<PAGE> 1
SCHEDULE 14A
(RULE 14a)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
<TABLE>
<S> <C>
/ / Preliminary Proxy Statement / / CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
THE TRANZONIC COMPANIES
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
XXXXXX
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
Not Applicable
(2) Aggregate number of securities to which transaction applies:
Not Applicable
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
Not Applicable
(4) Proposed maximum aggregate value of transaction:
Not Applicable
(5) Total fee paid:
Not Applicable
/X/ Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
Not Applicable
(2) Form, Schedule or Registration Statement No.:
Not Applicable
(3) Filing Party:
Not Applicable
(4) Date Filed:
Not Applicable
<PAGE> 2
THE TRANZONIC COMPANIES
30195 CHAGRIN BOULEVARD
PEPPER PIKE, OHIO 44124
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
Notice is hereby given that the Annual Meeting of Shareholders of The
Tranzonic Companies will be held at the Cleveland Marriott East, 3663 Park East
Drive, Beachwood, Ohio, on Friday, August 2, 1996, at 10:30 A.M., local time,
for the purpose of considering and acting upon:
1. The election of three Class II Directors;
2. A proposal to convert the Class B Common Shares to Class A Common Shares
and to amend the Amended Articles of Incorporation to (i) eliminate the
Class B Common Shares, (ii) rename the Class A Common Shares as Common
Shares, and (iii) provide that the number of authorized Common Shares
shall be 12,000,000;
3. The selection of independent auditors for the fiscal year ending
February 28, 1997; and
4. The transaction of any other business which properly may come before the
meeting and any adjournments thereof.
Holders of Class A Common Shares and Class B Common Shares of The Tranzonic
Companies of record at the close of business on June 26, 1996 are entitled to
vote at the Annual Meeting and any adjournments thereof.
By order of the Board of Directors
JAMES H. BERICK
Secretary
Cleveland, Ohio
July 10, 1996
SHAREHOLDERS ARE REQUESTED TO COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED
PROXY(IES) IN THE ENVELOPE PROVIDED WHICH REQUIRES NO POSTAGE IF MAILED IN THE
UNITED STATES. IF YOU HOLD CLASS A COMMON SHARES AND CLASS B COMMON SHARES,
PLEASE RETURN BOTH PROXIES.
<PAGE> 3
July 10, 1996
THE TRANZONIC COMPANIES
30195 CHAGRIN BOULEVARD
PEPPER PIKE, OHIO 44124
PROXY STATEMENT
The accompanying proxies are solicited by the Board of Directors of the
Corporation for use at the Annual Meeting of Shareholders to be held on August
2, 1996 and any adjournments thereof.
Holders of Class A Common Shares and Class B Common Shares of record at the
close of business on June 26, 1996 (the record date) will be entitled to vote at
the Annual Meeting. At that date the Corporation had issued and outstanding
2,183,603 Class A Common Shares without par value and 1,313,585 Class B Common
Shares without par value. Only Class B Common Shares are entitled to vote in the
election of the Corporation's Class II Directors, as described below. Except as
hereinafter described in respect of the election of Directors, (i) each Class A
Common Share is entitled to one vote on all matters properly coming before the
Annual Meeting, and each Class B Common Share is entitled to one-tenth (1/10th)
of one vote on all matters properly coming before the Annual Meeting, (ii) Class
A Common Shares and Class B Common Shares shall vote together as a single class
on all matters properly coming before the Annual Meeting, and (iii) an aggregate
of at least 1,748,595 Class A Common Shares and Class B Common Shares must be
represented at the meeting in person or by proxy in order to constitute a quorum
for the transaction of business.
This Proxy Statement and the accompanying form of proxy were first mailed
to Shareholders on July 10, 1996.
ELECTION OF DIRECTORS
The Corporation's Board of Directors currently consists of nine (9)
persons, divided into three classes (Classes I, II and III) consisting of three
Directors each. Only Class A Common Shares are entitled to vote for Directors in
Classes I and III and only Class B Common Shares are entitled to vote for
Directors in Class II.
<PAGE> 4
At this Annual Meeting, Class II Directors are to be elected for a term
expiring at the 1999 Annual Meeting of Shareholders and until their respective
successors are duly elected and qualified. The Board of Directors has designated
the three (3) persons first named in the table below as nominees for Director
for such term. Each of the nominees presently is a Director.
Pursuant to the Articles of Incorporation of the Corporation, as amended,
and in accordance with the procedures established by the American Stock
Exchange, the holders of Class B Common Shares are entitled to vote separately
as a class for the election of three Class II Directors. At least 656,793 Class
B Common Shares of the Corporation must be represented at the meeting in person
or by proxy in order to constitute a quorum for the election of such Directors.
The holders of Class A Common Shares are not entitled to vote in the election of
Class II Directors.
Unless a holder of Class B Common Shares requests that voting of his or her
proxy be withheld for the nominees for election as Class II Directors in
accordance with the instructions set forth on such proxy, it presently is
intended that Class B Common Shares represented by proxies solicited hereby will
be voted for the election as Class II Directors of the nominees designated by
the Board of Directors. All nominees have consented to being named in this Proxy
Statement and to serve if elected. Should any nominee subsequently decline or be
unable to accept such nomination or to serve as a Director, an event which the
Board of Directors does not now expect, the persons voting the Class B Common
Shares represented by proxies solicited hereby may either vote such shares for a
substitute nominee for such class or for a reduced number of nominees, as they
may deem advisable.
In the event holders of Class B Common Shares shall have the right to
cumulate their voting power for the election of Directors (see GENERAL
INFORMATION -- CUMULATIVE VOTING for the procedure required to initiate
cumulative voting), the persons designated as proxies will allocate the votes
among the nominees designated for election in accordance with their judgment.
Cumulative voting permits a holder of Class B Common Shares to give one nominee
a number of votes equal to the number of Directors to be elected by the holders
of Class B Common Shares multiplied by the number of Shares the Shareholder may
vote, or a holder of Class B Common Shares may distribute votes on the same
principle among two or three nominees.
2
<PAGE> 5
The information concerning the nominees set forth in the following table is
based in part on information received from the respective nominees and in part
on the Corporation's records:
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION FIRST
NAME OF NOMINEE AGE AS OF DURING PAST FIVE YEARS BECAME
OR DIRECTOR JUNE 26, 1996 AND OTHER DIRECTORSHIPS HELD DIRECTOR
- ------------------------- ------------- ------------------------------------------- ---------------
<S> <C> <C> <C>
NOMINEES TO SERVE UNTIL 1999 ANNUAL MEETING OF SHAREHOLDERS (CLASS II)
Joseph A. Campanella+++ 53 Executive Vice President of Star Banc Cor- 1979
poration (bank holding company) since 1991.
Previously, President of Star Bank, N.A.,
Cleveland from 1988 until 1991.
Thomas S. Robertson+++ 53 Sainsbury Professor of Marketing, London 1989
Business School since 1994. Prior thereto,
Chairperson of the Department of Market-
ing, The Wharton School, University of
Pennsylvania, from 1988 until 1994.
Steven W. Percy+++ 49 President of BP Oil Company and Executive 1994
Vice President of BP America Inc. since
1992. Previously, Chief Executive Officer
of BP Finance International (a division of
BP International Ltd.), and Group Treasurer
of The British Petroleum Company, p.l.c.,
from 1989 until 1992.
DIRECTORS CONTINUING IN OFFICE UNTIL 1998 ANNUAL MEETING OF SHAREHOLDERS (CLASS I)
James H. Berick+++ 63 Chairman of Berick, Pearlman & Mills Co., 1970
L.P.A., Cleveland, Ohio (attorneys) and
Secretary of the Corporation. Also, Presi-
dent and Treasurer of Realty ReFund Trust
(real estate investment trust) and Presi-
dent and Treasurer of Mid-America ReaFund
Advisors, Inc. (its advisor) since January,
1990. Mr. Berick is a Director of MBNA
Corporation and A. Schulman, Inc. and a
Trustee of The Town and Country Trust and
Realty ReFund Trust.
</TABLE>
3
<PAGE> 6
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION FIRST
NAME OF NOMINEE AGE AS OF DURING PAST FIVE YEARS BECAME
OR DIRECTOR JUNE 26, 1996 AND OTHER DIRECTORSHIPS HELD DIRECTOR
- ------------------------- ------------- ------------------------------------------- ---------------
<S> <C> <C> <C>
Robert S. Reitman*() 62 Chief Executive Officer, Chairman of the 1960
Board of Directors and President of the
Corporation. Mr. Reitman is a Director of
Weirton Steel Corporation.
Sylvia K. Reitman 58 Investor, Cleveland, Ohio. 1989
DIRECTORS CONTINUING IN OFFICE UNTIL 1997 ANNUAL MEETING OF SHAREHOLDERS (CLASS III)
David J. Golden*() 63 Senior Vice President of the Corporation. 1958
Morton L. Reitman*() 59 Executive Vice President of the Corpora- 1973
tion.
James C. Spira++ 53 Managing Partner, Diamond Technology 1991
Partners (management consultants), since
November 1995. Previously Group Vice
President of the Corporation, from 1991 un-
til 1995.
</TABLE>
- ---------------
+ Member of the Compensation Committee.
++ Member of the Audit Committee.
* Member of the Executive Committee.
() Member of the Pension Committee.
The functions performed by the Audit Committee of the Board of Directors
include: (i) recommending to the Board of Directors the appointment of a firm of
independent auditors to examine the books and accounts of the Corporation and
its subsidiaries; (ii) reviewing with the independent auditors the scope of
their work; (iii) reviewing with the Corporation's management matters related to
the examination and to the Corporation's accounting procedures; (iv) reviewing
with the independent auditors compliance with the record keeping and internal
control requirements of the Foreign Corrupt Practices Act of 1977; (v) reviewing
with the independent auditors and approving each non-audit service performed or
proposed to be performed by the independent auditors, as well as the
relationship of audit to non-audit fees; and (vi) considering the effect of the
various non-audit services upon the independence of the auditors. The Audit
Committee held two meetings during the year ended February 29, 1996.
The functions performed by the Compensation Committee of the Board of
Directors include making recommendations to the Board of Directors concerning
compensa-
4
<PAGE> 7
tion policies, salaries and other forms of compensation for management and other
employees of the Corporation and its subsidiaries. The Compensation Committee
held two meetings during the year ended February 29, 1996.
The Board of Directors does not have a Nominating Committee.
The Board of Directors held four meetings during the year ended February
29, 1996. All incumbent Directors attended all of the meetings of the Directors
and any committees thereof on which they served during the year.
CERTAIN RELATIONSHIPS; COMPENSATION COMMITTEE INTERLOCKS AND INSIDER
PARTICIPATION
David J. Golden and Sylvia K. Reitman are brother and sister. Sylvia K.
Reitman is the wife of Robert S. Reitman. Robert S. Reitman and Morton L.
Reitman are brothers. Alayne L. Reitman, Vice President -- Finance and Treasurer
of the Corporation, is the daughter of Robert S. Reitman and Sylvia K. Reitman.
James H. Berick, Secretary and Director, is Chairman of the law firm
Berick, Pearlman & Mills Co., L.P.A., which is retained by the Corporation as
legal counsel.
COMPENSATION OF DIRECTORS
Each Director who is not an employee of the Corporation receives an annual
Director's fee of $12,000, plus $925 ($850 prior to July 1, 1996) for attendance
at each meeting of the Board or any Committee. In addition, if such a Director
elects to have his compensation deferred and invested in Class B Common Shares
pursuant to the Corporation's Deferred Compensation Plan for Non-Employee
Directors, then each such Director receives, in Class B Common Shares, an
additional amount equal to 25% of the amount so deferred and invested.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Corporation's compensation program is administered by the Compensation
Committee, which consists exclusively of non-employee Directors. This
compensation program is designed and administered to align the interests of the
Corporation's executive officers and its other key employees with that of the
Corporation's Shareholders, to link compensation to the performance of the
Corporation as well as to individual contributions and to provide compensation
at a level which is competitive in the marketplace so that the Corporation can
continue to attract, motivate, and retain qualified management.
5
<PAGE> 8
The Corporation's compensation program for its executive officers
(including the named executive officers) and certain other key employees
consists of an annual salary, bonus (in some instances) and a long-term
incentive represented by stock options and, in some instances, deferred
compensation. The policies in respect of each of these elements, as well as the
basis for determining the compensation of the Chairman of the Board and Chief
Executive Officer, Mr. Robert S. Reitman (the "CEO"), are described below.
The Compensation Committee establishes annual salaries to be competitive
with the marketplace and to reflect the varying levels of responsibilities of
the CEO and the other executive officers. Such salaries are based, in part, on
information provided to the Corporation by independent compensation consultants.
The services of independent compensation consultants also are used by the
Corporation in respect of surveying compensation levels and trends in industry
generally and in respect of structuring the bonus component of the compensation
of the CEO and the other executive officers. For the Corporation's executive
officers, annual bonuses are based upon an evaluation of their respective
division's actual performance against its business plan. Assuming that
performance levels are achieved, the bonus paid is a predetermined percentage of
the division's pretax profits. In the event that predetermined standards are not
achieved, bonuses are subject to reduction. In addition to earnings performance,
the Compensation Committee evaluates other managerial achievements of the
Corporation's executive officers as a component of bonus awards.
The Compensation Committee determines the annual bonus of the CEO based
upon the Corporation's sales, pretax income and return on investment
(collectively, the "Corporation Components") as well as upon a subjective factor
designed to reward individual performance independent of the Corporation
Components. The CEO's bonus is determined in part based upon the Corporation's
attaining certain threshold, target and maximum Corporation Component levels,
which levels are established based upon a Board-approved business plan for the
Corporation. The CEO's fiscal 1996 bonus was determined by weighting the
Corporation Components as follows: 45% of his 1996 bonus was based upon the
levels of Corporation Components achieved (each bearing equal weight) and 55%
was determined subjectively based upon the CEO's overall contributions to the
Corporation.
Stock options are awarded to the Corporation's executive officers in
accordance with plans approved by the Shareholders. During the fiscal year ended
February 29, 1996, options were available for grant only under the Corporation's
1995 Incentive
6
<PAGE> 9
Stock Option Plan (The "1995 Plan"). Subject to certain limitations and based
upon management input, the Compensation Committee determines the persons to whom
options will be granted and the numbers of shares to be represented by such
options. In general, the Compensation Committee has awarded options based upon
the individual's position with the Corporation and potential contribution to
corporate profitability. The 1995 Plan provides for the granting of incentive
stock options for Class B Common Shares, the option price of which may not be
less than 100% of the fair market value of such shares on the date of grant.
However, in the case of an optionee who owns or is deemed to own shares of the
Corporation representing more than 10% of the total voting power of all classes
of the Corporation's shares at the time an option is granted (currently the CEO
and two other executive officers), the option price may not be less than 110% of
the fair market value of such shares on the date of grant. During the fiscal
year ended February 29, 1996, stock options were granted under the 1995 Plan to
the named executive officers in amounts indicated later in this Proxy Statement.
It is the intention of the Compensation Committee that such grants constitute an
additional tie between the Corporation's performance and executive compensation
while further aligning the common long-term interests of the Corporation's
executive officers and its Shareholders.
Stock options also have been granted to certain executive officers pursuant
to their employment agreements with the Corporation (one of which employment
agreements now is terminated). Such options were designed to tie the interests
of such executive officers, as new employees of the Corporation, to the interest
of the Corporation's Shareholders and to retain those executive officers by
linking the exercisability of their options to their continued employment with
the Corporation.
In addition, the Corporation has adopted for many of its employees various
benefit plans in which the executive officers are permitted to participate,
subject to any legal limitations on the amounts that may be contributed or the
benefits that may be payable under the plans.
The Compensation Committee:
James H. Berick, Chairman
Joseph A. Campanella
Thomas S. Robertson
Steven W. Percy
7
<PAGE> 10
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth the compensation paid by the Corporation or
its subsidiaries during the Corporation's last three fiscal years to the
Corporation's Chief Executive Officer and each of the five most highly
compensated executive officers (as measured by salary and bonus) whose aggregate
salary and bonus during the fiscal year ended February 29, 1996, exceeded
$100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG
TERM
COMPEN-
ANNUAL COMPENSATION SATION
------------------------------------- --------
OTHER
ANNUAL AWARDS ALL OTHER
COMPEN- -------- COMPEN-
NAME AND FISCAL SALARY(1) BONUS SATION(2) OPTIONS SATION
PRINCIPAL POSITION YEAR ($) ($) ($) (#) ($)
- ------------------------------ ------- --------- --------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Robert S. Reitman, 1996 424,208 89,987 -- 2,500 137,156(3)
Chief Executive Officer, 1995 407,819 192,531 23,618 2,500 133,312
Chairman of the Board of 1994 388,419 100,000 -- 9,500 114,090
Directors and President
Morton L. Reitman, 1996 355,535 -- 53,250 2,400 31,109(3)
Executive Vice President 1995 298,893 122,800 -- 2,400 26,115
1994 276,677 55,000 -- 2,600 24,645
Richard J. Sims, 1996 217,062 169,305 -- 2,400 4,011(3)
Vice President 1995 200,712 116,000(4) -- 2,000 3,967
1994 185,654 70,480 -- 2,000 5,051
James C. Spira, 1996 181,042 -- -- 2,400 3,724(3)
Group Vice President(5) 1995 261,619 -- -- 2,200 5,352
1994 248,968 -- -- 2,400 7,176
James L. Glenn, 1996 159,538 11,130 25,000(6) 1,000 1,342(3)
Vice President(6) 1995 152,550 -- 23,888 1,000 66,718
1994 144,700 20,000 -- 1,000 842
Dennis H. Kelly, 1996 123,600 79,936 4,250 1,000 3,618(3)
Vice President 1995 117,415 59,430 -- 1,000 3,595
1994 109,904 33,100 -- 1,000 3,038
</TABLE>
- ---------------
(1) Includes amounts deferred pursuant to the Corporation's Salary Savings and
Profit Sharing Plan (the "Defined Contribution Plan"), a defined
contribution plan under Section 401(k) of the Internal Revenue Code.
8
<PAGE> 11
(2) Except as otherwise noted, includes the net value (market value less
exercise price) realized in respect of Class A Common Shares and/or Class B
Common Shares purchased from the Corporation pursuant to exercise of stock
options.
(3) Includes (a) Corporation payments of premiums for long-term disability
insurance: Messrs. Robert S. Reitman, Morton L. Reitman and Sims $743 each;
Mr. Spira $510; Mr. Glenn $588; and Mr. Kelly $456, (b) Corporation
contributions under the Defined Contribution Plan: Mr. Robert S. Reitman
$2,949; Mr. Morton L. Reitman $2,897; Mr. Spira $2,294; Mr. Sims $3,267; Mr.
Glenn $754; and Mr. Kelly $3,163, (c) Corporation payments of premiums for
life insurance: Mr. Morton L. Reitman $5,700, (d) amounts accrued under
deferred compensation agreements: Mr. Robert S. Reitman $132,084; and Mr.
Morton L. Reitman $21,768, and (e) Corporation payments of parking fees: Mr.
Robert S. Reitman $1,380 and Mr. Spira $920.
(4) The final calculation of Mr. Sim's fiscal 1995 bonus resulted in a higher
bonus than that reported in the Corporation's Proxy Statement dated May 12,
1995, which was calculated based upon figures available at that time.
(5) Mr. Spira's employment with the Corporation as an executive officer
terminated effective October 31, 1995. The 1996 compensation figures for Mr.
Spira reflect the period from March 1, 1995 through October 31, 1995.
(6) Mr. Glenn's employment with the Corporation terminated at the end of March,
1996 in connection with the Corporation's sale of its housewares division.
Mr. Glenn was paid $25,000 in respect of such termination.
STOCK OPTIONS
The following table contains information concerning the grant of stock
options during fiscal year 1996 to the named executive officers.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL
------------------------------------------------------ REALIZABLE VALUE AT
% OF TOTAL ASSUMED ANNUAL
OPTIONS RATES OF STOCK
GRANTED TO EXERCISE PRICE APPRECIATION
OPTIONS EMPLOYEES IN OR BASE EXPIR- FOR OPTION TERM(3)
GRANTED(1) FISCAL PRICE ATION -------------------
NAME (#) YEAR(2) ($/SH) DATE 5% 10%
- ----------------------- ---------- ------------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Robert S. Reitman 2,500 6.54% $16.02 2/29/00 $11,075 $24,450
Morton L. Reitman 2,400 6.27% $14.56 2/28/05 $21,984 $55,680
James C. Spira 2,400 6.27% $14.56 2/28/05 $21,984 $55,680
Richard J. Sims 2,400 6.27% $14.56 2/28/05 $21,984 $55,680
James L. Glenn 1,000 2.61% $14.56 2/28/05 $ 9,160 $23,200
Dennis H. Kelly 1,000 2.61% $14.56 2/28/05 $ 9,160 $23,200
</TABLE>
9
<PAGE> 12
- ---------------
(1) All options are for Class B Common Shares and were granted pursuant to the
Corporation's 1995 Incentive Stock Option Plan. Such options become
exercisable on March 1, 1998.
