<PAGE>
 
                                                                      EXHIBIT 13
Consolidated Highlights
(Dollars in thousands, except per share data)

<TABLE>
<CAPTION>
Year Ended March 31,        1992       1993       1994       1995       1996       1997
-----------------------------------------------------------------------------------------
<S>                       <C>        <C>        <C>        <C>        <C>        <C>
Net Sales                 $160,279   $160,466   $171,821   $179,694   $206,247   $225,442
Net Income                   9,695     11,635     12,851     14,825     16,950     15,888
Working Capital             56,223     59,576     66,980     73,531     58,174     70,341
Total Assets               150,479    153,871    158,734    171,524    165,838    185,956
Stockholders' Equity       123,065    128,671    136,477    145,594     84,831    101,253
Long-Term Debt               1,172          -          -          -     51,525     51,503
Return on Average
  Stockholders' Equity         8.0%       9.2%       9.7%      10.5%      14.7%      17.1%
Current Ratio                3.8:1      3.9:1      5.0:1      4.8:1      3.9:1      4.3:1
Per Share Data:
  Earnings                $   0.62   $   0.74   $   0.81   $   0.93   $   1.07   $   1.28
  Dividends Paid              0.40       0.40       0.40       0.41       0.44       0.12
</TABLE>

                                       1
<PAGE>
 
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION

RESULTS OF OPERATIONS

Net Sales in fiscal 1997 were $225.4 million, an increase of 9.3% over fiscal
1996. This compares to sales growth of 14.8% in 1996 when compared to 1995. The
increases in both years were primarily attributable to higher sales applicable
to the telecommunications, instrumentation and data processing markets and to
acquisitions. These increases were partially offset by the sale of Anvil Cases,
Inc. in May 1996 and by declines in the air cargo market in 1996 and 1995.

     Operating income margin in 1997 decreased to 12.8% as compared with 12.9%
in 1996, primarily due to losses at two European operations. Operating income
margin increased 5.7% in 1996 from 12.2% in 1995 primarily due to higher volume,
favorable product mix and cost-containment efforts, partially offset by
increased material and supply costs.

 . Effects of Inflation
Price increases by ZERO did not contribute significantly to increases in the
Company's Net Sales. The impact of rising costs of labor, material and supplies,
and equipment was mitigated, in part, by changes in product design, overall
manufacturing and purchasing efficiencies, and effective management and control
of operating expenses.

 . Stock Repurchases
In a Dutch Auction Tender Offer during fiscal 1996, the Company repurchased
approximately 25% of its outstanding shares, funded by the issuance of long-term
promissory notes aggregating $50 million, together with approximately $22
million of cash and cash derived from the sale of short-term investments. As a
result, net income for fiscal 1997 was reduced by approximately $2.8 million due
to the interest expense on the $50 million notes together with the foregone
investment income on the $22 million cash used.

     In November 1996, the Board of Directors authorized the repurchase of up to
an additional 400,000 shares, as well as the shares of "odd lot" stockholders.
During fiscal 1997, approximately 15,400 shares were repurchased.

 . Acquisitions and Divestiture
The Company acquired two companies in fiscal 1997 and three companies during
fiscal 1996, all of which complement existing operations. These acquisitions
were accounted for using the purchase method of accounting. The operating
results of the entities acquired, which were not material, were included in the
consolidated financial statements from their respective acquisition dates. The
Company also completed the sale of Anvil Cases, Inc. in fiscal 1997.

 . Liquidity and Capital Resources
The Company's source of liquidity is a combination of cash and cash equivalents
and cash provided by operations, together with a $20 million revolving bank
credit facility and a $20 million shelf facility available to finance
acquisitions.

                                      10
<PAGE>
 
     At March 31, 1997, the Company's cash and cash equivalents and short-term
investments increased to $16,201,000 from $7,983,000 at March 31, 1996,
primarily due to cash provided by operating activities which amounted to
$19,204,000 in 1997, partially offset by cash used for capital expenditures,
acquisitions and dividend payments. Cash dividends paid during fiscal 1997
decreased $5,599,000 as compared with fiscal 1996 due to the reduction in the
annual cash dividend rate from $.44 per share to $.12 per share, which was
effective April 1996, and the reduction in outstanding shares as a result of the
stock repurchases.

     At March 31, 1996, the Company's cash and cash equivalents and short-term
investments decreased to $7,983,000 from $37,034,000 at March 31, 1995,
primarily as a result of the stock repurchase which required approximately $22
million of cash (in addition to the $50 million notes), as well as property
additions, the acquisition of three companies and payment of dividends,
partially offset by cash provided by operating activities of $17,326,000.

     In fiscal 1995, cash provided by operating activities was used primarily
for capital expenditures and payment of dividends.

     Management believes cash from operations, together with the Company's $20
million revolving bank credit facility, $20 million shelf facility available to
finance acquisitions and the reduction in cash dividends, will provide
sufficient funds to finance current and forecasted operations, including
potential smaller acquisitions, for the next 12-month period. For larger
acquisitions, management believes the balance sheet will sustain additional
borrowing. The Company will continue to invest its cash reserves in liquid,
lower-risk investments.

 . Contingencies
The Company was notified by certain governmental agencies that it is, or may be,
potentially responsible for costs associated with the investigation and
remediation of four sites where soil and/or groundwater contamination is
alleged. The Company is working with the governmental agencies to resolve these
matters. The Company has provided reserves to cover those costs that can be
reasonably estimated at this time. Refer to Note 10 of Notes to Consolidated
Financial Statements for further discussion of environmental and other
contingencies.

 . New Accounting Standards
During 1996, the Company adopted Statement of Financial Accounting Standards
(SFAS) No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of." The adoption did not have a material
effect on the Company's financial position or operating results.

     In October 1995, the Financial Accounting Standards Board issued SFAS No.
123, "Accounting for Stock-Based Compensation," effective in fiscal years
beginning after December 15, 1995. As permitted by SFAS No. 123, the Company has
continued to apply Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees,"

                                      11 
<PAGE>
 
and has included the necessary disclosures in its 1997 financial statements.

