<PAGE>
FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTER PERIOD ENDED DECEMBER 31, 1999
- 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 0-14328
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ZING TECHNOLOGIES, INC.
- --------------------------------------------------------------------------------
(EXACT NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)
NEW YORK 13-2650621
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(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
115 STEVENS AVENUE, VALHALLA, NEW YORK 10595
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(914) 747-7474
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(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
NO CHANGE
- --------------------------------------------------------------------------------
(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR,
IF CHANGED SINCE LAST REPORT)
CHECK WHETHER THE REGISTRANT (1) FILED ALL REPORTS REQUIRED TO BE FILED BY
SECTION 13 OR 15(d) OF THE EXCHANGE ACT OF DURING THE PAST 12 MONTHS (OR FOR
SUCH SHORTER PERIODS THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND
(2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS.
YES X NO ___
THE NUMBER OF SHARES OF COMMON STOCK, $.01 PAR VALUE, OUTSTANDING AS OF JANUARY
31, 2000 WAS 2,406,837.
================================================================================
<PAGE>
INDEX
ZING TECHNOLOGIES, INC. AND SUBSIDIARY
<TABLE>
<CAPTION>
PART 1. FINANCIAL INFORMATION
<S> <C> <C>
Item 1. Financial Statements (Unaudited)
Condensed consolidated balance sheets - December 31, 1999 and
June 30, 1999...........................................................................................3
Condensed consolidated statements of income - three month
and six month periods ended
December 31, 1999 and 1998..............................................................................4
Condensed consolidated statements of cash flows - six months ended
December 31, 1999 and 1998..............................................................................5
Notes to condensed consolidated financial statements - December 31, 1999................................6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations...................................................................................8
PART II. OTHER INFORMATION
Item 5. Other Information......................................................................................12
Item 6. Exhibits and Reports on Form 8-K.......................................................................14
Signatures.............................................................................................15
</TABLE>
2
<PAGE>
PART 1. FINANCIAL INFORMATION
ZING TECHNOLOGIES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
Item 1. Financial Statements (unaudited)
DECEMBER 31, June 30,
1999 1999
--------------------------
(Unaudited) (Note)
(000's omitted, except
--------------------------
share data)
ASSETS
<S> <C> <C>
Current assets
Cash and cash equivalents $ 3,638 $ 880
Marketable securities 14,890 21,931
Accounts receivable, less allowances of $83 and $71, respectively 3,273 4,048
Inventories 5,615 4,464
Prepaid expenses 311 214
Other current assets 463 632
--------------------------
Total current assets 28,190 32,169
Property, plant and equipment 13,916 13,268
Less accumulated depreciation and amortization 7,813 7,282
--------------------------
6,103 5,986
Deferred income taxes, net of valuation allowance 693 608
Excess of cost over assets acquired, net of amortization of $1,555
and $1,478, respectively 981 1,057
Other assets 70 70
--------------------------
Total assets $ 36,037 $ 39,890
==========================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 1,553 $ 1,569
Accrued expenses and taxes payable 2,774 1,101
Accrued compensation expense 809 904
Loan payable - bank 5,200 7,700
Due to broker -- 3,514
Current portion of long-term obligations 700 722
--------------------------
Total current liabilities 11,036 15,510
Long-term obligations, less current portion 2,894 3,231
Stockholders' equity
Common stock, par value $.01 per share; authorized 12,000,000 shares; issued
3,064,792 shares as of December 31, 1999 and 3,081,681 as
of June 30, 1999 30 30
Additional paid-in capital 15,168 15,295
Note receivable from stockholders (396) (396)
Accumulated other comprehensive loss/income (2,122) 411
Retained earnings 14,308 10,816
Less treasury shares at cost (657,955 shares at December 31, 1999, and
674,844 at June 30, 1999) (4,881) (5,007)
--------------------------
Total stockholders' equity 22,107 21,149
--------------------------
Total liabilities and stockholders' equity $ 36,037 $ 39,890
