FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
X Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 [Fee Required]
For the Fiscal Year Ended March 31, 1994
Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 [No Fee Required]
For the Transition Period From To
Commission File Number 1-5502
ZURN INDUSTRIES, INC.
State of Address and IRS Employer
Incorporation Telephone Number Identification Number
Pennsylvania One Zurn Place 25-1040754
Erie, Pennsylvania 16505
814-452-2111
Securities Registered Pursuant to Section 12(b) of the Act
Title of Each Class Exchange on Which Registered
Common Stock, $.50 Par Value New York Stock Exchange
Pacific Stock Exchange
5-3/4% Convertible Subordinated New York Stock Exchange
Debentures due 1994
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ ]
The aggregate market value of the voting stock held by nonaffiliates of the
registrant was $269,851,000 based on the closing sale price per share for the
12,406,945 shares of Common Stock, $.50 par value, outstanding on June 1, 1994
and excluding the value of 2,900 shares of preferred stock which have no
quoted market value.
Documents Incorporated by Reference
Portions of Annual Report to Stockholders for the year ended March 31, 1994
incorporated by reference in Parts I and II
Portions of Proxy Statement dated June 27, 1994 incorporated by reference in
Part III
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PART I
ITEM 1 - BUSINESS
General Development of Business
Zurn Industries, Inc., a corporation founded in 1900 and incorporated in 1932
together with its subsidiaries (the "Company") designs, constructs,
manufactures, markets, and operates in four industry segments: Power Systems;
Water Control; Lynx Golf; Other businesses.
In March 1994, a decision was made to close the steam generating manufacturing
facilities of the Power Systems segment because of uncompetitive costs.
Financial Information about Industry Segments
"Industry Segment Data" on page 19 of the Annual Report to Stockholders for
the year ended March 31, 1994 is incorporated herein by reference.
Narrative Description of Business
The first sentence of the first paragraph and the second paragraph, excluding
the fourth sentence, of "Notes to Consolidated Financial Statements - Industry
Segment Data" on page 20 of the Annual Report to Stockholders for the year
ended March 31, 1994 is incorporated herein by reference.
Product Class Sales
Year Ended March 31
Segment and Products 1994 1993 1992
(Thousands)
Power Systems
Power plants and steam generating systems $450,674 $336,593 $255,562
Other products 11,375 14,460 15,365
Water Control
Plumbing products 99,496 88,051 84,782
Water resource and treatment systems 85,921 60,416 78,531
Other products 61,048 83,926 90,442
Power Systems - Design, engineering, construction, and operation of alternate
energy and combined-cycle power plants; factory-assembled and field-
constructed steam generating systems, waste heat energy recovery systems,
economizers, superheaters, spreader stokers, burners, pulverizers, and other
auxiliary components; solid, liquid, and gaseous waste incineration systems;
acid gas removal systems, mechanical dust collectors, wet scrubbers, fabric
filters, heavy-duty dampers, and fans.
Water Control - Construction of water resource and treatment systems and
general construction services for civil, structural, and mechanical piping
fields; engineered concrete products including precast prestressed concrete
bridge components, box beam girders, pilings, panels, support systems,
underground wastewater pipe, and modular jail cells; plumbing products,
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including roof, floor, and trench drains, primers, traps, backwater valves,
hair, grease, oil, and solids interceptors, cleanouts, off-the-floor fixture
supports, water hammer arrestors, hydrants, floor sinks, ferrous castings,
flush valves, shower heads, faucets, and hand dryers for commercial,
industrial, and institutional applications; residential, commercial, and
industrial pressure reducing and regulating valves, temperature/pressure
relief valves, swing-away ball valves, reduced pressure backflow preventers,
pressure vacuum breakers, check valves, double check valves, water gravity
flow systems; automatic interior fire protection sprinkler systems.
Lynx Golf - Golf clubs and accessories.
Other Businesses - Clutches, heavy-duty overrunning clutches, clutch
couplings, torque and overload release clutches, backstops, and Ringspann
freewheel clutches; flexible gear and diaphragm couplings, flexible spindle
couplings, universal joints, and precision steel forgings.
Segment Status
No new segment or product is being planned or developed which will require the
investment of a material amount of the Company's assets, or which otherwise is
material.
Sources and Availability of Raw Materials
The Company's businesses use ferrous and non-ferrous metals, concrete
products, and stainless steel castings purchased from various domestic and
foreign suppliers. The sources of supply are adequate and the Company is not
substantially dependent upon any one supplier.
Patents and Licenses
The Company owns numerous patents relating to the design and manufacture of
its products and systems. From time to time, the Company grants licenses to
others under certain of its patents and obtains licenses under the patents of
others. While the Company considers that, in the aggregate, its patents and
licenses are important in the operation of its businesses, it believes that
the successful manufacture and sale of its products generally depends more
upon its technological know-how and manufacturing and construction skills.
Seasonal Business
The demand for Lynx Golf products is highest in the Company's first and fourth
quarters. None of the other industry segments is considered to have
significant seasonal business.
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Working Capital Requirements
Certain products of the Water Control segment are considered standard items
and significant amounts of inventory are required to meet rapid delivery
requirements of customers. The Lynx Golf segment requires significant amounts
of inventory to meet customer demands. There are no special or unusual
working capital requirements for the Company's other businesses.
Customer Dependence
None of the industry segments has a customer the loss of which would have a
material adverse effect on the segment.
Customer Identity
There are no customers the loss of which would have a material adverse effect
on the Company.
Backlog
The backlog of unshipped orders was as follows:
March 31
1994 1993
(Thousands)
Power Systems $159,000 $422,000
Water Control 69,000 137,000
Lynx Golf 5,000 10,000
Other Businesses 11,000 12,000
$244,000 $581,000
Approximately 9% of the Power Systems backlog and 4% of the Water Control
backlog is expected to be completed in fiscal years ending after March 31,
1995.
Government Contracts
No material portion of the business of any industry segment is subject to
renegotiation of profits or termination of contracts or subcontracts at the
election of the Government.
Competitive Conditions
The Company's major markets are electric power generation, industrial,
commercial, municipal, and consumer. The Company competes with a number and
variety of diverse manufacturers, both large and small. Because of the
multiplicity and diversity of such markets, it is impracticable to ascertain a
proper competitive rating index for any of the Company's segments.
In general, all the Company's products and systems are sold for the most part
in world-wide markets characterized by substantial price, service, and product
quality competition.
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Research and Development
Research and development expenditures were not material in any of the last
three years.
Impact of Environmental Laws and Regulations
Federal, state, and local regulations enacted to regulate the discharge of
materials into the environment will have no material effect on the Company's
capital expenditures, earnings, or competitive position.
Number of Employees
The Company has approximately 2,900 employees.
Foreign and Domestic Operations and Export Sales
The Company's foreign operations represented less than 10% of consolidated
sales, operating income, and assets in each of the last three years. Export
sales were: 1994-$20,073,000; 1993-$29,309,000; 1992-$28,903,000.
ITEM 2 - PROPERTIES
The Company principally operates in various locations throughout the United
States in facilities considered to be in good condition, well maintained, and
adequate for its purposes. The approximate square feet of floor space
utilized in the United States is as follows:
Owned Leased
Power Systems 94,000 73,000
Water Control 564,000 140,900
Lynx Golf 61,000 124,000
Other Businesses 353,000 5,000
Corporate Headquarters 213,600
1,285,600 342,900
ITEM 3 - LEGAL PROCEEDINGS
On September 24, 1993, the Superior Court of Imperial County California
entered a judgment in the amount of $25.7 million against the Company and its
subsidiary, National Energy Production Corporation (NEPCO), in connection with
a cross complaint filed in February 1991 by Imperial Resource Recovery
Associates, L.P., a California Limited Partnership, which alleged that NEPCO
had failed to construct an electric generating facility in accordance with
contract terms. The Court also assessed prejudgment interest of $6.1 million
and attorney fees of $8.4 million. An appeal from the entire judgment was
taken on September 24, 1993 by the Company and NEPCO and is pending in the
California Court of Appeal, Fourth Appellate District.
Four civil actions against the Company, two of its subsidiaries, and eighteen
other defendants were filed in the Superior Court of Los Angeles County
California in May 1991 by Continental Insurance Company, Insurance Company of
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North America, Continental Casualty Company, Allianz Underwriters, Inc., and
others seeking recovery of an aggregate $76.5 million in insurance claims
arising out of a 1988 fire in a building undergoing alterations. It is
alleged that the Company's standpipe valves and fire sprinkler system
installation procedures contributed to the duration of the fire.
The Company received an Administrative Order, effective April 30, 1992, issued
by the United States Environmental Protection Agency (EPA) pursuant to Section
106(a) of the Comprehensive Environmental Response, Compensation and Liability
Act of 1980 directing the Company and thirty-five others to implement response
activities at the Millcreek Dumpsite in Erie County, Pennsylvania in
accordance with a remedial plan. The Company is informed that EPA has secured
estimates of the cost of the remedial work which approximate $12 million.