     In February 1997, the Financial Accounting Standards Board issued SFAS No.
128, "Earnings Per Share," which is applicable to the Company in fiscal year
ending March 31, 1998. The Company has determined that the effect of SFAS No.
128 would not have a material effect on the Company's financial statements for
the year ended March 31, 1997.

 . Outlook for 1998
The Company announced that it expects fiscal 1998 to be stronger than fiscal
1997 due in part to the continued growth of the electronics markets it serves
and the level of backlog at the beginning of the fiscal year.

 . SAFE HARBOR STATEMENT
STATEMENTS THAT ARE NOT HISTORICAL FACTS, INCLUDING STATEMENTS ABOUT OUR
CONFIDENCE, STRATEGIES AND EXPECTATIONS, TECHNOLOGIES AND OPPORTUNITIES,
INDUSTRY AND MARKET SEGMENT GROWTH, DEMAND AND ACCEPTANCE OF NEW AND EXISTING
PRODUCTS, AND RETURN ON INVESTMENTS IN PRODUCTS AND MARKETS, ARE FORWARD-LOOKING
STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES, INCLUDING WITHOUT LIMITATION,
THE EFFECT OF GENERAL ECONOMIC AND MARKET CONDITIONS, THE CONTINUING STRENGTH OF
THE ELECTRONICS MARKETS WE SERVE, COMPETITOR PRICING, MAINTENANCE OF OUR CURRENT
MOMENTUM AND OTHER FACTORS.

                                      12
<PAGE>
 
  STATEMENTS OF CONSOLIDATED INCOME
<TABLE>
<CAPTION>
 
Years Ended March 31,                           1997            1996            1995
------------------------------------------------------------------------------------

<S>                                     <C>             <C>             <C>             
Net Sales                               $225,442,000    $206,247,000    $179,694,000

Cost of Sales                            151,131,000     135,708,000     118,084,000

Selling and Administrative Expenses       45,522,000      43,933,000      39,769,000
------------------------------------------------------------------------------------
     Operating Income                     28,789,000      26,606,000      21,841,000
====================================================================================
Other Income                               1,847,000       1,077,000       1,344,000

Interest Income                              515,000       1,727,000       1,703,000

Interest Expense                           4,670,000       1,163,000         662,000
------------------------------------------------------------------------------------
Income Before Income Taxes                26,481,000      28,247,000      24,226,000

Income Taxes                              10,593,000      11,297,000       9,401,000
------------------------------------------------------------------------------------
Net Income                              $ 15,888,000    $ 16,950,000    $ 14,825,000
====================================================================================
Earnings Per Common Share                      $1.28           $1.07           $0.93
------------------------------------------------------------------------------------

====================================================================================
The Notes to Consolidated Financial Statements are an integral part of these statements.
</TABLE> 

                                      13
<PAGE>
 
<TABLE> 
<CAPTION> 
  CONSOLIDATED BALANCE SHEETS


March 31,                                                                 1997            1996
----------------------------------------------------------------------------------------------
<S>                                                               <C>             <C> 
 . ASSETS

Current Assets

     Cash and cash equivalents                                    $ 16,201,000    $  7,018,000

     Short-term investments                                                ---         965,000

     Receivables (less allowances for doubtful accounts of                                    

       $607,000 in 1997 and $759,000 in 1996)                       35,966,000      33,973,000

     Inventories                                                                              

         Raw materials and supplies                                 21,504,000      18,266,000

         Work in process                                             7,821,000       7,810,000

         Finished goods                                              5,685,000       5,485,000

     Other (including deferred tax assets of $1,864,000                                       

       in 1997 and $2,334,000 in 1996)                               4,172,000       4,931,000
----------------------------------------------------------------------------------------------

Total Current Assets                                                91,349,000      78,448,000
==============================================================================================                        

Net Property, Plant and Equipment                                   44,375,000      39,721,000

Goodwill (less accumulated  amortization of $11,844,000                                                                    

  in 1997 and $10,644,000 in 1996)                                  30,602,000      31,425,000

Other Assets                                                        19,630,000      16,244,000
----------------------------------------------------------------------------------------------

     Total Assets                                                 $185,956,000    $165,838,000 
==============================================================================================                        
==============================================================================================                        

The Notes to Consolidated Financial Statements are an integral part of these statements.
</TABLE> 

                                      14
<PAGE>
 
<TABLE> 
<CAPTION> 
 
  CONSOLIDATED BALANCE SHEETS

March 31,                                                                 1997            1996
----------------------------------------------------------------------------------------------
<S>                                                               <C>             <C> 
 . LIABILITIES

Current Liabilities

     Current portion of long-term debt                            $     35,000    $     69,000 

     Accounts payable                                                8,901,000       8,318,000 

     Income taxes payable                                                  ---       1,101,000 

     Accrued liabilities              

          Other taxes                                                  675,000         473,000 

          Wages and commissions                                      6,579,000       6,258,000 

          Workers' compensation                                      1,128,000         634,000 

          Other                                                      3,690,000       3,421,000 
----------------------------------------------------------------------------------------------
     Total Current Liabilities                                      21,008,000      20,274,000 
==============================================================================================
Non-Current Liabilities (including deferred compensation
   of $9,443,000 in 1997 and $7,903,000 in 1996)                    12,192,000       9,208,000 

Long-term Debt                                                      51,503,000      51,525,000 

Commitments and Contingencies (Notes 9 and 10)

 . STOCKHOLDERS' EQUITY
     Preferred stock -- authorized 1,000,000 shares of $.01
       par value; none issued                              

     Common stock -- authorized 30,000,000 shares of $.01  
       par value; issued shares, 16,445,332 in 1997 and    
       16,285,343 in 1996; outstanding shares, 12,250,427  
       in 1997 and 12,105,840 in 1996                                  164,000         163,000 

     Additional paid-in capital                                     37,021,000      34,248,000 

     Retained earnings                                             137,750,000     124,184,000 
----------------------------------------------------------------------------------------------
                                                                   174,935,000     158,595,000 
     Foreign currency translation adjustment                           132,000        (243,000)