==========================
</TABLE>
Note: The condensed consolidated balance sheet at June 30, 1999 has been
derived from the audited consolidated financial statements at that date
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
3
<PAGE>
ZING TECHNOLOGIES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED, SIX MONTHS ENDED,
DECEMBER 31 DECEMBER 31
1999 1998 1999 1998
--------------------------------------------------------
(000's omitted, except share data)
<S> <C> <C> <C> <C>
Net sales $ 6,607 $ 6,276 $ 12,610 $ 12,244
Cost of goods sold 4,022 4,001 7,815 7,827
-------------------------- --------------------------
Gross profit 2,585 2,275 4,795 4,417
Selling, general and administrative expenses 1,535 1,545 2,857 2,872
Research and development of product and
process technology 492 440 938 866
Depreciation and amortization of property,
plant and equipment 158 147 305 302
Interest expense 299 269 579 541
Interest and other income - net (4,368) (481) (5,261) (428)
-------------------------- --------------------------
Income before income taxes 4,469 355 5,377 264
Provision for income taxes 1,680 80 1,885 80
-------------------------- --------------------------
Net income $ 2,789 $ 275 $ 3,492 $ 184
========================== ==========================
Net income per common share - basic $ 1.16 $ .11 $ 1.45 $ .08
========================== ==========================
Net income per common share - diluted $ 1.15 $ .11 $ 1.44 $ .08
========================== ==========================
Average number of outstanding shares -
basic 2,406,837 2,398,257 2,406,837 2,397,985
========================== ==========================
Average number of outstanding shares -
diluted 2,417,354 2,408,342 2,417,528 2,408,961
========================== ==========================
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
4
<PAGE>
ZING TECHNOLOGIES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED,
DECEMBER 31
1999 1998
-------------------
(000's omitted)
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 3,492 $ 264
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 607 548
Deferred income taxes (85) --
Realized (gains) losses on sales of marketable securities (4,790) 274
Changes in operating assets and liabilities:
Accounts receivable 775 (754)
Inventories (1,151) (518)
Prepaid expenses and other current assets 72 96
Accounts payable and accrued expenses 1,561 636
Other - net -- (1)
------------------
Net cash provided by operating activities 481 545
INVESTING ACTIVITIES
Purchases of property and equipment (648) (883)
Net sales (purchases) of marketable securities 9,298 (254)
------------------
Net cash provided by (used in) investing activities 8,650 (1,137)
FINANCING ACTIVITIES
Proceeds from borrowings 500 1,390
Reduction of borrowings (6,873) (956)
Exercise of stock options -- 182
Repurchase of common stock for treasury -- (447)
------------------
Net cash (used in) provided by financing activities (6,373) 169
Net increase (decrease) in cash and cash equivalents 2,758 (423)
Cash and cash equivalents at beginning of period 880 1,092
------------------
Cash and cash equivalents at end of period $ 3,638 $ 669
==================
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
5
<PAGE>
ZING TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
December 31, 1999
BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the six-month period ended December 31,
1999 are not necessarily indicative of the results that may be expected for the
year ending June 30, 2000.
COMPREHENSIVE INCOME
Comprehensive income (loss) is composed of unrealized gains or losses on the
Company's available for sale securities.
Total comprehensive income for the three months ended December 31, 1999 and 1998
amounted to $484 and $1,281 respectively. Total comprehensive income for the six
months ended December 31, 1999 and 1998 amounted to $959 and $806, respectively.
INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out method) or
market. Inventories consist of the following:
<TABLE>
<CAPTION>
December 31, June 30,
1999 1999
----------------------
(000's omitted)
<S> <C> <C>
Raw materials $2,619 $1,677
Work in process 1,859 1,870
Finished goods 1,137 917
---------------------
$5,615 $4,464
=====================
</TABLE>
REALIZED GAINS ON SALES OF MARKETABLE SECURITIES
Included in interest and other income-net are realized net gains (losses) on
sales of marketable securities. Realized net gains for the three months ended
December 31, 1999 and 1998 were $3,887,000 and $142,000, respectively. Realized
net gains (losses) for the six months ended December 31, 1999 and 1998 were
$4,790,000 and $(274,000), respectively.
