<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
<TABLE>
<S> <C>
- --
X | Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
- -- For the quarterly period ended November 30, 1995 or
-----------------
- -- Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
| For the transition period from to
- -- ------------------- -------------------
Commission file number 2-29697
-------
THE TRANZONIC COMPANIES
- ------------------------------------------------------------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Ohio 34-0664235
- --------------------------------------------------- -----------------------------------------------------------------
(State or other jurisdiction of incorporation (I.R.S. Employer Identification No.)
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 January 8, 1996 2,185,773
---------
Number of Class B Common Shares Outstanding at January 8, 1996 1,317,615
---------
</TABLE>
<PAGE> 2
PART I: FINANCIAL INFORMATION
-----------------------------
Item 1. Financial Statements
----------------------------
THE TRANZONIC COMPANIES
Condensed Consolidated Balance Sheets
November 30, 1995 and February 28, 1995
<TABLE>
<CAPTION>
November 30, February 28,
Assets 1995 1995
------ ----------- -----------
(unaudited)
<S> <C> <C>
Current assets
Cash (including cash equivalents of $3,266,200 at
November 30, 1995 and $349,600 at February 28, 1995) $ 4,984,224 2,387,540
Receivables, net 17,624,560 16,995,651
Inventories
Raw materials 13,693,426 13,318,921
Finished goods 10,131,779 9,854,683
Deferred income taxes 1,325,739 1,285,533
Prepaid expenses and other current assets 1,655,153 2,046,517
----------- -----------
Total current assets 49,414,881 45,888,845
Property, plant and equipment, net 22,190,145 23,102,181
Other noncurrent assets 2,561,695 2,416,958
Intangible assets 10,783,324 8,871,482
----------- -----------
$84,950,045 80,279,466
=========== ===========
</TABLE>
<PAGE> 3
THE TRANZONIC COMPANIES
Condensed Consolidated Balance Sheets
November 30, 1995 and February 28, 1995
<TABLE>
<CAPTION>
November 30, February 28,
Liabilities and Shareholders' Equity 1995 1995
------------------------------------ ------------ -----------
(unaudited)
<S> <C> <C>
Current liabilities
Trade accounts payable $ 9,867,455 9,657,007
Accrued compensation 3,068,335 2,981,782
Other payables and accrued expenses 3,678,288 2,922,604
----------- -----------
Total current liabilities 16,614,078 15,561,393
Long-term debt 8,500,000 7,600,000
Deferred gain 1,952,130 2,071,830
Deferred income taxes 1,779,756 1,878,728
Other noncurrent liabilities 1,173,451 931,168
Shareholders' equity
Serial preferred shares without par value; authorized 200,000,
no shares issued -- --
Class A common shares, no par value; authorized 4,000,000,
issued 2,658,669 at November 30, 1995 and 2,660,404 at
February 28, 1995 664,667 665,101
Class B common shares, no par value; authorized 8,000,000,
issued 1,336,870 at November 30, 1995 and 1,316,385 at
February 28, 1995 334,218 329,096
Additional paid-in capital 5,771,666 5,643,705
Retained earnings 52,256,822 49,780,163
----------- -----------
59,027,373 56,418,065
Less cost of common shares held in treasury
472,846 Class A common and 19,305 Class B common
shares at November 30, 1995 and 483,146 Class A common
and 19,305 Class B common shares at February 28, 1995 4,096,743 4,181,718
----------- -----------
Total shareholders' equity 54,930,630 52,236,347
----------- -----------
$84,950,045 80,279,466
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE> 4
THE TRANZONIC COMPANIES
Condensed Consolidated Statements of Earnings
Nine- and three-month periods ended November 30, 1995 and 1994
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
November 30, November 30,
----------------- ------------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Sales $ 122,224,052 112,863,988 40,224,220 37,276,446
Cost and expenses
Cost of goods sold 85,284,207 75,963,885 28,218,587 25,052,326
Selling, general, and
administrative expenses 31,554,948 30,078,704 10,383,637 10,111,293
------------- ------------- ------------- -------------
116,839,155 106,042,589 38,602,224 35,163,619
------------- ------------- ------------- -------------
Operating earnings 5,384,897 6,821,399 1,621,996 2,112,827
Interest income 58,120 54,466 24,772 19,064
Interest expense (554,787) (291,634) (182,406) (86,162)
------------- ------------- ------------- -------------
Earnings before
income taxes 4,888,230 6,584,231 1,464,362 2,045,729
Income taxes 1,752,500 2,543,000 550,500 755,000
------------- ------------- ------------- -------------
Net earnings $ 3,135,730 4,041,231 913,862 1,290,729
============= ============= ============= =============
Net earnings per common share $ .89 1.15 .26 .36
==== ==== ==== ====
Dividends per Class A common share $ .145 .135 .050 .045
==== ==== ==== ====
Dividends per Class B common share $ .265 .255 .090 .085
==== ==== ==== ====
Average common and common
equivalent shares outstanding 3,526,447 3,512,904 3,530,961 3,572,175
============= ============= ============= =============
Shares outstanding at end of period 3,503,388 3,455,538 3,503,388 3,455,538
============= ============= ============= =============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE> 5
THE TRANZONIC COMPANIES
Condensed Consolidated Statements of Cash Flows
Nine-month periods ended November 30, 1995 and 1994
(Unaudited)
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Cash flows from operating activities
Net earnings $ 3,135,730 4,041,231
Adjustments to reconcile net earnings to net cash provided by
operating activities
Depreciation and amortization 3,046,514 3,124,767
Deferred income taxes (139,178) (122,548)
Changes in assets and liabilities, net of effects from purchase of Plezall
Wipers, Inc.
