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, 1997 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, 1997 -- 12,326,340 shares.
<PAGE>
PART I - FINANCIAL INFORMATION
Corporation for which information is given:
This report is filed for ZERO Corporation and its subsidiaries (hereafter
"Registrant" or "Company") for the quarterly period ended September 30, 1997.
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:
ZERO CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED
SEPTEMBER 30,
1997 1996
<S> <C> <C>
OPERATING ACTIVITIES:
NET CASH PROVIDED BY OPERATING ACTIVITIES $15,591,000 $ 9,855,000
INVESTING ACTIVITIES:
DECREASE IN SHORT-TERM INVESTMENTS - 965,000
EXPENDITURES FOR PROPERTY, PLANT AND EQUIPMENT (5,427,000) (5,975,000)
PURCHASE OF NON-CASH ASSETS OF ACQUIRED BUSINESSES (8,860,000) (1,927,000)
PROCEEDS FROM SALE OF ASSETS - 1,258,000
OTHER 167,000 153,000
NET CASH USED IN INVESTING ACTIVITIES (14,120,000) (5,526,000)
FINANCING ACTIVITIES:
DIVIDENDS PAID (736,000) (727,000)
OTHER (INCLUDES EFFECT OF EXCHANGE RATE CHANGES) 385,000 574,000
NET CASH USED IN FINANCING ACTIVITIES (351,000) (153,000)
NET INCREASE IN CASH AND CASH EQUIVALENTS 1,120,000 4,176,000
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 16,201,000 7,018,000
CASH AND CASH EQUIVALENTS AT END OF PERIOD* $17,321,000 $11,194,000
</TABLE>
* Cash and Cash Equivalents include investments purchased with maturities of
three months or less. At September 30, 1997 and 1996, there are no short-term
investments with maturities longer than three months.
These Statements of Consolidated Cash Flows for the six months ended September
30, 1997 and 1996 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.
<PAGE>
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, 1997 increased 20.8%
and 19.4%, respectively, when compared to the comparable periods in the prior
year due primarily to increased orders within the telecommunications,
instrumentation and data processing markets.
Operating income as a percent of net sales for the three and six months ended
September 30, 1997 increased to 13.4% and 13.5%, respectively, from 12.9% and
12.6%, respectively, for the same periods in the prior year primarily due to
costs associated with combining an acquisition with an existing business in the
prior year.
The Company recognized a non-taxable gain of $1,709,000 in the second quarter
of fiscal 1998 from insurance proceeds on the life of the former Vice President
of Marketing and Sales of ZERO Corporation.
Recent Acquisition
In September 1997, the Company acquired the assets of EG&G Birtcher, Inc., a
manufacturer of locking printed circuit card guides and printed circuit card
extractors, which are used both to secure printed circuit cards in their
enclosures and to improve the overall thermal performance of electronic
sensors. The acquisition was accounted for using the purchase method of
accounting. The operating results of the acquisition, which were not material,
were included in the consolidated financial statements from the acquisition
date.
Financial Condition and Liquidity
The Company's working capital increased to $74,769,000 at September 30, 1997
when compared to $70,341,000 at March 31, 1997, primarily due to the receivable
recorded on the life insurance proceeds and reclassification of a $2,450,000
non-current note to current.
Management believes that cash from operations, together with the ability to
obtain financing, 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.
Safe Harbor Statement
STATEMENTS THAT ARE NOT HISTORICAL FACTS, INCLUDING STATEMENTS ABOUT OUR
CONFIDENCE, STRATEGIES AND EXPECTATIONS, TECHNOLOGIES AND OPPORTUNITIES,
INDUSTRY AND MARKET SEGMENT GROWTH, DEMAND AND ACCEPTANCE OF NEW AND EXISTING
PRODUCTS, AND RETURN ON INVESTMENTS IN PRODUCTS AND MARKETS, ARE FORWARD-
LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES, INCLUDING WITHOUT
LIMITATION, THE EFFECT OF GENERAL ECONOMIC AND MARKET CONDITIONS, THE
CONTINUING STRENGTH OF THE ELECTRONICS MARKETS WE SERVE, COMPETITOR PRICING,
MAINTENANCE OF OUR CURRENT MOMENTUM AND OTHER FACTORS.
Exhibit Ia - The Company's Statements of Consolidated Income (Unaudited) for
the Three and Six Months Ended September 30, 1997 and 1996.
Exhibit Ib - The Company's Consolidated Balance Sheets as of September 30, 1997
(Unaudited) and March 31, 1997.