Also, the respondents may be obligated to reimburse EPA for amounts expended
for preliminary cleanup, the development of a Record of Decision, and the
remedial design. The Company and seventeen of the other respondents have
notified EPA of their intention to undertake the remedial action.
On October 19, 1993, the Commonwealth of Pennsylvania Department of
Environmental Resources (Department) filed a complaint in the United States
District Court for the Western District of Pennsylvania against the Company
and twenty-six others seeking to recover past and future specified and
unspecified costs exceeding $2.2 million arising out of the Department's
involvement at the Millcreek Dumpsite in Erie County, Pennsylvania.
In January 1994, the State of California filed a complaint in the Municipal
Court of the Los Angeles Judicial District against the Company's subsidiary,
Zurn Constructors, Inc., two of its employees, and another company and
individual alleging felony and misdemeanor violations of the State's Health
and Safety, Water, and Penal codes in connection with the discharge of a
pollutant from the other company's property into a Coyote Creek tributary.
The maximum fines for the alleged charges sought in the complaint against Zurn
Constructors total $.6 million.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report.
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EXECUTIVE OFFICERS OF THE REGISTRANT
Name Age Positions Period Served
George H. Schofield 64 Director Since 1984
Chairman Since 1986
Chief Executive Officer Since 1985
President 1985 - 1991
Charles L. Hedrick 59 Director and Vice Chairman Since 1992
Senior Executive Vice President 1983 - 1992
William A. Freeman 51 Director and President Since 1991
Senior Vice President-Finance
and Administration 1986 - 1991
Donald F. Fessler 63 Executive Vice President Since 1985
James A. Zurn 52 Director Since 1970
Senior Vice President Since 1981
John E. Rutzler III 53 Vice President-Controller Since 1989
Dennis Haines 41 General Counsel and Secretary Since 1993
Associate General Counsel 1989 - 1993
PART II
ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market Information
The principal markets on which the Company's Common Stock is traded are the
New York Stock Exchange and the Pacific Stock Exchange.
"Unaudited Quarterly Financial Data - Common Stock Market Price" on page 13 of
the Annual Report to Stockholders for the year ended March 31, 1994 is
incorporated herein by reference.
Holders
At March 31, 1994, there were 6,242 holders of record of the Company's Common
Stock.
Dividends
"Unaudited Quarterly Financial Data - Common Stock Cash Dividends Declared" on
page 13 of the Annual Report to Stockholders for the year ended March 31, 1994
is incorporated herein by reference.
ITEM 6 - SELECTED FINANCIAL DATA
"Five Year Consolidated Financial Summary - Operating Data," "Five Year
Consolidated Financial Summary - Financial Position at Year End - Total Assets
and Debt and Capital Leases," and the footnote thereto on page 13 of the
Annual Report to Stockholders for the year ended March 31, 1994 are
incorporated herein by reference.
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ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
"Financial Review" on pages 14 and 15 of the Annual Report to Stockholders for
the year ended March 31, 1994 is incorporated herein by reference.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements and notes to consolidated financial
statements on pages 16 through 23 of the Annual Report to Stockholders for the
year ended March 31, 1994 are incorporated herein by reference.
"Unaudited Quarterly Financial Data" on page 13 of the Annual Report to
Stockholders for the year ended March 31, 1994 is incorporated herein by
reference.
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
Zurn Industries, Inc.
Erie, Pennsylvania
We have audited the consolidated financial statements and the financial
statement schedules of Zurn Industries, Inc. and subsidiaries listed in Item
14. These financial statements and schedules are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements and schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements listed in Item 14 present fairly,
in all material respects, the consolidated financial position of Zurn
Industries, Inc. and subsidiaries at March 31, 1994 and 1993, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended March 31, 1994, in conformity with generally
accepted accounting principles. Also, in our opinion, the related financial
statement schedules, when considered in relation to the basic financial
statements taken as a whole, present fairly in all material respects the
information set forth therein.
As discussed in the significant accounting policies note to the consolidated
financial statements, the Company changed its methods of accounting for
postretirement benefits other than pensions and for income taxes in the year
ended March 31, 1992.
/s/ Ernst & Young
Erie, Pennsylvania
May 19, 1994
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ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
There has been no change in independent auditors within twenty-four months
prior to the date of the most recent financial statements.
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
"Nominees for Election as Directors" and "Directors Whose Terms of Office
Continue Until 1995" on page 2 and "Directors Whose Terms of Office Continue
Until 1996" on page 3 of the Proxy Statement dated June 27, 1994 are
incorporated herein by reference.
Information with respect to executive officers is presented in Part I.
Based solely upon a review of Forms 3, 4, and 5, and amendments thereto,
furnished to the Company with respect to its most recent fiscal year, and
written representations that no Form 5 was required, no person who, at any
time during the fiscal year, was a director, officer, or beneficial owner of
more than 10% of any class of equity securities of the Company failed to file
on a timely basis reports required by Section 16(a) of the Securities Exchange
Act of 1934 during the most recent fiscal year or prior fiscal years, except
as set forth under "Compliance With Exchange Act Section 16(a)" on page 6 of
the Proxy Statement dated June 27, 1994 incorporated herein by reference.
ITEM 11 - EXECUTIVE COMPENSATION
"Summary Compensation Table" on page 6, "Stock Option Grants" and "Stock
Option Exercises and Fiscal Year End Option Values" on page 7, "Pension Plans"
on page 8, and "Directors' Compensation" on pages 8 and 9 of the Proxy
Statement dated June 27, 1994 are incorporated herein by reference.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
"Security Ownership of Common Stock" on page 5 of the Proxy Statement dated
June 27, 1994 is incorporated herein by reference.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There were no relationships or related transactions required to be reported
during the fiscal year covered by this report.
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PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
Financial Statements
The following consolidated financial statements included in the Annual Report
to Stockholders for the year ended March 31, 1994 are incorporated herein by
reference:
Consolidated Financial Position - March 31, 1994 and 1993
Consolidated Operations - Years Ended March 31, 1994, 1993, and 1992
Consolidated Stockholders' Equity - Years ended March 31, 1994, 1993,
and 1992
Consolidated Cash Flows - Years ended March 31, 1994, 1993, and 1992
Industry Segment Data - Years ended March 31, 1994, 1993, and 1992
Notes to Consolidated Financial Statements
Financial Statement Schedules
The following consolidated financial statement schedules are included in this
Item:
Schedule I - Marketable Securities - Other Investments
Schedule II - Accounts Receivable from Related Parties and Underwriters,
Promoters, and Employees other than Related Parties
Schedule VIII - Valuation and Qualifying Accounts
All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under
the related instructions or are inapplicable and, therefore, have been
omitted.
Exhibits
The exhibits listed in the Exhibit Index to this report are incorporated
herein by reference.
Reports on Form 8-K
March 22, 1994 incorporating a news release commenting on earnings estimates
for the fourth quarter ending March 31, 1994.
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<TABLE>
SCHEDULE I - MARKETABLE SECURITIES - OTHER INVESTMENTS
(Thousands)
<CAPTION>
Col. A Col. B Col. C Col. D Col. E
Amount
at Which Each
Market Portfolio of Equity
Value of Security Issues and
Number of Shares or Each Issue Each Other Security
Units-Principal Amount at Balance Issue Carried in
Name of Issuer and Title of Each Issue of Bonds and Notes Cost of Each Issue Sheet Date the Balance Sheet
<S> <C> <C> <C> <C>
United States Treasury Notes $8,870 $8,788 $8,782 $ 8,782
Tax exempt bonds:
States and their agencies 6,195 6,308 6,244 6,244
State subdivisions and their agencies:
General 7,730 7,891 7,849 7,849
Energy 5,500 5,844 5,715 5,715
Other 7,415 7,611 7,331 7,331
Tax exempt bond funds:
Nuveen 6,650 6,666 6,660 6,660
Alliance Municipal Securities Income
Fund, Inc. Series B 1,500 1,503 1,503 1,503
Other 8,500 8,522 8,522 8,522
Mortgage-backed:
Federal Home Loan Mortgage
Corporation 1552 TB 1,200 1,240 871 871
Other 8,332 8,719 7,530 7,530
Certificates of deposit 282 289 289 289
$61,296
</TABLE>
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<TABLE>
SCHEDULE II - ACCOUNTS RECEIVABLE FROM RELATED PARTIES AND
UNDERWRITERS, PROMOTERS, AND EMPLOYEES OTHER THAN RELATED PARTIES
(Thousands)
<CAPTION>
Col. A Col. B Col. C Col. D Col. E
Deductions
Balance at (1) (2) Balance at End of Period
Beginning of Amounts Amounts (1) (2)
Name of Debtor Period Additions Collected Written Off Current Not Current
<S> <C> <C> <C> <C> <C> <C>
Year Ended March 31, 1994
Clifton A. and
Cindra L. Belschner -A $194 $194
Peter L. Makin -C $107 $107
Year Ended March 31, 1993
Clifton A. and
Cindra L. Belschner -A $194 $194
Richard J. Nanula -B 725 $725
$919
Year Ended March 31, 1992
Clifton A. and
Cindra L. Belschner -A $194 $194
Richard J. Nanula -B 725 725
$919 $919
<F1>
A-Noninterest bearing mortgage loan due November 1, 1995 with five year
extension options so long as the property securing the note has not
been sold without consent, C.A. Belschner is totally disabled, and he
is not deceased.