(2) Based upon an aggregate of 38,250 options granted to all employees in 1995.
(3) The potential realizable values illustrated at 5% and 10% compound annual
appreciation assume that the price of the Corporation's Class B Common
Shares increases from $14.56 per share to $23.72 and $37.76 per share,
respectively, over the 10-year term of the options which were granted to all
named executive officers other than Robert S. Reitman. If those named
executive officers realize those values, the Corporation's Shareholders will
realize aggregate appreciation in the price of the 1,313,585 Class B Common
Shares of the Corporation outstanding of approximately $12,032,439 or
$30,475,172, respectively, over the same period.
The following table contains information concerning stock option exercises
during fiscal year 1996 by the named executive officers and the value of their
unexercised options at February 29, 1996.
AGGREGATED OPTION EXERCISES IN LAST FISCAL
YEAR AND FISCAL YEAR-END VALUES
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL IN-THE-MONEY OPTIONS
YEAR-END (#) AT FISCAL YEAR-END ($)
---------------------- ----------------------
SHARES ACQUIRED VALUE REALIZED EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) ($) UNEXERCISABLE UNEXERCISABLE
- --------------------- ---------------- ---------------- ---------------------- ----------------------
<S> <C> <C> <C> <C>
Robert S. Reitman None None Class B: 4,000/14,500 Class B: 0/0
Morton L. Reitman Class A: 3,000 Class A: 36,000 Class A: 6,300/0 Class A: 31,225/0
Class B: 1,500 Class B: 17,250 Class B: 13,450/7,400 Class B: 19,363/0
James C. Spira None None Class B: 34,000/0 Class B: 0/0
Richard J. Sims None None Class B: 12,000/26,000 Class B: 0/0
James L. Glenn None None Class B: 3,200/3,000 Class B: 0/0
Dennis H. Kelly Class B: 2,000 Class B: 4,250 Class B: 5,200/3,000 Class B: 750/0
</TABLE>
10
<PAGE> 13
PERFORMANCE GRAPH
The following graph compares total Shareholder returns in respect of the
Corporation's Class A Common Shares ("TNZA") and Class B Common Shares ("TNZB")
over the last five fiscal years to the American Stock Exchange Index ("AMEX")
and the American Stock Exchange Consumer Goods Index ("AMEX Consumer Goods").
Total return values for AMEX, AMEX Consumer Goods, TNZA and TNZB were calculated
based upon market weighting at the beginning of the period and include
reinvestment of dividends. The Shareholder returns shown on the graph below are
not necessarily indicative of future performance.
The following graph shall not be deemed incorporated by reference by any
general statement incorporating by reference this proxy statement into any
filing under the Securities Act of 1933 or under the Securities Exchange Act of
1934, except to the extent the Corporation specifically incorporates this
information by reference and otherwise shall not be deemed filed under such
Acts.
<TABLE>
<CAPTION>
DOLLARS
Measurement Period AMEX Con-
(Fiscal Year Covered) TNZA TNZB AMEX sumer Goods
<S> <C> <C> <C> <C>
2/28/91 100 100 100 100
2/29/92 192 169 120 157
2/28/93 174 183 118 158
2/28/94 131 140 136 186
2/28/95 173 193 131 175
2/29/96 128 152 162 209
</TABLE>
11
<PAGE> 14
EMPLOYMENT CONTRACTS AND CHANGE-IN-CONTROL ARRANGEMENTS
In 1990, the Corporation entered into employment agreements with Robert S.
Reitman and Morton L. Reitman. Robert S. Reitman's employment agreement, which
expires in June 1997, currently provides for an annual salary of $425,000, which
salary may be reviewed periodically by the Compensation Committee to determine
if the same should be increased. Robert S. Reitman's employment agreement also
provides for payment to Mr. Reitman of an annual incentive based upon certain
performance criteria, the maximum of which amount shall be not less than
$160,000, and for certain disability benefits.
Morton L. Reitman's employment agreement with the Corporation, which
expires in June 1996, currently provides for an annual salary of $303,000, which
salary may be reviewed periodically by the Compensation Committee to determine
if the same should be increased, and for certain disability benefits. Morton L.
Reitman also has a consultant agreement with the Corporation providing for
payment to Mr. Reitman for consulting services in the amount of $72,000 per
year, for a term of three years commencing upon the termination of his
employment.
In 1991, the Corporation entered into an employment agreement with James C.
Spira. Mr. Spira's employment agreement, which terminated October 31, 1995,
provided for an annual salary of $273,000. In addition, pursuant to Mr. Spira's
employment agreement, the Corporation granted to Mr. Spira options to purchase
70,000 Class B Common Shares of the Corporation, the exercise price of which
options is $14.50, the fair market value of such shares on the date of the
grant. 34,000 of the options became exercisable prior to the termination of Mr.
Spira's employment and Mr. Spira may exercise such options until February 29,
2000. Mr. Spira's remaining 36,000 unvested options expired on October 31, 1995.
In March 1995, a wholly-owned subsidiary of the Corporation entered into an
employment agreement with Mr. Dennis H. Kelly. Mr. Kelly's employment agreement,
which expires in February 1998, currently provides for an annual salary of
$124,000 plus incentives based upon performance.
The Corporation also has deferred compensation agreements with certain key
employees which provide for benefits for a term of 10 years following
retirement, disability or death. These benefits vary according to the employee's
corporate responsibility and the age of the employee at the date of such event.
The ranges of annual benefits under the deferred compensation agreements for
Messrs. Robert S. Reitman and Morton L. Reitman during the first five years of
said term are $34,800 to $68,400
12
<PAGE> 15
and $15,600 to $36,600, respectively. The amount of benefits payable to such
executive officers during the second five years of the term is 75% of the
benefit payable during the first five years.
The benefits payable to Messrs. Robert S. Reitman and Morton L. Reitman
under the deferred compensation agreements will be replaced with the benefits
payable to them under the Corporation's 1992 Supplemental Benefit Plan (the
"Supplemental Benefit Plan") upon the vesting of each such individual's rights
in that plan. Vesting under the Supplemental Benefit Plan does not occur unless
and until that individual has been a participant in the plan for 10 years or has
attained age 65, whichever first occurs; provided, however, that a participant
who becomes disabled or dies shall be vested after six years of employment by
the Corporation. In addition, in the event that effective control of the
Corporation changes from that management in control at the date of adoption of
the Supplemental Benefit Plan, all participants immediately vest in the plan
benefits. Under the Supplemental Benefit Plan, Messrs. Robert S. Reitman and
Morton L. Reitman will receive $140,000 and $60,000, respectively, in annual
benefits for a term of 15 years following their retirement, death or disability.
In the event that either individual's rights under the Supplemental Benefit Plan
fail to vest, then the benefits under the deferred compensation agreements
remain payable to such non-vested individual.
BENEFICIAL OWNERSHIP OF CLASS A COMMON SHARES
AND CLASS B COMMON SHARES
The following tables, together with the accompanying footnotes, describe
the beneficial ownership of the Corporation's Class A Common Shares and Class B
Common Shares as of June 26, 1996 (except as otherwise indicated) of (1) each
person who was known to the Corporation to be the beneficial owner of more than
five percent of the total Shares of either class issued and outstanding on such
date, (2) each current Director and nominee for election as Director, as well as
all executive officers and Directors as a group and (3) all Shareholders, other
than Current Directors, nominees and executive officers, as a group. In
addition, the following tables set forth the aggregate voting power of each of
the aforementioned persons both prior to the proposed conversion of Class B
Common Shares into Class A Common Shares (see the proposal commencing on Page 19
of this proxy statement) and after giving effect to such conversion. Except as
otherwise indicated, the share figures shown below are based upon information
supplied by the named individuals and group members described in the tables and
the Corporation's records.
13
<PAGE> 16
As used in the tables, a person is deemed to be the beneficial owner of all
shares in respect of which such person has or shares voting or investment power
(regardless of whether such individual is entitled to receive any economic
benefits derived from such shares). As used herein, "voting power" means the
power to vote, or to direct the voting of, shares and "investment power" means
the power to dispose of, or to direct the disposition of, shares. Also, included
are shares which were not owned on June 26, 1996 but which can be acquired
within 60 days after that date.
As indicated specifically in the footnotes to the tables, certain Class A
Common Shares and Class B Common Shares included for the named individuals in
each table below are deemed to be beneficially owned by more than one of such
named individuals and, as a result, have been so reported. Certain individuals
listed in the tables have disclaimed beneficial ownership with respect to some
of the Shares disclosed as beneficially owned under the definition set forth
above.
14
<PAGE> 17
BENEFICIAL OWNERSHIP OF MORE THAN FIVE PERCENT OF
CLASS A COMMON SHARES AND CLASS B COMMON SHARES
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF BENEFICIAL PRO FORMA
OWNERSHIP BY CLASS AGGREGATE
----------------------------------------------------- VOTES
CLASS A CLASS B AGGREGATE ASSUMING
NAME AND ADDRESS OF COMMON PERCENT OF COMMON PERCENT OF VOTES CONVERSION
BENEFICIAL OWNER SHARES CLASS SHARES(1) CLASS /% (2) /%(3)
- ------------------------------- --------- ---------- --------- ---------- ---------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
David J. Golden 864,337 39.6% 435,668 33.2% 907,903.8 1,300,005
30195 Chagrin Boulevard (4)(5) (5)(6) /39.2%(4)(5)(6) /37.2%(4)(5)(6)
Pepper Pike, Ohio 44124
Robert S. Reitman 863,651 39.6% 443,295 33.7% 907,980.5 1,306,946
30195 Chagrin Boulevard (7) (7) /39.2%(7) /37.4%(7)
Pepper Pike, Ohio 44124
Sylvia K. Reitman 863,651 39.6% 443,295 33.7% 907,980.5 1,306,946
30195 Chagrin Boulevard (5)(8) (5)(8) /39.2%(5)(8) /37.4%(5)(8)
Pepper Pike, Ohio 44124
Estate of Miriam G. Golden 383,662 17.6% 191,831 14.6% 402,845.1 575,493
David J. Golden and (9) (9) /17.4%(9) /16.5%(9)
Sylvia K. Reitman,
Co-executors
30195 Chagrin Boulevard
Pepper Pike, Ohio 44124
Dimensional Fund 132,400 6.1% 69,150 5.3% 139,315.0 201,550
Advisors Inc. (10) (10) /6.0%(10) /5.8%(10)
1299 Ocean Avenue,
Suite 650
Santa Monica,
California 90401
Lazard Freres & Co. 108,618 5.0% 79,592 6.1% 116,577.2 188,210
One Rockefeller Plaza (11) (11) /5.0%(11) /5.4%(11)
New York, New York 10020
</TABLE>
- ---------------
(1) Each Class A Common Share is convertible into one Class B Common Share.
Class B Common Shares issuable upon such conversion are not included.
(2) Aggregate Class A Common Share and Class B Common Share voting power,
expressed as a number of votes and as a percentage of total available votes
(based upon 2,183,603 Class A votes and 131,358.5 Class B votes,
aggregating 2,314,961.5 votes), of the respective named Shareholders. The
figures shown reflect one vote for each Class A Common Share and 1/10th of
one vote for each Class B Common Share held by each such named Shareholder.
The figures shown do not take into account that the Class A Common Shares
and Class B Common Shares vote for separate classes of Directors and,
therefore, are not aggregated for that purpose.
15
<PAGE> 18
(3) Pro forma voting power, expressed as a number of votes and as a percentage
of total available votes (based upon an aggregate of 3,497,188 votes), of
the respective named Shareholders, after giving effect to the proposed
conversion of each Class B Common Share into one Class A Common Share, as
described in the proposal commencing on page 19 of this proxy statement.
The figures shown reflect one vote for each Common Share which would be
held by each such named Shareholder subsequent to the proposed conversion.
(4) Includes 7,700 Class A Common Shares held as trustee for the benefit of Mr.
Golden's son.
(5) Includes 383,662 Class A Common Shares or 191,831 Class B Common Shares, as
applicable, in respect of which David J. Golden and Sylvia K. Reitman share
voting and dispositive power as co-executors of the estate of Miriam G.
Golden; and 133,529 Class A Common Shares or 66,764 Class B Common Shares,
as applicable, in respect of which David J. Golden and Sylvia K. Reitman,
acting in concert, share the right to direct the voting and disposition
pursuant to the terms of the Louis B. Golden Insurance Trust u/a/d October
20, 1980.
(6) Includes 3,500 Class B Common Shares which are not owned, but can be
purchased within 60 days upon the exercise of options granted under the
Corporation's 1989 Incentive Stock Option Plan (the "1989 Plan"). Also
includes 3,850 Class B Common Shares held as trustee for the benefit of Mr.
Golden's son.
(7) Includes 268,906 Class A Common Shares and 134,453 Class B Common Shares,
as applicable, owned by Sylvia K. Reitman, Mr. Reitman's wife, and the
Class A Common Shares and Class B Common Shares, as applicable, described
in Note (5), above, as to all of which shares Mr. Reitman disclaims
beneficial ownership.
(8) Includes 77,554 Class A Common Shares or 50,247 Class B Common Shares, as
applicable, owned by Robert S. Reitman, Mrs. Reitman's husband, as to which
shares Mrs. Reitman disclaims beneficial ownership.
(9) The estate of Miriam G. Golden is the record owner of the Shares shown;
however, the co-executors each are deemed to own beneficially all of such
Shares, as reported above.
(10) Information based solely upon Schedules 13G filed by such shareholder with
the Securities and Exchange Commission in January, 1995. Dimensional Fund
Advisors Inc. ("Dimensional"), a registered investment advisor, is deemed
to have beneficial ownership of 132,400 Class A Common Shares and 69,150
Class B Common Shares, as applicable, as of December 31, 1994, all of which
Shares are held in portfolios of DFA Investment Dimensions Group, Inc., a
registered open-end investment company, in series of the DFA Investment
Trust Company, a Delaware business trust, or in the DFA Group Trust and DFA
Participation Group Trust, investment vehicles for qualified employee
benefit plans, as to all of which Dimensional serves as investment manager.
Dimensional disclaims beneficial ownership of all of such Shares.
(11) Information based solely upon Schedules 13G filed by such shareholder with
the Securities and Exchange Commission in February, 1995, in respect of
Class A Common Shares, and February, 1996, in respect of Class B Common
Shares.
16
<PAGE> 19
BENEFICIAL OWNERSHIP OF EXECUTIVE OFFICERS, DIRECTORS AND NOMINEES
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF BENEFICIAL
OWNERSHIP BY CLASS PRO FORMA
------------------------------------------------------- AGGREGATE
CLASS B VOTES
CLASS A COMMON AGGREGATE ASSUMING
NAME OF DIRECTOR COMMON PERCENT OF SHARES PERCENT OF VOTES CONVERSION
OR NOMINEE SHARES CLASS (1)(2) CLASS(1) /%(3) /%(4)
- --------------------------- ------- ---------- ------- ---------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
James H. Berick 600 (5) 8,410 (5) 1,441.0 9,010
/(5) /(5)
Joseph A. Campanella 500 (5) 6,310 (5) 1,131.0 6,810
/(5) /(5)
David J. Golden 864,337(6)(7) 39.6% 435,668(6)(7) 33.2% 907,903.8 1,300,005
/39.2%(6)(7) /37.2%(6)(7)
Robert S. Reitman 863,651(8) 39.6% 443,295(8) 33.7% 907,980.5 1,306,946
/39.2%(8) /37.4%(8)
Morton L. Reitman 47,564(9)(10) 2.2% 34,646(10) 2.6% 51,028.6 82,210
/2.2%(9)(10) /2.4%(9)(10)
Sylvia K. Reitman 863,651(6)(11) 39.6% 443,295(6)(11) 33.7% 907,980.5 1,306,946
/39.2%(6)(11) /37.4%(6)(11)
Thomas S. Robertson 0 0% 6,110 (5) 611.0 6,110
/(5) /(5)
James C. Spira 4,800 (5) 36,400 2.8% 8,440.0 41,200
/(5) /1.2%
Steven W. Percy 0 0% 2,955 (5) 295.5 2,955
/(5) /(5)
Richard J. Sims 1,520 (5) 20,760 1.6% 3,596.0 22,280
/(5) /(5)
Dennis H. Kelly 0 0% 9,200 (5) 920.0 9,200
/(5) /(5)
James L. Glenn 0 0% 4,200 (5) 420.0 4,200
/(5) /(5)
Executive Officers, 1,278,131 58.5% 758,634 57.8% 1,353,994.4 2,036,765
Directors and /58.5% /58.2%
Nominees as a Group (14
persons)
All Shareholders other than 905,472 41.5% 554,951 42.2% 960,967.1 1,460,423
Executive Officers, /41.5% /41.8%
Directors and Nominees as
a Group
</TABLE>
17
<PAGE> 20
- ---------------
(1) Includes the following number of Class B Common Shares which are not owned,
but can be purchased within 60 days upon the exercise of options granted
under the Corporation's 1981 Performance Share Option Plan (the "1981
Plan") and 1989 Plan (and in the case of Mr. Spira, under his employment
agreement which was terminated and Mr. Sims, under his existing employment
agreement): Robert S. Reitman -- 13,500; Morton L. Reitman -- 16,050; David
J. Golden -- 3,500; James C. Spira -- 34,000; Richard J. Sims -- 20,000;
Dennis H. Kelly -- 6,200; and all executive officers and Directors as a
group -- 102,050.
(2) Each Class A Common Share is convertible into one Class B Common Share.
Class B Common Shares issuable upon such conversion are not included.
(3) Aggregate Class A Common Share and Class B Common Share voting power,
expressed as a number of votes and as a percentage of total available votes
(based upon 2,183,603 Class A votes and 131,358.5 Class B votes,
aggregating 2,314,961.5 votes), of the respective named Shareholders. The
figures shown reflect one vote for each Class A Common Share and 1/10th of
one vote for each Class B Common Share held by each such named Shareholder.
The figures shown do not take into account that the Class A Common Shares
and Class B Common Shares vote for separate classes of Directors and,
therefore, are not aggregated for that purpose.
(4) Pro forma voting power, expressed as a number of votes and as a percentage
of total available votes (based upon an aggregate of 3,497,188 votes), of
the respective named Shareholders, after giving effect to the proposed
conversion of each Class B Common Share into one Class A Common Share, as
described in the proposal commencing on page 19 of this proxy statement.
The figures shown reflect one vote for each Common Share which would be
held by each such named Shareholder subsequent to the proposed conversion.
(5) Less than 1%.
(6) Includes 383,662 Class A Common Shares or 191,831 Class B Common Shares, as
applicable, in respect of which David J. Golden and Sylvia K. Reitman share
voting and dispositive power as co-executors of the estate of Miriam G.
Golden; and 133,529 Class A Common Shares or 66,764 Class B Common Shares,
as applicable, in respect of which David J. Golden and Sylvia K. Reitman,
acting in concert, share the right to direct the voting and disposition
pursuant to the terms of the Louis B. Golden Insurance Trust u/a/d October
20, 1980.
(7) Includes 7,700 Class A Common Shares and 3,850 Class B Common Shares, as
applicable, held as trustee for the benefit of Mr. Golden's son.
(8) Includes 268,906 Class A Common Shares and 134,453 Class B Common Shares,
as applicable, owned by Sylvia K. Reitman, Mr. Reitman's wife, and the
Class A Common Shares and Class B Common Shares, as applicable, described
in note (6), above, as to all of which shares Mr. Reitman disclaims
beneficial ownership.
(9) Includes the 6,300 Class A Common Shares, which are not owned, but can be
purchased within 60 days upon the exercise of options granted under the
Corporation's 1981 Plan by Morton L. Reitman.