     Treasury stock (4,194,905 shares in 1997 and 
       4,179,503 shares in 1996), at cost                          (73,814,000)    (73,521,000)
----------------------------------------------------------------------------------------------
     Total Stockholders' Equity                                    101,253,000      84,831,000 
----------------------------------------------------------------------------------------------
     Total Liabilities and Stockholders' Equity                   $185,956,000    $165,838,000 
==============================================================================================

==============================================================================================
The Notes to Consolidated Financial Statements are an integral part of these statements.
</TABLE> 

                                      15
<PAGE>
 
  STATEMENTS OF CONSOLIDATED STOCKHOLDERS' EQUITY
<TABLE> 
<CAPTION> 
------------------------------------------------------------------------------------------------------------------------------------

                                                                                                         Foreign
                                                                        Additional                       Currency
                                           Issued          Common         Paid-in         Retained      Translation     Treasury
                                           Shares*          Stock         Capital         Earnings      Adjustments        Stock
------------------------------------------------------------------------------------------------------------------------------------

<S>                                      <C>               <C>          <C>            <C>                <C>           <C> 
Balance at March 31, 1994                16,079,500        $161,000     $30,605,000    $107,509,000       $(124,000)    $(1,674,000)


Net income for the year                         ---             ---             ---      14,825,000             ---             --- 


Cash dividends declared --
   $.41 per share                               ---             ---             ---      (6,533,000)            ---             --- 


Exercise of stock options and
   issuance of treasury stock                44,644             ---         474,000         (42,000)            ---          13,000 


Foreign currency translation
   adjustments and other                        ---             ---             ---          (5,000)        385,000             --- 

------------------------------------------------------------------------------------------------------------------------------------

Balance at March 31, 1995                16,124,144         161,000      31,079,000     115,754,000         261,000      (1,661,000)


Net income for the year                         ---             ---             ---      16,950,000             ---             --- 


Cash dividends declared --
   $.44 per share                               ---             ---             ---      (7,059,000)            ---             --- 


Exercise of stock options and
   issuance of treasury stock               161,199           2,000       3,169,000      (1,461,000)            ---          11,000 


Stock repurchase                                ---             ---             ---             ---             ---     (71,871,000)


Foreign currency translation
   adjustments and other                        ---             ---             ---             ---        (504,000)            --- 

------------------------------------------------------------------------------------------------------------------------------------

Balance at March 31, 1996                16,285,343         163,000      34,248,000     124,184,000        (243,000)    (73,521,000)


Net income for the year                         ---             ---             ---      15,888,000             ---             --- 


Cash dividends declared --
   $.12 per share                               ---             ---             ---      (1,460,000)            ---             --- 


Exercise of stock options                   159,989           1,000       2,773,000        (862,000)            ---             --- 


Stock repurchase                                ---             ---             ---             ---             ---        (293,000)


Foreign currency translation
   adjustments and other                        ---             ---             ---             ---         375,000             --- 

------------------------------------------------------------------------------------------------------------------------------------

Balance at March 31, 1997                16,445,332        $164,000     $37,021,000    $137,750,000        $132,000    $(73,814,000)

===================================================================================================================================

===================================================================================================================================
</TABLE> 
* Outstanding shares at March 31, 1997, 1996 and 1995 were 12,250,427,
  12,105,840 and 15,963,256, respectively.

  The Notes to Consolidated Financial Statements are an integral part of these
  statements.


                                      16
<PAGE>
 
  STATEMENTS OF CONSOLIDATED CASH FLOWS
<TABLE> 
<CAPTION> 
Years Ended March 31,                                           1997            1996            1995
----------------------------------------------------------------------------------------------------
<S>                                                      <C>             <C>             <C> 
Cash Flow From Operating Activities
Net income                                               $15,888,000     $16,950,000     $14,825,000 
Adjustments to reconcile net income to net
  cash provided by operating activities
   Depreciation                                            6,249,000       5,069,000       4,642,000 
   Amortization                                            1,200,000       1,086,000       1,025,000 
   Gain on sale of assets                                   (511,000)        (46,000)            --  
   Changes in operating assets and liabilities, 
     net of effect of business acquisitions     
      Receivables                                         (2,046,000)     (4,833,000)     (1,823,000)
      Inventories                                         (2,711,000)     (1,852,000)     (4,379,000)
      Other non-current assets                            (2,239,000)       (215,000)       (710,000)
      Accounts payable                                       603,000          (8,000)      2,287,000 
      Accrued liabilities                                     49,000         118,000         141,000 
      Other non-current liabilities                        1,417,000       2,639,000       1,245,000 
   Other                                                   1,305,000      (1,582,000)        888,000 
----------------------------------------------------------------------------------------------------
Net cash provided by operating activities                 19,204,000      17,326,000      18,141,000 
----------------------------------------------------------------------------------------------------
Cash Flow From Investing Activities
  (Purchases) sales of short-term investments, net           965,000      18,937,000      (1,377,000)
  Purchase of non-cash assets of
    acquired businesses                                   (1,936,000)    (11,748,000)            --  
  Expenditures for property, plant
    and equipment                                        (10,822,000)     (8,657,000)     (8,561,000)
  Proceeds from sale of assets                             1,651,000       1,670,000             --  
  Other                                                     (142,000)        324,000        (215,000)
----------------------------------------------------------------------------------------------------
Net cash provided by (used in)
 investing activities                                    (10,284,000)        526,000     (10,153,000)
----------------------------------------------------------------------------------------------------
Cash Flow From Financing Activities
  Stock repurchases                                         (293,000)    (71,871,000)            --  
  Cash dividends paid                                     (1,460,000)     (7,059,000)     (6,533,000)
  Proceeds from issuance of long-term debt                        --      50,000,000             --  
  Payments of long-term debt                                (273,000)       (253,000)            --  
  Exercise of stock options                                1,912,000       1,710,000         432,000 
  Other (including effect of exchange
    rate changes)                                            377,000        (493,000)        402,000 
----------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities          263,000     (27,966,000)     (5,699,000)
----------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and
 cash equivalents                                          9,183,000     (10,114,000)      2,289,000 
Cash and cash equivalents at
 beginning of period                                       7,018,000      17,132,000      14,843,000 
----------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period               $16,201,000      $7,018,000     $17,132,000 
====================================================================================================

====================================================================================================
The Notes to Consolidated Financial Statements are an integral part of these statements.
</TABLE>

                                      17
<PAGE>
 
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
NOTE 1

SIGNIFICANT ACCOUNTING POLICIES

 . Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the
Company and its subsidiaries. All significant intercompany balances and
transactions have been eliminated.