<F2>
B-Noninterest bearing mortgage loan due December 31, 1994.
<F3>
C-Noninterest bearing relocation bridge loan due on demand.
</TABLE>
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<TABLE>
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
(Thousands)
<CAPTION>
Col. A Col. B Col. C Col. D Col. E
Additions
Balance at (1) (2) Balance
Beginning of Charged to Costs Charged to Other Deductions- at End
Description Period and Expenses Accounts-Describe Describe of Period
<S> <C> <C> <C> <C> <C>
Year Ended March 31, 1994
Allowance for doubtful accounts $13,915 $(5,933) $ 1,779 -A $ 6,203
Reserves:
Plant closings $ 4,052 $ 6,927 $ 1,625 -B
1,625 -C $ 7,729
Warranties 4,157 1,089 864 -D 4,382
$ 8,209 $ 8,016 $ 4,114 $12,111
Year Ended March 31, 1993
Allowance for doubtful accounts $14,007 $ 1,797 $ 1,784 -A
105 -E
$ 1,889 $13,915
Reserves:
Plant closings $ 4,965 $171 -E $ 761 -B
323 -C $ 4,052
Warranties 3,684 $ 1,784 50 -E 1,361 -D 4,157
$ 8,649 $ 1,784 $221 $ 2,445 $ 8,209
Year Ended March 31, 1992
Allowance for doubtful accounts $ 3,059 $11,857 $700 -E $ 1,609 -A $14,007
Reserves:
Plant closings $ 4,965 $ 4,965
Warranties $ 3,072 2,800 $190 -A $ 2,378 -D 3,684
$ 3,072 $ 7,765 $190 $ 2,378 $ 8,649
<F1>
A-Uncollectible accounts written off, net of recoveries.
<F2>
B-Credit to costs and expenses.
<F3>
C-Costs incurred.
<F4>
D-Warranty claims allowed.
<F5>
E-Account transfers
</TABLE>
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
ZURN INDUSTRIES, INC.
(Registrant)
June 6, 1994
/s/ G.H. Schofield
George H. Schofield
Chairman
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.
/s/ G.H. Schofield Director, Chairman, and June 6, 1994
George H. Schofield Chief Executive Officer
/s/ Charles L. Hedrick Director and Vice Chairman June 6, 1994
Charles L. Hedrick
/s/ W.A. Freeman Director and President June 6, 1994
William A. Freeman
/s/ John E. Rutzler III Vice President-Controller June 6, 1994
John E. Rutzler III
/s/ K.S. Axelson Director June 6, 1994
Kenneth S. Axelson
/s/ Zoe Baird Director June 6, 1994
Zoe Baird
/s/ William E. Butler Director June 6, 1994
William E. Butler
/s/ E.J. Campbell Director June 6, 1994
Edward J. Campbell
/s/ Alton S. Cartwright Director June 6, 1994
Alton S. Cartwright
/s/ David W. Wallace Director June 6, 1994
David W. Wallace
/s/ James A. Zurn Director June 6, 1994
James A. Zurn
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EXHIBIT INDEX
3 Articles of Incorporation and By-laws
Restated Articles of Incorporation with Amendments through Incorporated
August 7, 1987 filed as Exhibit 19A to Form 10-Q for the by reference
quarter ended September 30, 1987
By-laws as of April 1990 filed as Exhibit 3 to Form 10-K Incorporated
for the year ended March 31, 1990 by reference
4 Instruments Defining the Rights of Security Holders,
Including Indentures
Description of Common Stock contained in the prospectus Incorporated
dated July 26, 1972 beginning on page 18 ("Description of by reference
Capital Stock") forming a part of Amendment No. 3 to the
Form S-1 Registration Statement No. 2-44631
Description of Common Stock as set forth in the Restated Incorporated
Articles of Incorporation with Amendments through by reference
August 7, 1987 filed as Exhibit 19A to Form 10-Q for the
quarter ended September 30, 1987
Description of Preferred Share Purchase Rights contained Incorporated
in the Form 8-A Registration Statement dated May 22, 1986 by reference
Description of 5-3/4% Convertible Subordinated Debentures Incorporated
due 1994 contained in the prospectus dated November 12, by reference
1969 beginning on page 15 ("Description of Debentures")
forming a part of the Form S-1 Registration Statement
filed November 12, 1969
10 Material Contracts
1986 Stock Option Plan filed as Exhibit 28A to Form S-8 Incorporated
Post-Effective Amendment No. 1 Registration Statement No. by reference
33-19103
1989 Directors Stock Option Plan filed as Exhibit 28 to Incorporated
Form S-8 Registration Statement No. 33-30383 by reference
1991 Stock Option Plan filed as Exhibit 28 to Form S-8 Incorporated
Registration Statement No. 33-49224 by reference
Supplemental Executive Retirement Plan of Zurn Incorporated
Industries, Inc. filed as Exhibit 19A to Form 10-Q for by reference
the quarter ended December 31, 1992
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1982 Retirement Plan for Outside Directors of Zurn Incorporated
Industries, Inc. filed as Exhibit 19A to Form 10-Q for by reference
the quarter ended June 30, 1989
1986 Retirement Plan for Outside Directors of Zurn Incorporated
Industries, Inc. filed as Exhibit 19B to Form 10-Q for by reference
the quarter ended June 30, 1989
Agreements Relating to Employment dated June 5, 1989 with Incorporated
D.F. Fessler, W.A. Freeman, C.L. Hedrick, G.H. Schofield by reference
and J.A. Zurn filed as Exhibit 10H to Form 10-Q for the
quarter ended June 30, 1989
Zurn Industries, Inc. Deferred Compensation Plan for Non- Incorporated
Employee Directors filed as Exhibit 19E to Form 10-Q for by reference
the quarter ended June 30, 1989
Zurn Industries, Inc. Deferred Compensation Plan for Incorporated
Salaried Employees filed as Exhibit 19F to Form 10-Q for by reference
the quarter ended June 30, 1989
Zurn Industries, Inc. Optional Deferment Plan for Incorporated
Incentive Compensation Plan Participants filed as Exhibit by reference
19G to Form 10-Q for the quarter ended June 30, 1989
Zurn Industries, Inc. Supplemental Pension Plan for Incorporated
Participants in the Deferred Compensation Plan for by reference
Salaried Employees filed as Exhibit 19B to Form 10-Q for
the quarter ended December 31, 1992
Indemnity Agreements dated August 14, 1986 with K.S. Incorporated
Axelson, E.J. Campbell, A.S. Cartwright, G.H. Schofield, by reference
D.W. Wallace, and J.A. Zurn filed as Exhibit 19J to Form
10-Q for the quarter ended September 30, 1986
Indemnity Agreements dated October 20, 1986 with D.F. Incorporated
Fessler, W.A. Freeman, and C.L. Hedrick filed as Exhibit by reference
19A to Form 10-Q for the quarter ended December 31, 1986
and with J.E. Rutzler III filed as Exhibit 10B to Form
10-Q for the quarter ended December 31, 1988
Indemnity Agreements dated January 25, 1993 with W.E. Incorporated
Butler, April 1, 1993 with D. Haines, and August 6, 1993 by reference
with Z. Baird filed as Exhibit 10A to Form 10-Q for the
quarter ended June 30, 1993
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Irrevocable Trust Agreements for the Grantor's: 1982 Incorporated
Retirement Plan for Outside Directors of Zurn Industries, by reference
Inc.; 1986 Retirement Plan for Outside Directors of Zurn
Industries, Inc.; Deferred Compensation Plan for Non-
Employee Directors; Supplemental Executive Retirement
Plan for Zurn Industries, Inc.; Zurn Industries, Inc.
