<PAGE> 1
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 May 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 2-29697
-----------
THE TRANZONIC COMPANIES
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Ohio 34-0664235
- ------------------------------- -----------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
30195 Chagrin Blvd., Pepper Pike, Ohio 44124
- --------------------------------------- ---------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 216/831-5757
---------------------------
Indicate by check mark whether the registrant (1) has filed all annual,
quarterly, and other reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months and (2) has been
subject to the filing requirements for at least the past 90 days.
Yes X No
----- -----
Number of Class A Common Shares Outstanding at July 6, 1995 2,185,223
-----------
Number of Class B Common Shares Outstanding at July 6, 1995 1,308,065
-----------
<PAGE> 2
PART I: FINANCIAL INFORMATION
-----------------------------
Item 1. Financial Statements
----------------------------
THE TRANZONIC COMPANIES
Condensed Consolidated Balance Sheets
May 31, 1995 and February 28, 1995
<TABLE>
<CAPTION>
May 31, February 28,
Assets 1995 1995
------ ----------- -----------
(unaudited)
<S> <C> <C>
Current assets
Cash (including cash equivalents of $40,000 at May 31,
1995 and $349,600 at February 28, 1995) $ 1,931,930 2,387,540
Receivables, net 17,101,213 16,995,651
Inventories
Raw materials 14,759,876 13,318,921
Finished goods 10,920,847 9,854,683
Deferred income taxes 1,331,002 1,285,533
Prepaid expenses and other current assets 1,502,198 2,046,517
---------- ----------
Total current assets 47,547,066 45,888,845
Property, plant and equipment, net 22,677,682 23,102,181
Other noncurrent assets 2,479,159 2,416,958
Intangible assets 10,991,897 8,871,482
---------- ----------
$ 83,695,804 80,279,466
========== ==========
</TABLE>
(Continued)
<PAGE> 3
THE TRANZONIC COMPANIES
Condensed Consolidated Balance Sheets
May 31, 1995 and February 28, 1995
<TABLE>
<CAPTION>
May 31, February 28,
Liabilities and Shareholders' Equity 1995 1995
------------------------------------ ------------ ------------
(unaudited)
<S> <C> <C>
Current liabilities
Trade accounts payable $ 8,547,842 9,657,007
Accrued compensation 2,381,870 2,981,782
Other payables and accrued expenses 3,666,861 2,922,604
------------ ------------
Total current liabilities 14,596,573 15,561,393
Long-term debt 11,000,000 7,600,000
Deferred gain 2,031,930 2,071,830
Deferred income taxes 1,865,663 1,878,728
Other noncurrent liabilities 1,023,940 931,168
Shareholders' equity
Serial preferred shares without par value; authorized 200,000,
no shares issued - -
Class A common shares, no par value; authorized 4,000,000,
issued 2,659,069 at May 31, 1995 and 2,660,404 at
February 28, 1995 664,767 665,101
Class B common shares, no par value; authorized 8,000,000,
issued 1,327,370 at May 31, 1995 and 1,316,385 at
February 28, 1995 331,843 329,096
Additional paid-in capital 5,672,341 5,643,705
Retained earnings 50,613,739 49,780,163
------------ ------------
57,282,690 56,418,065
Less cost of common shares held in treasury
473,846 Class A common and 19,305 Class B common
shares at May 31, 1995 and 483,146 Class A common
and 19,305 Class B common shares at February 28, 1995 4,104,992 4,181,718
------------ ------------
Total shareholders' equity 53,177,698 52,236,347
------------ ------------
$ 83,695,804 80,279,466
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE> 4
THE TRANZONIC COMPANIES
Condensed Consolidated Statements of Earnings
Three-month periods ended May 31, 1995 and 1994
(Unaudited)
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
Sales $ 39,269,877 36,647,776
Cost and expenses
Cost of goods sold 26,984,670 24,536,342
Selling, general, and administrative expenses 10,562,018 9,975,914
------------ ------------
37,546,688 34,512,256
------------ ------------
Operating earnings 1,723,189 2,135,520
Interest income 20,573 19,154
Interest expense (184,989) (101,011)
------------ ------------
Earnings before income taxes 1,558,773 2,053,663
Income taxes 518,000 793,000
------------ ------------
Net earnings $ 1,040,773 1,260,663
============ ============
Net earnings per common share $ .30 .36
=== ===
Dividends per Class A common share $ .045 .045
==== ====
Dividends per Class B common share $ .085 .085
==== ====
Average common and common equivalent shares outstanding 3,522,927 3,474,046
========= =========
Shares outstanding at end of period 3,493,288 3,452,038
========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE> 5
THE TRANZONIC COMPANIES
Condensed Consolidated Statements of Cash Flows
Three-month periods ended May 31, 1995 and 1994
(Unaudited)
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Cash flows from operating activities
Net earnings $ 1,040,773 1,260,663
Adjustments to reconcile net earnings to net cash provided by
(used in) operating activities
Depreciation and amortization 1,024,219 1,065,746
Deferred income taxes (58,534) 111,315
Changes in assets and liabilities, net of effects from purchase of
Plezall Wipers, Inc.