 . Cash Equivalents
Cash equivalents include mutual funds, treasury bills and other highly liquid
investments purchased with maturities of three months or less. As of March 31,
1997 and 1996, the carrying values of cash equivalents approximated market
values.

 . Short-term Investments
Short-term investments at March 31, 1996 consist primarily of municipal bonds
that are classified as securities available-for-sale. Market prices, which
approximated cost at the balance sheet dates, are reasonable estimates of the
portfolio's fair value.

 . Inventories
Inventories are stated at the lower of cost (first-in, first-out or average) or
market.

 . Property, Plant and Equipment
Property, plant and equipment are recorded at cost. Depreciation is computed
principally using the straight-line method over the estimated useful lives of
the assets. Capital leases and leasehold improvements are amortized over the
life of the related assets or the life of the lease, whichever is shorter.

 . Intangible Assets
Costs in excess of the fair value of net assets acquired in purchase
transactions are recorded as goodwill and amortized over periods of up to 40
years. The Company reviews the recoverability of intangible assets to determine
if there has been any permanent impairment. Such review includes estimating cash
flows based on operating performance and future prospects of the business. If a
permanent impairment has occurred, a reserve for such impairment would be
recorded.

 . Earnings per Common Share
Earnings per common share are computed using the weighted average number of
shares of common stock and common stock equivalents (stock options) outstanding,
which for 1997, 1996 and 1995 were 12,414,566, 15,865,866 and 16,020,063,
respectively.

 . Foreign Currency Translation
Assets and liabilities of foreign subsidiaries are translated into U.S. dollars
at the year-end exchange rate and gains and losses are being accumulated in
stockholders' equity. The related income statement is translated at the average
exchange rate for the year.

 . Supplemental Cash Flow Information
For the years ended March 31, 1997, 1996 and 1995, cash paid for income taxes
was $11,696,000, $12,065,000 and $8,333,000, respectively, and cash paid for
interest on long-term debt was $3,801,000, $118,000 and $0, respectively.

                                      18
<PAGE>
 
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)

In connection with acquisitions during fiscal years 1997 and 1996, the following
liabilities were created:
<TABLE>
<CAPTION>
                                                        1997            1996
----------------------------------------------------------------------------
<S>                                              <C>            <C>
Estimated fair value of assets acquired          $ 2,488,000    $  9,696,000 

Goodwill and identifiable intangible assets        1,331,000       3,899,000 

Cash paid                                         (1,936,000)    (11,748,000)
----------------------------------------------------------------------------
Liabilities created                              $ 1,883,000    $  1,847,000 
============================================================================
</TABLE> 

 . Concentration of Credit Risks
Financial instruments that potentially subject the Company to concentration of
credit risk consist primarily of cash equivalents, short-term investments and
receivables. The Company places its cash equivalents and short-term investments
with high credit quality institutions and limits the amount of credit exposure
with any one institution. Credit risk on trade receivables is minimized as a
result of the diverse nature of the Company's customer base. The Company
performs ongoing credit evaluations of its customers and maintains an allowance
for potential credit losses.

 . Use of Estimates
The preparation of financial statements, in conformity with generally accepted
accounting principles, requires management to make estimates and assumptions.
Such estimates and assumptions affect the reported amounts of assets and
liabilities, and the 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.

 . New Accounting Standards
During 1996, the Company adopted Statement of Financial Accounting Standards
(SFAS) No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of." The adoption did not have a material
effect on the Company's financial position or operating results.

     In October 1995, the Financial Accounting Standards Board issued SFAS No.
123, "Accounting for Stock-Based Compensation," effective in years beginning
after December 15, 1995. As permitted by SFAS No. 123, the Company has continued
to apply Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock
Issued to Employees," and has included the necessary disclosures in its 1997
financial statements.

     In February 1997, the Financial Accounting Standards Board issued SFAS No.
128, "Earnings Per Share" (EPS), which is applicable to the Company in the
fiscal year ended March 31, 1998. The Statement replaces the presentation of
primary EPS with a presentation of basic EPS, which excludes dilution and is
computed by dividing income available to common stockholders 

                                      19
<PAGE>
 
by the weighted average number of common shares outstanding for the period.
Diluted EPS is computed similarly to fully diluted EPS pursuant to APB Opinion
No. 15. The Company has determined that the effect of SFAS No. 128 would not
have a material effect on the Company's financial statements for the year ended
March 31, 1997.

 . Fair Value of Financial Instruments
The Company's financial instruments consist primarily of cash equivalents,
short-term investments, receivables, accounts payable, accrued liabilities and
debt instruments. The carrying values of all financial instruments, other than
debt instruments, are representative of their fair values due to their short
maturities. The estimated fair value of the notes payable has been determined
using the appropriate valuation methodologies and approximates book value.

 . Impairment of Long-lived Assets
The Company evaluates long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying value of an asset may not be
recoverable. If the estimated future cash flows (undiscounted and without
interest charges) from the use of an asset are less than the carrying value, a
write down would be recorded to reduce the related asset to its estimated fair
value.

 . Report Presentation
Certain amounts reported in prior years have been reclassified to conform to the
1997 presentation.