Supplemental Pension Plan for Participants in the
Deferred Compensation Plan for Salaried Employees;
Deferred Compensation Plan for Salaried Employees;
Optional Deferment Plan for Incentive Compensation Plan
Participants filed as Exhibit 19I to Form 10-Q for the
quarter ended September 30, 1986
Second Irrevocable Trust Agreement for the Grantor's Incorporated
Indemnity Agreements filed as Exhibit 10A to Form 10-Q by reference
for the quarter ended December 31, 1988
10A Incentive Compensation Plan
11 Statement Re Computation of Per Share Earnings
Computation of Earnings Per Share
13 Annual Report to Security Holders
Electronic Format of Pages of Annual Report to Stockholders
for the Year Ended March 31, 1994 Incorporated by Reference
21 Subsidiaries of the Registrant
Subsidiaries
23 Consents of Experts and Counsel
Consent of Independent Auditors
-17-<PAGE>
EXHIBIT 10A - INCENTIVE COMPENSATION PLAN
The Company's Incentive Compensation Plan, as it applies to executive
officers, provides that an amount equal to 4% of earnings before income taxes
in excess of a 10% return on the Company's net worth plus 4% of earnings
before income taxes in excess of a 20% return on the Company's net worth is
available to the Management Development and Compensation Committee to make
incentive compensation payments. The distributable amount may be modified by
the Committee in circumstances it views as appropriate (e.g., when the Company
incurs an unusual gain or loss). Using both financial and non-financial
criteria to measure performance, the Committee determines the amount to be
awarded to the Chief Executive Officer and, based on his recommendations and
their evaluation, to each other executive officer.
-18-<PAGE>
EXHIBIT 11 - COMPUTATION OF EARNINGS PER SHARE
(Thousands Except Per Share Amounts)
Year Ended March 31
1994 1993 1992
Primary Earnings Per Share
Net (loss) income $(13,876) $27,488 $(5,222)
Preferred stock dividends 3 3 3
$(13,879) $27,485 $(5,225)
Shares outstanding
Weighted average common shares 12,438 12,457 12,514
Net common shares issuable on Anti-
exercise of stock options dilutive 64 92
Average common shares outstanding
as adjusted 12,438 12,521 12,606
Primary (loss) earnings per share $ (1.12) $ 2.20 $ (.42)
Fully Diluted Earnings Per Share
Net income A $27,488 A
Interest on convertible debentures, n n
net of applicable income taxes t 37 t
i $27,525 i
d d
Shares outstanding i i
Average common shares as adjusted l l
for primary computation u 12,521 u
Common shares issuable if the t t
preferred stock and convertible i i
debentures were converted at v v
the beginning of the year e 77 e
Additional common shares issuable
on exercise of stock options 13
Average common shares outstanding
as adjusted 12,611
Fully diluted earnings per share $ 2.18
-19-<PAGE>
EXHIBIT 13
ELECTRONIC FORMAT OF PAGES OF ANNUAL REPORT TO STOCKHOLDERS
FOR THE YEAR ENDED MARCH 31, 1994 INCORPORATED BY REFERENCE
ANNUAL REPORT PAGE 13
FIVE YEAR CONSOLIDATED FINANCIAL SUMMARY
Year Ended March 31 1994 1993 1992 1991 1990
(Thousands of Dollars Except Per Share Amounts)
OPERATING DATA
Net sales $785,688 $669,841 $596,532 $696,728 $605,294
(Loss) income before
accounting changes (13,876) 27,488 11,512 30,737 28,324
Accounting changes (16,734)
Net (loss) income (13,876) 27,488 (5,222) 30,737 28,324
Earnings per share:
Before accounting
changes (1.12) 2.20 .91 2.46 2.28
Accounting changes (1.33)
Net (loss) income (1.12) 2.20 (.42) 2.46 2.28
Common stock cash dividends
declared per share .88 .88 .88 .82 .72
FINANCIAL POSITION AT YEAR END
Liquid assets $ 65,433 $ 90,643 $ 69,723 $ 41,568 $ 39,003
Working capital 160,516 183,778 171,497 159,727 145,242
Property, plant,
and equipment 57,003 70,423 67,138 73,131 75,994
Total assets 447,893 490,178 441,132 437,317 394,551
Debt and capital leases 13,806 20,934 18,164 13,121 15,050
Stockholders' equity 221,583 249,098 237,601 250,856 227,691
Per share of
common stock 17.86 20.03 18.90 20.22 18.47
GENERAL STATISTICS
Capital expenditures $ 9,180 $ 14,318 $ 10,697 $ 8,925 $ 15,005
Depreciation and
amortization 10,687 10,649 11,539 12,292 11,612
Stockholders of record 6,277 6,278 6,445 6,499 6,428
Average common shares
outstanding (thousands) 12,438 12,521 12,606 12,513 12,431
Common stock price range:
High 39 1/2 40 3/4 39 1/4 51 1/8 44 1/4
Low 22 3/4 27 3/4 30 1/4 29 1/2 27 1/2
1994 includes costs relating to litigation ($38,902 - $2.00 per share) and a
plant closing and the write off of assets ($23,000 - $1.15 per share). 1992
includes restructuring costs ($14,700 - $.72 per share) and changes in
accounting for postretirement benefits other than pensions and for income
taxes.
-20-<PAGE>
<TABLE>
ANNUAL REPORT PAGE 13
UNAUDITED QUARTERLY FINANCIAL DATA
<CAPTION>
Year Ended March 31, 1994 Year Ended March 31, 1993
First Second Third Fourth First Second Third Fourth
Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter
(Thousands Except Per Share Amounts)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $288,776 $215,493 $142,724 $138,695 $143,244 $177,520 $191,043 $158,034
Gross profit 35,314 29,462 28,865 22,587 32,083 32,457 31,944 30,364
Net (loss) income (16,628) 6,825 4,922 (8,995) 5,635 6,234 6,845 8,774
Per share (1.34) .55 .40 (.73) .45 .50 .55 .70
Common stock:
Cash dividends declared .22 .22 .22 .22 .22 .22 .22 .22
Market price:
High 39 1/2 35 33 29 3/4 36 32 1/8 39 3/8 40 3/4
Low 31 3/8 30 1/8 25 1/8 22 3/4 27 7/8 27 3/4 29 3/8 35 1/4
Fiscal 1994 unusual items are $38,902 ($2.00 per share) in the first quarter as a result of a jury verdict
in connection with a power plant construction contract and related legal costs, $7,000 ($.34 per share) in
the second quarter and $16,000 ($.81 per share) in the fourth quarter for plant closings and asset write-
offs, and benefits in the second quarter of $8,363 ($.41 per share) from the recovery of an account
receivable previously written off and $.15 per share from revaluing net deferred tax assets.
Fiscal 1993 unusual items in the third quarter are $5,377 ($.27 per share) for power plant litigation costs
($3,416, or $.17 per share incurred in other quarters) reduced by a $.37 per share benefit from the
settlement of prior year state income tax assessments. The fourth quarter includes a $4,563 ($.23 per
share) gain from sales of businesses.
Common stock market prices as reported in The Wall Street Journal.
</TABLE>
-21-<PAGE>
ANNUAL REPORT PAGE 14
FINANCIAL REVIEW
Sales And Earnings
The fifth new record high sales level in the last seven years was attained in
fiscal 1994. The single most significant factor affecting consolidated sales
has been the change in Power Systems segment revenues (increases of $111.0
million in 1994 and $80.1 in 1993) primarily related to the number, size, and
completion status of power plants under construction. In 1994, water resource
construction revenues increased $25.5 million and sales of plumbing products
by the Water Control segment increased $11.4 million in 1994 and $3.3 million
in 1993, but the segment suffered an 8% decline in fiscal 1993 due to lower
revenues from water resource projects and dispositions of nonstrategic
businesses. Lynx Golf sales were off slightly having more than doubled in the
United States market in fiscal 1993, reversing the downward trend of the prior
two years from the recession's effects on consumer spending.
Generally gross profit margins have been affected from year to year by
the types and numbers of projects the Power Systems segment has under
construction. This year the margins were lower primarily because of the high
costs and weak market for steam generating systems manufactured by the Power
Systems segment and increased costs incurred by Lynx Golf. While margins from
the construction of power plants and sales by Lynx Golf improved in fiscal
1993, there was an overall decline attributable to the fire protection
sprinkler systems business. Inflation's effect on the Company's costs over
the last three years has not been as great as the consumer price index change
and most cost increases have been recovered currently.
Marketing and administration expenses for the most part do not bear a
direct relationship to sales volumes and, as a percent of sales, they declined
in each of the last three years. These expenses increased in the last two
years primarily as a result of Lynx Golf promotional efforts, and its sales
growth in 1993, and the higher operating levels of the Power Systems segment.
The fiscal 1994 increases, together with Water Control segment new product
introduction costs, almost equaled the $5.4 million incurred in fiscal 1993 by
businesses which have been sold.
The unusual items are described in the notes to consolidated financial
statements and discussed elsewhere in this review. The items in the footnote
table reduced income $2.74 per share in fiscal 1994 and $1.10 in 1992, and
they increased income $.02 per share in fiscal 1993. In addition, the
revaluation of net deferred tax assets resulting from a tax law change added
$.15 per share in fiscal 1994 and the income tax adjustment associated with
the 1993 state tax settlement increased that year's income $.14 per share.