6
<PAGE>
ZING TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(CONTINUED)
EARNINGS PER SHARE
The following is a reconciliation of the numerators and denominators for the
basic and diluted per share computations and other related disclosures as
required by Statement 128.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31 DECEMBER 31
-----------------------------------------------
1999 1998 1999 1998
-----------------------------------------------
(000's omitted, except share data)
<S> <C> <C> <C> <C>
Numerator
Numerator for basic and diluted
earnings per share - income
available to common stockholders $ 2,789 $ 275 $ 3,492 $ 184
======================= =======================
Denominator
Denominator for basic earnings per
share - weighted-average shares 2,406,837 2,398,257 2,406,837 2,397,985
Effect of dilutive securities:
Subsidiary options exercisable into
Zing common shares 10,517 10,085 10,691 10,976
----------------------- -----------------------
Denominator for diluted earnings per
share - adjusted weighted-average
shares and assumed conversions 2,417,354 2,408,342 2,417,528 2,408,961
======================= =======================
Basic earnings per share $ 1.16 $ .11 $ 1.45 $ .08
======================= =======================
Diluted earnings per share $ 1.15 $ .11 $ 1.44 $ .08
======================= =======================
</TABLE>
SUBSEQUENT EVENTS
On January 27, 2000, the Company agreed to the acquisition of all of the
Company's shares of common stock by International Rectifier Corp. ("IR") for
$15.36 per share, payable in cash. IR then commenced a cash tender offer for the
Company on February 7, 2000. The offer is currently expected to conclude on
March 6, 2000, unless it is extended by IR. IR's obligation to consummate this
tender offer is subject to certain conditions, including the valid tender of at
least two thirds of the Company's shares. Shareholders, including officers and
directors of the Company, who own approximately 57% of all outstanding shares
have agreed to tender their shares.
In addition, during January 2000 the Company sold all of its marketable
securities and incurred a realized loss of approximately $2,071,000.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
ZING TECHNOLOGIES, INC. AND SUBSIDIARIES
DISCUSSION OF TRANSACTION WITH INTERNATIONAL RECTIFIER
On January 27, 2000, the Company entered into an Agreement and Plan of
Reorganization with International Rectifier Corporation and its wholly-owned
subsidiary IRC Acquisition Corporation, under which the Company would merge with
IRC Acquisition after International Rectifier completed a tender offer for up to
all of the outstanding shares of the Company's common stock. Under the
agreement, International Rectifier agreed to pay each tendering shareholder
$15.36 in cash for each share validly tendered and not withdrawn, by the closing
of the tender offer.
The board of directors of the Company unanimously recommended that the tender
offer, which commenced February 7, 2000, be accepted by all shareholders.
The obligations of International Rectifier to complete the tender offer and
consummate the merger is subject to a variety of conditions, including that at
least two-thirds of all outstanding shares are validly tendered and not
withdrawn. Holders of approximately 57% of the Company's outstanding shares have
already agreed with International Rectifier to tender their shares.
Following the consummation of the tender offer and subsequent merger, the
Company will become a wholly-owned subsidiary of International Rectifier.
OPERATIONS
The following table sets forth the percentage relationship to net sales of
certain items from the consolidated statement of operations:
<TABLE>
<CAPTION>
PERCENT OF NET SALES
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
-------------------------------------------------
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of goods sold 60.87 63.75 61.97 63.92
Gross profit 39.13 36.25 38.03 36.08
Selling, general and administrative
expenses 23.23 24.62 22.66 23.46
Research and development of products
and process technology 7.45 7.01 7.44 7.07
Depreciation and amortization of
property and equipment and excess
of costs over assets acquired 2.39 2.34 2.42 2.46
Interest expense 4.53 4.28 4.59 4.42
Interest and other income - net (66.11) (7.66) (41.72) (3.49)
Income before income taxes 67.64 5.66 42.64 2.16
Provision for income taxes 25.42 1.27 14.95 .65
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Net income 42.22 4.39 27.69 1.51
</TABLE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION (CONTINUED)
THREE MONTHS ENDED DECEMBER 31, 1999 COMPARED TO THREE MONTHS ENDED DECEMBER 31,
1998
Zing Technologies, Inc. ("Zing" or the "Company"), a holding company with one
wholly owned operating subsidiary, Omnirel LLC ("Omnirel"), reported net income
of $2,789,000 or $1.16 per share (basic; $1.15 diluted) for the three months
ended December 31, 1998. For the quarter ended December 31, 1998, the Company
reported income of $275,000 or $.11 per share (basic; $.08 diluted).
Sales of Omnirel increased to $6,607,000 for the three months ended December 31,
1999 as compared to $6,276,000 for the three months ended December 31, 1998. The
net increase from period to period of $331,000 was attributed to the following
offsetting factors: Sales of discrete power semiconductor devices to a
manufacturer of undersea telecommunication cable systems increased approximately
$1,920,000 for the three months ended December 31, 1999 as compared to the 1998
period. This increase was offset by sales decreases of power hybrids and modules
for two major programs amounting to approximately $1,213,000. These products are
in a redesign status and shipments are expected to commence during the second
half of the current fiscal year.
