<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 JUNE 30, 1996 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 July 31, 1996 -- 12,155,906 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 June 30, 1996.
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 Three Months Ended
June 30,
1996 1995
<S> <C> <C>
OPERATING ACTIVITIES:
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 8,734,000 $ 1,040,000
INVESTING ACTIVITIES:
DECREASE IN SHORT-TERM INVESTMENTS 13,742,000
EXPENDITURES FOR PROPERTY, PLANT AND EQUIPMENT (3,679,000) (1,346,000)
PURCHASE OF NON-CASH ASSETS OF ACQUIRED BUSINESSES (1,152,000) (4,080,000)
PROCEEDS FROM SALE OF ASSETS 1,258,000 1,670,000
OTHER 210,000 134,000
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (3,363,000) 10,120,000
FINANCING ACTIVITIES:
DIVIDENDS PAID (363,000) (1,756,000)
OTHER (INCLUDING EFFECT OF EXCHANGE RATE CHANGES) 144,000 785,000
NET CASH USED IN FINANCING ACTIVITIES (219,000) (971,000)
NET INCREASE IN CASH AND CASH EQUIVALENTS 5,152,000 10,189,000
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 7,018,000 17,132,000
CASH AND CASH EQUIVALENTS AT END OF PERIOD* $12,170,000 $ 27,321,000
These Statements of Consolidated Cash Flows for the three months ended
June 30, 1996 and 1995 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 investments purchased with
maturities of three months or less. At June 30, 1996 and 1995
short-term investments with maturities longer than three months
totaled $965,000 and $6,160,000, 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 months ended June 30, 1996 increased 12.4% when
compared to the prior year period due primarily to increased sales to
electronics markets and acquisitions, partially offset by a reduction in air
cargo.
Operating income margin increased to 12.4% for the three months ended June 30,
1996 from 11.8% for the same period in the prior year. The increase was
primarily due to higher volume.
Interest expense increased to $1,135,000 for the three months ended June 30,
1996 from $196,000 for the same period in fiscal 1996 primarily due to the
issuance of long-term debt in connection with the stock repurchase in
February 1996.
Financial Condition and Liquidity
Cash and short-term investments totaled $13,135,000 at June 30, 1996 compared
to $7,983,000 at March 31, 1996. The Company's working capital increased
to $59,388,000 from $58,174,000 at March 31, 1996.
Net cash provided by operating activities for the three months ended
June 30, 1996 totaled $8,734,000 versus $1,040,000 during the fiscal
1996 period. The increase was primarily attributable to decreased levels of
accounts receivable and increased levels of accounts payable.
Management believes that cash from operations, together with the ability to
obtain financing and the reduction in the dividend rate, will provide
sufficient funds to finance current and forecasted operations, including
potential acquisitions, for the next twelve month period. The Company will
continue to invest its available funds in liquid, low-risk investments.
Acquisitions and Divestitures
In April 1996, the Company acquired the assets of Instrument Enclosures, a
manufacturer of engineered deep drawn aluminum and fabricated cases and in May
1996 completed the sale of Anvil Cases, Inc., a subsidiary of the Company,
which manufactures riveted cases primarily for the music, packaging specialists
and audio/video markets.
Exhibit Ia - The Company's Statements of Consolidated Income for the
Three Months Ended June 30, 1996 and 1995.
Exhibit Ib - The Company's Consolidated Balance Sheets as of
June 30, 1996 and March 31, 1996.
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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. The Company has provided no reserves for its
share of the construction, operation and maintenance costs, because its share
is not estimable at this time.
Item 4. Submission of Matters to a Vote of Security Holders
a. On July 24, 1996, the Company held its Annual Meeting of Stockholders.
Of the 12,128,518 shares eligible to vote at the meeting, 10,306,681
shares were represented in person or by proxy.
b. At the meeting, nominee Gary M. Cusumano received 10,244,381 votes and
was elected to serve as a Director for a three year term.
c. A shareholder proposal to declassify the Board of Directors received
4,765,791 shares voted against and 112,394 abstentions (which have the
same effect as votes against), 1,206,061 broker nonvotes and 4,222,435
shares voted in favor.
A shareholder proposal to provide stock compensation for non-employee
directors received 7,464,112 shares voted against and 135,574
abstentions (which have the same effect as votes against), 1,206,063
broker nonvotes and 1,500,932 shares voted in favor.
Item 6. Exhibits and Reports on Form 8-K.
a. Exhibit - 27. Financial Data Schedule
b. Reports on Form 8-K - None.