Interest income derived from financial instruments has not been
significantly affected by the changes in liquid assets over the last three
years as declining rates offset the higher liquid asset level that existed
through fiscal 1994's third quarter. The higher income levels for 1994 and
1992 came from Power Systems' long-term receivables and financing of equipment
for customers' projects. Interest expense on long-term obligations was lower
in fiscal 1994, but the total increased as a result of providing for interest
on the recorded litigation liability.
-22-<PAGE>
ANNUAL REPORT PAGE 14
Tax exempt investment income was the major contributor to the lower
effective tax rates in fiscal 1994 and 1992. Settlement of prior year state
tax assessments significantly reduced the overall effective tax rate in fiscal
1993.
The net (loss) income per share for the last three years was: 1994 -
$(1.12); 1993 - $2.20; 1992 - $(.42). Absent the unusual items, and the
accounting principles change in fiscal 1992, net income per share would have
been: 1994 - $1.47; 1993 - $2.04; 1992 - $2.01.
Backlog 1994 1993 1992
(Millions)
Power Systems $159 $422 $324
Water Control 69 137 121
Lynx Golf 5 10 11
Others 11 12 16
$244 $581 $472
Completion after fiscal 1995 is expected for 9% of the Power
Systems and 4% of the Water Control amounts at March 31, 1994.
Power Systems
The segment's design, engineering, and construction of power plants has made
it the Company's most significant source of revenues. Most of its fiscal 1994
power plant project revenues were derived from the record high beginning of
the year backlog while the segment's equipment manufacturing businesses
suffered a 21% decline in sales. In fiscal 1993, the segment's revenues were
boosted by the combination of new power plant orders and those received in the
latter part of fiscal 1992. The lower revenues in 1992 resulted from
postponement of projects due to delays experienced by customers in obtaining
permits and financing. Six power plants were completed in 1994, three in
1993, and four were completed in 1992.
The gross profit margin from construction of power plants in fiscal 1994
exceeded 1992's level by 25% while fiscal 1993's margin exceeded 1992 by 30%
as the plants under construction that year included less purchased equipment.
The Company's overall gross profit margin was adversely affected in fiscal
1994 by high steam generating systems manufacturing costs and the decline in
sales of those systems. The Power Systems segment had an operating loss for
fiscal 1994 rather than a $19.1 million profit because of the $50.8 million of
unusual items for litigation, plant closing costs, and the recovery of one of
the accounts receivable from a financially stressed power plant project owner
written off in fiscal 1992. In fiscal 1993, its operating profit was reduced
by unusual litigation costs and the lower operating levels of the equipment
manufacturing businesses.
Substantially lower Power Systems revenues and operating profit are
expected in the near term because of the excess domestic electric power
generation capacity and the effects of the slowed United States economy in the
last few years which the fiscal 1994 year-end backlog reflects. For the
balance of the decade, the North American market could be about half the size
of the last several years. Profitability also will be affected to some extent
-23-<PAGE>
ANNUAL REPORT PAGE 14
by the segment's move into the developing international market for small and
medium-size private power plants, with long order lead times, and the
reorientation of the steam generating systems business resulting from the
decision to close its manufacturing facilities before the second half of
fiscal 1995 begins.
Water Control
Fiscal 1994 sales were up 14% from last year excluding the effect of
businesses sold in the fourth quarter of fiscal 1993. This resulted from the
greater water resource construction project revenues and increased sales of
plumbing products which have been driven in the last two years by market share
gains from new products introduced over the last several years. Revenues from
the installation of fire protection sprinkler systems were lower in fiscal
1994, reflecting the depressed, highly-competitive West Coast commercial
construction market, after increasing in each of the prior three years. The
comparison of fiscal 1993 sales with 1992 also is distorted by the operations
of the businesses sold in each of those years. The unusual items note to the
consolidated financial statements includes other information about changes in
the Water Control segment's operations resulting from acquisitions and
dispositions.
The segment's operating profit did not benefit from the fiscal 1994 sales
increase because of lower margins on those sales and the development costs for
new plumbing products. However, as the result of downsizing, the fire
protection sprinkler systems business made a positive contribution to the
year's operating profit after incurring a small loss in fiscal 1993. The
lower water resource construction revenues in 1993 had little effect on the
segment's operating profit that year.
The lower Water Control backlog at the end of fiscal 1994 is attributable
to the water resource construction business. However, because the Southern
California market it serves has a continuing need to expand and upgrade its
water and wastewater infrastructure, there should be new projects that can be
bid successfully and managed profitably.
ANNUAL REPORT PAGE 15
Lynx Golf And Others
Domestic sales of golf clubs and accessories, 36% of which were derived from
new metal woods, experienced a small decline in fiscal 1994 which was offset
for the most part by a 28% sales increase in the United Kingdom and Europe.
The fiscal 1993 sales increase was derived from domestic market share gains as
foreign sales, which fell 38% in fiscal 1992, were essentially unchanged due
to the very depressed offshore markets. Surplus capacity in the last three
years has been a significant factor contributing to the operating losses. The
fiscal 1994 loss includes $2.4 million for the disposition of discontinued
products and $.9 million for the write off of manufacturing assets not being
used. Excess costs initially encountered in producing the new metal woods and
substantially higher new product introduction costs contributed to the loss in
both 1994 and 1993. The manufacturing difficulties have been solved and new,
-24-<PAGE>
ANNUAL REPORT PAGE 15
innovative products scheduled for introduction in the latter part of fiscal
1995 are directed at positioning Lynx Golf to be a strong contender in a
market which is expected to consolidate rapidly over the next few years.
The Mechanical Drives Products group was the only significant other
business in fiscal 1994. Its $37.2 million in sales was up 7% despite the
continuing weak market for industrial equipment in the United States which
caused a 14% decline in sales the prior year. The group's operating profit
also would have increased in 1994 absent a $1.8 million charge for the write
off of a minority investment in a product line which no longer fit the group's
future direction. In fiscal 1993, the group's operating profit fell 37%. The
other changes in sales and operating profit for 1993 compared with fiscal 1992
are attributable to businesses which have been sold and restructuring costs
described in the notes to financial statements.
In the prior two years, Corporate income resulted from the reversal in
fiscal 1993 of interest ($4.6 million) which had been accrued in connection
with a state income tax dispute which was settled and from gains on the sales
of businesses (1993 - $4.6 million; 1992 - $2.4 million).
Financial Condition
Liquidity is important to the Company's ability to take on construction
contract commitments. Year-end liquid assets amounted to $65.4 million, down
from the $90.6 million accumulated at the end of fiscal 1993 primarily from
the then growing level of power plant and water resource construction
activities. The cash provided by operations was nominal in fiscal 1994 partly
because of the steam generating systems business and Lynx Golf operating
losses. The other factors affecting cash from operations were the advance
billings on fiscal 1994's contracts in fiscal 1993 and the payment of
operating expenses which exceeded the benefit from utilizing inventories which
had been purchased in the prior year.
The proceeds from sales of operations and liquid assets were used for
investments in facilities ($33.4 million over the last three years) and to
purchase treasury stock in 1994 and 1993. Other significant uses of funds
were dividend payments to stockholders, payment of income taxes and interest
in connection with the fiscal 1993 settlement of prior year tax assessments,
and long-term investments including the purchases of plumbing products
businesses in fiscal 1994 and 1992.
Most of the working capital components were reduced in fiscal 1994 as
construction activities slowed and total working capital was diminished as a
result of the litigation provision and the losses in the steam generating
systems and Lynx Golf businesses. Working capital amounted to $160.5 million
at year end and the 1.9 to 1 current ratio was only one-tenth point lower than
its historical level. A $20.0 million short-term line of credit, with
interest at money market rates, is available to augment working capital.
-25-<PAGE>
ANNUAL REPORT PAGE 15
Property, plant, and equipment was reduced in fiscal 1994 by part of the
plant closing and asset write-off provision. That provision and the one for
litigation caused the increase in net deferred tax assets included in current
and other long-term assets. A change in the funding status of a pension plan
and the accrual of employee termination benefits increased both the prepaid
cost in other long-term assets and the retirement obligations liability.
Power plant performance efficiency payments earned by the Power Systems
segment, but payable in future years, more than offset the $5.0 million
reduction in long-term investments that resulted from relinquishing the
limited partnership investment related to the collection of the $8.4 million
construction contract receivable which was fully reserved in fiscal 1992.
Associated with the receivable collection was the cancellation of a $5.0
million nonrecourse note payable which caused a substantial part of the
decline in long-term obligations. In fiscal 1992, $8.2 million was borrowed
pursuant to the terms of a 1991 sales-type lease transaction. Otherwise,
long-term debt has been reduced over the last three years by scheduled
payments and conversions of debentures into common stock. Should financing be
necessary in the future, the Company has a revolving credit agreement which is
described in the debt and line of credit note to the financial statements.