(10) Includes 1,820 Class A Common Shares or 910 Class B Common Shares, as
applicable, held as custodian for the benefit of Morton L. Reitman's adult
child. Also includes 1,200 Class A Common Shares or 600 Class B Common
Shares, as applicable, owned by Mr. Reitman's wife, as to which shares Mr.
Reitman disclaims beneficial ownership.
(11) Includes 77,554 Class A Common Shares or 50,247 Class B Common Shares, as
applicable, owned by Robert S. Reitman, Mrs. Reitman's husband, as to all
of which shares Mrs. Reitman disclaims beneficial ownership.
18
<PAGE> 21
PROPOSAL: CONVERSION OF CLASS B COMMON SHARES
TO CLASS A COMMON SHARES, AND AMENDMENT TO THE
AMENDED ARTICLES OF INCORPORATION TO ELIMINATE
THE CLASS B COMMON SHARES, REDESIGNATE THE CLASS A
COMMON SHARES AS "COMMON SHARES", AND PROVIDE THAT
THE NUMBER OF AUTHORIZED COMMON SHARES SHALL BE 12,000,000
INTRODUCTION
At its meeting held April 29, 1996, the Board of Directors of the
Corporation approved, and determined to submit to the shareholders for their
approval, (i) the conversion of Class B Common Shares to Class A Common Shares
(the "Conversion") and (ii) an amendment (referred to in this Section of the
proxy statement as the "Amendment") to Article Fourth of the Corporation's
Amended Articles of Incorporation to (a) eliminate the Class B Common Shares,
(b) redesignate the Class A Common Shares as "Common Shares" (the "Common
Shares"), and (c) provide that the number of authorized Common Shares shall be
12,000,000.
Following shareholder approval of the Conversion and the Amendment and
approval for listing of the additional Common Shares to be issued upon the
Conversion on the American Stock Exchange, the Class B Common Shares shall be
converted to Class A Common Shares. Upon the Conversion, each Class B Common
Share outstanding will be converted to one Class A Common Share (the "Converted
Shares") and all Class A Common Shares (including the Converted Shares) will be
redesignated as "Common Shares". The affirmative vote of holders of a majority
of the outstanding Class A Common Shares and Class B Common Shares of the
Corporation entitled to vote at the meeting, voting as separate classes, is
required to adopt this proposal.
The foregoing items as well as other matters in respect of the Conversion
and the Amendment are discussed in greater detail below.
PURPOSE
The Class B Common Shares were authorized in 1988 primarily to enable the
Corporation to raise capital for acquisitions, expansion or general corporate
purposes through the issuance of Class B Common Shares or debt securities
convertible into such shares. Since the authorization of the Class B Common
Shares, there has existed no need to utilize such shares for capital raising
purposes and the Board of Directors presently does not anticipate such a need in
the future. Accordingly, the Board of
19
<PAGE> 22
Directors believes that it would be in the best interests of the Corporation to
convert the outstanding Class B Common Shares into Class A Common Shares to
simplify the Corporation's capital stock structure and potentially to increase
the liquidity in the market for the holders of the Class A Common Shares and
Class B Common Shares. After the Conversion of the Class B Common Shares and the
redesignation of the Class A Common Shares, the Corporation's capital stock will
consist only of two classes, Common Shares without par value and Serial
Preferred Shares without par value. No Serial Preferred Shares are outstanding.
The Amendment will effect the redesignation of the Class A Common Shares as
"Common Shares" and provide that the number of authorized Common Shares shall be
12,000,000, the aggregate number of presently authorized Class A Common Shares
and Class B Common Shares.
DESCRIPTION OF THE REDESIGNATED COMMON SHARES
The express terms of the Common Shares shall be identical in all respects
to the Class A Common Shares, other than in respect of the election of Directors
and there will be no right to convert the Common Shares to shares of any other
class. Those terms are set forth in full in the Amendment, the text of which is
attached hereto as Exhibit A. The following summary is qualified in its entirety
by reference to Exhibit A.
1. Voting. Subsequent to the Conversion, each Common Share will entitle the
holder to one vote on all matters submitted to a vote of shareholders, including
the election of Directors in each of the three existing classes. Presently, each
Class A Common Share entitles the holder to one vote and each Class B Common
Share entitles the holder to one-tenth of one vote. The Class A Common Shares
and the Class B Common Shares presently are voted together as a single class,
except that only the holders of Class A Common Shares are entitled to vote for
Directors in Classes I and III and only the holders of Class B Common Shares are
entitled to vote for Directors in Class II (the Class subject to election at
this Annual Meeting). Notwithstanding the Conversion, the Directors in Class II
elected at this Annual Meeting by the holders of Class B Common Shares will
serve their designated term and until their respective successors are duly
elected and qualified.
The following information sets forth the aggregate voting power of three
hypothetical shareholders both before and after the Conversion (based upon an
aggregate of 2,314,961.5 and 3,497,188 votes available before and after the
Conversion, respectively). A Shareholder owning 1,000 Class A Common Shares and
no Class B Common Shares would have .0433% of the voting power before the
Conversion and .0285% after the Conversion. A Shareholder owning 1,000 Class A
Common Shares and 500
20
<PAGE> 23
Class B Common Shares would have .0454% of the voting power before the
Conversion and .0429% after the Conversion. A Shareholder owning 1,000 Class A
Common Shares and 1,000 Class B Common Shares would have .0475% of the voting
power before the Conversion and .0572% after the Conversion.
Under Ohio law, the vote of holders of at least a majority of the
outstanding Common Shares will be required for any amendment to the Articles
which would change the express terms of such shares in any manner substantially
prejudicial to the holders thereof.
2. Dividends. The Board of Directors intends to pay dividends on the Common
Shares, following shareholder approval of the Conversion, from funds legally
available therefor. The Board of Directors anticipates that the aggregate amount
of such dividends to the holders of Common Shares will increase over the
combined aggregate dividends paid in recent quarters to the holders of Class A
Common Shares and Class B Common Shares. However, the Board of Directors
anticipates that initially such dividend will be $.07 per quarter, which is less
than the dividend currently paid to holders of Class B Common Shares. The
Corporation declared the following cash dividends in the second fiscal quarter
of 1997 and has paid the following cash dividends in the first fiscal quarter of
1997 and in its last two fiscal years ended February 29 and 28, respectively:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B
QUARTER 1997 1997 1996 1996 1995 1995
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
1 $.050 $.090 $.045 $.085 $.045 $.085
2 $.050* $.090* $.050 $.090 $.045 $.085
3 -- -- $.050 $.090 $.045 $.085
4 -- -- $.050 $.090 $.045 $.085
</TABLE>
- ---------------
*To be paid July 16, 1996 to shareholders of record June 28, 1996.
No assurance can be given as to the payment of any dividends in the future or
the amounts thereof. The Corporation is not in arrears in dividends in respect
of either Class A Common Shares or Class B Common Shares.
3. Transferability. The Common Shares will be transferrable freely and will
be listed for trading under the symbol "TNZ", on the American Stock Exchange, on
which Exchange the Class A Common Shares and Class B Common Shares currently are
listed. However, no assurance can be given as to the price at which the Common
Shares will trade.
21
<PAGE> 24
4. Other. The Class A Common Shares and Class B Common Shares do not, and
the Common Shares will not, carry any pre-emptive rights enabling a holder to
subscribe or receive shares of the Corporation. The Board of Directors will
continue to possess the power to issue authorized but unissued Common Shares
without further shareholder action. The Shareholder's equity of each holder of
Class A Common Shares and of Class B Common Shares will not be diluted or
otherwise affected by reason of the Conversion.
DISSENTING SHAREHOLDERS
Any holder of Class B Common Shares who does not vote any such shares in
favor of this proposal is entitled to make written demand for the payment to
such shareholder of the fair cash value of its Class B Common Shares not so
voted. The written demand must be delivered by such shareholder to the
Corporation not later than August 12, 1996 and must contain such shareholder's
address, the number of Class B Common Shares not voted in favor of this
proposal, and the amount claimed by such shareholder as the fair cash value of
such shares. In the event any such shareholder does not make the aforementioned
written demand in accordance with this paragraph and in accordance with Section
1701.85 of the Ohio Revised Code, such shareholder's right to demand payment of
the fair cash value of its Class B Common Shares not voted in favor of this
proposal will terminate.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THIS PROPOSAL CONCERNING THE
CONVERSION OF CLASS B COMMON SHARES INTO CLASS A COMMON SHARES AND THE AMENDMENT
TO THE AMENDED ARTICLES OF INCORPORATION TO ELIMINATE THE CLASS B COMMON SHARES,
REDESIGNATE THE CLASS A COMMON SHARES AS "COMMON SHARES" AND PROVIDE THAT THE
AUTHORIZED COMMON SHARES SHALL BE 12,000,000.
SELECTION OF AUDITORS
The Board of Directors of the Corporation has recommended that KPMG Peat
Marwick LLP be selected as independent auditors to examine the books, records
and accounts of the Corporation and its subsidiaries for the fiscal year ending
February 28, 1997. In accordance with past practice, the recommendation is being
presented to holders of Class A Common Shares and Class B Common Shares for
adoption or rejection at the Annual Meeting. KPMG Peat Marwick LLP were the
independent auditors of the Corporation for the fiscal year ended February 29,
1996 and are considered by the Board of Directors to be well qualified.
Representatives of KPMG Peat Marwick LLP are expected to be present at the
Annual Meeting with the
22
<PAGE> 25
opportunity to make a statement if they desire to do so and are expected to be
available to respond to appropriate questions.
COMPLIANCE WITH SECTION 16(A) OF
THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Corporation's executive officers and Directors, and persons who beneficially own
more than 10% of the Corporation's Common Shares, to file reports of ownership
and changes in ownership with the Securities and Exchange Commission. James C.
Spira reported the expiration of stock options in October, 1995 subsequent to
the due date for such reporting.
OTHER MATTERS
The Board of Directors knows of no matter to be presented for action at the
Annual Meeting other than those described in this Proxy Statement. Should other
matters come before the meeting, the Class A Common Shares and Class B Common
Shares represented by proxies solicited hereby will be voted with respect
thereto in accordance with the best judgment of the proxy holders.
GENERAL INFORMATION
CUMULATIVE VOTING
If notice in writing is given by any holder of Class B Common Shares to the
President, a Vice President or the Secretary of the Corporation, not less than
forty-eight hours before the time fixed for the holding of the Annual Meeting,
that such Shareholder desires that the voting with respect to the election of
Directors shall be cumulative, and if an announcement of the giving of such
notice is made upon the convening of the meeting by the Chairman or Secretary of
the Meeting or by or on behalf of the Shareholder giving such notice, each
holder of Class B Common Shares shall have the right to cumulate such voting
power as he or she possesses at such election. If the Shareholder desires to
make the foregoing announcement at the convening of the meeting, such
Shareholder must be present in person or through a properly authorized
representative other than those persons designated in the accompanying form of
proxy.
23
<PAGE> 26
VOTING OF PROXIES
Class A Common Shares and Class B Common Shares represented by properly
executed Management proxies will be voted at the meeting, and if a holder of
such shares has specified how the same are to be voted, they will be voted in
accordance with such specification. It is intended that Class B Common Shares
represented by proxies in which no specification has been made will be voted for
the election of Directors and Class A Common Shares and Class B Common Shares
represented by proxies in which no specification has been made will be voted for
the proposal to convert the Class B Common Shares and amend the Amended Articles
of Incorporation and for the selection of the independent auditors.
SHAREHOLDER PROPOSALS
If a holder of Class A Common Shares or Class B Common Shares intends to
present a proposal at the next Annual Meeting of Shareholders presently
scheduled for June 16, 1997, it must be received by the Corporation for
consideration for inclusion in the Corporation's Proxy Statement and form of
proxy relating to that meeting on or before January 12, 1997.
REVOCATION OF PROXIES
A proxy may be revoked at any time before a vote is taken or the authority
granted is otherwise exercised. Revocation may be accomplished by the execution
of a later proxy with regard to the same Class A Common Shares or Class B Common
Shares, as the case may be, or by giving notice in writing or in open meeting.
SOLICITATION OF PROXIES
The cost of soliciting the accompanying proxies will be borne by the
Corporation. The Corporation does not expect to pay any compensation for the
solicitation of proxies but may pay brokers, nominees, fiduciaries and
custodians their reasonable expenses for sending proxy material to principals
and obtaining their instructions. In addition to solicitation by mail, proxies
may be solicited in person, by telephone or telegraph, or by Directors, officers
and regular employees of the Corporation.
FINANCIAL INFORMATION
The following financial statements of the Corporation and the Independent
Auditors' Report of KPMG Peat Marwick LLP are set forth on pages 18 through 27
of
24
<PAGE> 27
the Corporation's 1996 Annual Report to Shareholders and are incorporated herein
by reference:
Consolidated Balance Sheets at February 29, 1996 and February 28, 1995
Consolidated Statements of Operations for the years ended February 29,
1996 and February 28, 1995 and 1994.
Consolidated Statements of Shareholders' Equity for the years ended
February 29, 1996 and February 28, 1995 and 1994.
Consolidated Statements of Cash Flows for the years ended February 29,
1996 and February 28, 1995 and 1994.
Notes to Consolidated Financial Statements for the years ended
February 29, 1996 and February 28, 1995 and 1994.
The following financial statements of the Corporation and the Independent
Auditor's Review Report of KPMG Peat Marwick LLP are set forth on pages 1
through 5 and 9 of the Corporation's Quarterly Report on Form 10-Q for the
quarterly period ended May 31, 1996 and are incorporated herein by reference:
Condensed Consolidated Balance Sheets at May 31, 1996 (unaudited) and
February 29, 1996.
Condensed Consolidated Statements of Earnings for the three-month
period ended May 31, 1996 and 1995 (unaudited).
Condensed Consolidated Statements of Cash Flows for the three-month
periods ended May 31, 1996 and 1995 (unaudited).
Notes to Consolidated Financial Statements for the three-month periods
ended May 31, 1996 and 1995 (unaudited).
Management's Discussion and Analysis of Financial Condition and Results of
Operations of the Corporation is set forth on pages 14 through 17 of the
Corporation's 1996 Annual Report to Shareholders and on page 6 of the
Corporation's Quarterly Report on Form 10-Q for the quarterly period ended May
31, 1996 and each is incorporated herein by reference.
By order of the Board of Directors
JAMES H. BERICK
July 10, 1996 Secretary
25
<PAGE> 28
EXHIBIT A
AMENDMENT AND RESTATEMENT OF ARTICLE "FOURTH" OF THE
AMENDED ARTICLES OF INCORPORATION
FOURTH: Effective upon the filing of this Amendment, each outstanding
Class B Common Share of the Corporation shall be converted into one Class A
Common Share of the Corporation, all authorized but unissued Class B Common
Shares shall be eliminated, and the Class A Common Shares shall be redesignated
as Common Shares. Thereupon, the number of shares which the Corporation is
authorized to have outstanding shall be 12,200,000 consisting of (i) 12,000,000
Common Shares without par value (collectively, the "Common Shares" and
individually, a "Common Share") and (ii) 200,000 Serial Preferred Shares without
par value ("Serial Preferred Shares").
The shares of such classes shall have the following express terms:
DIVISION A
EXPRESS TERMS OF COMMON SHARES
The Common Shares shall be subject to the express terms of the Serial
Preferred Shares and any series thereof. Each Common Share shall be equal to
every other Common Share. Each holder of Common Shares shall be entitled to one
vote for each Common Share so held upon all matters presented to Shareholders.
The Common Shares will not carry any pre-emptive rights enabling a holder to
subscribe or receive shares of the Corporation. The Board of Directors shall
possess the power to issue authorized but unissued Common Shares without further
shareholder action.
DIVISION B
EXPRESS TERMS OF SERIAL PREFERRED SHARES
Section 1. Serial Preferred Shares may be issued from time to time in one
or more series. All Serial Preferred Shares shall be of equal rank and shall be
identical, except in respect of the matters that may be fixed by the Board of
Directors as hereinafter provided, and each share of each series shall be
identical with all other shares of such series, except as to the date from which
dividends are cumulative.
A-1
<PAGE> 29
Subject to the provisions of Section 2 to 7, inclusive, of this Division B,
which provisions shall apply to all Serial Preferred Shares, the Board of
Directors hereby is authorized to cause Serial Preferred Shares to be issued in
one or more series and with respect to each such series prior to the issuance
thereof to fix:
(a) The designation of the series, which may be by distinguishing
number, letter or title.
(b) The number of shares of the series, which number the Board of
Directors may (except where otherwise provided in the creation of the
series) increase or decrease (but not below the number of shares thereof
then outstanding).
(c) The annual dividend rate of the series.
(d) The dates at which dividends, if declared, shall be payable, and
the dates from which dividends shall be cumulative.
(e) The redemption rights and price or prices, if any, for shares of
the series.
(f) The terms and amount of any sinking fund provided for the
purchase or redemption of shares of the series.
(g) The amounts payable on shares of the series in the event of any
voluntary or involuntary liquidation, dissolution or winding up of the
affairs of the Corporation.
(h) Whether the shares of the series shall be convertible into Common
Shares, and, if so, the conversion price or prices, any adjustments
thereof, and all other terms and conditions upon which such conversion may
be made.
(i) Restrictions (in addition to those set forth in Section 6(b) of
this Division) on the issuance of shares of the same series or of any other
class or series.
The Board of Directors is authorized to adopt from time to time amendments
to the Amended Articles of Incorporation fixing, with respect to each such
series, the matters described in clauses (a) to (i), inclusive, of this Section
1.
Section 2. The holders of Serial Preferred Shares of each series, in
preference to the holders of Common Shares and of any other class of shares
ranking junior to the Serial Preferred Shares, shall be entitled to receive out
of any funds legally available
A-2
<PAGE> 30
and when and as declared by the Board of Directors, dividends in cash at the
rate for such series fixed in accordance with the provisions of Section 1 of
this Division B and no more, payable quarterly on the dates fixed for such
series. Such dividends shall be cumulative, in the case of shares of each
particular series, from and after the date or dates fixed with respect to such
series. No dividends may be paid upon or declared or set apart for any of the
Serial Preferred Shares for any quarterly dividend period unless at the same
time a like proportionate dividend for the same quarterly dividend period,
ratably in proportion to the respective annual dividend rates fixed therefor,
shall be paid upon or declared or set apart for all Serial Preferred Shares of
all series then issued and outstanding and entitled to receive such dividend.
Section 3. In no event so long as any Serial Preferred Shares shall be
outstanding shall any dividends, except a dividend payable in Common Shares or
other shares ranking junior to the Serial Preferred Shares be paid or declared
or any distribution be made except as aforesaid on the Common Shares or any
other shares ranking junior to the Serial Preferred Shares, nor shall any Common
Shares or any other shares ranking junior to the Serial Preferred Shares be
purchased, retired or otherwise acquired by the Corporation (except out of the
proceeds of the sale of Common Shares or other shares ranking junior to the
Serial Preferred Shares received by the Corporation on or subsequent to the date
on which the Serial Preferred Shares authorized herein are first issued):
(a) Unless all accrued and unpaid dividends on Serial Preferred
Shares, including the full dividends for the current dividend period, shall
have been declared and paid or a sum sufficient for payment thereof set
apart; and
(b) Unless there shall be no arrearages with respect to the redemption
of Serial Preferred Shares of any series from any sinking fund provided for
shares of such series in accordance with the provisions of Section 1 of
this Division B.
Section 4.
(a) Subject to the express terms of each series and to the provisions
of Section 6(b) (iii) of this Division B, the Corporation may from time to
time redeem all or any part of the Serial Preferred Shares of any series at
the time outstanding (i) at the option of the Board of Directors at the
applicable redemption price for such series fixed in accordance with the
provisions of Section 1 of this Division B, or (ii) in fulfillment of the
requirements of any sinking fund provided for shares of such series at the
applicable sinking fund redemption price, fixed in accordance with the
provisions of Section 1 of this Division B,
A-3
<PAGE> 31
together in each case with an amount equal to all dividends accrued and
unpaid thereon (whether or not such dividends shall have been earned or
declared) to the redemption date.