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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: August 9, 1996 /s/ D. N. KAJIKAMI
D. N. Kajikami, Controller
and Chief Accounting Officer
Date: August 9, 1996 /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
June 30,
1996 1995
<S> <C> <C>
NET SALES $ 54,664,000 $ 48,617,000
COST OF SALES 35,910,000 32,023,000
SELLING AND ADMIN. EXPENSE 11,972,000 10,860,000
OPERATING INCOME 6,782,000 5,734,000
OTHER INCOME 698,000 176,000
INTEREST INCOME 85,000 465,000
INTEREST EXPENSE 1,135,000 196,000
INCOME BEFORE INCOME TAXES 6,430,000 6,179,000
INCOME TAXES 2,630,000 2,472,000
NET INCOME $ 3,800,000 $ 3,707,000
PRIMARY EARNINGS PER SHARE $0.31 $0.23
DIVIDENDS DECLARED PER SHARE $0.03 $0.11
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 12,392,000 16,094,000
</TABLE>
These Statements of Consolidated Income for the Three Months Ended
June 30, 1996 and 1995 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>
June 30, March 31,
1996 1996
<S> <C> <C>
ASSETS
CURRENT ASSETS
CASH AND SHORT-TERM INVESTMENTS $ 13,135,000 $ 7,983,000
ACCOUNTS RECEIVABLE (LESS ALLOWANCE FOR
DOUBTFUL ACCOUNTS OF $813,000 AND $759,000,
RESPECTIVELY) 31,018,000 33,973,000
INVENTORIES
RAW MATERIALS AND SUPPLIES 19,969,000 18,266,000
WORK IN PROCESS 7,820,000 7,810,000
FINISHED GOODS 5,593,000 5,485,000
OTHER 5,035,000 4,931,000
TOTAL CURRENT ASSETS 82,570,000 78,448,000
PROPERTY, PLANT AND EQUIPMENT 91,867,000 89,400,000
LESS ACCUMULATED DEPRECIATION AND AMORTIZATION (50,463,000) (49,679,000)
NET PROPERTY, PLANT AND EQUIPMENT 41,404,000 39,721,000
GOODWILL 31,333,000 31,425,000
OTHER ASSETS 18,180,000 16,244,000
TOTAL ASSETS $173,487,000 $165,838,000
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
ACCOUNTS PAYABLE $ 9,318,000 $ 8,318,000
ACCRUED WAGES AND COMMISSIONS 5,135,000 6,258,000
ACCRUED INCOME AND OTHER TAXES 3,422,000 1,574,000
OTHER 5,307,000 4,124,000
TOTAL CURRENT LIABILITIES 23,182,000 20,274,000
OTHER NON-CURRENT LIABILITIES (INCLUDING
DEFERRED COMPENSATION OF $8,437,000 AND
$7,903,000, RESPECTIVELY) 10,367,000 9,208,000
NOTES PAYABLE 51,526,000 51,525,000
STOCKHOLDERS' EQUITY
PREFERRED STOCK $.01 PAR VALUE; NONE ISSUED
COMMON STOCK $.01 PAR VALUE;
ISSUED SHARES, 16,571,677 AND 16,285,343,
RESPECTIVELY;
OUTSTANDING SHARES, 12,392,136 AND
12,105,840, RESPECTIVELY 163,000 163,000
ADDITIONAL PAID-IN-CAPITAL 34,825,000 34,248,000
RETAINED EARNINGS 127,170,000 124,184,000
162,158,000 158,595,000
FOREIGN CURRENCY TRANSLATION ADJUSTMENTS (208,000) (243,000)
TREASURY STOCK (4,179,541 AND 4,179,503 SHARES,
RESPECTIVELY) AT COST (73,538,000) (73,521,000)
TOTAL STOCKHOLDERS' EQUITY 88,412,000 84,831,000
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $173,487,000 $165,838,000
</TABLE>
The Consolidated Balance Sheet as of June 30, 1996 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
<TABLE> <S> <C>
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND STATEMENTS 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-31-1997
<PERIOD-END> JUN-30-1996
<CASH> 12,170
<SECURITIES> 965
<RECEIVABLES> 31,831
<ALLOWANCES> 813
<INVENTORY> 33,382
<CURRENT-ASSETS> 82,570
<PP&E> 91,867
<DEPRECIATION> 50,463
<TOTAL-ASSETS> 173,487
<CURRENT-LIABILITIES> 23,182
<BONDS> 0
<COMMON> 163
0
0
<OTHER-SE> 88,250
<TOTAL-LIABILITY-AND-EQUITY> 88,412
<SALES> 54,664
<TOTAL-REVENUES> 55,447
<CGS> 35,910
<TOTAL-COSTS> 35,910
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,135
<INCOME-PRETAX> 6,430
<INCOME-TAX> 2,630
<INCOME-CONTINUING> 3,800
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,800
<EPS-PRIMARY> 0.31
<EPS-DILUTED> 0.31
</TABLE>