Receivables, net (122,899) (1,650,257)
Inventories (160,695) (2,248,487)
Prepaid expenses and other current assets 394,505 1,168,005
Trade accounts payable 58,816 820,152
Accrued compensation 73,055 415,610
Other payables and accrued expenses 738,747 893,021
Other, net (157,974) (118,035)
----------- -----------
Net cash provided by operating activities 6,866,621 6,323,459
Cash flows from financing activities
Proceeds from revolving credit 5,900,000 500,000
Cash dividends (659,071) (615,927)
Repayment of long-term debt (5,000,000) (4,100,000)
----------- -----------
Net cash provided by (used in) financing activities 240,929 (4,215,927)
Cash flows from investing activities
Payment for purchase of Plezall Wipers, Inc. (2,909,735) --
Restrictive covenants -- (135,000)
Proceeds on exercise of share options 217,624 40,062
Purchases of property and equipment (1,818,755) (1,884,926)
----------- -----------
Net cash used in investing activities (4,510,866) (1,979,864)
----------- -----------
Cash
Increase during the period 2,596,684 127,668
Beginning balance 2,387,540 3,303,191
----------- -----------
Ending balance $ 4,984,224 3,430,859
=========== ===========
Supplemental disclosure of cash flow information
Income taxes paid $ 1,965,885 972,799
Interest paid $ 540,914 297,134
Supplemental schedule of noncash investing and financing activities In
conjunction with the acquisition of Plezall Wipers, Inc., liabilities were
assumed as follows
Fair value of assets acquired $ 3,091,802 --
Cash paid 2,909,735 --
----------- -----------
$ 182,067 --
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE> 6
THE TRANZONIC COMPANIES
Notes to Condensed Consolidated Financial Statements
Nine- and three-month periods ended November 30, 1995 and 1994
Note A In the opinion of management, the accompanying unaudited condensed
consolidated financial statements contain such adjustments (all of
which are normal and recurring in nature) necessary to present
fairly the financial position of The Tranzonic Companies (Company)
at November 30, 1995 and the results of operations for the nine- and
three-month periods ended November 30, 1995 and 1994. The statements
should be read in conjunction with the consolidated financial
statements and notes thereto included in the Company's annual report
for the fiscal year ended February 28, 1995.
Note B Net earnings per share have been calculated based on the weighted
average Class A common and Class B common shares outstanding during
the periods plus the incremental shares (calculated using the
treasury share method) for those outstanding share options which are
considered equivalent shares and have a dilutive impact on net
earnings per share.
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>
Nine Months Ended Three Months Ended
November 30, November 30,
----------------- ------------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Class A common 2,194,703 2,201,926 2,195,618 2,201,653
Class B common 1,331,744 1,310,978 1,335,343 1,370,522
--------- --------- --------- ---------
3,526,447 3,512,904 3,530,961 3,572,175
========= ========= ========= =========
</TABLE>
The table below depicts the Class A common and Class B common shares outstanding
at the end of the periods reported:
<TABLE>
<CAPTION>
November 30,
--------------------
1995 1994
---- ----
<S> <C> <C>
Class A common 2,185,823 2,177,758
Class B common 1,317,565 1,277,780
--------- ---------
3,503,388 3,455,538
========= =========
</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.
Note D The insurance company which insures and administers the
Company's health and welfare benefits plan converted from a mutual
to a stock company. As a result of that conversion, and subsequent
to this quarter close, the Company was issued shares of stock which
it then sold at a gain of approximately $600,000 after tax which
will be reflected in the fourth quarter. These proceeds will be used
to fund future health and welfare benefit claims.
<PAGE> 7
PART I: FINANCIAL INFORMATION
-----------------------------
Item 2. Management's Discussion and Analysis of
-----------------------------------------------
Financial Condition and Results of Operation
--------------------------------------------
The Company's financial position remains strong. The current ratio at November
30, 1995 was 3.0:1, and current assets continue to exceed total liabilities.
Revenues for the nine-month period ended November 30, 1995 increased
8.3 percent to $122,224,052 from $112,863,988 recorded in the prior year like
period. Third quarter revenues increased 7.9 percent to $40,224,220 from
$37,276,446 recorded in the same prior year period. The inclusion of sales from
the March 1995 acquisition of Plezall Wipers, Inc. contributed in both periods
to the revenue growth. In addition, each of the Company's divisions recorded
year-to-year revenue growth.