(b) Notice of every such redemption shall be mailed, postage prepaid
to the holders of record of the Serial Preferred Shares to be redeemed at
their respective addresses then appearing on the books of the Corporation,
not less than 30 days nor more than 60 days prior to the date fixed for
such redemption. At any time before or after notice has been given as above
provided, the Corporation may deposit the aggregate redemption price of the
Serial Preferred Shares to be redeemed with any bank or trust company in
Cleveland, Ohio or New York, New York, having capital and surplus of more
than $5,000,000, named in such notice, and direct that such deposited
amount be paid to the respective holders of the Serial Preferred Shares so
to be redeemed, in amounts equal to the redemption price of all Serial
Preferred Shares so to be redeemed, on surrender of the share certificate
or certificates held by such holders. Upon the making of such deposit such
holders shall cease to be shareholders with respect to such shares, and
after such notice shall have been given and such deposit shall have been
made such holders shall have no interest in or claim against the
Corporation with respect to such shares except only to receive such money
from such bank or trust company without interest or the right to exercise,
before the redemption date, any unexpired privileges conversion. In case
less than all of the outstanding Serial Preferred Shares are to be
redeemed, the Corporation shall select pro rata or by lot the shares so to
be redeemed in such manner as shall be prescribed by its Board of
Directors. If the holders of Serial Preferred Shares which shall have been
called for redemption shall not, within six years after such deposit, claim
the amount deposited for the redemption thereof, any such bank or trust
company shall, upon demand, pay over to the Corporation such unclaimed
amounts and thereupon such bank or trust company and the Corporation shall
be relieved of all responsibility in respect thereof and to such holders.
(c) Any Serial Preferred Shares which are redeemed by the Corporation
pursuant to the provisions of this Section 4 and any Serial Preferred
Shares which are purchased and delivered in satisfaction of any sinking
fund requirements provided for shares of such series and any Serial
Preferred Shares which are converted in accordance with the express terms
thereof shall be cancelled and not reissued. Any Serial Preferred Shares
otherwise acquired by the Corporation shall resume the status of authorized
and unissued Serial Preferred Shares without serial designation.
A-4
<PAGE> 32
Section 5.
(a) The holders of Serial Preferred Shares of any series shall, in
case of liquidation, dissolution or winding up of the affairs of the
Corporation, be entitled to receive in full out of the assets of the
Corporation, including its capital, before any amount shall be paid or
distributed among the holders of the Common Shares or any other shares
ranking junior to the Serial Preferred Shares, the amounts fixed with
respect to shares of such series in accordance with Section I of this
Division B, plus an amount equal to all dividends accrued and unpaid
thereon (whether or not such dividends shall have been earned or declared)
to the date of payment of the amount due pursuant to such liquidation,
dissolution or winding up of the affairs of the Corporation. In case the
net assets of the Corporation legally available therefor are insufficient
to permit the payment upon all outstanding Serial Preferred Shares and any
shares ranking on a parity therewith of the full preferential amount to
which they are respectively entitled, then such net assets shall be
distributed ratably upon outstanding Serial Preferred Shares and any shares
ranking on a parity therewith in proportion to the full preferential amount
to which each such share is entitled.
After payment to holders of Serial Preferred Shares of the full
preferential amounts as aforesaid, holders of Serial Preferred Shares as
such shall have no right or claim to any of the remaining assets of the
Corporation.
(b) The merger or consolidation of the Corporation into or with any
other corporation, or the merger of any other corporation into it, or the
sale, lease or conveyance of all or substantially all the property or
business of the Corporation, shall not be deemed to be a dissolution,
liquidation or winding up for the purposes of this Section 5.
Section 6.
(a) The holders of Serial Preferred Shares shall be entitled to one
vote for each share; and, except as otherwise provided herein or required
by law, the holders of Serial Preferred Shares and the holders of Common
Shares shall vote together as one class on all matters. No adjustment of
the voting rights of holders of Serial Preferred Shares shall be made for
an increase or decrease in the number of Common Shares authorized or issued
or for share splits or combinations of the Common Shares or for share
dividends on any class of shares payable solely in Common Shares.
A-5
<PAGE> 33
If, and so often as, the Corporation shall be in default in dividends
in an amount equivalent to six full quarterly dividends on any series of
Serial Preferred Shares at the time outstanding, whether or not earned or
declared, the holders of Serial Preferred Shares of all series, voting
separately as a class and in addition to all other rights to vote for
Directors, shall be entitled to elect, as herein provided, two members of
the Board of Directors of the Corporation; provided, however, that the
holders of Serial Preferred Shares shall not have or exercise such special
class voting rights except at meetings of the shareholders for the election
of Directors at which the holders of not less than 45% of the outstanding
Serial Preferred Shares of all series then outstanding are present in
person or by proxy; and provided further that the special class voting
rights provided for herein when the same shall have become vested shall
remain so vested until all accrued and unpaid dividends on the Serial
Preferred Shares of all series then outstanding shall have been paid,
whereupon the holders of Serial Preferred Shares shall be divested of their
special class voting rights in respect of subsequent elections of
Directors, subject to the revesting of such special class voting rights in
the event hereinabove specified in this paragraph.
In the event of default entitling the holders of Serial Preferred
Shares to elect two Directors as above specified, a special meeting of the
shareholders for the purpose of electing such Directors shall be called by
the Secretary of the Corporation upon written request of, or may be called
by, the holders of record of at least 15% of the Serial Preferred Shares of
all series at the time outstanding, and notice thereof shall be given in
the same manner as that required for the annual meeting of shareholders;
provided, however, that the Corporation shall not be required to call such
special meeting if the annual meeting of shareholders shall be held within
90 days after the date of receipt of the foregoing written request from the
holders of Serial Preferred Shares. At any meeting at which the holders of
Serial Preferred Shares shall be entitled to elect Directors, the holders
of 45% of the then outstanding Serial Preferred Shares of all series,
present in person or by proxy, shall be sufficient to constitute a quorum,
and the vote of the holders of a majority of such shares so present at any
such meeting at which there shall be such a quorum shall be sufficient to
elect the members of the Board of Directors which the holders of Serial
Preferred Shares are entitled to elect as hereinabove provided.
The two Directors who may be elected by the holders of Serial
Preferred Shares pursuant to the foregoing provisions shall be in addition
to any other Directors then in office or proposed to be elected otherwise
than pursuant to such
A-6
<PAGE> 34
provisions, and nothing in such provisions shall prevent any change
otherwise permitted in the total number of Directors of the Corporation or
require the resignation of any Director elected otherwise than pursuant to
such provisions.
(b) The affirmative vote of the holders of at least a majority of the
Serial Preferred Shares at the time outstanding, given in person or by
proxy at a meeting called for the purpose at which the holders of Serial
Preferred Shares shall vote separately as a class, shall be necessary to
effect any one or more of the following (but so far as the holders of
Serial Preferred Shares are concerned, such action may be effected with
such vote):
(i) Any amendment, alteration or repeal of any of the provisions
of the Amended Articles of Incorporation or of the Code of Regulations
of the Corporation which affects adversely the voting powers, rights or
preferences of the holders of Serial Preferred Shares; provided,
however, that, for the purpose of this clause (i) only, neither the
amendment of the Amended Articles of Incorporation so as to authorize or
create, or to increase the authorized or outstanding amount of, Serial
Preferred Shares or of any shares of any class ranking on a parity with
or junior to the Serial Preferred Shares, nor the amendment of the
provisions of the Code of Regulations so as to increase the number of
Directors of the Corporation, shall be deemed to affect adversely the
voting powers, rights or preferences of the holders of Serial Preferred
Shares; and provided further, that if such amendment, alteration or
repeal affects adversely the rights or preferences of one or more but
not all series of Serial Preferred Shares at the time outstanding, only
the vote of the holders of at least a majority of the number of the
shares at the time outstanding of the series so affected shall be
required;
(ii) The authorization or creation of, or the increase in the
authorized amount of, any shares of any class, or any security
convertible into shares of any class, ranking prior to the Serial
Preferred Shares;
(iii) The purchase or redemption (for sinking fund purposes or
otherwise) of less than all of the Serial Preferred Shares then
outstanding except in accordance with a share purchase offer made to all
holders of record of Serial Preferred Shares, unless all dividends upon
all Serial Preferred Shares then outstanding for all previous quarterly
dividend periods shall have been declared and paid or funds therefor set
apart and all accrued sinking fund obligations applicable thereto shall
have been complied with;
A-7
<PAGE> 35
(iv) The consolidation of the Corporation with or its merger into
any other corporation unless the corporation resulting from such
consolidation or merger will have after such consolidation or merger no
class of shares either authorized or outstanding ranking prior to or on
a parity with the Serial Preferred Shares except the same number of
shares ranking prior to or on a parity with the Serial Preferred Shares
and having the same rights and preferences as the shares of the
Corporation authorized and outstanding immediately preceding such
consolidation or merger, and each holder of Serial Preferred Shares
immediately preceding such consolidation or merger shall receive the
same number of shares, with the same rights and preferences, of the
resulting corporation; or
(v) The authorization of any shares ranking on a parity with the
Serial Preferred Shares or an increase in the authorized number of
Serial Preferred Shares.
Section 7. For the purpose of this Division B:
Whenever reference is made to shares "ranking prior to the Serial
Preferred Shares" or "on a parity with the Serial Preferred Shares", such
reference shall mean and include all shares of the Corporation in respect
of which the rights of the holders thereof as to the payment of dividends
or as to distributions in the event of a voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the Corporation
are given preference over, or rank on an equality with (as the case may be)
the rights of the holders of Serial Preferred Shares; and whenever
reference is made to shares "ranking junior to the Serial Preferred
Shares", such reference shall mean and include all shares of the
Corporation in respect of which the rights of the holders thereof as to the
payment of dividends and as to distributions in the event of a voluntary or
involuntary liquidation, dissolution or winding up of the affairs of the
Corporation are junior and subordinate to the rights of the holders of
Serial Preferred Shares.
A-8
<PAGE> 36
THE TRANZONIC COMPANIES
P
R CLASS A COMMON SHARE PROXY
O
X THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Y
The undersigned holder of Class A Common Shares hereby appoints
JAMES H. BERICK AND ROBERT S. REITMAN as Proxies, each with the
full power to appoint his substitute, and hereby authorizes them to
represent and to vote, as designated below, all the Class A Common
Shares of The Tranzonic Companies held of record by the undersigned
on June 26, 1996, at the annual meeting of shareholders to be held
on August 2, 1996, and at any adjournments thereof.
<TABLE>
<S> <C>
Conversion of the Class B Common Shares to Class A Common (change of address)
Shares and Amendment of the Amended Articles of __________________________________
Incorporation to (i) eliminate the Class B Common Shares, __________________________________
(ii) rename the Class A Common Shares as Common Shares, and __________________________________
(iii) provide that the number of authorized Common Shares __________________________________
shall be 12,000,000. (If you have written in the above
space, please mark the
corresponding box on the reverse
side of this card.)
</TABLE>
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE
APPROPRIATE BOXES, SEE REVERSE SIDE, BUT YOU NEED NOT MARK ANY BOXES
IF YOU WISH TO VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS'
RECOMMENDATIONS. THE PROXIES CANNOT VOTE YOUR SHARES UNLESS YOU SIGN
AND RETURN THIS PROXY.
SEE REVERSE
SIDE
- --------------------------------------------------------------------------------
DETACH CARD
Dear Shareholder,
Included in this year's proxy statement, is a proposal by the
Corporation's Board of Directors to consolidate the Corporation's
two classes of Common Shares. The recommendation has been made
for the purpose of simplifying the Corporation's capital stock
structure and potentially increasing the liquidity in the market
for all Tranzonic shareholders.
We urge you to read thoroughly the entire proxy statement, but
call your particular attention to the information beginning on
page 19 concerning the purpose of the consolidation proposal and
its impact upon your dividends.
As always, we appreciate your interest in and support of the
Corporation.
Robert S. Reitman
Chairman, President and Chief Executive Officer
<PAGE> 37
<TABLE>
<S> <C> <C>
/X/ PLEASE MARK YOUR SHARES IN YOUR NAME
VOTES AS IN THIS
EXAMPLE.
</TABLE>
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
<S> <C> <C> <C> <C> <C> <C> <C>
1. To Convert / / / / / / 2. To ratify the / / / / / /
the Class B selection of
Common KPMG Peat
Shares and Marwick LLP
Amend the Amended Articles of as independent
Incorporation (see reverse) auditors.
THIS PROXY WHEN PROPERLY EXECUTED WILL
BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED HOLDER OF CLASS A
COMMON SHARES. IF NO DIRECTION IS MADE,
THIS PROXY WILL BE VOTED FOR PROPOSALS
1 AND 2.
</TABLE>
Change / /
of
Address
Attend / /
Meeting
SIGNATURE(S) ________________________________________________ DATE __________
SIGNATURE(S) ________________________________________________ DATE __________
NOTE: Please sign exactly as name appears hereon. Joint owners should
each sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such.
- --------------------------------------------------------------------------------
DETACH CARD
<PAGE> 38
THE TRANZONIC COMPANIES
P
R CLASS B COMMON SHARE PROXY
O
X THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Y
The undersigned holder of Class B Common Shares hereby appoints
JAMES H. BERICK AND ROBERT S. REITMAN as Proxies, each with the
full power to appoint his substitute, and hereby authorizes them to
represent and to vote, as designated below, all the Class B Common
Shares of The Tranzonic Companies held of record by the undersigned
on June 26, 1996, at the annual meeting of shareholders to be held
on August 2, 1996, and at any adjournments thereof.
<TABLE>
<S> <C>
1. Election of Directors. (change of address)
Joseph A. Campanella, Thomas S. Robertson __________________________________
and Steven W. Percy __________________________________
__________________________________
2. Conversion of the Class B Common Shares to Class A __________________________________
Common Shares and Amendment of the Amended Articles (If you have written in the above
of Incorporation to (i) eliminate the Class B Common space, please mark the
Shares, (ii) rename the Class A Common Shares as corresponding box on the reverse
Common Shares and (iii) provide that the number of side of this card.)
authorized Common Shares shall be 12,000,000.
</TABLE>
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE
APPROPRIATE BOXES, SEE REVERSE SIDE, BUT YOU NEED NOT MARK ANY BOXES
IF YOU WISH TO VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS'
RECOMMENDATIONS. THE PROXIES CANNOT VOTE YOUR SHARES UNLESS YOU SIGN
AND RETURN THIS PROXY.
SEE REVERSE
SIDE
- --------------------------------------------------------------------------------
DETACH CARD
Dear Shareholder,
Included in this year's proxy statement, is a proposal by the
Corporation's Board of Directors to consolidate the Corporation's
two classes of Common Shares. The recommendation has been made
for the purpose of simplifying the Corporation's capital stock
structure and potentially increasing the liquidity in the market
for all Tranzonic shareholders.
We urge you to read thoroughly the entire proxy statement, but
call your particular attention to the information beginning on
page 19 concerning the purpose of the consolidation proposal, its
impact upon your dividends, and the information on page 22 under
the caption "Dissenting Shareholders" concerning your rights
should the proposal be approved contrary to your wishes.
You also have a right of cumulative voting in respect of election
of Directors as set forth on page 23 of the proxy statement under
the caption "Cumulative Voting."
As always, we appreciate your interest in and support of the
Corporation.
Robert S. Reitman
Chairman, President and Chief Executive Officer
<PAGE> 39
<TABLE>
<S> <C> <C>
/X/ PLEASE MARK YOUR SHARES IN YOUR NAME
VOTES AS IN THIS
EXAMPLE.
</TABLE>
<TABLE>
<CAPTION>
FOR WITHHELD FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Election of / / / / 2. To Convert the / / / / / / 2. To ratify the / / / / / /
Directors Class B Common selection of
(see reverse) Shares and KPMG Peat
Amend the Marwick LLP
For, except vote withheld from Amended Articles as independent auditors.
the following nominee(s): of Incorporation
(see reverse)
_______________________________ THIS PROXY WHEN PROPERLY EXECUTED WILL
BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED HOLDER OF CLASS B
COMMON SHARES. IF NO DIRECTION IS MADE,
THIS PROXY WILL BE VOTED FOR PROPOSALS
1, 2 AND 3.
</TABLE>
Change / /
of
Address
Attend / /
Meeting
SIGNATURE(S) ________________________________________________ DATE __________
SIGNATURE(S) ________________________________________________ DATE __________
NOTE: Please sign exactly as name appears hereon. Joint owners should
each sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such.
- --------------------------------------------------------------------------------
DETACH CARD
<PAGE> 40
[OUTSIDE FRONT COVER]
THE TRANZONIC COMPANIES
[TRANZONIC LOGO]
[PHOTO 1: Photo of Morton L. Reitman, William E. Hermann, Kathleen A. Metzger
and Beth Smylie Richardson, the President, Executive Vice President, Vice
President Administration and Vice President Retail Division, respectively, of
the Personal Care Division, and miscellaneous personal care products.]
ANNUAL REPORT 1996
[PHOTO 2: Photo of Richard J. Sims, Christopher T. Cira and Norman D. Sull, the
President, Assistant Vice President Finance, and Vice President Purchasing,
respectively, of the Industrial Textiles Division, and miscellaneous industrial
wiping and cleaning products.]
THE BEST PEOPLE
[PHOTO 3: Photo of Dennis H. Kelly, James D. Armstrong, Jr., and Robert E.
Isaacs, the President, Plant Manager - Perrysburg, and National Sales Manager,
respectively, of the Industrial Packaging Divisions, and miscellaneous paper
tubes, sleeves and cores.]
PRODUCE THE BEST RESULTS
<PAGE> 41
THE TRANZONIC COMPANIES
Headquartered in Cleveland, Ohio, The Tranzonic Companies manufactures and
distributes nationally a wide variety of products to the industrial,
institutional, and consumer sectors. Expanding outward from strengths in paper
and cloth products, Tranzonic has added complementary product lines in personal
hygiene, maintenance and safety, and industrial packaging in order to serve as a
primary supplier in each of its customer segments. Product quality and customer
service have been primary growth drivers, and the Company has been enhancing
efficiency through the implementation of leading-edge management and information
strategies. The Company has expanded through both internal development and
strategic acquisitions of growth businesses that have strong synergy with
existing operations.
[PHOTO 4: Photo of miscellaneous personal care products.]
[PHOTO 5: Photo of miscellaneous industrial wiping and cleaning products and
protective garments.]
[PHOTO 6: Photo of miscellaneous paper tubes, sleeves and cores.]
[INSIDE FRONT COVER]
<PAGE> 42
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
THE TRANZONIC COMPANIES
For the Years Ended February 29/28 1996 1995
- ----------------------------------------------------------------------------------
<S> <C> <C>
Sales .......................................... $ 137,215,521 126,940,765
Operating earnings ............................. 7,179,566 7,621,726
Earnings from continuing operations............. 4,416,310 4,531,342
Earnings from discontinued operations
(net of income taxes) ........................ 410,032 754,054
Loss on disposal of Housewares Division
(net of income taxes) ....................... (7,250,000) --
Net earnings (loss) ............................ (2,423,658) 5,285,396
Net earnings (loss) per Common Share:
From continuing operations ................... 1.25 1.29
From discontinued operations ................. (1.94) .22
Cash dividends:
Per Class A Common Share ..................... .195 .18
Per Class B Common Share ..................... .355 .34
Total assets ................................... 75,021,643 80,279,466
Long-term debt ................................. 7,000,000 7,600,000
Shareholders' equity ........................... 49,154,116 52,236,347
Shareholders' equity per Common Share .......... 14.03 15.03
Common Shares outstanding ...................... 3,503,388 3,474,338
</TABLE>
1
<PAGE> 43
TO OUR SHAREHOLDERS
Although financial results in fiscal 1996 were disappointing, several
aspects of Tranzonic's performance suggest that we should emerge successfully
from that difficult period. Each of our divisions produced record sales, and all
were profitable during the year ended February 29th.
Fiscal 1996 consolidated sales from continuing operations grew to $137.2
million, up 8.1 percent from the $126.9 million recorded a year earlier.
However, throughout the year we experienced mounting pressure on profit margins
primarily as a result of raw material cost increases, customer pricing demands
and competition for market share. These market conditions, combined with changes
in product mix, led to a 5.8 percent decline in operating earnings from
continuing operations to $7.2 million. The comparable number last fiscal year
was $7.6 million.
While we have been able to improve operating efficiency, effect cost
savings through our materials procurement practices, and obtain price increases
in some markets, the struggle to preserve margins has been particularly acute in
certain retail segments of our business. Over the past year, we have been
evaluating the opportunities in each of the markets we serve, and reassessing
how best to deploy our resources to achieve long-term profitable growth. This
process included analysis of the factors influencing growth and of the
investment requirements necessary to achieve our goals.