Sales included the continued fulfillment of a series of orders placed by General
Electric for multi-chip power modules containing power hybrid components. Sales
to General Electric accounted for 17% and 25% of the sales, respectively, in
each of the three month periods ended December 31, 1999 and 1998 and,
accordingly, sales were approximately $436,000 less in the current year's second
quarter as compared to the prior year period.
The Omnirel gross profit, expressed as a percentage of sales, was 39% and 36%,
respectively, in each of the quarters ended December 31, 1999 and 1998. This 3%
increase in gross profit of $310,000 resulted from the following factors: An
increase in shipments of discrete semiconductor products which have a lower cost
of materials than the power modules and hybrids, whose shipments decreased for
the comparable periods. This favorable materials variance was offset by
increases in labor and overhead. Labor increased primarily because of higher
rates paid for skilled workers. Increased overhead costs were primarily
attributable to manpower and other costs related to new product introduction
into the manufacturing process.
Selling, general and administrative expenses were $1,535,000 and $1,545,000,
respectively, for the three months ended December 30, 1999 and 1998. The
decrease from period to period as expressed in dollars and percentages was
insignificant.
Research and development costs related to product and process technology were
reclassified and presented separately effective in the third quarter of fiscal
1999. This presentation is continued for the fiscal quarters of the year 2000.
The amount expended for the three months ended December 31, 1999 was $492,000 as
compared to $440,000 in the comparable three months ended December 31, 1998.
Interest expense increased approximately $30,000 to $299,000 during the quarter
ended December 31, 1999 compared to the quarter ended December 31, 1998. The
increase was primarily attributable to increased borrowings used to finance the
Company's investment portfolio activity.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION (CONTINUED)
THREE MONTHS ENDED DECEMBER 31, 1999 COMPARED TO THREE MONTHS ENDED DECEMBER 31,
1998 (CONTINUED)
Interest and other income, net, for the three months ended December 31, 1999 and
1998 was $4,368,000 and $481,000, respectively. Interest and other income is
primarily comprised of revenues from dividends, interest and from realized gains
and losses on sales of marketable securities. Included in the increase from
period to period of $3,887,000 are realized net gains on the sale of marketable
securities amounting to $3,834,000. During January 2000, the Company sold all of
its marketable securities and incurred a realized loss of approximately
$2,071,000.
For the quarters ended December 31, 1999 and 1998, the difference between the
effective tax rate and the federal tax rate of 34% is primarily due to
nontaxable dividends included in other income, tax credits and state taxes.
SIX MONTHS ENDED DECEMBER 31, 1999 COMPARED TO SIX MONTHS ENDED DECEMBER 31,
1998
The Company reported net income of $3,492,000 or $1.45 per share (basic; $1.44
diluted) for the six months ended December 31, 1999. For the six months ended
December 31, 1998, the Company reported net income of $184,000 or $.08 per share
(basic and diluted).
Sales at Omnirel increased $366,000 to $12,610,000 for the six months ended
December 31, 1999 compared to the six months ended December 31, 1998. This
increase in sales from period to period is attributable to the following
offsetting factors:
- - Sales of discrete power semiconductor devices to a manufacturer of undersea
telecommunication cable systems increased approximately $3,015,000 for the
six months ended December 31, 1999 as compared to the 1998 six month
period.
- - This increase was offset by net decreases in sales primarily of power
hybrids and modules and to a lesser amount, shipments of other products all
approximating $2,649,000. Power hybrids and modules for two major programs
are in a redesign status and shipments of these products are expected to
commence during the second half of the current fiscal year.
Sales for the period included the continued fulfillment of a series of orders
placed by General Electric for multi-chip power modules containing power hybrid
components. Sales to General Electric accounted for 19% and 25% of the sales,
respectively, in each of the fiscal year 2000 and 1999 six month periods. Sales
to General Electric were approximately $728,000 less in the current fiscal
year's first six months as compared to the period a year ago.