Receivables, net 400,448 (856,935)
Inventories (2,016,213) (485,752)
Prepaid expenses and other current assets 547,460 957,846
Trade accounts payable (1,260,797) 1,608,792
Accrued compensation (613,410) (42,238)
Other payables and accrued expenses 727,320 708,290
Other, net (169,514) (44,624)
----------- -----------
Net cash provided by (used in) operating activities (378,248) 4,283,103
Cash flows from financing activities
Proceeds from revolving credit 4,900,000 -
Repayment of long-term debt (1,500,000) (2,100,000)
Cash dividends (207,197) (205,374)
----------- -----------
Net cash provided by (used in) financing activities 3,192,803 (2,305,374)
Cash flows from investing activities
Payment for purchase of Plezall Wipers, Inc. (2,909,735)
Restrictive covenants - (45,000)
Proceeds on exercise of share options 107,775 -
Purchases of property, plant and equipment (468,205) (744,179)
----------- -----------
Net cash used in investing activities (3,270,165) (789,179)
----------- -----------
Cash
Increase (decrease) during the period (455,610) 1,188,550
Beginning balance 2,387,540 3,303,191
----------- -----------
Ending balance $ 1,931,930 4,491,741
=========== ===========
Supplemental disclosure of cash flow information
Income taxes paid $ 695,199 626,946
Interest paid $ 163,079 101,201
Supplemental schedule of noncash investing and financing activities
In conjunction with the acquisition of Plezall Wipers, Inc.,
liabilities were assumed as follows
Fair value of assets acquired $ 3,091,802 -
Cash paid 2,909,735 -
----------- -----------
$ 182,067 -
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE> 6
THE TRANZONIC COMPANIES
Notes to Condensed Consolidated Financial Statements
Three-month periods ended May 31, 1995 and 1994
Note A In the opinion of management, the accompanying unaudited condensed
consolidated financial statements contain such adjustments (all of
which are normal and recurring in nature) necessary to present
fairly the financial position of The Tranzonic Companies (Company)
at May 31, 1995 and the results of operations for the three-month
periods ended May 31, 1995 and 1994. The statements should be read
in conjunction with the consolidated financial statements and notes
thereto included in the Company's annual report for the fiscal year
ended February 28, 1995.
Note B Net earnings per share have been calculated based on the weighted
average Class A common and Class B common shares outstanding during
the periods plus the incremental shares (calculated using the
treasury share method) for those outstanding share options which are
considered equivalent shares and have a dilutive impact on net
earnings per share.
<TABLE>
The table below depicts the average Class A common and Class B common
shares used in the calculation of net earnings per share for the
reported periods:
<CAPTION>
Three Months Ended
May 31,
------------------
1995 1994
---- ----
<S> <C> <C>
Class A common 2,193,133 2,201,224
Class B common 1,329,794 1,272,822
--------- ---------
3,522,927 3,474,046
========= =========
</TABLE>
<TABLE>
The table below depicts the Class A common and Class B common shares
outstanding at the end of the periods reported:
<CAPTION>
May 31,
------------------
1995 1994
---- ----
<S> <C> <C>
Class A common 2,185,223 2,186,358
Class B common 1,308,065 1,265,680
--------- ---------
3,493,288 3,452,038
========= =========
</TABLE>
Note C On March 1, 1995, the Company acquired substantially all the assets
and assumed certain liabilities of Plezall Wipers, Inc., a Miami,
Florida, distributor of woven textile wipers. The acquisition was
accounted for under the purchase method of accounting.
<PAGE> 7
PART I: FINANCIAL INFORMATION
-----------------------------
Item 2. Management's Discussion and Analysis of
-----------------------------------------------
Financial Condition and Results of Operation
--------------------------------------------
The Company's financial position remains strong. At May 31, 1995, the current
ratio was 3.3:1 and current assets continued to exceed total liabilities.
Revenues for the first quarter ended May 31, 1995 rose 7.2 percent to
$39,269,877 from $36,647,776 recorded a year ago. Increased sales to our
institutional customer base and the March 1, 1995 acquisition of Plezall
Wipers, Inc. overcame some weakness experienced in certain consumer product
categories.
Significant increases in the cost of core raw materials, such as wood pulp and
paper products used extensively in our Personal Care Division and Industrial
Packaging Division, and to a lesser extent steel used extensively in our
Housewares Division, have contributed to a 10.0 percent year-to-year increase
in cost of goods sold. Improved sales volume and cost containment programs
decreased selling, general, and administrative expenses on a relative basis to
26.9 percent of sales in the first fiscal quarter compared to 27.2 percent a
year ago.
Operating earnings were $1,723,189, a 19.3 percent decrease from $2,135,520
earned in the prior year like period. While the Company is adjusting selling
prices in an effort to recover raw material cost increases and to maintain
gross margins, intense competition has slowed the achievement of this
continuing goal.
On March 1, 1995, the Company acquired substantially all the assets and assumed
certain liabilities of Plezall Wipers, Inc., a Miami, Florida, distributor of
woven textile wipers. Debt used to fund this transaction and the forward
purchase of certain raw materials has caused an increase in net interest
expense for the current first fiscal quarter as compared to a year ago.