--------------------------------------------------------------------------------
NOTE 2

 .Property, Plant and Equipment

Property, plant and equipment and accumulated depreciation and amortization at
March 31, 1997 and 1996 consisted of:

<TABLE>
<CAPTION>
                                                     ESTIMATED
                                                    USEFUL LIVES      1997          1996
--------------------------------------------------------------------------------------------
<S>                                                 <C>            <C>           <C>
Land                                                               $ 2,866,000   $ 2,908,000
Buildings/land improvements                         10-40 years     20,835,000    19,156,000
Machinery/equipment                                 3-15 years      68,894,000    62,739,000
Leasehold improvements                              5-9 years        4,646,000     4,597,000
--------------------------------------------------------------------------------------------
     Total                                                          97,241,000    89,400,000
Less accumulated depreciation and amortization                      52,866,000    49,679,000
--------------------------------------------------------------------------------------------
Net property, plant and equipment                                  $44,375,000   $39,721,000
============================================================================================
</TABLE>

                                      20
<PAGE>
 
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)

--------------------------------------------------------------------------------

NOTE 3

 . Employee Benefits
The Company has a defined contribution pension plan and, as of January 1, 1995,
a 401(k) plan which, except for employees covered by a collective bargaining
agreement at one plant, cover all employees who have completed at least one year
of service and are employed by U.S. divisions that have elected to participate.
The pension plan cost, which is fully funded on a current basis, is based upon
percentages of eligible employees' compensation. The Company's contributions to
the pension plan aggregated $1,607,000, $1,539,000 and $1,507,000 in 1997, 1996
and 1995, respectively, and to the 401(k) plan aggregated $489,000, $427,000 and
$95,000 in 1997, 1996 and 1995, respectively.

     The Company has nonqualified deferred compensation plans for key employees
who can elect to have a portion of their compensation deferred. The amounts set
aside earn interest at rates generally higher than the average prime interest
rate. Interest expense accrued on the participants' accounts totalled $862,000,
$714,000 and $620,000 in 1997, 1996 and 1995, respectively. Generally, payment
of a participant's account balance will be deferred until death, disability,
retirement or termination.

--------------------------------------------------------------------------------
NOTE 4

 . Long-term Debt
At March 31, 1997 and 1996, long-term debt consisted of:
<TABLE>
<CAPTION>
                                                                    1997          1996
--------------------------------------------------------------------------------------
<S>                                                          <C>           <C>
Senior promissory notes due March 8, 2011                    $50,000,000   $50,000,000
Other notes payable due July 3, 2002 and March 31, 2005        1,538,000     1,594,000
--------------------------------------------------------------------------------------
Total                                                         51,538,000    51,594,000
Less current portion                                              35,000        69,000
--------------------------------------------------------------------------------------
Total long-term debt                                         $51,503,000   $51,525,000
======================================================================================
</TABLE>

     The Company issued senior promissory notes in the aggregate of $50,000,000,
which bear interest at 7.13%, and are payable in 11 annual payments of
$4,545,000 beginning March 8, 2001. The proceeds from the notes were used solely
for the repurchase of the Company's common stock in the Dutch Auction Tender
Offer and for payment of related expenses. Other notes payable have imputed
interest rates ranging from 8.5% to 10%.

     On March 31, 1996, the Company entered into a credit agreement with a bank,
which provides for a revolving line of credit of 

                                      21
<PAGE>
 
$20,000,000 through March 31, 1998, and for letters of credit totaling
$8,000,000. The revolving line of credit bears interest either at the prime rate
or the London Interbank Offered Rate plus 1%, at the Company's option, at the
time of borrowing. No amounts were outstanding under the line at March 31, 1997
or at March 31, 1996. The Company has also negotiated a $20,000,000 shelf
facility for future acquisitions. The interest rate for the shelf facility would
be based on U.S. Treasury rates at the time of borrowing.

     Aggregate maturities of long-term debt over the next five fiscal years are
as follows: $35,000 in 1998, $142,000 in 1999, $217,000 in 2000, $4,801,000 in
2001, $4,841,000 in 2002 and $41,502,000 thereafter.

--------------------------------------------------------------------------------
NOTE 5

 . Acquisitions and Divestiture
The Company acquired two companies during fiscal 1997 and three companies in
fiscal 1996, all of which complement existing operations. These acquisitions
were accounted for using the purchase method of accounting. The operating
results of the entities acquired, which were not material, were included in the
consolidated financial statements from their respective acquisition dates. The
purchase prices of these acquisitions were allocated to the net assets acquired,
including intangible assets, based upon their estimated fair values at the dates
of acquisition. Intangible assets, principally the excess of cost over the fair
value of identifiable net assets of these purchased businesses, are being
amortized using the straight-line method over a period of 15 years.

     During fiscal 1997, the Company completed the sale of Anvil Cases, Inc., a
subsidiary of the Company, which manufactures riveted cases primarily for the
music, packaging specialists and audio/video markets. The pro forma effect of
these transactions on 1997 and 1996 was not material.

--------------------------------------------------------------------------------
NOTE 6

 . Common Stock

The Company has a stock option plan that provides for the granting of options to
purchase shares of the Company's stock to directors, officers and other key
employees at a price not less than the fair market value on the date of grant.
Options are granted for terms of five to eight years and are exercisable in
annual installments (generally one-third of the total grant) commencing one year
from date of grant, on a cumulative basis.

     The Company's stock option plan provides for the granting of qualified and
nonqualified options as well as stock appreciation rights (SARs) in tandem with
options. The SARs entitle a holder to receive an amount equal to the excess 

                                      22
<PAGE>
 
of the fair market value of the Company's common stock on the date of exercise
over the option price. The exercise of SARs automatically cancels the option on
the related shares. Compensation expense recognized in connection with SARs
during the years ended March 31, 1997, 1996 and 1995 was not material.