Gross profit increased approximately $378,000 to $4,795,000 for the six months
ending December 31, 1999 as compared to $4,417,000 for the six months ending
December 1, 1998. Gross profit increased to 38% of sales for the six months
ended December 31, 1999 as compared to 36% for the six months ended December 31,
1998. Material costs as a percentage of sales were 5% lower in the six months
ended December 31, 1999 as compared to the 1998 six month period. This was a
result of an increase in shipments of discrete semiconductor products which have
a lower cost of materials than the power modules and hybrids whose shipments
decreased for the
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION (CONTINUED)
SIX MONTHS ENDED DECEMBER 31, 1999 COMPARED TO SIX MONTHS ENDED DECEMBER 31,
1998 (CONTINUED)
comparable periods. This favorable material variance was offset by increases in
labor and overhead of 3% as a percentage of sales. Labor increased primarily
because of higher rates paid for skilled workers. Increased overhead costs were
primarily attributable to manpower and other costs related to new product
introduction into the manufacturing process.
Selling, general and administrative expenses were essentially unchanged for the
six months ended December 31, 1999 as compared to the six months ended December
31, 1998. Costs savings related to Omnirel converting to a direct sales force
were offset by the Omnirel employee incentive plan and other general and
administrative expenses.
Research and development costs related to product and process technology were
reclassified and presented separately effective with the third quarter of the
1999 fiscal year. This presentation has continued and the amounts expended were
$938,000 and $866,000, respectively, for the six month periods ended December
31, 1999 and 1998.
The increase of approximately $38,000 in interest expense for the six month
period ended December 31, 1999 compared to the 1998 period is primarily as a
result of increased borrowings used to finance the Company's investment
portfolio activity.
Interest and other income increased approximately $4,833,000 from $428,000 for
the six months ended December 31, 1998 to $5,261,000 for the six months ended
December 31, 1999. The increase is primarily attributable to the Company
realizing net gains of $4,790,000 on the sale of marketable securities. In
January 2000, the Company sold all its remaining marketable securities and
incurred a net realized loss of approximately $2,071,000.
For the six months December 31, 1999 and 1998, the difference between the
effective tax rate and the federal tax rate of 34% is primarily due to
non-taxable dividends included in other income, tax credits and state taxes.
LIQUIDITY AND CAPITAL RESOURCES
During the six months ended December 31, 1999, the Company generated cash from
operations, borrowings at Omnirel and from sales of marketable securities. Cash
was used to purchase equipment and to pay down bank loans and the broker margin
account used to finance the purchase of marketable securities. Management
expects that the Company's internally generated funds and available credit
facilities will be sufficient to finance the continued operations of the
Company.
IMPACT OF YEAR 2000
Omnirel completed all necessary upgrades for systems that could be affected by
the Year 2000 problem. Omnirel performed a complete system backup and shut down
all IT systems on December 30, 1999 and restarted the system on January 2, 2000.
Omnirel did not encounter any problems with the operation of manufacturing
systems, manufacturing equipment, information technology systems or HVAC system.
The total costs incurred relating to the Year 2000 problem were not significant.
11
<PAGE>
PART II. OTHER INFORMATION
ZING TECHNOLOGIES, INC. AND SUBSIDIARIES
ITEM 5. OTHER INFORMATION
When used in this Form 10-QSB, and in future filings by Zing with the Securities
and Exchange Commission, in Zing's press releases and in any oral statements
made with the approval of an authorized Zing executive officer, the words or
phrases "will likely result", "are expected to", "will continue", "is
anticipated", "estimate", "project", or similar expressions are intended to
identify "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Such statements are subject to certain
risks and uncertainties, including those discussed in Item 2 above, and those
discussed below, that could cause actual results to differ materially from
historical earnings or those presently anticipated or projected. Zing wishes to
caution readers not to place undo reliance on such "forward-looking statements",
which speak only as of the date made. Zing wishes to advise readers that factors
listed below could affect Zing's financial performance and could cause Zing's
actual results for future periods to differ materially from any opinion or
statements expressed with respect to future periods in any current statements.
Zing will not undertake and specifically declines any obligation to publicly
release the result of any revisions which may be made to any forward-looking
statements to reflect events or circumstances after the date of such statements
or to reflect the occurrence of anticipated or unanticipated events.
THE ENVIRONMENT FOR THE POWER HYBRID MODULE BUSINESS
The following factors can materially affect the Company's performance: the
rapidly changing environment for the power hybrid module business which might
cause market acceptance of Omnirel's existing products to decrease; the
cancellation or rescheduling of one or several material orders; the perceived
absolute or relative overall value of these products by the purchasers,
including the features and pricing compared to other competitive products, the
level of availability of Omnirel products and substitutes, and the ability and
willingness of purchasers to acquire newer or more advanced models; and pricing,
purchasing, financing, operational, advertising and promotional decisions by
intermediaries in the distribution channels, which could affect the supply of,
or end user demand for, Omnirel products.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Changes in the amount and rate of growth in Omnirel's selling, general and
administrative expenses, as well as the impact of unusual items resulting from
Omnirel's ongoing evaluation of its business strategies and organizational
structures can materially affect the Company's performance.
