,804,000 6,587,000 4,028,000 0.25
June 30, 1994 44,372,000 15,332,000 5,370,000 3,278,000 0.21
1994
March 31, 1994 $44,984,000 $15,285,000 $5,517,000 $3,514,000 $0.22
December 31, 1993 42,611,000 13,855,000 4,774,000 2,885,000 0.18
September 30, 1993 45,009,000 15,059,000 5,780,000 3,446,000 0.22
June 30, 1993 41,279,000 14,044,000 4,892,000 3,006,000 0.19
==================================================================================================
</TABLE>
<PAGE>
Market and Dividend Information
The Company's common stock is traded on the New York Stock Exchange and the
Pacific Stock Exchange under the ticker symbol ZRO. The trading range and
dividends paid by quarter for the two fiscal years ended March 31, 1995 are as
follows:
<TABLE>
<CAPTION>
Trading Range
-------------- Dividends
Quarter Ended High Low Paid
- ------------- --------------- ---------
<S> <C> <C> <C>
1995
March 31, 1995 $14.75 $12.63 $.11
December 31, 1994 14.00 12.13 .10
September 30, 1994 13.50 12.13 .10
June 30, 1994 14.00 11.63 .10
1994
March 31, 1994 $16.13 $12.63 $.10
December 31, 1993 16.63 12.75 .10
September 30, 1993 14.75 12.75 .10
June 30, 1993 15.13 13.00 .10
</TABLE>
<PAGE>
EXHIBIT 21
ZERO CORPORATION
Subsidiaries of Registrant*
As of March 31, 1995
1. Air Cargo Equipment Corporation, a Delaware corporation
2. Air Cargo Equipment (UK) Limited, a U.K. corporation
3. Air Cooling Technology, Inc., a California corporation
4. Anvil Cases, Inc., a California corporation
5. Electronic Solutions, a Nevada corporation
6. McLean Midwest Corporation, a Minnesota corporation
7. Nielsen Hardware Corporation, a Connecticut corporation
8. Productos Aeros, S.A., a Mexican corporation
9. Samuel Groves & Co. Limited, a U.K. corporation
10. ZERO FSC Corporation, a Virgin Islands corporation
11. ZERO East Division, ZERO Corporation, a Massachusetts corporation
12. ZERO International, Inc., a California corporation
13. ZERO Manufacturing Corporation, a California corporation
14. ZERO McLean Europe Ltd., a U.K. corporation
* All are 100% owned
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
- -------------------------------
We consent to the incorporation by reference in Registration Statement No. 33-
56175 on Form S-8, Registration Statement No. 33-27929 on Form S-8 and
Registration Statement No. 33-44143 on Form S-8 of ZERO Corporation of our
reports dated May 11, 1995, appearing in and incorporated by reference in this
Annual Report on Form 10-K of ZERO Corporation for the year ended March 31,
1995.
/s/ DELOITTE & TOUCHE LLP
Los Angeles, California
June 28, 1995
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
consolidated financial statements of ZERO Corporation and its subsidiaries
included in the 1995 Annual Report and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1995
<PERIOD-START> APR-01-1994
<PERIOD-END> MAR-31-1995
<CASH> 17,132
<SECURITIES> 19,902
<RECEIVABLES> 27,034
<ALLOWANCES> 724
<INVENTORY> 26,221
<CURRENT-ASSETS> 92,892
<PP&E> 81,914
<DEPRECIATION> 47,925
<TOTAL-ASSETS> 171,524
<CURRENT-LIABILITIES> 19,361
<BONDS> 0
<COMMON> 161
0
0
<OTHER-SE> 145,433
<TOTAL-LIABILITY-AND-EQUITY> 171,524
<SALES> 179,694
<TOTAL-REVENUES> 182,741
<CGS> 115,068
<TOTAL-COSTS> 151,887
<OTHER-EXPENSES> 5,758
<LOSS-PROVISION> 208
<INTEREST-EXPENSE> 662
<INCOME-PRETAX> 24,226
<INCOME-TAX> 9,401
<INCOME-CONTINUING> 14,825
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,825
<EPS-PRIMARY> 0.93
<EPS-DILUTED> 0.93
</TABLE>