The Company recognized its previously unrecorded $26.7 million commitment
for postretirement benefits other than pensions in April 1991. While the
accounting change reduced stockholders' equity by 6%, future cash flows will
be unaffected. No other item, including the litigation disclosed in the
unusual items, commitments and contingencies note to the financial statements,
is expected to have a future material effect on the Company's financial
position. However, if all issues which led to the unusual litigation
provision are lost on appeal, the resulting cash expenditure could be more
than $30 million net of the ensuing income tax payment reductions. Some of
the cash expenditures included in the plant closing provision for the added
costs of winding up manufacturing operations, and for union and nonunion
employees' pensions and severance, have already been made. The balance will
not adversely affect liquidity.
Common stock dividends in the last eight profitable years have averaged 40%
of the per share earnings. In fiscal 1994, they were 60% of the $1.47 per
share before unusual items. Prospectively, dividend payments will be based on
future earnings trends and expectations and could be impacted by losing the
litigation appeal.
Total capital employed at March 31, 1994 amounted to $235.4 million which
includes $221.6 million ($17.86 per share of common stock) of stockholders'
equity. The March 1994 equity to debt ratio was 16 to 1.
-26-<PAGE>
ANNUAL REPORT PAGE 16
CONSOLIDATED FINANCIAL POSITION
March 31 1994 1993
(Thousands)
ASSETS
Current Assets
Cash and equivalents $ 4,137 $ 25,491
Marketable securities 61,296 65,152
Accounts receivable 132,328 151,433
Inventories and contracts in progress 86,379 92,338
Deferred income taxes 41,880 26,740
Other assets 5,642 4,959
Total Current Assets 331,662 366,113
Property, Plant, And Equipment 57,003 70,423
Investments 35,958 35,896
Other Assets 23,270 17,746
$447,893 $490,178
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Trade accounts payable $ 47,948 $ 66,347
Advance billings on contracts in progress 31,369 52,200
Litigation 25,937
Insurance 14,065 14,432
Salaries, wages, and payroll items 13,622 15,132
Income taxes 1,012 2,274
Other liabilities 37,193 31,950
Total Current Liabilities 171,146 182,335
Long-Term Obligations 10,972 18,694
Retirement Obligations 44,192 40,051
Stockholders' Equity
Common stock, $.50 par value per share
100,000 authorized - 12,570 issued 6,285 6,285
Capital in excess of par value 36,226 36,372
Retained earnings 183,670 210,483
Treasury stock - 166 and 139 shares (4,598) (4,042)
221,583 249,098
Commitments And Contingencies
$447,893 $490,178
See notes to consolidated financial statements.
-27-<PAGE>
ANNUAL REPORT PAGE 17
CONSOLIDATED OPERATIONS
Year Ended March 31 1994 1993 1992
(Thousands Except Per Share Amounts)
Net Sales $785,688 $669,841 $596,532
Cost of sales 669,460 542,993 477,365
Marketing and administration 90,278 89,636 83,533
Unusual items 53,539 (384) 22,464
Interest income (5,067) (3,907) (5,119)
Interest expense 3,334 2,406 2,857
Other income (2,380) (1,731) (2,590)
(Loss) Income Before Income Taxes (23,476) 40,828 18,022
Income tax (benefit) expense (9,600) 13,340 6,510
(Loss) Income Before Accounting Changes (13,876) 27,488 11,512
Accounting changes (16,734)
Net (Loss) Income $(13,876) $ 27,488 $ (5,222)
Earnings Per Share
(Loss) income before accounting changes $(1.12) $2.20 $ .91
Accounting changes (1.33)
Net (loss) income $(1.12) $2.20 $ (.42)
-28-<PAGE>
ANNUAL REPORT PAGE 17
CONSOLIDATED STOCKHOLDERS' EQUITY
Capital in
Common Excess of Retained Treasury
Stock Par Value Earnings Stock Total
(Thousands)
Balance April 1, 1991 $6,216 $33,693 $211,703 $ (756) $250,856
Net loss (5,222) (5,222)
Cash dividends declared -
$.88 per common share (11,032) (11,032)
Conversion of debentures -
91 shares 33 623 637 1,293
Stock options - 72 shares 33 2,007 (101) 119 2,058
Pension minimum liability (168) (168)
Currency translation (184) (184)
Balance March 31, 1992 6,282 36,323 194,996 - 237,601
Net income 27,488 27,488
Cash dividends declared -
$.88 per common share (10,961) (10,961)
Treasury stock purchased -
191 shares (5,563) (5,563)
Conversion of debentures -
10 shares 1 (78) 214 137
Stock options - 48 shares 2 127 (41) 1,307 1,395
Pension minimum liability (310) (310)
Currency translation (689) (689)
Balance March 31, 1993 6,285 36,372 210,483 (4,042) 249,098
Net loss (13,876) (13,876)
Cash dividends declared -
$.88 per common share (10,945) (10,945)
Treasury stock purchased -
99 shares (2,632) (2,632)
Conversion of debentures -
8 shares (114) 227 113
Stock options - 64 shares (32) (248) 1,849 1,569
Investment unrealized loss (1,241) (1,241)
Pension minimum liability (123) (123)
Currency translation (380) (380)
Balance March 31, 1994 $6,285 $36,226 $183,670 $(4,598) $221,583
See notes to consolidated financial statements.
-29-<PAGE>
ANNUAL REPORT PAGE 18
CONSOLIDATED CASH FLOWS
Year Ended March 31 1994 1993 1992
(Thousands)
OPERATIONS
Net (loss) income $(13,876) $27,488 $ (5,222)
Items not affecting cash from operations:
Litigation 34,317
Plant closings and asset write-offs 22,277 14,700
Depreciation and amortization 10,687 10,649 11,539
Deferred income taxes (18,000) 40 (8,490)
Accounting changes 16,734
Miscellaneous (429) (4,400) (3,624)
Changes in operating assets and liabilities:
Receivables (24,194) (13,362) 27,949
Inventories and prepaid expenses 9,145 (3,018) (1,250)
Trade accounts payable and accrued expenses (18,533) 33,391 (16,929)
Income taxes and interest 403 (7,915) (1,545)
Total From Operations 1,797 42,873 33,862
INVESTING
Capital expenditures (9,180) (14,318) (9,925)
Purchases of businesses (3,387) (2,297)
Long-term investments (1,143) (34) (1,966)
Sales of operations 2,716 7,453 9,103
Marketable securities 1,771 (22,888) (14,963)
Property, plant, and equipment disposals 300 474 619
Notes receivable 100 1,909 2,122
Total Used For Investing (8,823) (27,404) (17,307)
FINANCING
Dividends paid (10,956) (10,992) (10,997)
Treasury stock purchased (2,632) (5,563)
Debt payments (2,309) (2,475) (2,648)
Stock options exercised 1,569 1,395 1,785
Borrowing 198 8,497
Total Used For Financing (14,328) (17,437) (3,363)
CASH AND EQUIVALENTS
(Decrease) increase (21,354) (1,968) 13,192
Beginning of year 25,491 27,459 14,267
End Of Year $ 4,137 $25,491 $ 27,459
See notes to consolidated financial statements.
-30-<PAGE>
ANNUAL REPORT PAGE 19
INDUSTRY SEGMENT DATA
Power Water Lynx
Systems Control Golf Others Corporate Total
(Thousands)
Year Ended March 31, 1994
Net sales $462,049 $246,465 $39,284 $37,890 $785,688
Operating (loss)
profit (31,699) 22,095 (14,424) 1,920 (22,108)
Corporate expense (1,368)
Loss before
income taxes (23,476)
Identifiable assets 122,021 124,042 48,482 27,264 $126,084 447,893
Capital expenditures 1,599 3,923 2,244 1,201 213 9,180
Depreciation and
amortization 3,063 3,623 1,631 1,662 708 10,687
Year Ended March 31, 1993
Net sales $351,053 $232,393 $39,626 $46,769 $669,841
Operating profit
(loss) 10,495 21,549 (3,124) 4,023 32,943
Corporate income 7,885
Income before
income taxes 40,828
Identifiable assets 139,592 109,659 54,642 31,113 $155,172 490,178
Capital expenditures 4,373 4,491 2,601 2,386 467 14,318
Depreciation and
amortization 3,343 3,498 1,367 1,782 659 10,649
Year Ended March 31, 1992
Net sales $270,927 $253,755 $24,789 $47,061 $596,532
Operating profit
(loss) 4,628 21,265 (7,271) (2,702) 15,920
Corporate income 2,102
Income before
income taxes 18,022
Identifiable assets 124,161 118,027 41,477 35,054 $122,413 441,132
Capital expenditures 2,715 4,282 744 2,761 195 10,697
Depreciation and
amortization 3,412 4,399 1,310 1,737 681 11,539
See notes to consolidated financial statements.