SELLING PRICES
Omnirel is subject to continued or increased pressure to change its selling
prices for its products, which can affect margins.
RAW MATERIALS
Difficulties in obtaining raw materials, supplies and other items needed for the
production of products and capacity constraints may have an affect on Omnirel's
ability to ship some products.
12
<PAGE>
ZING TECHNOLOGIES, INC. AND SUBSIDIARIES
DEVELOPMENT AND MARKETING
Omnirel is subject to difficulties or delays in the development, production,
testing and marketing of products, including, but not limited to, the failure to
ship new products and technologies when anticipated; the failure of customers to
accept these products or technologies when planned; difficulties or delays in
the design and production of custom product orders and changes in the commercial
viability of the end user products of which these products are a party; any
defects in products; the failure of a critical Omnirel vendor or supplier to
deliver material required by Omnirel; and failures of manufacturing economies to
develop when planned.
ASSETS AND EXPENDITURES
Omnirel's business is also subject to the acquisition of fixed assets and other
assets, including inventories and receivables; the making or incurring of any
expenditures and expenses including, but not limited to, depreciation and
research and development expenses; and the revaluation of assets including, but
not limited to, specialized inventories or related expenses; and the amount of,
and any changes to, tax rates.
PRODUCTION LOSSES AND REWORK COSTS
Omnirel's business is also subject to the occurrences of production losses and
rework costs on new or custom programs in excess of those anticipated during the
pricing process.
DECLINE IN DEFENSE AND/OR AEROSPACE SPENDING
Although Omnirel's military, defense and aerospace business represents a
decreasing percentage of its overall sales in recent years (and, therefore, is
decreasing in its significance), the business of Omnirel continues to depend to
a substantial extent upon sales to military, defense and aerospace contractors.
In the event that military, defense and/or aerospace spending were to decline
significantly over the next several years, sales by Omnirel could suffer a
corresponding or greater decline. In such event, Omnirel would have to seek
replacement markets in other industries. There can be no assurance that such
markets would be available or that Omnirel would be successful in penetrating
them.
DEPENDENCE ON KEY PERSONNEL
The business of Omnirel is substantially dependent upon the active participation
and technical expertise of its executive officers. Omnirel is dependent upon the
services of John F. Catrambone, its President. Omnirel maintains a key-man life
insurance policy on Mr. Catrambone in the amount of $2,500,000. Omnirel's Board
of Directors regularly re-evaluates the need for and the amount of such key-man
life insurance. There can be no assurance, however, that Zing or Omnirel can
obtain executives of comparable expertise and commitment in the event of death,
or that the business of Zing would not suffer material adverse effects as the
result of the death (notwithstanding coverage by key-man insurance), disability
or voluntary departure or any such executive officer.
COMPETITION
Although the market for multi-chip power modules and packaged semiconductor
components is fragmented and no single company maintains a dominant position, it
is nevertheless highly competitive among the five manufacturers(including
Omnirel) who collectively account for approximately 50% of sales to such market.
Omnirel believes that its products and technologies can compete favorably with
the products of its principal
13
<PAGE>
competitors. Nevertheless, a few of these competitors have greater financial,
marketing, servicing and research and development resources than those of
Omnirel. There can be no assurance that existing or potential competitors will
not develop and market products that are superior or perceived to be superior to
multi-chip power modules and other products supplied by Omnirel.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
The following exhibits are included herein:
2.1 Agreement and Plan of Reorganization dated January 27, 2000 by and
among International Rectifier Corporation, IRC Acquisition Corporation
and the Company (filed as Exhibit (d)(1) to Form TO dated February 7,
2000 filed by IRC Acquisition Corporation and International Rectifier
Corporation).
The Company did not file any report on Form 8-K during the three months ended
December 31, 1999.
14
<PAGE>
ZING TECHNOLOGIES, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ZING TECHNOLOGIES, INC.
-----------------------------------
(Registrant)
Date: February 18, 2000 ROBERT E. SCHRADER
-----------------------------------
Robert E. Schrader
President and Chief Executive Officer
Date: February 18, 2000 MARTIN S. FAWER
------------------------------------
Martin S. Fawer
Treasurer and Chief Financial Officer
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