PART II - OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K.
a. Exhibit - 27. Financial Data Schedule
b. Reports on Form 8-K - None.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ZERO Corporation
Date: November 14, 1997 /S/ D. N. KAJIKAMI
D. N. Kajikami, Controller
and Chief Accounting Officer
Date: November 14, 1997 /S/ G. A. DANIELS
G. A. Daniels, Vice President
and Chief Financial Officer
<PAGE>
ZERO CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
NET SALES $64,465,000 $53,387,000 $129,017,000 $108,051,000
COST OF SALES 42,939,000 36,015,000 85,913,000 71,925,000
SELLING AND ADMIN. EXPENSES 12,860,000 10,511,000 25,687,000 22,483,000
OPERATING INCOME 8,666,000 6,861,000 17,417,000 13,643,000
OTHER INCOME:
Life Insurance Gain, Net 1,709,000 - 1,709,000 -
Other 347,000 460,000 591,000 1,158,000
INTEREST INCOME 221,000 139,000 385,000 224,000
INTEREST EXPENSE 1,220,000 1,150,000 2,374,000 2,285,000
INCOME BEFORE INCOME TAXES 9,723,000 6,310,000 17,728,000 12,740,000
INCOME TAXES 3,206,000 2,588,000 6,408,000 5,218,000
NET INCOME $6,517,000* $3,722,000 $11,320,000* $7,522,000
PRIMARY EARNINGS PER SHARE $0.52* $0.30 $0.90* $0.61
DIVIDENDS DECLARED PER SHARE $0.03 $0.03 $0.06 $0.06
AVERAGE NUMBER OF SHARES
OUTSTANDING 12,626,000 12,411,000 12,580,000 12,402,000
</TABLE>
* Includes life insurance gain of $1,709,000 or $.14 per share
These Statements of Consolidated Income for the Three and Six Months Ended
September 30, 1997 and 1996 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
<PAGE>
ZERO CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, MARCH 31,
1997 1997
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS
CASH AND SHORT-TERM INVESTMENTS $17,321,000 $16,201,000
ACCOUNTS RECEIVABLE (LESS ALLOWANCE
FOR DOUBTFUL ACCOUNTS OF $844,000 AND
$607,000, RESPECTIVELY) 37,244,000 35,966,000
INVENTORIES
RAW MATERIALS AND SUPPLIES 20,509,000 21,504,000
WORK IN PROCESS 9,197,000 7,821,000
FINISHED GOODS 6,159,000 5,685,000
OTHER 8,864,000 4,172,000
TOTAL CURRENT ASSETS 99,294,000 91,349,000
PROPERTY, PLANT AND EQUIPMENT 102,053,000 97,241,000
LESS ACCUMULATED DEPRECIATION AND AMORTIZATION (55,577,000) (52,866,000)
NET PROPERTY, PLANT AND EQUIPMENT 46,476,000 44,375,000
GOODWILL 37,792,000 30,602,000
OTHER ASSETS 17,417,000 19,630,000
TOTAL ASSETS $200,979,000 $185,956,000
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
ACCOUNTS PAYABLE $9,602,000 $8,901,000
ACCRUED WAGES AND COMMISSIONS 7,926,000 6,579,000
ACCRUED INCOME AND OTHER TAXES 992,000 675,000
OTHER 6,005,000 4,853,000
TOTAL CURRENT LIABILITIES 24,525,000 21,008,000
OTHER NON-CURRENT LIABILITIES (INCLUDING
DEFFERED COMPENSATION OF $10,158,000 AND
$9,443,000, RESPECTIVELY) 12,724,000 12,192,000
NOTES PAYABLE 51,509,000 51,503,000
STOCKHOLDERS' EQUITY
PREFERRED STOCK $.01 PAR VALUE; NONE ISSUED
COMMON STOCK $.01 PAR VALUE; ISSUED SHARES,
16,521,262 AND 16,445,332, RESPECTIVELY;
OUTSTANDING SHARES, 12,326,340 AND 12,250,427,
RESPECTIVELY 165,000 164,000
ADDITIONAL PAID-IN-CAPITAL 38,227,000 37,021,000
RETAINED EARNINGS 147,547,000 137,750,000
185,939,000 174,935,000
FOREIGN CURRENCY TRANSLATION ADJUSTMENT 98,000 132,000
TREASURY STOCK (4,194,922 AND 4,194,905 SHARES,
RESPECTIVELY), AT COST (73,816,000) (73,814,000)
TOTAL STOCKHOLDERS' EQUITY 112,221,000 101,253,000
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $200,979,000 $185,956,000
</TABLE>
The Consolidated Balance Sheet as of September 30, 1997 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>
<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> 6-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> SEP-30-1997
<CASH> 17321
<SECURITIES> 0
<RECEIVABLES> 38088
<ALLOWANCES> 844
<INVENTORY> 35865
<CURRENT-ASSETS> 99294
<PP&E> 102053
<DEPRECIATION> 55577
<TOTAL-ASSETS> 200979
<CURRENT-LIABILITIES> 24525
<BONDS> 0
0
0
<COMMON> 165
<OTHER-SE> 112056
<TOTAL-LIABILITY-AND-EQUITY> 112221
<SALES> 129017
<TOTAL-REVENUES> 129017
<CGS> 85913
<TOTAL-COSTS> 85913
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2374
<INCOME-PRETAX> 17728
<INCOME-TAX> 6408
<INCOME-CONTINUING> 11320
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<CHANGES> 0
<NET-INCOME> 11320
<EPS-PRIMARY> .90
<EPS-DILUTED> .90
</TABLE>