-31-<PAGE>
ANNUAL REPORT PAGE 20
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation The financial statements include the accounts of the
Company and its subsidiaries after elimination of significant intercompany
transactions and accounts with reclassification of certain amounts to conform
with the current year presentation.
Investments Marketable and irrevocable trust securities are available-for-
sale and are carried at their estimated fair value (carried at cost before
March 1994) with unrealized gains and losses included in stockholders' equity
as a component of retained earnings. Debt securities maturing within three
months of purchase are cash equivalents. Certificates of deposit and notes
receivable are carried at cost with interest recognized as it accrues. The
sales-type lease represents the present value of future minimum rental
payments. Business ventures are accounted for by the equity method, or
carried at cost if less than 20% of the stock is owned.
Engineering and Construction Contracts Revenue and costs on long-term
contracts are recognized by the cost-to-cost percentage-of-completion method,
commencing when progress is sufficient to determine earnings with reasonable
accuracy, based on estimates of total sales value and cost at completion.
Earnings adjustments arising from changes in estimates are recognized
currently. Estimated losses are recorded when identified.
Inventories Inventories are valued at the lower of cost, which includes
material, labor, and manufacturing overhead, or market.
Properties Property, plant, and equipment are stated at cost. Depreciation
and amortization of properties are provided over their estimated useful lives
by the straight-line method.
Foreign Currency Translation Translation adjustments of foreign
subsidiaries, whose local currencies are their functional currencies, are
included in stockholders' equity as a component of retained earnings.
Earnings Per Share Earnings per share are based on net income or loss and
the average shares of common stock and dilutive stock options outstanding
during the year (1994 - 12,438,000; 1993 - 12,521,000; 1992 - 12,606,000).
Financial Instrument Fair Values No class of instrument has a significant
difference between its carrying value and estimated fair value based on market
quotations, projected cash flows, and other estimating methods.
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ANNUAL REPORT PAGE 20
Changes In Accounting Principles Statement of Financial Accounting Standards
(SFAS) No. 115, "Accounting for Certain Investments in Debt and Equity
Securities," which reduced fiscal 1994 stockholders' equity by $1,241,000. In
fiscal 1992, SFAS No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions," which reduced earnings by $26,709,000, less income taxes
of $10,550,000, ($1.29 per share) and SFAS No. 109, "Accounting for Income
Taxes," which reduced earnings by $575,000 ($.04 per share).
INDUSTRY SEGMENT DATA
The Power Systems segment designs, constructs, and operates alternate energy
and combined-cycle power plants, designs steam generators and waste heat
energy recovery and incineration systems, and produces equipment and fans to
control emissions of solid particulate and gaseous pollutants. The segment's
major construction contracts generally are with project financed entities with
credit extended based on the financing without collateral. Sales to
individual customers amounting to more than 10% of consolidated sales were:
1994 - $192,456,000; 1993 - $77,957,000 and $68,853,000; 1992 - $78,945,000.
The Water Control segment manufactures and constructs a wide variety of
systems and products used in nonresidential construction and by government
agencies, among others, to control and treat water and wastewater. Lynx Golf
manufactures and distributes golf clubs and accessories to country club
professionals, golf specialty shops, and distributors. These products and
systems are marketed by the Company's sales organizations and through factory
sales offices and independent representatives and agents. Credit is extended
based on evaluations of customers' financial condition.
Industry segment operating profit is net sales less operating costs and
certain corporate administrative expenses, allocated to the segments in
relation to their sales, payrolls, and assets, and excludes interest expense.
Corporate amounts include gains from sales of businesses, investment income,
unallocated administrative expenses, and interest expense. Corporate assets
consist principally of cash and equivalents, short-term marketable securities,
long-term investments, and corporate headquarters and rental properties.
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ANNUAL REPORT PAGE 21
UNUSUAL ITEMS, COMMITMENTS AND CONTINGENCIES
UNUSUAL ITEMS
Year Ended March 31 1994 1993 1992
(Thousands)
Litigation $38,902 $ 8,793
Plant closings and asset write-offs 23,000 $14,700
Doubtful account (recovery) provisions (8,363) 10,169
Prior year state income tax settlement (4,614)
Sales of businesses (4,563) (2,405)
$53,539 $ (384) $22,464
The litigation charge was recognized as the result of a jury verdict against
the Company in connection with a contract to construct an agricultural waste-
burning power plant and includes $9,747,000 for the write-off of accounts
receivable and legal costs (1994-$2,655,000; 1993-$8,793,000). If all issues
are lost on the appeal which is being aggressively pursued, additional charges
could reach $18,000,000.
In fiscal 1994, a decision was made to close the Energy Division
manufacturing facilities because of uncompetitive costs and certain other
assets were written off. The $8,400,000 of probable cash expenditures and
$14,600,000 in asset write-downs charged to the industry segments were: Power
Systems - $20,300,000; Lynx Golf - $860,000; Other - $1,840,000. In fiscal
1992, the $14,700,000 principally represented the revaluation of assets and
excess operating costs of nonstrategic businesses associated with Water
Control operations ($9,472,000) and Other segment operations ($3,676,000).
One Water Control business was sold in fiscal 1993 and the Other segment
business (fiscal 1993 sales - $11,123,000) was sold effective with the
beginning of fiscal 1994.
The Water Control segment sold Permutit and Vinylplex (fiscal 1993 sales -
$16,519,000) in the fourth quarter of fiscal 1993 for cash ($7,992,000) and a
ninety-day note ($1,900,000) and, in fiscal 1992, it sold Lamar for cash
($5,251,000) and a note ($1,900,000) which was paid in fiscal 1993. Operating
profits of the businesses were nominal. It also sold a product line effective
April 1991 and purchased slightly larger plumbing products businesses in May
1991 and December 1993.
In fiscal 1994, the Power Systems segment recovered one of the accounts
receivable it wrote off in fiscal 1992. Also in fiscal 1994, the revaluation
of net deferred tax assets because of a tax law change reduced the net loss by
$.15 per share. The unusual income tax settlement item is the reversal of
previously accrued interest and an associated income tax adjustment amounted
to $.14 per share in fiscal 1993.
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ANNUAL REPORT PAGE 21
In the normal course of business, financial and performance guarantees are
made in connection with major engineering and construction contracts and a
liability is recognized when a probable loss occurs. Also, there are various
claims, legal, and environmental proceedings which management believes will
have no material effect on the Company's financial position or results of
operations when they are resolved.
Outstanding letters of credit amount to $19,387,000.
FINANCIAL INSTRUMENTS
Unrealized
March 31, 1994 Cost Gain Loss Fair Value
(Thousands)
Statement Classification
Cash and equivalents $ 123 $ 123
Marketable securities 63,381 $ 11 $2,096 61,296
Other current assets 1,847 17 4 1,860
Investments 15,507 140 36 15,611
$80,858 $168 $2,136 $78,890
Investment Type
Certificates of deposit $ 301 $ 301
Debt securities:
United States Treasury 8,788 $ 6 8,782
States and subdivisions 33,135 $155 565 32,725
Tax exempt bond funds 28,675 13 7 28,681
Mortgage-backed 9,959 1,558 8,401
$80,858 $168 $2,136 $78,890
The certificates of deposit and United States Treasury securities are pledged
in lieu of providing construction performance surety bonds. Debt securities
mature within three years except for mortgage-backed instruments maturing in
various subsequent years. The values for marketable securities at March 31,
1993 were: cost - $64,599; market - $65,379; carrying - $65,152.
ACCOUNTS RECEIVABLE
(Thousands)
At March 31, 1994 accounts receivable include retainage on long-term contracts
expected to be collected in fiscal 1995 - $4,438 and 1996 - $84. Allowances
deducted are: 1994 - $6,203; 1993 - $13,915.
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ANNUAL REPORT PAGE 21
INVENTORIES AND CONTRACTS IN PROGRESS
March 31 1994 1993
(Thousands)
Finished products $44,208 $45,897
Work in process 16,390 22,612
Raw materials and supplies 13,386 16,763
Contracts in progress 12,395 7,066
$86,379 $92,338
Last-in, first-out (LIFO) method 71% 62%
First-in, first-out (FIFO) method 29 38
Inventory increase if only the FIFO method, which
approximates replacement costs, had been used $13,295 $13,285
PROPERTY, PLANT, AND EQUIPMENT
March 31 1994 1993
(Thousands)
Land and land improvements $ 7,297 $ 7,552
Buildings and leasehold improvements 35,723 46,834
Machinery and equipment 95,761 108,005
138,781 162,391
Depreciation and amortization 81,778 91,968
$ 57,003 $ 70,423
INVESTMENTS
March 31 1994 1993
(Thousands)
Irrevocable trust securities for nonqualified
pension, deferred compensation, and
other employee plans $15,611 $14,821
Notes receivable 8,180 2,162
Sales-type lease 7,843 7,997
Business ventures 3,786 10,100
Other 538 816
$35,958 $35,896
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ANNUAL REPORT PAGE 22
DEBT AND LINE OF CREDIT
Payment of the unsecured note is guaranteed by the lessee under a sales-type
lease. The unsecured 5 3/4% Convertible Subordinated Debentures due November
1994 are convertible into common stock at $14.25 per share, are redeemable at
the Company's option, and are subordinated to other long-term debt. The
nonrecourse note was canceled on collection of a construction contract
receivable.