From this assessment, we determined that changes occurring in the retail
marketplace limit the opportunity for adequate earnings growth and return in
relation to the market risks. Thus, we concluded to reduce our involvement in
certain consumer products.
To accomplish this, in late February 1996 we entered into a definitive
agreement to sell our Housewares Division, which principally markets laundry and
closet storage products to mass merchants and specialty retailers, to Whitney
Corr.Pak International, Inc. We completed the sale on March 29, 1996. As a
result of this divestiture, we incurred a one-time fourth quarter non-cash,
after-tax charge of $7.3 million. Together with earnings from discontinued
operations of $410 thousand net of tax, the fourth quarter loss from
discontinued operations totaled $6.8 million, or $1.94 per share, result-
<TABLE>
<CAPTION>
Sales from
Continuing
Operations
(In Thousands)
<S> <C>
92 $105,765
93 $110,188
94 $115,919
95 $126,941
96 $137,216
</TABLE>
<TABLE>
<CAPTION>
Operating
Earnings from
Continuing
Operations
(In Thousands)
<S> <C>
92 $7,490
93 $6,544
94 $4,019
95 $7,622
96 $7,180
</TABLE>
2
<PAGE> 44
[PHOTO 7: Photo of Robert S. Reitman]
Robert S. Reitman
Chairman, President and
Chief Executive Officer
ing in a net loss of $2.4 million for the year. On a per share basis, the
quarter and full year net loss totaled $1.58 and $.69 per share, respectively.
In addition, the douche and enema product lines manufactured by our
Hospital Specialty unit were sold in February 1996, for cash, to NutraMax
Products, Inc., based in Gloucester, Massachusetts. This transaction served to
reduce further our exposure to a particularly price-sensitive segment of the
retail marketplace.
THE DIVESTITURES IN PERSPECTIVE
A significant aspect of our long-term growth plan is to become more
important to each of our customers. We have worked toward that objective by
broadening our product line offerings through internal expansion and
acquisitions. Our investment in building the housewares business from
approximately $3 million when we entered that market in 1988 to $24 million last
year met our original revenue growth objectives. We achieved that level of scale
through internal growth and the four acquisitions that comprised Design Trend,
which would have served us well in the retail environment we entered in 1988.
However, consumer price sensitivity, coupled with the immense purchasing
and pricing power of mass merchandisers, substantially increased the threshold
of scale required to achieve reasonable profitability. Indeed, even large
players in the housewares market balked at raising prices last year--despite
dramatic increases in raw material costs--in the face of pressure from
mass-merchants and specialty retailers.
While such market dynamics may be cyclical, the more important reason for
exiting what has become a very intense retail arena is that it enables us to
focus financial and management resources on growing our businesses which serve
industrial and institutional markets. It is those areas served by our three
remaining business units--Hospital Specialty, CCP Industries and Baxter Tube--in
which we have special experience and knowledge, historically have earned better
margins and a higher rate of return, and see the greatest long-term opportunity.
<TABLE>
<CAPTION>
Net Earnings
from Continuing
Operations
(In Thousands)
<S> <C>
92 $4,693
93 $4,101
94 $2,331
95 $4,531
96 $4,416
</TABLE>
<TABLE>
<CAPTION>
Net Earnings
Per Common Share
from Continuing
Operations
<S> <C>
92 $1.33
93 $1.15
94 $ .67
95 $1.29
96 $1.25
</TABLE>
3
<PAGE> 45
CONTINUED DEVELOPMENT OF CORE STRATEGIES
Building upon the established foundations of each of our remaining
businesses is our first priority going forward. We remain committed to becoming
a much larger company able to deliver profitable growth and a corresponding
increase in shareholder value. That will be achieved by implementing our core
strategies discussed in this letter a year ago, namely: focusing on customers,
implementing technology, and enabling human resource development.
To expand our importance to customers and our customer base, we
aggressively seek acquisitions which add to our array of complementary products.
Our acquisition criteria require a strong existing management team, moderate to
low-cost products that enhance our value to customers as a single source
supplier, and the ability to enhance earnings upon consolidation. Our
acquisition of Plezall Wipers early last year is a good case in point. Now part
of our CCP Industries unit, Plezall increased CCP's scale by expanding
significantly our line of woven textiles thereby, complementing our non-woven
product offerings, expanding CCP's markets and customer base, and opening new
opportunities for market penetration. Plezall was successfully integrated into
CCP and contributed to CCP's strong sales and profit results in fiscal 1996.
Our strategy of implementing information technology has been effective in
improving our sales forecasting, purchasing practices, inventory management, and
cost controls, and in helping to identify market and other trends which offer
opportunity. We are working smarter and more efficiently. Just one reflection of
this is that in a year of rising costs (fiscal 1996), we experienced a modest
decline in the ratio of selling, general and administrative expense to sales.
Important to migrating this technology throughout the Tranzonic
organization is the third part of our core strategy--enabling human resource
development. Strong division management in each of our business units is
supported by the valued experience and dedication of the people who make
<TABLE>
<CAPTION>
Total
Capitalization
(In Thousands)
<S> <C> <C>
92 $42,744 - $195
93 $46,329 - $2,900
94 $47,479 - $9,000
95 $52,236 - $7,600
96 $49,154 - $7,000
Long-Term
Debt
Shareholders'
Equity
</TABLE>
4
<PAGE> 46
up our organization. We rely on them individually and as a team to absorb and
successfully integrate new technologies into their operations, and to identify
the products and services which strengthen our relationships with customers.
THE OUTLOOK
We believe the near- and long-term outlook for The Tranzonic Companies is
bright. While fiscal 1996 produced a pause in our bottom line growth, we believe
that the results of the divestitures will be positive. Proceeds of the sales,
along with our strong financial position and ready access to capital, provide
ample resources to support our acquisition pursuits and other corporate
requirements. We will continue our assessment of each division in the context of
the changing needs of our markets and how to best meet them, and this year we
will implement strategic refinements to our operations that focus on
strengthening our customer-partner relationships and growing our position in the
industrial and institutional markets.
We would like to commend our employees who remain focused on quality and
customer service. We also are grateful to our directors for their important
contributions in shaping our Company and thank our customers for their loyalty
and our shareholders for their continued support in this challenging transition
period.
Sincerely,
/s/ Robert S. Reitman
Robert S. Reitman
Chairman, President and Chief Executive Officer
May 17, 1996
<TABLE>
<CAPTION>
Shareholders'
Equity
Per Share
<S> <C>
92 $12.32
93 $13.21
94 $13.75
95 $15.03
96 $14.03
</TABLE>
5
<PAGE> 47
CRITERIA TO IDENTIFY
ACQUISITION TARGETS
- ----------------------------------- HOSPITAL SPECIALTY [PHOTO 8:
Photo of miscellaneous personal
care products.]
ENHANCE IMPORTANCE TO CUSTOMERS
HIGH-AFFINITY PRODUCT LINE
DIVERSIFICATION
NEW CHANNELS
REGIONAL STRENGTH
CONSOLIDATION POTENTIAL
PRIORITIZING
ACQUISITION TARGETS
- ----------------------------------------------------- CCP INDUSTRIES [PHOTO 9:
Photo of miscellaneous
industrial wiping and
cleaning products and
protective garments.]
OPERATIONS FINANCIAL
SUPERIOR MANAGEMENT EARNINGS MOMENTUM
LOW COST TO PRODUCE BALANCE SHEET HEALTH
TECHNOLOGY RIGHT SIZE
CONSUMABLES
CRITICAL/LOW-COST COMPONENTS
BAXTER TUBE [PHOTO 10: Photo
of miscellaneous paper tubes,
sleeves and cores.]
6
<PAGE> 48
THE OPERATIONS AND MARKETS OF
THE TRANZONIC COMPANIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MAJOR PRODUCTS PRINCIPAL MARKETS PRIMARY CUSTOMERS
-------------------------------------------------------------------
<S> <C> <C>
Feminine Hygiene Institutional Grocery and Drug Chains
Adult Incontinence Commercial Mass Merchandisers
Baby Diapers Away From Home Paper Distributors
Toilet Seat Covers Healthcare Janitorial Distributors
Odor Control Consumer Medical Distributors
Washroom Accessories Home Healthcare Dealers
Food Service Distributors
- --------------------------------------------------------------------------------
Industrial Wiping Cloths Automotive Tens of thousands of small
Personal Safety Manufacturing businesses across the U.S.
Work Apparel Food Service and Canada
Specialty Chemicals Facility Maintenance
Environmental Protection Healthcare
Washroom Supplies Graphic Arts
- --------------------------------------------------------------------------------
Forming Tubes Automotive Fiberglass Manufacturers
General-purpose Tubes Industrial Automotive and Industrial
Sleeves Construction Manufacturers
Construction Products
Distributors
- --------------------------------------------------------------------------------
</TABLE>
7
<PAGE> 49
HOSPITAL SPECIALTY
...the Division is focused on reducing manufacturing costs,
improving productivity, and maintaining an aggressive
marketing posture to hold or gain share...
Hospital Specialty, the Company's Personal Care Division and largest
operating unit, had a modest increase in sales to a new record level in fiscal
1996, with increases recorded in all but one major product category. Operating
profits, however, fell well below those of the prior year primarily as a result
of rapid cost increases in raw materials such as fluff pulp, which is used in
many of the Division's products, and continued pricing pressure in all markets
served. The impact of raw material increases would have been substantially
greater but for the Division's forward purchases of fluff pulp as prices rose.
While the Division was able to obtain price increases for some of its products,
the markets it serves remain very price sensitive. In this environment, the
Division is focused on reducing manufacturing costs, improving productivity, and
maintaining an aggressive marketing posture to hold or gain share.
The Division serves institutional, industrial and to a lesser extent
consumer markets with a broad line of personal care and washroom related
products. Several initiatives undertaken during the year helped to improve
quality and service to distributor-partners and retail customers, and
contributed to sales growth. These initiatives included: introduction of
restroom deodorant systems; continued product bundling for industrial
distribution; improved use of computerized distribution systems; restructuring
of sales, technical and administrative staff; and aggressive marketing of many
new products.
Building on its program of bundling synergistic products, the Division's
"Total Washroom Essentials" (TWE) program accounted for solid growth including
sales of restroom deodorant systems. The TWE program features MAXITHINS(R) and
GARDS(R) feminine napkins, Tampax(R) brand tampons, HEALTHGARDS(R) toilet seat
covers, HEALTHGARDS(R) odor control systems, and Hospeco washroom accessories.
The TWE program was introduced in fiscal 1995 and has proven successful
through offering an integrated bundle of value-added products to institutional
and industrial customers. The program is a significant shift from traditional
product focus to a total program concept that enhances the Division's value as a
single-source supplier to our industrial distributors.
The largest sales gain came from the toilet seat cover segment where the
Division was able to gain market share. In addition to toilet seat covers, sales
of restroom deodorant systems were also strong throughout most of the year. Both
are integral lines in the Division's core business. The institutional business
offers the greatest opportunities for profitable growth which will be augmented
by new products added through internal development and acquisitions. As noted in
the Letter to Shareholders, the Division sold its douche and enema product lines
during the year, thus reducing its exposure to a particularly price-sensitive
segment of the retail marketplace.
Personal Care Division
- ----------------------
MORTON L. REITMAN (Standing middle)
President
WILLIAM E. HEMANN (Standing left)
Executive Vice President
KATHLEEN A. METZGER (Seated)
Vice President Administration
BETH SMYLIE RICHMAN (Standing right)
Vice President Retail Division
8
<PAGE> 50
[PHOTO 11: Photo of Morton L. Reitman, William E. Hermann, Kathleen A. Metzger
and Beth Smylie Richardson, the President, Executive Vice President, Vice
President Administration, and Vice President Retail Division, respectively, of
the Personal Care Division, in the foreground, with shelves stocked with
miscellaneous personal care products in the background.]
9
<PAGE> 51
[PHOTO 12: Photo of Richard J. Sims, Christopher T. Cira, David J. Williams,
Robert W. Dailey III, Norman D. Sull, Helen Malhotra, Brian H. Markowitz and
Daniel R. Moon, the President, Assistant Vice President Finance, Vice President
Sales, Vice President Market Development, Vice President Purchasing, Assistant
Vice President Information Systems, Vice President and Assistant Vice President
Marketing, respectively, of the Industrial Textiles Division, seated at and
standing by a table of miscellaneous industrial wiping and cleaning products
and protective garments.]
10
<PAGE> 52
CCP INDUSTRIES, INC.
...additional development and enhancement of key procurement
relationships resulted in a better than expected expansion
into wholesale channel sales...
Fiscal 1996 was a year of record performance for CCP Industries, our
Industrial Textiles Division. All three of the Division's business units: CCP
U.S., CCP Canada and Plezall Wipers, acquired at the beginning of the fiscal
year, contributed to the significant gains in sales and operating income.
This superior performance was driven by a number of key initiatives in
CCP's business plan. Continuous improvement initiatives in marketing, sales
management and operations resulted in product line diversification, development
of additional management information systems, sales training and service
enhancements. Additional development and enhancement of key procurement
relationships resulted in a better than expected expansion into wholesale
channel sales. These accomplishments were consistent with business strategies
which focus on customer relationship management, strategic acquisitions and
alliances, profit maximization and development of a progressive corporate
culture.
Lavatory supplies, safety products and work apparel product categories
registered the strongest growth last year. Growth in all product categories is
accomplished most effectively by increasing sales to existing customers. Product
development and line diversification play a large part in achieving that end.
During the past year dozens of products were added to the Division's work
apparel, wiping cloths, washroom, chemicals and cleaning supplies, and safety
lines. CCP has sharpened its focus on specific industry segments, such as
automotive and graphics, to achieve greater market penetration. It has expanded
its use of telephone sales and developed new management information enabling CCP
quickly to direct its resources toward under-performing areas. All of these
initiatives have contributed to CCP's ability to serve customers in a broad
array of industrial, commercial and institutional markets.
Intensive on-going sales training programs equip our more than 250 sales
people to better communicate the benefits and cost savings which CCP offers as a
primary supplier. Among these benefits are quality guaranteed product bundles,
application solutions, reduced procurement cost through our Primary Supplier
Approach, and customized products and solutions. Training extends to programs
aimed at improving management skills, and addresses specific operating functions
such as purchasing, inventory management, computer systems, and safety, to name
only a few. In addition to helping employees develop their potential and become
more productive, training is an important inducement to retaining the best
people.
CCP continues to develop into a progressive manufacturing and distribution
company focused on long-term growth, supported by a large sales force and
product line diversification that improves its position as a primary supplier to
customers. To increase this diversification, CCP will continue to develop
creative resources and undertake strategic acquisitions and alliances that
strengthen relationships with major suppliers and heighten value to customers.
Industrial Textiles Division
- ----------------------------------------
(Starting in lower left going clockwise)
RICHARD J. SIMS
President
CHRISTOPER T. CIRA
Assistant Vice President Finance
DAVID J. WILLIAMS
Vice President Sales
ROBERT W. DAILEY, III
Vice President
Market Development
NORMAN D. SULL
Vice President Purchasing
HELEN MALHOTRA
Assistant Vice President
Information Systems
BRIAN H. MARKOWITZ
Vice President
DANIEL R. MOON
Assistant Vice President
Marketing
11
<PAGE> 53
BAXTER TUBE COMPANY
...Baxter employees provide a high degree of knowledgeable
support in product application and problem solving that
enhances customer satisfaction...
Baxter Tube Company, our Industrial Packaging Division, overcame a myriad
of challenges in fiscal 1996 to score double-digit increases in sales over the
prior record year and achieve the best operating earnings in its history. This
progress was achieved despite flattening of sales among some existing customers
as business levels peaked. Baxter offset this condition through a combination of
pricing initiatives which enabled it to hold its position with existing
customers while successfully developing new account activity.
Baxter met the challenges of rapidly rising raw material costs and
restricted availability of certain raw materials through internal improvements
and corrective actions which, combined with a recent easing in the raw material
market and active purchasing efforts, indicates improved earnings potential in
the period ahead.
Baxter produces spiral wound paper tubes, cores and sleeves for a wide
variety of industrial applications. It focuses on customer relations with an
emphasis on consumable products that meet all requirements for cost
effectiveness and quality. Baxter's products are used in industries, such as
fiberglass production, where its forming tubes have proven to be technically
superior and cost-efficient, and in the automotive industry where Baxter
products have found a wide range of general and product-specific uses. While
Baxter's business is global, the majority of revenue arises in the United
States.
Baxter's products are manufactured under carefully controlled conditions
emphasizing techniques that ensure the high quality required to satisfy our
customers' performance criteria. This close attention to quality manufacturing
was recognized again in fiscal 1996 as the Division's Minerva, Ohio, plant
achieved International Organization for Standardization Certification,
ISO-9002:94. Its Ware Shoals, South Carolina, plant received that status in
fiscal 1995. ISO Certification affirms, through an audit by the ISO third party
assessor, that a company documents its quality policies and procedures, trains
its people and audits processes to ensure compliance. The Certification
confirms, in effect, that Baxter does what it says it will do in delivering
products manufactured to its high quality levels. Since only some 700 U.S.
companies are currently ISO Certified, Baxter is in very select company. In
addition to a strong quality system, Baxter employees provide a high degree of
knowledgeable support in product application and problem solving that enhances
customer satisfaction.
Baxter's sales efforts will be enhanced by further training and aggressive
deployment of its direct sales force--an initiative that will impact positively
its ability to sell in increasing depth to volume core and tube users. In
addition, the Division remains focused on continued product development and
increased plant productivity.
Industrial Packaging Division
- ------------------------------
DENNIS H. KELLY (Seated right)
President
ROBERT A. DOUGLAS (Seated left)
Financial Manager
KENNETH E. ZWICK (Standing left)
Plant Manager-Minerva
JAMES D. ARMSTRONG, JR. (Standing middle)
Plant Manager-Perrysburg
ROBERT E. ISAACS (Standing right)
National Sales Manager
BUSTER T. SIMPSON (not pictured)
Plant Manager-Ware Shoals, SC
12
<PAGE> 54
[PHOTO 13: Photo of Dennis H. Kelly, Robert A. Douglas, Kenneth E. Zwick, James
D. Armstrong, Jr., and Robert E. Isaacs, the President, Financial Manager,
Plant Manager - Mineva, Plant Manager - Perrysburg, and National Sales Manager,
respectively, of the Industrial Packaging Division, seated on or standing near
paper tubes and cores.]
13
<PAGE> 55
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
RESULTS OF OPERATIONS:
FISCAL 1996 COMPARED TO FISCAL 1995
On February 29, 1996, the Company signed a definitive agreement to sell for
cash substantially all net operating assets of its Housewares Division, Design
Trend. Conse-quently, results of operations discussed below have been
reclassified to reflect both continuing and discontinued operations. The
divestiture, which occurred on March 29, 1996, represents a strategic
redirection in the Company's allocation of resources away from the consumer
retail market. The downward trend in profitability brought about by increasing
raw materials costs, coupled with the immense purchasing and pricing power of
mass merchandisers lead to management's decision to divest the Housewares
Division and refocus the Company's resources towards its strengths in industrial
and institutional markets which the Company's continuing operations serve.
As a result of that transaction, the Company incurred a fourth quarter
non-cash after-tax charge of $7.3 million, or $2.06 per share. This charge,
representing a loss on disposal of discontinued operations, includes mainly the
write-off of goodwill which approximated 5.5 million, losses recorded on sale
of net assets which approximated 2.2 million, transaction costs which
approximated $600 thousand and contingent accruals which approximated $200
thousand. Earnings from discontinued operations of $410 thousand, or 12 cents
per share combined with the loss on disposal, resulted in a fiscal 1996 loss
from discontinued operations of $6.8 million, or $1.94 per share. Earnings from
discontinued operations in fiscal 1995 were $754 thousand, or 22 cents per
share. In combining continued and discontinued operations the Company reported
a fiscal 1996 net loss of $2.4 million, or 69 cents per share, compared with
prior fiscal year earnings of $5.3 million, or $1.51 per share.
Sales from continuing operations for the fiscal year ended February 29, 1996
were $137.2 million, 8.1 percent above the $126.9 million of fiscal 1995. Each
of the three continuing operating units contributed to this sales gain. Of the
sales increase recorded in fiscal 1996, 52 percent resulted from the addition of
Plezall Wipers, acquired at the beginning of the fiscal year. Selective price
increases instituted during the year added 30 percent to year over year sales
gains. The introduction of new products such as our restroom deodorants systems
distributed through Hospital Specialty (our Personal Care Division), and the
expansion of new safety products distributed by CCP Industries (our Industrial
Textiles Division), added 16 percent to the fiscal year overall increase. The
Company's continuing initiatives to improve sales force effectiveness through
product line extensions, sales force training and the use of sales management
information systems helped to improve volume sales.