Gross profit margins for both the third quarter and year-to-date periods
continue to reflect the impact of significantly higher raw material costs,
particularly in wood pulp, steel, and cotton. Added is the fact that economic
conditions in the retail industry and strong competitive pressures have limited
our ability to maintain historic gross margins. Recent indications are that
these raw material costs have leveled off or declined slightly. Company-wide
efforts to identify labor and manufacturing efficiencies have been made in an
attempt to dampen the impact of current margin trends.
Improved sales volume and cost containment strategies in place at each of our
divisions continue to favorably impact selling, general, and administrative
expenses on a relative basis. Selling, general, and administrative expenses
were 25.8 percent of sales in both the third quarter and year-to-date as
compared to 27.1 percent and 26.7 percent, respectively, in the prior year.
As a result of increased borrowings for our March 1995 acquisition of Plezall
and opportunistic forward purchases of raw materials, net interest costs
increased in both the current fiscal three- and nine-month periods ended
November 30, 1995.
With cash flow generated from operations and recent signs of raw material cost
stability, the Company has been able to reduce its borrowings by $3,500,000
during the third quarter to near the prior fiscal year-end level.
Net earnings for the nine-month period ended November 30, 1995 were $3,135,730
or 89 cents per share, down 22.4 percent from $4,041,231 or $1.15 per share
recorded in the prior year like period. Net earnings for the current fiscal
three-month period were $913,862 or 26 cents per share, down 29.2 percent from
$1,290,729 or 36 cents per share of the same period a year ago.
<PAGE> 8
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>
27 Financial Data Schedule(1)
99 Independent Auditors' Review Report
b) No reports on Form 8-K have been filed during the quarter ended November 30, 1995.
</TABLE>
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: 1/12/96 By: /s/ Richard J. Pennza
--------- ----------------------------
Richard J. Pennza
(Duly authorized officer and
Principal Accounting Officer)
(1) Filed only in electronic format pursuant to Item 601(b) (27) of Regulation
S-K.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEETS AT NOVEMBER 30, 1995 AND FEBRUARY 28,
1995 AND CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS FOR THE NINE AND
THREE-MONTH PERIODS ENDED NOVEMBER 30, 1995 AND 1994. AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATMENTS.
</LEGEND>
<CIK> 0000001761
<NAME> TRANZONIC COMPANIES
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> FEB-29-1996
<PERIOD-START> MAR-01-1995
<PERIOD-END> NOV-30-1995
<CASH> 4,984,224
<SECURITIES> 0
<RECEIVABLES> 17,624,560
<ALLOWANCES> 0
<INVENTORY> 23,825,205
<CURRENT-ASSETS> 49,414,881
<PP&E> 22,190,145
<DEPRECIATION> 0
<TOTAL-ASSETS> 84,950,045
<CURRENT-LIABILITIES> 16,614,078
<BONDS> 0
<COMMON> 998,885<F1>
0
0
<OTHER-SE> 58,028,488<F2>
<TOTAL-LIABILITY-AND-EQUITY> 84,950,045
<SALES> 122,224,052
<TOTAL-REVENUES> 122,224,052
<CGS> 85,284,207
<TOTAL-COSTS> 116,839,155
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 554,787
<INCOME-PRETAX> 4,888,230
<INCOME-TAX> 1,752,500
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,135,730
<EPS-PRIMARY> .89
<EPS-DILUTED> 0
<FN>
<F1>This figure includes $664,667 Class A Common and $334,218 Class B Common Shares
<F2>This figure includes $5,771,666 in additional paid-in capital and $52,256,822
in retained earnings.
</FN>
</TABLE>
<PAGE> 1
KPMG Peat Marwick LLP
1500 National City Center
1900 East Ninth Street
Cleveland, Ohio 44114-3495
Form 10-Q, Part II
Item 6
Exhibit 99
INDEPENDENT AUDITORS' REVIEW REPORT
-----------------------------------
The Board of Directors
The Tranzonic Companies:
We have reviewed the condensed consolidated balance sheet of The Tranzonic
Companies as of November 30, 1995, and the related condensed consolidated
statements of earnings for the nine- and three-month periods ended November 30,
1995 and 1994, and cash flows for the nine-month periods ended November 30,
1995 and 1994. These condensed consolidated financial statements are the
responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical review
procedures to financial data and making inquiries of persons responsible for
financial and accounting matters. It is substantially less in scope than an
audit conducted in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the condensed consolidated financial statements referred to above
for them to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of The Tranzonic Companies as of
February 28, 1995, and the related consolidated statements of earnings,
shareholders' equity, and cash flows for the year then ended (not presented
herein); and in our report dated March 31, 1995, we expressed an unqualified
opinion on those consolidated financial statements. In our opinion, the
information set forth in the accompanying condensed consolidated balance sheet
as of February 28, 1995, is fairly presented, in all material respects, in
relation to the consolidated balance sheet from which it has been derived.
KPMG Peat Marwick LLP
/s/ KPMG Peat Marwick LLP
Cleveland, Ohio
December 27, 1995