     Changes in the number of shares subject to options during the three years
ended March 31, 1997, are summarized as follows:

<TABLE>
<CAPTION>
                                               1997                       1996                 1995
--------------------------------------------------------------------------------------------------------------
                                                    Weighted                   Weighted            Weighted
                                                  Avg. Exercise             Avg. Exercise        Avg. Exercise
                                       Shares         Price         Shares     Price      Shares     Price
--------------------------------------------------------------------------------------------------------------
<S>                                   <C>                <C>       <C>         <C>      <C>         <C>
Outstanding at beginning
  of year                              826,741           $13.60     866,048    $12.82    772,000    $13.08
Granted                                216,900           $19.47     253,500    $15.39    272,600    $12.87
Exercised                             (204,378)          $13.17    (250,871)   $12.74    (44,644)   $11.91
Canceled or expired                    (29,035)          $15.13     (41,936)   $13.45   (133,908)   $14.72
--------------------------------------------------------------------------------------------------------------
Outstanding at end of year             810,228           $15.22     826,741    $13.60    866,048    $12.82
==============================================================================================================
Options exercisable
  at year-end                          392,262                      370,447              399,685 

Weighted average fair value
  of options granted
  during the year                        $6.10                        $4.62 

Options available for
  future grant                          56,768                      255,868              482,300 
==============================================================================================================
</TABLE>

     The Company has recognized no compensation cost for its plan. Had
compensation cost for the Company's stock option plan been determined based on
the fair value at the grant dates for awards under this plan consistent with the
method of SFAS No. 123, the Company's pro forma net income and earnings per
share for fiscal year 1997 would have been $15.6 million and $1.25 per share,
respectively, and $16.9 million and $1.06 per share, respectively, for fiscal
year 1996.

     The fair value of each option granted is estimated on the date of grant
using the Black-Scholes option-pricing model with the following weighted average
assumptions for fiscal 1997 and 1996, respectively: risk-free interest rate of
6.3% and 5.8%; expected volatility of 22.6% and 23.3%; dividend yield of .6% and
 .8%; and an expected life of five years. No adjustments have been made for non-
transferability or risk of forfeiture.

                                      23
<PAGE>
 
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)


The following table summarizes information about stock options outstanding at
March 31, 1997:

<TABLE>
<CAPTION>
                              Options Outstanding                                          Options Exercisable                 
-------------------------------------------------------------------------------------  --------------------------------            
                                 Number              Wtd. Avg.                              Number                              
        Range of             Outstanding at          Remaining            Wtd. Avg.     Exercisable at     Wtd. Avg.        
     Exercise Prices            3/31/97           Contractual Life     Exercise Price      3/31/97       Exercise Price     
-------------------------------------------------------------------------------------  --------------------------------            
<S>                              <C>                    <C>                <C>             <C>               <C> 
     $11.31 - $13.75             385,189                3.8                $12.78          321,550           $12.77            
     $15.38 - $15.63             212,139                5.6                $15.39           70,712           $15.39            
     $19.38 - $21.38             212,900                6.6                $19.47                                               
</TABLE>

--------------------------------------------------------------------------------
NOTE 7

 . Common Stock Repurchase
In February 1996, the Company repurchased approximately 4,019,000 shares of its
common stock at a cost of approximately $71,871,000 in a Dutch Auction Tender
Offer.

     The source of the funds to repurchase the shares in February 1996 was
provided by the issuance of promissory notes totaling $50,000,000 by the Company
(refer to Note 4), together with available cash and cash derived from the sale
of short-term investments.

     In November 1996, the Board of Directors authorized the repurchase of up to
an additional 400,000 shares, as well as the shares of "odd lot" stockholders.
During fiscal 1997, approximately 15,400 shares were repurchased.

--------------------------------------------------------------------------------
NOTE 8

 . Income Taxes

The Company uses the asset and liability method of accounting for income taxes.
This approach requires the recognition of deferred tax assets and liabilities
for the expected future tax consequences of temporary differences between the
financial reporting basis and tax basis of assets and liabilities.

     The provision for income taxes is summarized as follows:
<TABLE>
<CAPTION>
                                   1997            1996            1995                                                    
-----------------------------------------------------------------------                                                
<S>                        <C>             <C>             <C>                     
Current                                                                                                                
    Federal                 $ 8,470,000     $10,031,000     $ 7,867,000                                                
    State                     1,432,000       2,145,000       1,580,000                                                
Deferred                                                                                                               
    Federal                     708,000        (740,000)        (38,000)                                               
    State                       (17,000)       (139,000)         (8,000)                                               
-----------------------------------------------------------------------                                                
Total                       $10,593,000     $11,297,000     $ 9,401,000                                                
=======================================================================
</TABLE> 

                                      24
<PAGE>
 
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)

Deferred tax assets and liabilities comprised the following as of March 31,

<TABLE> 
<CAPTION> 
                                                  1997                            1996
--------------------------------------------------------------------------------------------------
                                      Deferred Tax    Deferred Tax    Deferred Tax    Deferred Tax
                                        Assets         Liabilities       Assets        Liabilities
--------------------------------------------------------------------------------------------------
<S>                                    <C>             <C>             <C>              <C>  
Depreciation/amortization               $      --       $2,814,000      $      --       $2,388,000
Provision for estimated expenses           444,000             ---         952,000             ---
Employee benefit plans                   5,353,000             ---       4,465,000             ---
State and foreign taxes                        ---         235,000         604,000             ---
Other                                          ---         884,000             ---       1,078,000
--------------------------------------------------------------------------------------------------
Total                                   $5,797,000      $3,933,000      $6,021,000      $3,466,000
==================================================================================================
</TABLE>

A reconciliation between the income taxes computed at the federal statutory rate
and the provision for income taxes is as follows:

<TABLE>
<CAPTION>
                                           1997            1996           1995
------------------------------------------------------------------------------
<S>                                 <C>             <C>             <C>
Income taxes computed at the       
  federal statutory rate            $ 9,268,000     $ 9,886,000     $8,479,000 
State income taxes, net of         
  federal income tax benefit            909,000       1,304,000      1,022,000 
Tax-exempt income                       (97,000)        (90,000)      (152,000)
Other                                   513,000         197,000         52,000 
------------------------------------------------------------------------------
Total provision                     $10,593,000     $11,297,000     $9,401,000 
==============================================================================
Effective income tax rate                 40.0%           40.0%          38.8% 
------------------------------------------------------------------------------
</TABLE> 

--------------------------------------------------------------------------------
NOTE 9
 
 . Commitments
Future minimum lease payments under operating leases at March 31, 1997 are
 summarized as follows:
<TABLE> 
<CAPTION> 
     Years Ending March 31,
          <S>              <C>     
          1998             $ 2,343,000
          1999               2,191,000
          2000               1,665,000
          2001               1,089,000
          2002                 950,000
          Thereafter         3,159,000
          ----------------------------
          Total            $11,397,000
          ============================
</TABLE>

     Rental expense under operating leases was $2,090,000, $2,059,000 and
$2,049,000 for 1997, 1996 and 1995, respectively. Obligations under capital
leases at March 31, 1997 were not material.