The cost of goods sold for continuing operations increased to 68.6 percent
of sales in fiscal 1996 from 65.8 percent for fiscal 1995. This increase was the
result of a combination of forces, including the dramatic increase in the price
of fluff pulp and paper which did not begin to subside until late in the fourth
quarter of fiscal 1996. Pricing of fluff pulp, the major raw material component
of product cost at Hospital Specialty, nearly doubled at its peak in late fiscal
1996 over its lowest level in fiscal 1995. Other factors influencing cost of
goods as a percent of sales include competitive pricing in consumer markets and
the increase in sales of lower gross margin wholesale products.
Tight control of selling, general and administrative expenses and continued
improvement in administrative efficiency resulting from the effective use of
technology in the areas of marketing and distribution resulted in a decrease in
these expenses to 26.1 percent of sales for fiscal 1996 from 28.2 percent for
the prior fiscal year. Two other events, which occurred during the fourth
quarter of the current fiscal year, added to this favorable decline. Consistent
with the strategic redirection exemplified by the sale of Design Trend, our
Hospital Specialty Division sold for a gain ($931,800) certain assets comprising
its douche and enema line of business. In addi-
14
<PAGE> 56
tion, the insurance company which administers the Company's health and welfare
benefits plan converted to a stock company from a mutual company. In the
conversion, the Company received shares which it sold for a gain
($604,500). The proceeds will be used to fund future health claims.
Earnings from continued operations declined 2.5 percent to $4.4 million in
fiscal 1996 from $4.5 million in fiscal 1995. Highly competitive and
price-sensitive customers forced the Company to absorb rapidly escalating raw
material costs in several product categories. As a result, earnings from
continued operations fell to 3.2 percent from 3.6 percent in fiscal 1995.
Net interest expense increased to $594 thousand in fiscal 1996, as compared
to $317 thousand in fiscal 1995. This 87.2 percent increase was the result of
higher borrowing levels related to the acquisition of Plezall and forward
purchases of raw materials, and higher interest rates which raised the cost of
borrowing. Interest coverage, calculated as operating earnings divided by net
interest expense, fell to 12.1 times for fiscal 1996 from 24.0 times for fiscal
1995. Reflective of this increase in interest expense, weighted average debt
outstanding in fiscal 1996 was $9,855,000 as compared to $6,625,000 in fiscal
1995. The weighted average interest rate in fiscal 1996 was 6.96 percent as
compared to 5.85 percent in fiscal 1995.
Earnings from continuing operations before income taxes for fiscal 1996
declined to $6.6 million from $7.3 million in the preceding fiscal year.
Consistent with the lower earnings, income taxes fell to $2.2 million from $2.8
million for fiscal 1995. The effective tax rate also declined to 32.9 percent
for fiscal 1996 versus 38.0 percent for the prior fiscal year. This improvement
resulted from lower state and local taxes and the increase in tax-exempt income
earned by the Company. Earnings per share from continuing operations were
$1.25 per share in fiscal 1996 as compared to $1.29 in fiscal 1995. The
decline resulted solely from the decline in earnings, as the weighted average
number of shares outstanding did not change materially.
Earnings from discontinued operations net of income taxes were $410 thousand
in fiscal 1996, down from $754 thousand in fiscal 1995. Despite a 9.8 percent
increase in sales year over year, earnings declined 45.6 percent as a result of
product mix shift and significantly higher costs for both steel and cotton, the
primary components of goods sold for the discontinued operation.
RESULTS OF OPERATIONS:
FISCAL 1995 COMPARED TO FISCAL 1994
Fiscal 1995 sales from continuing operations were $126.9 million, 9.5
percent above the $115.9 million level achieved in fiscal 1994. Growth in adult
incontinent product sales provided the largest increase in sales for Hospital
Specialty. Sales gains at CCP Industries and Baxter Tube resulted from strong
general domestic economic growth and improved marketing efficiencies.
Cost of goods sold decreased slightly to 65.8 percent of sales in fiscal
1995 versus 66.0 percent of sales in fiscal 1994. Product mix changes and
procurement opportunities more than offset the initial stages of raw material
cost increases which carried into fiscal 1996.
The implementation of technology to improve efficiency resulted in the
reduction of selling, general and administrative expenses as a percent of sales
to 28.2 percent in fiscal 1995, from 29.4 percent in 1994. Improved productivity
allows the expense level to be leveraged over greater volume.
Net interest expense increased 22.5 percent, primarily as a result of higher
interest rates and the year-over-year impact of borrowings to finance
acquisitions made in fiscal 1994. Interest coverage for fiscal 1995 was 24.0
times.
Earnings from continuing operations before income taxes for fiscal 1995 of
$7.3 million provided a 94.3 percent increase over the $3.8 million recorded in
fiscal 1994. As a result, income taxes for fiscal 1995 rose to $2.8 million from
$1.4 million for the prior fiscal year. The tax rate was 38.0 percent for fiscal
1995 and fiscal 1994.
15
<PAGE> 57
Fiscal 1995 earnings from continuing operations totaled $4.5 million,
compared to the $2.3 million, reported in fiscal 1994. Earnings per share from
continuing operations were $1.29 per share in fiscal 1995 compared to 67 cents
in fiscal 1994. The improvement was solely attributable to the increase in
earnings, as the weighted average number of shares outstanding did not change
materially. Included in continuing operations for the fourth quarter of
fiscal 1994 is a $1.3 million (or 22 cents per share) charge taken by the
Company in connection with the restructuring of its Housewares Division. The
charge included costs of shutting down duplicate facilities in Dallas and
Philadelphia, termination costs and moving expenses.
Earnings from discontinued operations net of income taxes were $754
thousand in fiscal 1995 as compared to $468 thousand in fiscal 1994. The
increase of 61 percent was the result of the combination of Ever-Ready
Appliance Mfg. Co., aquired late in the fiscal 1994 second quarter.
Consolidated net earnings in fiscal 1995 increased to $5.3 million, or
$1.51 per share, from $2.8 million, or 80 cents per share in fiscal 1994.
LIQUIDITY AND CAPITAL RESOURCES
The Company's financial position continues to be strong. Current assets are
3.2 times current liabilities at February 29, 1996 as compared to 2.9 times at
February 28, 1995. Cash and cash equivalents nearly tripled by fiscal year end
1996 as a result of strong operating cash flow and the influx of cash from
Hospital Specialty's sale of its douche and enema line of business. The
reclassification of certain non-current assets to current as a result of the
Housewares Division divestiture also added to an improved current ratio.
Working capital at fiscal year end of $33.2 million increased 9.6 percent
from the prior year's $30.3 million. The Company's debt-to-equity ratio of 14.2
percent at fiscal year end increased from 14.5 percent at prior year end.
Cash provided from operations is the primary source of liquidity and
amounted to $9.7 million in fiscal 1996, $3.9 million in fiscal 1995 and $7.2
million in fiscal 1994. These internally generated funds are used primarily for
capital expenditures, dividends paid to shareholders and other miscellaneous
investing and financing activities.
The Company invested $3.2 million in property, plant and equipment to expand
capacity and improve productivity. This amount compares to the $2.6 million
invested in fiscal 1995 and $2.8 million in fiscal 1994. Fiscal 1997 investments
are budgeted to be consistent with prior years.
In March 1995, the Company acquired Plezall Wipers, Inc., a Miami, Florida
distributor of woven textile wipers, for $2.9 million in a cash transaction
accounted for as a purchase.
In fiscal 1996 the Company increased its dividend payout to shareholders 7.7
percent to $885 thousand from $822 thousand. The Company's objective is to
increase dividends periodically in a manner consistent with increases in free
cash flow.
The Company maintains a $30.0 million line of credit to finance working
capital requirements if needed and to finance acquisitions. Cash received
subsequent to fiscal year end 1996 from the sale of the Housewares Division was
used to pay off outstanding debt.
In fiscal 1995 the need to increase certain inventory stock at Design Trend
to strengthen its ability to respond quickly to orders and the need to stock raw
materials ahead of price increases at Hospital Specialty, caused the downward
trend in cash provided by operations as compared to fiscal 1994. Further debt
repayment and investments in property, plant and equipment in fiscal 1995 also
added to the decreased cash levels from fiscal 1994.
ACCOUNTING CHANGES
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard No. 123, "Accounting for Stock-Based
Compensation," which provides a basis for measurement and recognition of all
stock-based employee compensation plans. The disclosure requirements of this
Statement are effective for fiscal years beginning after December 15, 1995. The
Company expects that it will maintain its current accounting
16
<PAGE> 58
method for stock-based compensation and disclose the pro-forma effects on net
income and earnings per share of the fair market value method as permitted by
the Statement.
INFLATION
Fiscal 1996 saw rising raw material costs, particularly for fluff pulp,
paper and steel which significantly outpaced general inflation. Competitive
pricing and customer pricing pressures, especially in the retail sectors which
the Company serves, put downward pressure on operating margins. The Company
attempts to alleviate these pressures by increasing selling prices to help
offset rising costs, increasing productivity and improving manufacturing
techniques.
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
THE TRANZONIC COMPANIES
For the Years Ended February 29/28 1996 1995 1994 1993 1992
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sales ......................................... $ 137,215,521 126,940,765 115,919,011 110,187,909 105,765,052
Operating earnings ............................ 7,179,566 7,621,726 4,018,590 6,543,941 7,489,936
Earnings from continuing operations
before income taxes ......................... 6,585,310 7,304,342 3,759,432 6,514,297 7,705,153
Income taxes .................................. 2,169,000 2,773,000 1,428,000 2,413,000 3,012,000
Earnings from continuing operations ........... 4,416,310 4,531,342 2,331,432 4,101,297 4,693,153
Earnings from discontinued operations
(net of income taxes) ....................... 410,032 754,054 467,833 112,685 (116,872)
Loss on disposal of Housewares
Division (net of income taxes) .............. (7,250,000) -- -- -- --
Net earnings (loss) ........................... (2,423,658) 5,285,396 2,799,265 4,213,982 4,576,281
Net earnings (loss) per Common Share:
From continuing operations .................. 1.25 1.29 .67 1.15 1.33
From discontinued operations ................ (1.94) .22 .13 .04 (.04)
Cash dividends:
Per Class A Common Share .................... .195 .18 .18 .165 .16
Per Class B Common Share .................... .355 .34 .34 .325 .32
Total assets .................................. 75,021,643 80,279,466 73,537,946 63,675,545 58,015,061
Long-term debt ................................ 7,000,000 7,600,000 9,000,000 2,900,000 195,000
Shareholders' equity .......................... 49,154,116 52,236,347 47,479,072 46,328,637 42,743,659
Shareholders' equity per Common
Share ....................................... 14.03 15.03 13.75 13.21 12.32
Common Shares outstanding ..................... 3,503,388 3,474,338 3,452,038 3,507,838 3,468,128
</TABLE>
Fiscal year 1994 includes a $1,300,000 charge to operating earnings ($792,000
after tax or 22 cents per share) for costs associated with restructuring the
Housewares Division.
17
<PAGE> 59
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THE TRANZONIC COMPANIES
Years Ended February 29/28 1996 1995 1994
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales ....................................................... $ 137,215,521 126,940,765 115,919,011
Costs and expenses:
Cost of goods sold ....................................... 94,171,671 83,580,232 76,560,280
Selling, general and administrative expenses (note N) .... 35,864,284 35,738,807 34,040,141
Restructuring cost ....................................... -- -- 1,300,000
- ----------------------------------------------------------------------------- ----------- ------------
130,035,955 119,319,039 111,900,421
- ----------------------------------------------------------------------------- ----------- ------------
Operating earnings .................................... 7,179,566 7,621,726 4,018,590
Interest income ............................................. 91,386 70,236 54,369
Interest expense ............................................ (685,642) (387,620) (313,527)
- ----------------------------------------------------------------------------- ----------- ------------
Earnings from continuing operations before income taxes 6,585,310 7,304,342 3,759,432
Income taxes (note I) ....................................... 2,169,000 2,773,000 1,428,000
- ----------------------------------------------------------------------------- ----------- ------------
Earnings from continuing operations ................... 4,416,310 4,531,342 2,331,432
- ----------------------------------------------------------------------------- ----------- ------------
Discontinued operations (note O):
Earnings from discontinued operations, net of income taxes
of $400,000 in 1996; $581,000 in 1995; and $372,000
in 1994 ................................................ 410,032 754,054 467,833
Loss on disposal of discontinued operations, net of income
tax benefit of $1,250,000 .............................. (7,250,000) -- --
- ----------------------------------------------------------------------------- ----------- ------------
Earnings (loss) from discontinued operations .......... (6,839,968) 754,054 467,833
- ----------------------------------------------------------------------------- ----------- ------------
Net earnings (loss) ................................... $ (2,423,658) 5,285,396 2,799,265
- ----------------------------------------------------------------============= =========== ============
Net earnings (loss) per Common Share:
From continuing operations ............................... $ 1.25 1.29 .67
From discontinued operations ............................. $ (1.94) .22 .13
Net earnings (loss) per Common Share .................. $ (.69) 1.51 .80
- ----------------------------------------------------------------============= =========== ============
</TABLE>
See accompanying notes to consolidated financial statements.
18
<PAGE> 60
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
THE TRANZONIC COMPANIES
February 29/28 1996 1995
- --------------------------------------------------------------------------------------------------------
ASSETS
<S> <C> <C>
Current assets:
Cash (including cash equivalents of $4,673,200 in 1996
and $349,600 in 1995) ................................................ $ 6,610,933 2,387,540
Receivables, less allowance for doubtful receivables of
$290,500 in 1996 and $408,500 in 1995 ................................ 13,752,460 16,995,651
Inventories (note C) .................................................... 15,338,665 23,173,604
Deferred income taxes (note I) .......................................... 1,804,106 1,285,533
Prepaid expenses and other current assets ............................... 1,219,235 2,046,517
Net assets of discontinued operations (note O) .......................... 9,274,244 --
- ------------------------------------------------------------------------------------------ -----------
Total current assets ........................................... 47,999,643 45,888,845
Property, plant and equipment, net (note D) ................................ 19,376,208 23,102,181
Other noncurrent assets .................................................... 2,477,913 2,416,958
Intangible assets (note E) ................................................. 5,167,879 8,871,482
- ------------------------------------------------------------------------------------------ -----------
$75,021,643 80,279,466
- -------------------------------------------------------------------------------=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Trade accounts payable .................................................. $ 8,337,445 9,657,007
Accrued compensation .................................................... 2,943,971 2,981,782
Other payables and accrued expenses ..................................... 3,489,484 2,922,604
- ------------------------------------------------------------------------------------------ -----------
Total current liabilities ...................................... 14,770,900 15,561,393
Long-term debt, noncurrent portion (note F) ................................ 7,000,000 7,600,000
Deferred gain .............................................................. 1,912,230 2,071,830
Deferred income taxes (note I) ............................................. 935,573 1,878,728
Other noncurrent liabilities ............................................... 1,248,824 931,168
Shareholders' equity (notes F, G and L):
Serial preferred shares without par value.
Authorized 200,000; no shares issued ................................. -- --
Class A Common Shares, no par value; shares at stated value.
Authorized 4,000,000; issued 2,658,149 in 1996 and
2,660,404 in 1995 ................................................. 664,537 665,101
Class B Common Shares, no par value; shares at stated value.
Authorized 8,000,000; issued 1,337,390 in 1996 and
1,316,385 in 1995 ................................................. 334,348 329,096
Additional paid-in capital .............................................. 5,780,774 5,643,705
Retained earnings ....................................................... 46,471,200 49,780,163
- ------------------------------------------------------------------------------------------ -----------
53,250,859 56,418,065
Less cost of shares held in treasury--
Class A Common Shares - 472,846 in 1996 and 483,146 in 1995 .......... 3,899,037 3,984,012
Class B Common Shares - 19,305 in 1996 and 1995 ...................... 197,706 197,706
- ------------------------------------------------------------------------------------------ -----------
Total shareholders' equity ..................................... 49,154,116 52,236,347
- ------------------------------------------------------------------------------------------ -----------
Commitments (note K) ....................................................... -- --
- ------------------------------------------------------------------------------------------ -----------
$75,021,643 80,279,466
- -------------------------------------------------------------------------------=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
19
<PAGE> 61
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THE TRANZONIC COMPANIES
Years Ended February 29/28 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net earnings (loss) ......................................................... $ (2,423,658) 5,285,396 2,799,265
Adjustments to reconcile net earnings (loss) to net cash provided
by continuing operations:
(Earnings) loss from discontinued operations ............................. 6,839,968 (754,054) (467,833)
Depreciation and amortization ............................................ 3,517,521 3,616,163 3,438,898
Gain on sale of assets ................................................... (910,637) -- --
Deferred income taxes .................................................... (246,000) 170,000 311,000
Other, net ............................................................... 38,122 (132,103) 140,831
Change in assets and liabilities, net of effects of acquisitions:
Receivables, net ........................................................ (136,600) (1,174,977) (37,400)
Inventories ............................................................. 2,904,762 (5,292,712) (801,189)
Prepaid expenses and other current assets ............................... 546,861 430,586 (1,138,407)
Trade accounts payable .................................................. (668,092) 2,083,258 907,464
Accrued compensation .................................................... 158,733 637,717 26,799
Other payables and accrued expenses ..................................... 541,811 284,393 471,451
- ---------------------------------------------------------------------------------------------- ---------- -----------
Net cash provided by continuing operations ........................ 10,162,791 5,153,667 5,650,879
Net cash provided by (used in) discontinued operations ............ (455,770) (1,291,739) 1,505,909
- ---------------------------------------------------------------------------------------------- ---------- -----------
Net cash provided by operating activities ......................... 9,707,021 3,861,928 7,156,788
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from revolving credit .............................................. 6,400,000 3,400,000 13,100,000
Repayments of long-term debt ................................................ (7,000,000) (4,900,000) (6,995,000)
Cash dividends .............................................................. (885,305) (821,833) (826,501)
- ---------------------------------------------------------------------------------------------- ---------- -----------
Net cash provided by (used in) financing activities ............... (1,485,305) (2,321,833) 5,278,499
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for acquisitions, net of cash acquired ............................. (2,909,735) -- (6,939,193)
Purchase of treasury shares ................................................. -- -- (922,953)
Proceeds on exercise of share options ....................................... 217,626 276,775 93,688
Non-compete payments ........................................................ -- (180,000) (230,000)
Proceeds from sale of property, plant and equipment ......................... 1,992,513 248,981 34,074
Purchases of property, plant and equipment .................................. (3,163,078) (2,586,894) (2,811,717)
Other, net .................................................................. (135,649) (214,608) (165,388)
- ---------------------------------------------------------------------------------------------- ---------- -----------
Net cash used in investing activities ....................................... (3,998,323) (2,455,746) (10,941,489)
- ---------------------------------------------------------------------------------------------- ---------- -----------
CASH AND CASH EQUIVALENTS:
Increase (decrease) during the year ......................................... 4,223,393 (915,651) 1,493,798
Beginning balance ........................................................... 2,387,540 3,303,191 1,809,393
- ---------------------------------------------------------------------------------------------- ---------- -----------
Ending balance .............................................................. $ 6,610,933 2,387,540 3,303,191
- ----------------------------------------------------------------------------------============ ========== ===========
Supplemental schedule of non-cash investing and financing activities:
On March 1, 1995, the Company purchased substantially all the assets
and assumed certain liabilities of Plezall Wipers, Inc.; in conjunction with
the acquisition, liabilities were assumed as follows:
Fair value of assets acquired ......................................... $ 3,091,802 -- --
Cash paid ............................................................. 2,909,735 -- --
- ---------------------------------------------------------------------------------------------- ---------- -----------
Liabilities assumed ................................................... $ 182,067 -- --
- ----------------------------------------------------------------------------------============ ========== ===========
The Company purchased all of the outstanding shares of Ever-Ready
Appliance Mfg. Co. for $7,730,651; in conjunction with the
acquisition, liabilities were assumed as follows:
Fair value of assets acquired ......................................... $ -- -- 8,370,094
Cash paid for shares .................................................. -- -- 7,730,651
- ---------------------------------------------------------------------------------------------- ---------- -----------
Liabilities assumed ................................................... $ -- -- 639,443
- ----------------------------------------------------------------------------------============ ========== ===========
Supplemental disclosures of cash flow information:
Income taxes paid ........................................................... $ 2,351,618 1,599,723 2,003,522
Interest paid ............................................................... $ 689,440 393,797 305,929
- ----------------------------------------------------------------------------------============ ========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
20
<PAGE> 62
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
THE TRANZONIC COMPANIES
Class A Class B Additional Treasury Shares
Common Common paid-in Retained -----------------------
Years Ended February 29/28 Shares Shares capital earnings Class A Class B
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at February 28, 1993 ........ $ 669,306 321,316 5,419,067 43,343,836 (3,064,207) (360,681)
Net earnings ........................ -- -- -- 2,799,265 -- --
Cash dividends, $.18 per Class A
Common Share ...................... -- -- -- (400,697) -- --
Cash dividends, $.34 per Class B
Common Share ...................... -- -- -- (425,804) -- --
Exercise of 400 Class A
Common and 7,900 Class B
Common Share options .............. -- 1,975 88,565 -- 3,148 --
Acquisition of 64,100 Class A Common
Shares for treasury ............... -- -- -- -- (922,953) --
Tax benefit associated with incentive
share options ..................... -- -- 6,936 -- -- --
Conversion of 6,369 Class A
Common Shares to 6,369
Class B Common Shares ............. (1,592) 1,592 -- -- -- --
- ------------------------------------------------- ------- --------- ---------- --------- -------
Balance at February 28, 1994 ........ 667,714 324,883 5,514,568 45,316,600 (3,984,012) (360,681)
Net earnings ........................ -- -- -- 5,285,396 -- --
Cash dividends, $.18 per Class A
Common Share ...................... -- -- -- (391,608) -- --
Cash dividends, $.34 per Class B
Common Share ...................... -- -- -- (430,225) -- --
Exercise of 22,300 Class B
Common Share options .............. -- 1,600 112,200 -- -- 162,975
Tax benefit associated with incentive
share options ..................... -- -- 16,937 -- -- --
Conversion of 10,451 Class A
Common Shares to 10,451
Class B Common Shares ............. (2,613) 2,613 -- -- -- --
- ------------------------------------------------- ------- --------- ---------- --------- -------
Balance at February 28, 1995 ........ 665,101 329,096 5,643,705 49,780,163 (3,984,012) (197,706)
Net (loss) .......................... -- -- -- (2,423,658) -- --
Cash dividends, $.195 per Class A
Common Share ...................... -- -- -- (425,775) -- --
Cash dividends, $.355 per Class B
Common Share ...................... -- -- -- (459,530) -- --
Exercise of 10,300 Class A
Common and 18,750 Class B
Common Share options .............. -- 4,688 127,963 -- 84,975 --
Tax benefit associated with incentive
share options ..................... -- -- 9,106 -- -- --
Conversion of 2,255 Class A
Common Shares to 2,255
Class B Common Shares ............. (564) 564 -- -- -- --
- ------------------------------------------------- ------- --------- ---------- --------- -------
Balance at February 29, 1996 ........ $ 664,537 334,348 5,780,774 46,471,200 (3,899,037) (197,706)
- ----------------------------------------========= ======= ========= ========== ========= =======
</TABLE>
See accompanying notes to consolidated financial statements.