The effective income tax rate in the just ended quarter of 33.2 percent
compared to a 38.6 percent rate in the prior year like period and reflected
certain credits recognized in the current year tax rate calculation.
Net earnings for the first fiscal quarter decreased 17.4 percent to $1,040,773
or 30 cents per share, as compared to $1,260,663 or 36 cents per share in the
prior year like period.
<PAGE> 8
FORM 10-Q -PART II: OTHER INFORMATION
-------------------------------------
Items 1 through 3 and 5 are not applicable or the answer to such items is
negative; therefore, the items have been omitted and no reference is required
in this report.
ITEM 4. Submission of matters to a vote of security holders
a) The Company's annual meeting of shareholders was held June 12, 1995.
b) The following Class I directors were elected at such annual meeting,
each for a three-year term expiring in 1998:
James H. Berick
Robert S. Reitman
Sylvia K. Reitman
c) The following matters were voted on at the annual meeting of
shareholders:
1. Election of Class I directors (only Class A common shares voted on this
matter.)
Director Name Votes For Abstentions
----------------- --------- -----------
James H. Berick 2,018,031 19,764
Robert S. Reitman 2,018,031 19,764
Sylvia K. Reitman 2,018,031 19,764
2. Selection of KPMG Peat Marwick LLP as independent auditors of the
Company for the fiscal year ending February 29, 1996:
Votes Broker
Votes For Against Abstentions Nonvotes
--------- ------- ----------- --------
Class A Common Shares 2,033,771 1,202 2,822 0
Class B Common Shares 9,924.4 160.6 67.6 0
<TABLE>
ITEM 6. Exhibits and reports on Form 8-K
<CAPTION>
a) Exhibit
Number Exhibit
------- -------
<S> <C>
27 Financial Data Schedule (1)
99 Independent Auditors' Review Report
b) No reports on Form 8-K have been filed during the quarter for which this
report is filed.
<FN>
(1) Filed only in electronic format pursuant to Item 601(b)(27) of Regulation
S-K.
</TABLE>
<PAGE> 9
SIGNATURE
---------
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 thereto duly authorized.
THE TRANZONIC COMPANIES
(Registrant)
Date: July 13, 1995 By: /s/ Richard J. Pennza
----------------------
Richard J. Pennza
(Duly authorized officer and
Principal Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000001761
<NAME> TRANZONIC COMPANIES
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-28-1996
<PERIOD-START> MAR-01-1995
<PERIOD-END> MAY-31-1995
<CASH> 1,931,930
<SECURITIES> 0
<RECEIVABLES> 17,101,213
<ALLOWANCES> 0
<INVENTORY> 25,680,723
<CURRENT-ASSETS> 47,547,066
<PP&E> 22,677,682
<DEPRECIATION> 0
<TOTAL-ASSETS> 83,695,804
<CURRENT-LIABILITIES> 14,596,573
<BONDS> 0
<COMMON> 996,610<F1>
0
0
<OTHER-SE> 56,286,080<F2>
<TOTAL-LIABILITY-AND-EQUITY> 83,695,804
<SALES> 39,269,877
<TOTAL-REVENUES> 39,269,877
<CGS> 26,984,670
<TOTAL-COSTS> 37,546,688
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 184,989
<INCOME-PRETAX> 1,558,773
<INCOME-TAX> 518,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,040,773
<EPS-PRIMARY> .30
<EPS-DILUTED> 0
<FN>
<F1> This figure consists of $664,767 Class A Common Shares and $331,843
Class B Common Shares.
<F2> This figure consists of $5,672,341 of Additional Paid-in-Capital and
$50,613,739 of Retained Earnings.
</FN>
</TABLE>
<PAGE> 1
KPMG Peat Marwick LLP
1500 National City Center
1900 East Ninth Street
Cleveland, OH 44114-3495
Form 10-Q, Part II
Item 6
Exhibit 99
Independent Auditors' Review Report
-----------------------------------
The Board of Directors
The Tranzonic Companies:
We have reviewed the condensed consolidated balance sheet of The
Tranzonic Companies and subsidiaries as of May 31, 1995, and the related
condensed consolidated statements of earnings and cash flows for the
three-month periods ended May 31, 1995 and 1994. These condensed consolidated
financial statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical review
procedures to financial data and making inquiries of persons responsible for
financial and accounting matters. It is substantially less in scope than an
audit conducted in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the condensed consolidated financial statements referred to above
for them to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of The Tranzonic Companies and
subsidiaries as of February 28, 1995, and the related consolidated statements
of earnings, shareholders' equity, and cash flows for the year then ended (not
presented herein); and in our report dated March 31, 1995, we expressed an
unqualified opinion on those consolidated financial statements. In our
opinion, the information set forth in the accompanying condensed consolidated
balance sheet as of February 28, 1995, is fairly presented, in all material
respects, in relation to the consolidated balance sheet from which it has been
derived.
KPMG PEAT MARWICK LLP
/s/ KPMG PEAT MARWICK LLP
Cleveland, Ohio
June 30, 1995