                                      25
<PAGE>
 
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)

--------------------------------------------------------------------------------
NOTE 10

CONTINGENT LIABILITIES

 . Environmental Matters
In November 1996, the Company, along with 39 other potentially responsible
parties (PRPs), received an Administrative Order for Remedial Action from the
U.S. Environmental Protection Agency (the EPA) with regard to implementation of
the interim remedy for the Glendale North and Glendale South Operable Units of
the San Fernando Valley Superfund Site near Los Angeles, California ("the
Site"). An administrative order on consent relating to the design work for the
interim remedies was entered into in March 1994 between the EPA and 24 PRPs,
including the Company. The design work is complete.

     An arbitrated award has resulted in the allocation of a 58.8% share of the
total costs associated with the Site to certain Burbank Operable Unit PRPs. The
remaining 41.2% share was allocated to the Glendale PRPs, including the Company.
The Company has provided reserves of approximately $900,000 for its estimated
share of the total costs of construction, operation and maintenance of the EPA
selected remedy, as well as certain response and oversight costs of the EPA and
the State of California in connection with the Site. The Company's liabilities
for these costs are based on management's best estimate of undiscounted future
costs, excluding possible insurance recoveries. The Company's ultimate liability
related to environmental matters at the Site is dependent upon a variety of
factors, including changes in the cost of the construction, operation and
maintenance of the interim remedy and the final remedy, as well as any changes
to the allocation of those costs among the PRPs including any additional
participants. The Company has received favorable rulings from the U.S. District
Court in response to its claim for reimbursement of defense costs related to the
Site from its insurance carriers. These rulings are currently being appealed by
the carriers.

     The Company is also engaged in remediation and/or environmental monitoring
at three other locations, and has been named by the State of California as
potentially responsible at one location. The Company has provided reserves,
which are not deemed to be material, for the cleanup costs associated with these
sites to the extent they could be reasonably estimated at this time.

 . Other Matters
In December 1996, the Company was contacted by the U.S. government General
Services Administration (GSA), Office of General Counsel, with respect to
responses of the Company in January 1994 to an administrative subpoena regarding
an examination of freight charges under certain GSA contracts with a division of
the Company. The Company again outlined 

                                      26
<PAGE>
 
its position with respect to the freight charges at that time. No further
information or response has been received from the GSA and, therefore, the
Company is unable to accurately assess the situation further at this time.

     The Company is subject to other legal proceedings that arise in the
ordinary course of its business activities. In the opinion of management, any
liability that may result from the resolution of these matters will not have a
material adverse effect on its financial statements.

--------------------------------------------------------------------------------
NOTE 11

Segment Information
Business segment information as of and for the years ended March 31, 1997, 1996
and 1995 is as follows:

<TABLE>
<CAPTION>
                                     1997                                  1996                                1995
---------------------------------------------------------------------------------------------------------------------------------   

                      Encl. and                               Encl. and                            Encl. and
(In $000s)           Accessories      Other       Total      Accessories    Other     Total       Accessories   Other     Total
---------------------------------------------------------------------------------------------------------------------------------   

<S>                     <C>         <C>         <C>            <C>         <C>       <C>            <C>        <C>       <C>
Net sales               $175,119    $ 50,323    $225,442       $152,378    $53,869   $206,247       $126,805   $52,889   $179,694 
                        ---------------------------------------------------------------------------------------------------------
Operating profit    
  before general    
  corporate expenses      31,312       4,222      35,534         30,547      2,435     32,982         24,868     2,939     27,807 
                        ---------------------------------------------------------------------------------------------------------
                    
General corporate   
  expenses, net                                   (4,383)                              (3,572)                             (2,919)
Interest expense                                  (4,670)                              (1,163)                               (662)
                    
                        ---------------------------------------------------------------------------------------------------------
Income before       
  income taxes                                  $ 26,481                             $ 28,247                            $ 24,226 
                        =========================================================================================================
Identifiable assets     $102,194    $ 46,519    $148,713       $ 99,570    $47,264   $146,834       $ 74,493   $45,288   $119,781
                        ---------------------------------------------------------------------------------------------------------
Corporate assets                                  37,243                               19,004                              51,743 
                        ---------------------------------------------------------------------------------------------------------
Total assets                                    $185,956                             $165,838                            $171,524 
                        =========================================================================================================
Depreciation            $  4,283    $  1,966    $  6,249       $  3,280    $ 1,789   $  5,069       $  2,781   $ 1,861   $  4,642 
                        ---------------------------------------------------------------------------------------------------------
Capital expenditures    $  9,063    $  1,759    $ 10,822       $  6,573    $ 2,667   $  9,240       $  7,107   $ 1,454   $  8,561 
                        ---------------------------------------------------------------------------------------------------------
</TABLE>

                                      27

<PAGE>
 
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)


     The Company's Enclosures and Accessories segment consists of products that
serve the system packaging, thermal management and engineered case requirements
of the telecommunications, instrumentation, data processing and
government/military markets of the electronics industry. These products include
cabinets, metal and plastic enclosures, instrumentation cases, card cages for
printed circuit boards, as well as precision slides, blowers, fans, cooling
systems and other similar products. The Company also manufactures and sells
aluminum luggage, camera cases, industrial carrying cases, air cargo enclosures
and hardware, food service containers and other custom metal products.