21
<PAGE> 63
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THE TRANZONIC COMPANIES
Years Ended February 29, 1996, and February 28, 1995 and 1994
- --------------------------------------------------------------------------------
A NATURE OF OPERATIONS AND SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
The Tranzonic Companies manufactures and distributes nationally a wide
variety of products to the industrial, institutional and consumer sectors
through its three remaining operating divisions. The principal market for the
Company's products is the continental United States. Tranzonic's Personal Care
Division, Hospital Specialty, provides personal care and other washroom related
products. Its Industrial Textiles Division, CCP Industries, distributes
industrial wiping cloths, washroom supplies, specialty chemicals, and safety and
work apparel. Baxter Tube, its Industrial Packaging Division, manufactures paper
tubes, cores and sleeves used in a wide variety of industrial applications.
(1) Principles of Consolidation
All of the Company's subsidiaries are wholly-owned and their accounts are
included in the accompanying consolidated financial statements. All material
inter-company balances and transactions have been eliminated.
(2) Inventories
Inventories are stated at the lower of cost or market with cost determined
using the first-in, first-out (FIFO) method.
(3) Property, Plant and Equipment
Property, plant and equipment is stated at cost. Depreciation and
amortization is computed on the straight-line method over the estimated useful
lives of the assets.
(4) Intangibles
Goodwill, the excess of cost over net assets of acquired companies, is being
amortized over periods not exceeding 40 years. At each quarterly balance sheet
date, management assesses whether there has been an impairment in the carrying
value, primarily by reviewing current and projected sales, operating income and
annual cash flows.
(5) Income Taxes
Deferred taxes are provided on the asset and liability method whereby
deferred tax assets are recognized for deductible temporary differences and loss
carryforwards, and deferred tax liabilities are recognized for taxable temporary
differences. Temporary differences are the differences between the reported
amounts of assets and liabilities and their tax basis. Deferred tax assets are
reduced by a valuation allowance when, in the opinion of management, it is more
likely than not that some portion or all of the deferred tax assets will not be
realized. Deferred tax assets and liabilities are adjusted for the effects of
changes in tax laws and rates on the date of enactment.
The Company files a consolidated Federal income tax return with its
subsidiaries.
(6) Share Options
Upon the exercise of Class A or Class B Common Share options granted under
the Company's incentive share option plans, the Company, at its discretion, can
either distribute newly issued shares or shares from treasury. Additional
paid-in capital is adjusted to reflect the balance of the option price.
(7) Net Earnings Per Common and Common Equivalent Share
Net earnings per common and common equivalent share have been calculated
based on the weighted average Class A and Class B Common Shares outstanding
during the period plus the incremental shares (calculated using the treasury
share method) for those outstanding share options which are considered common
share equivalents. Weighted average common and common equivalent shares used in
the calculation were 3,525,457, 3,508,467, and 3,515,658 in 1996, 1995 and 1994,
respectively.
(8) Cash Equivalents
The Company considers all highly liquid short-term investments, with
maturities when purchased of three months or less, to be cash equivalents.
(9) Revenue Recognition
The Company recognizes revenue as goods are shipped to customers.
(10) Deferred Gain
The deferred gain recorded on the books of the Company which resulted from a
sale and leaseback of certain real property is being amortized in proportion to
rental payments over 20 years, the life of the lease.
22
<PAGE> 64
(11) New Accounting Pronouncements
In October 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-based
Compensation," which provides a basis for measurement and recognition of all
stock-based employee compensation plans. The disclosure requirements of this
Statement are effective for fiscal years beginning after December 15, 1995. The
Company expects that it will maintain its current accounting method for
stock-based compensation and disclose the pro-forma effects on net income and
earnings per share of the fair market value method as permitted by the
Statement.
(12) Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
(13) Reclassification
Certain prior year amounts have been reclassified to conform to the current
year presentation.
B ACQUISITIONS / RESTRUCTURING
- --------------------------------------------------------------------------------
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 for $2.9 million in a cash transaction. The
acquisition was accounted for under the purchase method of accounting. Results
of operations have been reflected in the Company's consolidated financial
statements from the date of acquisition.
In fiscal 1994, the Company announced plans to consolidate the operating
units making up its Housewares Division. As a result, the Company recorded a
$1,300,000 charge to operating earnings ($792,000 after tax or 22 cents per
share). The charge includes costs of shutting down duplicate facilities in
Dallas and Philadelphia, termination costs and moving expenses. The project
was sucessfully completed in the first quarter of fiscal 1995 with no material
difference in amounts incurred and paid to those estimated in fiscal 1994.
Results of operations of Ever-Ready Appliance Mfg. Co., acquired on August
13, 1993, classified as discontinued operations as a result of the divestiture
of the Housewares Division, have been reflected in the Company's consolidated
financial statements from the date of acquisition.
C INVENTORIES
- --------------------------------------------------------------------------------
The components of inventories are summarized below:
<TABLE>
<CAPTION>
1996 1995
- -----------------------------------------------------------
<S> <C> <C>
Raw materials ................ $ 7,182,278 13,318,921
Finished goods ............... 8,156,387 9,854,683
- ---------------------------------------------- ----------
$ 15,338,665 23,173,604
- ---------------------------------============= ==========
</TABLE>
D PROPERTY, PLANT AND EQUIPMENT
- --------------------------------------------------------------------------------
The components of property, plant and equipment, net, are summarized below:
<TABLE>
<CAPTION>
1996 1995
- -----------------------------------------------------------
<S> <C> <C>
Land, buildings and
improvement................... $ 14,084,556 14,490,801
Machinery and equipment ...... 27,925,060 30,198,293
- ---------------------------------------------- ----------
42,009,616 44,689,094
Accumulated depreciation
and amortization ............. 22,633,408 21,586,913
- ---------------------------------------------- ----------
$ 19,376,208 23,102,181
- ---------------------------------============= ==========
</TABLE>
E INTANGIBLE ASSETS
- --------------------------------------------------------------------------------
Intangible assets consist primarily of goodwill. Amortizable goodwill
included therein of $4,396,697 and $8,098,026 in 1996 and 1995, respectively, is
shown net of accumulated amortization of $1,399,388 and $2,118,953 in those
years. In fiscal 1996, goodwill increased $2,120,202 resulting from the
acquisition of Plezall Wipers (note B) and decreased $5,476,905 as a result of
the Housewares Division divestiture (note O).
F LONG-TERM DEBT
- --------------------------------------------------------------------------------
A description of the long-term debt follows:
<TABLE>
<CAPTION>
1996 1995
- -----------------------------------------------------------
<S> <C> <C>
Revolving credit ............. $ 7,000,000 7,600,000
- ----------------------------------============ =========
</TABLE>
The Company has a $30,000,000 revolving credit facility maturing June 30,
1997. Funds borrowed may be used for working capital and/or acquisition
purposes. In lieu of a compensating balance requirement, the agreement requires
an annual fee of 3/10 of 1% on the unused portion. At the Company's option,
borrowings under the agreement bear interest at either the bank's prime rate or
at 1/2 of 1% above an adjusted LIBOR rate, subject to certain conditions in the
rate structure.
23
<PAGE> 65
At February 29, 1996, interest rates applicable to total borrowings
outstanding range from 5.8125% to 5.875%.
The debt agreements contain restrictions on the Company with respect to
investments, maintenance of working capital, net worth, use of cash for payments
of dividends, and purchase of treasury shares. Capital distributions during any
fiscal year are limited to 50% of average consolidated net earnings over a
three-year period. The Company was in compliance with all debt agreement
restrictions or has obtained waivers.
G SHARE OPTIONS
- --------------------------------------------------------------------------------
The Company has three performance share option plans in effect for key
employees. Under these plans 180,000 Class A Common Shares and 400,000 Class B
Common Shares were reserved for issuance at a per share option price of not less
than 100% of the market price on the dates these options were awarded.
Additionally, 60,000 Class A Common Shares were reserved for issuance at a per
share option price from 10% to 95% of the market price on the dates these
options were awarded, and 95,000 Class B Common Shares were granted as part of
certain employment contracts at 100% of market price at the date of grant. At
February 29, 1996, there were 136,250 Class B Common Shares available for grant
under these plans.
Details pertaining to the Company's plans are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
- ----------------------------------------------------
<S> <C> <C> <C>
Options granted:
Class B-Common ..... 38,250 35,950 48,400
Average option price:
Class B-Common ..... $ 14.75 12.04 14.08
Options exercised:
Class A-Common ..... 10,300 -- 400
Class B-Common ..... 18,750 22,300 7,900
Average option price:
Class A-Common ..... $ 3.95 -- 10.17
Class B-Common ..... $ 9.44 12.41 11.34
Options which became
exercisable:
Class B-Common .... 38,700 42,900 46,300
Average option price:
Class B-Common ..... $ 15.22 12.63 12.26
Options unexercised at
year-end:
Class A-Common .... 16,500 27,800 27,800
Class B-Common .... 243,835 281,485 279,400
</TABLE>
<TABLE>
<CAPTION>
1996 1995 1994
- ----------------------------------------------------------
<S> <C> <C> <C>
Option price range per
share:
Class A-Common.......... $ 5.08 .50 .50
........................ to to to
........................ $10.17 10.17 10.17
Class B-Common.......... $ 5.08 .50 .50
........................ to to to
........................ $ 16.78 16.78 16.78
Options cancelled:
Class A-Common........... 1,000 -- --
Class B-Common........... 57,150 11,565 14,400
Options exercisable:
Class A-Common.......... 16,500 27,800 27,800
Class B-Common.......... 121,850 107,400 90,700
</TABLE>
H RETIREMENT PLANS
- --------------------------------------------------------------------------------
Late in fiscal 1996, the Company received a favorable determination by the
IRS and the PBGC to terminate and make final distributions of pension benefits
from its General Employee's Retirement Plan of the Personal Care Division. As of
fiscal year end most of the pension benefits were distributed.
The Salary Savings and Profit-sharing Plan of The Tranzonic Companies is a
defined contribution plan covering certain qualifying employees. The Company's
contributions to The Salary Savings and Profit-sharing Plan were $385,311 in
1996, $363,690 in 1995 and $219,850 in 1994 for continuing operations.
I INCOME TAXES
- --------------------------------------------------------------------------------
The provision for income taxes from continuing operations consists of the
following:
<TABLE>
<CAPTION>
1996 1995 1994
- --------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal ....... $ 2,127,000 2,332,000 704,000
State and local 288,000 271,000 413,000
- ------------------------------- --------- ---------
2,415,000 2,603,000 1,117,000
Deferred:
Federal ....... (213,000) 92,000 311,000
State and local (33,000) 78,000 --
- ------------------------------- --------- ---------
(246,000) 170,000 311,000
- ------------------------------- --------- ---------
$ 2,169,000 2,773,000 1,428,000
- --------------------=========== ========= =========
</TABLE>
24
<PAGE> 66
The Company's effective tax rate from continuing operations differs from the
statutory federal income tax rate as follows:
<TABLE>
<CAPTION>
1996 1995 1994
- ----------------------------------------------------
<S> <C> <C> <C>
Computed income taxes at
statutory rate ....... 35.0% 35.0% 35.0%
State and local income
taxes, net of federal
income tax benefit ... 2.6 3.1 7.7
Tax-exempt income ...... (3.5) (.3) (.9)
General business
tax credit ........... (1.1) (1.0) (1.9)
Lower rate benefit ..... (1.0) (1.0) (1.0)
Other .................. 0.9 2.2 (.9)
- --------------------------------- ---- ----
32.9% 38.0% 38.0%
- -----------------------------==== ==== ====
</TABLE>
Significant components of the Company's deferred tax assets and liabilities
are as follows:
<TABLE>
<CAPTION>
1996 1995
- -------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Bad debt reserve ............................. $ 109,712 149,565
Inventory valuation .......................... 299,848 557,984
Vacation accrual ............................. 32,152 55,095
Bonus accrual ................................ 65,658 170,032
Deferred compensation ........................ 480,165 293,461
Deferred book gain ........................... 772,793 832,324
Package design costs ......................... 166,551 196,124
Deferred tax losses .......................... 2,491,925 --
Other ........................................ 316,678 287,620
- ------------------------------------------------------------- ---------
Total gross deferred tax assets .............. 4,735,482 2,542,205
Less valuation allowance ..................... 1,506,995 --
- ------------------------------------------------------------- ---------
Net deferred tax assets ...................... 3,228,487 2,542,205
Deferred tax liabilities:
Depreciation ................................. 1,994,855 2,334,910
Incentive compensation ....................... -- 264,986
Other ........................................ 365,099 535,504
- ------------------------------------------------------------- ---------
Total deferred tax liabilities ............... 2,359,954 3,135,400
- ------------------------------------------------------------- ---------
Net deferred tax (assets) liabilities .......... $(868,533) 593,195
- ----------------------------------------------------========= =========
</TABLE>
The valuation allowance for deferred tax assets as of February 29, 1996 is
$1,506,995. This newly established allowance represents the Federal tax effect
of a net capital loss carryforward created through the divestiture of the
Housewares Division. The capital loss carryforward is available to offset future
net capital gains, if any, through fiscal year 2002.
J SEGMENT DATA
- --------------------------------------------------------------------------------
The industry segment in which the Company operates is primarily the
conversion of paper and allied products.
The majority of the Company's products originate from large rolls of paper
or allied products purchased directly from mills where such materials are
manufactured. As such, each of the Company's divisions displays similar
purchasing function characteristics. Also, the end-use of most of the Company's
products is similar, as the majority of sales are of disposable products used
for personal hygiene and cleaning.
The Company's foreign operations and export sales are immaterial.
K LEASE COMMITMENTS
- --------------------------------------------------------------------------------
The Company conducts operations at certain facilities under various
non-cancellable operating leases. Rent expense charged to continuing operations
was $1,515,572, $1,328,365 and $1,180,269 in fiscal years 1996, 1995 and 1994,
respectively.
Rental commitments at February 29, 1996 for noncancellable operating leases
with initial terms greater than one year are as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
1997 .................................... $ 1,180,814
1998 .................................... 1,036,511
1999 .................................... 914,631
2000 .................................... 919,875
2001 .................................... 919,875
after 2001 .............................. 6,973,236
- -----------------------------------------------------------
$ 11,944,942
- -----------------------------------------------============
</TABLE>
L CLASS B COMMON SHARES
- --------------------------------------------------------------------------------
Class B Common Shares, each of which have one-tenth the voting power of a
Class A Common Share, must be paid a per share dividend at least equal to that
paid on the Class A Common Shares. Class A Common Shares may be converted into
Class B Common Shares on a one-for-one basis at the holder's option.
25
<PAGE> 67
M QUARTERLY FINANCIAL DATA (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
- --------------------------------------------------------------------- ----------- ----------- -----------
1996
<S> <C> <C> <C> <C>
Sales ................................................. $34,427,872 35,406,029 34,558,178 32,823,442
Cost of goods sold .................................... 23,132,588 24,251,306 23,781,598 23,006,179
Earnings from continuing operations before income taxes 1,566,002 1,419,458 1,267,185 2,332,665
Income taxes .......................................... 521,571 463,855 453,074 730,500
Earnings from continuing operations ................... 1,044,431 955,603 814,111 1,602,165
Discontinued operations:
Earnings from discontinued operations,
net of income taxes ................................. (3,658) 225,492 99,751 88,447
Loss on disposal of Housewares Division,
net of income tax benefit ........................... -- -- -- (7,250,000)
Earnings (loss) from discontinued operations .......... (3,658) 225,492 99,751 (7,161,553)
Net earnings (loss) ................................... 1,040,773 1,181,095 913,862 (5,559,388)
Per share amounts:
From continuing operations .......................... .30 .27 .23 .45
From discontinued operations ........................ -- .06 .03 (2.04)
Net earnings (loss) ................................. .30 .33 .26 (1.58)
Cash dividends paid:
Class A Common ..................................... .045 .05 .05 .05
Class B Common ..................................... .085 .09 .09 .09
1995
Sales ................................................. $31,155,636 32,413,654 32,391,524 30,979,951
Cost of goods sold .................................... 20,453,914 21,434,943 21,402,800 20,288,575
Earnings from continuing operations before income taxes 1,838,772 1,941,812 1,808,446 1,797,186
Income taxes .......................................... 663,907 758,783 651,810 698,500
Earnings from continuing operations ................... 1,092,991 1,183,029 1,156,636 1,098,686
Earnings from discontinued operations,
net of income taxes ................................. 167,672 306,810 134,093 145,479
Net earnings .......................................... 1,260,663 1,489,839 1,290,729 1,244,165
Per share amounts:
From continuing operations .......................... .31 .34 .32 .31
From discontinued operations ........................ .05 .09 .04 .04
Net earnings ........................................ .36 .43 .36 .35
Cash dividends paid:
Class A Common ..................................... .045 .045 .045 .045
Class B Common ..................................... .085 .085 .085 .085
- -------------------------------------------------------------------------------------------------------------
</TABLE>
N SELLING, GENERAL AND ADMINISTRATIVE EXPENSE
- --------------------------------------------------------------------------------
In the current fiscal year fourth quarter the Company realized a gain of
$931,800 from the sale of its Personal Care Division's douche and enema product
lines. In addition the Company realized a gain of $604,500 from the sale of
stock received when the Company's health and welfare benefits plan administrator
converted from a mutual to a stock company. Both of these transactions are
included in selling, general and administrative expense.
26
<PAGE> 68
O DISCONTINUED OPERATIONS
- --------------------------------------------------------------------------------
On February 29, 1996 the Company signed a definitive agreement to sell for
cash substantially all operating net assets of its Housewares Division.
Accordingly, their operations are segregated in the accompanying consolidated
financial statements. The Company closed the sale on March 29, 1996. A reserve
for loss on discontinued operations was established for expected transaction
costs, estimated adjustment to purchase price based on final audited numbers,
and estimated contingencies. Sales from discontinued operations were
$24,110,273, $21,957,298 and $14,910,820 for the fiscal years ended February 29,
1996 and February 28, 1995 and 1994, respectively.
The components of net assets of discontinued operations included in the
accompanying consolidated balance sheet as of February 29, 1996 (fiscal year
1995 amounts are shown as they were historically classified) are as follows:
<TABLE>
<CAPTION>
1996 1995
- -----------------------------------------------------------
<S> <C> <C>
Current assets:
Receivables, net .............. $ 4,793,777 3,885,801
Inventories ................... 5,815,190 5,421,083
Prepaid expenses and other
current assets ............... 458,789 291,694
- ----------------------------------------------- ---------
Total current assets ...... 11,067,756 9,598,578
Current liabilities:
Trade accounts payable ........ 671,490 803,102
Accrued compensation .......... 235,909 210,043
Other payables and accrued
expenses ..................... 146,955 --
- ----------------------------------------------- ---------
Total current liabilities . 1,054,354 1,013,145
- ----------------------------------------------- ---------
Total .................. 10,013,402 8,585,433
- ----------------------------------------------- ---------
Noncurrent assets:
Property, plant and equipment . 314,276 710,597
Other noncurrent assets ....... 113,691 200,575
Intangibles ................... 29,661 26,696
- ----------------------------------------------- ---------
Total noncurrent assets ... 457,628 937,868
- ----------------------------------------------- ---------
Net assets ............. 10,471,030 9,523,301
Reserve for loss on disposal of
discontinued operations ...... 1,196,786 --
- ----------------------------------------------- ---------
Net assets of
discontinued operations . $ 9,274,244 9,523,301
- ------------------------------------=========== =========
The reserve for loss on disposal of discontinued operations consists of
brokerage fees which were paid subsequent to year end and purchase price
accurals involving contingent inventory and accounts receivable adjustments.
</TABLE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
The Tranzonic Companies:
We have audited the accompanying consolidated balance sheets of The Tranzonic
Companies and subsidiaries as of February 29, 1996 and February 28, 1995, and
the related consolidated statements of operations, shareholders' equity and cash
flows for each of the years in the three-year period ended February 29, 1996.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
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, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of The Tranzonic
Companies and subsidiaries as of February 29, 1996 and February 28, 1995, and
the results of their operations and their cash flows for each of the years in
the three-year period ended February 29, 1996, in conformity with generally
accepted accounting principles.
/s/ KPMG Peat Marwick LLP
Cleveland, Ohio
March 29, 1996
27
<PAGE> 69
SHAREHOLDER INFORMATION
SHARE PRICE RANGE
THE TRANZONIC COMPANIES
Traded on the American Stock Exchange
Years Ended February 29/28
<TABLE>
<CAPTION>
Class A Common Class B Common
Symbol -- TNZA Symbol -- TNZB
--------------------------- ---------------------------
1996 1995 1996 1995
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1st Quarter 161/8 133/4 121/2 107/8 151/8 131/2 123/8 103/4
2nd Quarter 153/8 131/2 143/8 111/4 153/8 131/2 135/8 101/2
3rd Quarter 153/8 131/2 221/2 131/4 143/4 13 203/8 121/8
4th Quarter 143/4 111/4 191/4 143/4 141/2 115/8 173/4 143/8
</TABLE>
As of May 6, 1996, there were 367 Class A Common and 363 Class B Common
shareholders of record.
DIVIDEND PAYMENTS
THE TRANZONIC COMPANIES
Years Ended February 29/28
<TABLE>
<CAPTION>
Class A Common Class B Common
-------------- --------------
1996 1995 1996 1995
- ----------------------------------------------------------------------------------------
<C> <C> <C> <C> <C>
1st Quarter 4.5(cent) 4.5(cent) 8.5(cent) 8.5(cent)
2nd Quarter 5.0(cent) 4.5(cent) 9.0(cent) 8.5(cent)
3rd Quarter 5.0(cent) 4.5(cent) 9.0(cent) 8.5(cent)
4th Quarter 5.0(cent) 4.5(cent) 9.0(cent) 8.5(cent)
- ------------------------------------- --------- --------- ---------
19.5(cent) 18.0(cent) 35.5(cent) 34.0(cent)
- ----------------------------========= ========= ========= =========
</TABLE>
TRANSFER AGENT AND REGISTRAR
KeyCorp Shareholder Services, Inc.
Cleveland, Ohio 44115
GENERAL COUNSEL
Berick Pearlman & Mills Co., L.P.A.
Cleveland, Ohio 44114
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
Cleveland, Ohio 44114
FORM 10-K
Shareholders who desire a copy of the fiscal 1996 annual report on Form 10-K may
obtain it without charge by writing to Alayne L. Reitman, Vice President-Finance
and Treasurer
THE TRANZONIC COMPANIES
30195 Chagrin Blvd.
Pepper Pike, Ohio 44124
216/831-5757
28
<PAGE> 70
BOARD OF DIRECTORS
*JAMES H. BERICK
Chairman, Berick, Pearlman & Mills Co., L.P.A. (Attorneys)
*JOSEPH A. CAMPANELLA
Executive Vice President, Star Banc Corporation
+DAVID J. GOLDEN
Senior Vice President
*STEVEN W. PERCY
President, BP Oil Co. and
Executive Vice President, BP America Inc.
+MORTON L. REITMAN
Executive Vice President and President-Personal Care Division
+ROBERT S. REITMAN
Chairman, President and Chief Executive Officer
SYLVIA K. REITMAN
Investor
*THOMAS S. ROBERTSON
Sainsbury Professor of Marketing Chair, London Business School
JAMES C. SPIRA
Managing Partner, Diamond Technology Partners
*Members of Audit and Compensation Committees
+Members of Executive Committee
OFFICERS
ROBERT S. REITMAN
Chairman, President and Chief Executive Officer
MORTON L. REITMAN
Executive Vice President and President-Personal Care Division
DAVID J. GOLDEN
Senior Vice President
RICHARD J. SIMS
Senior Vice President and President-Industrial Textiles Division
DENNIS H. KELLY
Vice President and President-Industrial Packaging Division
ALAYNE L. REITMAN
Vice President-Finance and Treasurer
ROBERT D. WEITZNER
Vice President-Information Technology
RICHARD J. PENNZA
Chief Accounting Officer
JAMES H. BERICK
Secretary
WILLIAM E. HEMANN
Executive Vice President-Personal Care Division
ERNEST L. CLARKE
Vice President Medical Division-Personal Care Division
PAUL D. MARION, JR.
Vice President National Accounts-Personal Care Division
KATHLEEN A. METZGER
Vice President Administration-Personal Care Division
BETH SMYLIE RICHMAN
Vice President Retail Division-Personal Care Division
NORMAN D. SULL
Vice President Purchasing-Industrial Textiles Division
DAVID J. WILLIAMS
Vice President Sales-Industrial Textiles Division
CHRISTOPHER T. CIRA
Assistant Vice President Finance-Industrial Textiles Division
HELEN MALHOTRA
Assistant Vice President Information Systems-Industrial Textiles Division
DANIEL R. MOON
Assistant Vice President Marketing-Industrial Textiles Division
[INSIDE BACK COVER]
<PAGE> 71
THE TRANZONIC COMPANIES
30195 Chagrin Blvd.
Pepper Pike, Ohio 44124
[OUTSIDE BACK COVER]
<PAGE> 72
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, 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 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 3, 1996 2,177,503
---------
Number of Class B Common Shares Outstanding at July 3, 1996 1,312,685
---------
<PAGE> 73
PART I: FINANCIAL INFORMATION
-----------------------------
Item 1. Financial Statements
----------------------------
THE TRANZONIC COMPANIES
Condensed Consolidated Balance Sheets
May 31, 1996 and February 29, 1996
<TABLE>
<CAPTION>
May 31, February 29,
Assets 1996 1996
------ ----------- ----------
(unaudited)
<S> <C> <C>
Current assets
Cash (including cash equivalents of $7,693,000 at
May 31, 1996 and $4,673,200 at February 29, 1996) $ 9,764,715 6,610,933
Short-term investments 1,989,067 --
Receivables, net 13,351,172 13,752,460
Inventories
Raw materials 6,563,300 7,182,278
Finished goods 7,453,396 8,156,387
Deferred income taxes 1,204,852 1,804,106
Prepaid expenses and other current assets 1,674,865 1,219,235
Net assets of discontinued operations -- 9,274,244
----------- ----------
Total current assets 42,001,367 47,999,643
Property, plant and equipment, net 18,827,712 19,376,208
Other noncurrent assets 2,622,223 2,477,913
Intangible assets 5,136,527 5,167,879
----------- ----------
$68,587,829 75,021,643
=========== ==========
</TABLE>
(Continued)
(1)
<PAGE> 74
THE TRANZONIC COMPANIES
Condensed Consolidated Balance Sheets
May 31, 1996 and February 29, 1996
<TABLE>
<CAPTION>
May 31, February 29,
Liabilities and Shareholders' Equity 1996 1996
------------------------------------ ----------- ----------
(unaudited)
<S> <C> <C>
Current liabilities
Trade accounts payable $ 8,002,940 8,337,445
Accrued compensation 2,053,422 2,943,971
Other payables and accrued expenses 4,484,008 3,489,484
----------- ----------
Total current liabilities 14,540,370 14,770,900
Long-term debt -- 7,000,000
Deferred gain 1,872,330 1,912,230
Deferred income taxes 502,725 935,573
Other noncurrent liabilities 1,360,198 1,248,824
Shareholders' equity
Serial preferred shares without par value; authorized 200,000,
no shares issued -- --
Class A common shares, no par value; shares at stated value,
authorized 4,000,000, issued 2,657,949 at May 31, 1996
and 2,658,149 at February 29, 1996 664,487 664,537
Class B common shares, no par value; shares at stated value,
authorized 8,000,000, issued 1,337,590 at May 31, 1996
and 1,337,390 at February 29, 1996 334,398 334,348
Additional paid-in capital 5,780,774 5,780,774
Retained earnings 47,780,141 46,471,200
----------- ----------
54,559,800 53,250,859
Less cost of common shares held in treasury 479,146 Class A
common and 26,205 Class B common shares at May 31, 1996
and 472,846 Class A common and 19,305 Class B common
shares at February 29, 1996 4,247,594 4,096,743
----------- ----------
Total shareholders' equity 50,312,206 49,154,116
----------- ----------
$68,587,829 75,021,643
=========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
(2)
<PAGE> 75
THE TRANZONIC COMPANIES
Condensed Consolidated Statements of Earnings
Three-month periods ended May 31, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
------------ -----------
<S> <C> <C>
Sales $ 34,715,109 34,427,872
Cost and expenses
Cost of goods sold 23,400,738 23,132,588
Selling, general, and administrative expenses 8,987,220 9,564,866
------------ -----------
32,387,958 32,697,454
------------ -----------
Operating earnings 2,327,151 1,730,418
Interest income 77,406 20,573
Interest expense (27,979) (184,989)
------------ -----------
Earnings from continuing operations before
income taxes 2,376,578 1,566,002
Income taxes 842,000 521,571
------------ -----------
Earnings from continuing operations 1,534,578 1,044,431
Loss from discontinued operations, net of income taxes -- (3,658)
------------ -----------
Net earnings $ 1,534,578 1,040,773
============ ===========
Net earnings per common share
From continuing operations $ .44 .30
From discontinued operations -- --
------------ -----------
$ .44 .30
============ ===========
Dividends per Class A common share $ .050 .045
============ ===========
Dividends per Class B common share $ .090 .085
============ ===========
Average common and common equivalent shares outstanding 3,507,760 3,522,927
============ ===========
Shares outstanding at end of period 3,490,188 3,493,288
============ ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
(3)
<PAGE> 76
THE TRANZONIC COMPANIES
Condensed Consolidated Statements of Cash Flows
Three-month periods ended May 31, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
----------- ----------
<S> <C> <C>
Cash flows from operating activities
Net earnings $ 1,534,578 1,040,773
Adjustments to reconcile net earnings to net cash provided
by continuing operations
Loss from discontinued operations -- 3,658
Depreciation and amortization 827,451 890,518
Deferred income taxes 166,406 (58,534)
Changes in assets and liabilities, net of effects of acquisitions
Receivables, net 401,288 317,707
Inventories 1,321,969 (1,603,193)
Prepaid expenses and other current assets (423,226) 594,624
Trade accounts payable (334,505) (1,082,787)
Accrued compensation (890,549) (620,863)
Other payables and accrued expenses 534,829 810,310
Other, net (51,631) (169,514)
----------- ----------
Net cash provided by continuing operations 3,086,610 122,699
Net cash used in discontinued operations (24,143) (500,947)
----------- ----------
Net cash provided by (used in) operating activities 3,062,467 (378,248)
Cash flows from financing activities
Proceeds from revolving credit -- 4,900,000
Repayments of long-term debt (7,000,000) (1,500,000)
Cash dividends (225,637) (207,197)
----------- ----------
Net cash provided by (used in) financing activities (7,225,637) 3,192,803
Cash flows from investing activities
Net proceeds from sale of Housewares Division 9,725,678 --
Purchases of short-term investments (1,989,067) --
Payments for acquisitions, net of cash acquired -- (2,909,735)
Purchase of treasury shares (150,851) --
Proceeds on exercise of share options -- 107,775
Purchases of property, plant and equipment (268,808) (468,205)
----------- ----------
Net cash provided by (used in) investing activities 7,316,952 (3,270,165)
----------- ----------
Cash and cash equivalents
Increase (decrease) during the year 3,153,782 (455,610)
Beginning balance 6,610,933 2,387,540
----------- ----------
Ending balance $ 9,764,715 1,931,930
=========== ==========
Supplemental schedule of noncash investing and financing activities
On March 1, 1995, the Company purchased substantially all the assets
and assumed certain liabilities of Plezall Wipers, Inc.; in conjunction
with the acquisition, liabilities were assumed as follows:
Fair value of assets acquired $ -- 3,091,802
Cash paid -- 2,909,735
----------- ----------
Liabilities assumed $ -- 182,067
=========== ==========
Supplemental disclosure of cash flow information
Income taxes paid $ 1,166,543 695,199
Interest paid $ 36,317 163,079
=========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
(4)
<PAGE> 77
THE TRANZONIC COMPANIES
Notes to Condensed Consolidated Financial Statements
Three-month periods ended May 31, 1996 and 1995
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 and subsidiaries
(Company) at May 31, 1996 and the results of operations for the
three-month periods ended May 31, 1996 and 1995. 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 29, 1996.
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.
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:
<TABLE>
<CAPTION>
Three Months
Ended May 31,
-------------------
1996 1995
---- ----
<S> <C> <C>
Class A common 2,188,682 2,193,133
Class B common 1,319,078 1,329,794
--------- ---------
3,507,760 3,522,927
========= =========
</TABLE>
The table below depicts the Class A common and Class B common shares
outstanding at the end of the periods reported:
<TABLE>
<CAPTION>
May 31,
--------------------
1996 1995
---- ----
<S> <C> <C>
Class A common 2,178,803 2,185,223
Class B common 1,311,385 1,308,065
--------- ---------
3,490,188 3,493,288
========= =========
</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.
(5)
<PAGE> 78
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, 1996, the current
ratio was 2.9:1 and current assets continued to exceed total liabilities.
Revenues from continuing operations in the first fiscal quarter ended May 31,
1996 increased slightly to $34.7 million from $34.4 million as recorded in the
prior year like period. Volume revenue gains from the extension of existing
product lines, mostly serving the Company's institutional customers, were
largely offset by a decrease in revenues from the fiscal 1996 fourth quarter
sale of our Personal Care Division's douche and enema line of business and
reduced revenues from certain other product lines.
Gross margins in the current year first quarter were 32.6 percent, down
factionally from 32.8 percent of a year ago. Raw material costs, particularly
fluff pulp, which have influenced cost of sales during the current year fiscal
quarter are in a downward trend, and approaching the level of the prior year
like period. In addition, product mix shifts to historically higher margin
products were offset to some degree with competitive pricing pressures.
Operating margins in the current year first quarter improved to 6.7 percent of
sales as compared to 5.0 percent of sales from the prior year. Cost containment
and efficiency programs covering administration, distribution, and marketing
have reflected positively on earnings.
On March 28, 1996, the Company closed on the divestiture of its Housewares
Division substantially as expected when the Company reported the sale in the
prior year fourth fiscal quarter. The cash proceeds received were used to pay
off the outstanding line of credit, with the remainder invested in short-term
cash investments. As a consequence, interest income has increased and interest
expense has decreased on a quarter to quarter comparison.
Earnings from continuing operations in the first quarter ended May 31, 1996
increased to $1.5 million or 44 cents per share up 45.9 percent from $1.0
million or 30 cents per share recorded in the like period a year ago.
Cash increased $3.2 million during the first quarter along with a $2.0 million
increase in short-term investments. Cash generated from operations of $3.1
million, cash received from the Housewares Division divestiture of $10.0
million, and the pay off of $7.0 million in long-term debt were key
contributors to this net increase.
(6)
<PAGE> 79
FORM 10-Q - PART II: OTHER INFORMATION
--------------------------------------
Items 1 through 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 6. Exhibits and reports on Form 8-K
<TABLE>
<CAPTION>
a) Exhibit
Number Exhibit
------ -------
<S> <C>
10.1 Second Amendment to Credit Agreement dated
June 7, 1996, between the Registrant, Society
National Bank and National City Bank
27 Financial Data Schedule(1)
99 Independent Auditors' Review Report
b) Reports on Form 8-K
-------------------
On April 11, 1996, the Registrant filed a report on Form 8-K dated
March 29, 1996. On May 17, 1996, the Registrant filed Amendment No. 1
to such Form 8-K on Form 8-K/A dated May 16, 1996. The filings were
made under Item 2 of Form 8-K, in conjunction with the sale by the
Registrant and its wholly-owned subsidiaries, Design Trend, Inc. and
Ever-Ready Appliance Mfg. Co. (collectively, the "Subsidiaries"), of
substantially all of the assets of the Subsidiaries. The following
financial statements were filed as a part of the Form 8-K, as amended:
1. The Tranzonic Companies Unaudited Pro Forma Condensed Consolidated
Statement of Earnings for the year ended February 29, 1996; and
2. The Tranzonic Companies Unaudited Pro Forma Condensed Consolidated
Balance Sheet dated February 29, 1996.
<FN>
(1) Filed only in electronic format pursuant to Item 601(b)(27) of Regulation
S-K.
</TABLE>
(7)
<PAGE> 80
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 6, 1996 By: /s/ Richard J. Pennza
----------------------------------
Richard J. Pennza
(Duly authorized officer and
Principal Accounting Officer)
(8)
<PAGE> 81
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, 1996, and the related condensed
consolidated statements of earnings and cash flows for the three-month periods
ended May 31, 1996 and 1995. 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 29, 1996, and the related consolidated statements of
operations, shareholders' equity, and cash flows for the year then ended (not
presented herein); and in our report dated March 29, 1996, 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 29, 1996, 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 28, 1996
(9)
<PAGE> 82
KPMG Peat Marwick LLP
1500 National City Center
1900 East Ninth Street
Cleveland, OH 44114-3495
INDEPENDENT AUDITORS' CONSENT
-----------------------------
The Board of Directors
The Tranzonic Companies:
We consent to the use of our report dated March 29, 1996, on the consolidated
financial statements of The Tranzonic Companies and subsidiaries as of February
29, 1996 and February 28, 1995, and for each of the years in the three-year
period ended February 29, 1996, incorporated in the Proxy Statement Schedule 14A
as filed on July 10, 1996.
With respect to the subject Proxy Statement Schedule 14A, we acknowledge our
awareness of the incorporation by reference therein of our report dated June 28,
1996, related to our review of the interim financial information.
/s/ KPMG Peat Marwick LLP
Cleveland, Ohio
July 10, 1996