     The following presents a summary of operations by geographic area as of and
for the years ended March 31, 1997, 1996 and 1995:

<TABLE>
<CAPTION>
(In $000s)                               1997        1996        1995
---------------------------------------------------------------------
<S>                                  <C>         <C>         <C>
Net Sales
     U.S. operations                 $201,784    $183,662    $167,306 
     European operations               23,658      22,585      12,388 
---------------------------------------------------------------------
     Consolidated                    $225,442    $206,247    $179,694 
=====================================================================
Net Sales between operations         $  2,198    $  3,230    $  1,461 
=====================================================================
Operating income
     U.S. operations                 $ 29,444    $ 25,163    $ 21,063 
     European operations                 (655)      1,443         778 
---------------------------------------------------------------------
     Consolidated                    $ 28,789    $ 26,606    $ 21,841 
=====================================================================
Identifiable assets at year end
     U.S. operations                 $168,242    $149,394    $162,602 
     European operations               17,714      16,444       8,922 
---------------------------------------------------------------------
     Consolidated                    $185,956    $165,838    $171,524 
=====================================================================
</TABLE>

     Total export sales from U.S. operations and net sales from European
operations were $36,276,000, $34,323,000 and $20,706,000, or 16%, 17% and 12% of
total net sales, for the fiscal years ended March 31, 1997, 1996 and 1995,
respectively.

     Sales under U.S. government contracts and subcontracts accounted for
approximately 10%, 10% and 9% of total sales in 1997, 1996 and 1995,
respectively.

                                      28
<PAGE>
 
  INDEPENDENT AUDITORS' REPORT

To the Stockholders of ZERO Corporation:

     We have audited the accompanying consolidated balance sheets of ZERO
Corporation and its subsidiaries as of March 31, 1997 and 1996, and the related
statements of consolidated income, stockholders' equity, and cash flows for each
of the three years in the period ended March 31, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these 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, such consolidated financial statements present fairly, in
all material respects, the financial position of ZERO Corporation and its
subsidiaries at March 31, 1997 and 1996, and the results of their operations and
their cash flows for each of the three years in the period ended March 31, 1997
in conformity with generally accepted accounting principles.


/S/ Deloitte & Touche LLP

Los Angeles, California
May 12, 1997

                                      29
<PAGE>
 
  MANAGEMENT'S REPORT

     The accompanying consolidated financial statements have been prepared by 
management in accordance with generally accepted accounting principles and, 
where appropriate, include amounts based on management's judgment and estimates.
 The integrity of the financial statements and the other financial information 
in the Annual Report is the responsibility of management.  The financial 
statements have been audited by Deloitte & Touche LLP, independent auditors, 
appointed by the Board of Directors.
      
      The Company maintains internal accounting control systems that are 
adequate to provide reasonable, but not absolute, assurance that the assets are 
safeguarded from loss or unauthorized use.  These systems produce records 
adequate for preparation of financial information.  In establishing and 
maintaining internal controls, the Company exercises judgment in determining 
that the costs of such controls do not exceed the benefits to be derived.

     The Board of Directors has an Audit Committee composed solely of directors 
who are not officers or employees.  The Committee meets regularly with 
management, with the Company's internal audit staff, and with the independent 
auditors.  The independent auditors and the internal audit staff periodically 
meet alone with the Audit Committee and have free access to the Audit Committee 
at any time.

     In management's opinion, the consolidated financial statements present 
fairly, in all material respects, the financial position of ZERO Corporation and
its subsidiaries at March 31, 1997 and 1996, and the results of operations and 
cash flows for each of the three years in the period ended March 31, 1997 in 
conformity with generally accepted accounting principles.


/s/ Wilford D. Godbold, Jr.    /s/  George A. Daniels      /s/ Diane N. Kajikami

Wilford D. Godbold, Jr.        George A. Daniels           Diane N. Kajikami
President and Chief            Vice President and Chief    Controller and Chief
Executive Officer              Financial Officer           Accounting Officer

May 12, 1997

                                      30
<PAGE>
 
  SUPPLEMENTARY CONDENSED STATEMENTS
                       OF CONSOLIDATED INCOME
(In $000s, except per share data)
<TABLE> 
<CAPTION> 
Years Ended March 31,                                    1997          1996           1995           1994           1993
------------------------------------------------------------------------------------------------------------------------

<S>                                                  <C>           <C>            <C>            <C>            <C>
Net Sales                                            $225,442      $206,247       $179,694       $171,821       $160,466
Cost of Sales                                         151,131       135,708        118,084        115,957        107,663
Selling and Administrative Expenses                    45,522        43,933         39,769         36,482         35,388
Operating Income                                       28,789        26,606         21,841         19,382         17,415
Other Income, Net                                       2,362         2,804          3,047          2,062          2,106
Interest Expense                                        4,670         1,163            662            481            519
Income Before Income Taxes                             26,481        28,247         24,226         20,963         19,002
Net Income                                            $15,888       $16,950        $14,825        $12,851        $11,635
Per Share Data:
      Earnings                                          $1.28         $1.07          $0.93          $0.81          $0.74
      Dividends Paid                                     0.12          0.44           0.41           0.40           0.40
======================================================================================================================== 
</TABLE> 

  QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

<TABLE> 
<CAPTION> 
                                                                   Gross       Income Before       Net      Earnings Per
Quarter Ended:                                     Net Sales       Profit      Income Taxes      Income     Common Share
------------------------------------------------------------------------------------------------------------------------
<S>                                               <C>           <C>             <C>            <C>             <C> 
1997
March 31, 1997                                    $58,845,000   $18,975,000     $6,863,000     $4,167,000      $0.33
December 31, 1996                                  58,546,000    19,210,000      6,878,000      4,199,000       0.34
September 30, 1996                                 53,387,000    17,372,000      6,310,000      3,722,000       0.30
June 30, 1996                                      54,664,000    18,754,000      6,430,000      3,800,000       0.31
1996                                                                                                           
March 31, 1996                                    $55,915,000   $19,144,000     $8,064,000     $4,841,000      $0.32
December 31, 1995                                  50,328,000    16,775,000      6,420,000      3,852,000       0.24
September 30, 1995                                 51,387,000    18,026,000      7,584,000      4,550,000       0.28
June 30, 1995                                      48,617,000    16,594,000      6,179,000      3,707,000       0.23
======================================================================================================================== 
</TABLE>


                                      31