The Company has a $75,000,000 three-year commitment, annually extendable
for one year by mutual agreement until March 2000, from a group of banks for
revolving credit loans with interest, at the Company's election, at the agent
bank's prime rate, or based on quoted bid rates for certificates of deposit or
the London interbank market rate. One-half of the commitment may be used for
letters of credit.
Certain agreements contain restrictive covenants pertaining to the
maintenance of working capital and net worth and limit certain indebtedness.
LONG-TERM OBLIGATIONS
March 31 1994 1993
(Thousands)
Unsecured note - 8.46% interest $ 7,493 $ 7,811
Notes secured by various
properties - 2% to 5% interest 4,563 5,811
Nonrecourse note - prime rate interest 5,000
Capital lease obligations 915 1,364
5 3/4% Convertible Subordinated Debentures 835 948
13,806 20,934
Less current portion 2,834 2,240
$10,972 $18,694
Year Ended March 31 1994 1993 1992
(Thousands)
Interest incurred $3,334 $2,406 $2,857
Interest paid 1,603 5,366 1,660
Long-term obligation principal payments due in future fiscal years: 1995 -
$2,834; 1996 - $1,623; 1997 - $1,544; 1998 - $1,424; 1999 - $949; thereafter -
$5,453.
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ANNUAL REPORT PAGE 22
RETIREMENT OBLIGATIONS
Substantially all employees are covered by noncontributory Company sponsored
or multiemployer defined benefit plans. Generally those in collective
bargaining groups are provided benefits of stated amounts for each year of
service, while benefits for others are based on years of service and the five
highest years' compensation in the ten years prior to retirement, or
compensation at retirement. Funding of Company sponsored plans, invested
primarily in listed stocks and bonds and cash equivalents, is the minimum
required by law and additional amounts as deemed appropriate from time to
time. Contributions to multiemployer plans are related to hours worked or
compensation levels.
The Company provides postretirement medical and death benefits for certain
retirees and their spouses from unfunded plans. Employees participating in
the primary pension plan on December 31, 1986, or in other plans through
various dates ending in 1989, are eligible for these benefits. The Company
also sponsors defined contribution plans.
FUNDING STATUS
March 31 1994 1993
Pension Plans Medical Pension Plans Medical
Over Under And Life Over Under And Life
Funded Funded Plans Funded Funded Plans
(Thousands)
Actuarial present
value of benefits:
Vested $ 69,483 $ 25,363 $ 22,664 $ 78,325 $ 9,405 $ 22,288
Nonvested 424 402 6,663 2,636 48 9,024
Accumulated 69,907 25,765 29,327 80,961 9,453 31,312
Salary increases 8,264 1,617 10,853 91
Projected 78,171 27,382 29,327 91,814 9,544 31,312
Plans' assets 121,657 16,932 128,798 1,277
Asset excess
(deficiency) 43,486 (10,450) (29,327) 36,984 (8,267) (31,312)
Unrecognized:
Net (gain) loss (23,136) 2,105 (966) (18,161) 1,359 2,267
Initial asset (4,092) (187) (5,440) (9)
Prior service cost (329) (805) 456 73
Minimum liability (1,958) (1,528)
Prepaid (accrued)
cost $ 15,929 $(11,295) $(30,293) $ 13,839 $(8,372) $(29,045)
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ANNUAL REPORT PAGE 22
COSTS
Company Defined Benefit Plans
Pension Medical And Life
Year Ended March 31 1994 1993 1992 1994 1993 1992
(Thousands)
Service cost $ 3,339 $ 3,194 $ 2,920 $ 541 $ 565 $ 488
Interest 7,360 7,176 7,149 2,240 2,213 2,095
Termination benefits 2,652 142
Curtailment (gain)
loss (1,112) 63
Return on assets (13,888) (13,516) (19,944)
Other 3,031 3,099 9,639 78
Net expense
(income) $ 1,382 $ (47) $ (236) $2,986 $2,856 $2,583
Other Plans
Year Ended March 31 1994 1993 1992
(Thousands)
Multiemployer $2,535 $3,397 $2,861
Defined contribution 341 272 242
ACTUARIAL ASSUMPTIONS
Year Ended March 31 1994 1993 1992
Obligation discount 7.25% 7.25% 7.5%
Compensation increase 4.35 to 7.5 4.35 to 7.5 4.6 to 7.75
Asset long-term return 9.0 9.0 9.0
Health care cost trend rate 13.0 13.5 14.0
The accumulated medical and life plan obligation is attributable to:
retirees - 56%; fully-eligible employees - 21%; other active employees - 23%.
The assumed medical care cost trend rate declines 1/2% each year to 5.25% in
2010. A 1% greater rate would increase the accumulated obligation by $3,555
and the annual expense by $441.
Most of the termination benefits and curtailment gain relate to union and
nonunion employees and are part of the fiscal 1994 plant closing costs. They
changed the funded status of one pension plan from overfunded to marginally
underfunded.
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ANNUAL REPORT PAGE 23
STOCKHOLDERS' EQUITY
There are 1,997,000 shares of unreserved authorized preferred stock. At March
31, 1994, common stock has been reserved for the conversion of debentures
(59,000 shares) and for the exercise of stock options (1,447,000 shares).
Three million shares of Second Series Junior Participating Preferred Stock
($1.00 par value, $2.00 liquidation preference to common stock, redeemable at
the greater of $260 or four times the current common stock market price) are
reserved for issuance on exercise of rights attached to outstanding common
stock. The rights may be redeemed at $.025 per right and expire in May 1996.
If 20% or more of the Company's common stock becomes beneficially owned by a
person or group, or if an exchange or tender offer which would result in 30%
or more ownership is commenced, the rightholders, except such beneficial
owners, may purchase one-quarter share of the preferred stock at $65 per
share. If other triggering events constituting a change in control occur, the
same rightholders may, for $65, purchase shares of either the Company's or the
acquirer's common stock at one-half its market value.
The Company's stock option plan provides for granting either nonqualified
or incentive stock options to key employees to purchase no earlier than six
months after the grant date shares of common stock at its market value on the
grant date. Another plan provides for the annual distribution of a
nonqualified option for 1,000 shares of common stock, at its market value on
the distribution date, to each director who is not employed by the Company.
Outstanding options expire on dates from April 1994 to August 2003. In
lieu of cash, common stock was received and distributed on exercise of certain
stock options.
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ANNUAL REPORT PAGE 23
STOCK OPTIONS
Shares Option Price Per Share
(Thousands of Shares)
Year Ended March 31, 1994
Granted 131 $32.75 - $37.25
Exercised 94 21.125 - 28.75
Canceled 5 37.25
At year end:
Outstanding 703 21.125 - 45.375
Average 35.43
Exercisable 366 21.125 - 45.375
Available for grant 744
Year Ended March 31, 1993
Granted 159 $30.125 - $35.00
Exercised 59 21.125 - 34.50
Canceled 10 28.75 - 41.00
At year end:
Outstanding 671 21.125 - 45.375
Average 33.27
Exercisable 309 21.125 - 45.375
Available for grant 870
Year Ended March 31, 1992
Granted 149 $33.00 - $37.00
Exercised 90 17.50 - 28.75
Canceled 4 21.125 - 28.75
STOCK EXCHANGED
Year Ended March 31 1994 1993 1992
(Thousands)
Options exercised 42 18 29
Shares received and distributed:
Number 30 11 18
Market value $884 $404 $657
Additional shares issued 12 7 11
Charge to retained earnings $248 $ 41 $101
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ANNUAL REPORT PAGE 23
RETAINED EARNINGS COMPONENTS
March 31 1994 1993 1992
(Thousands)
Investment unrealized loss $ (1,241)
Pension minimum liability (1,007) $ (884) $ (574)
Currency translation (1,288) (908) (219)
Retained earnings 187,206 212,275 195,789
INCOME TAXES
NET DEFERRED TAX ASSET COMPONENTS
March 31 1994 1993
(Thousands)
Retirement obligations $14,200 $12,220
Litigation 9,550
Plant closings 6,850 1,750
Insurance 5,480 5,470
Engineering and construction contracts 4,830 3,400
Allowance for doubtful accounts 4,410 5,470
Warranties 4,000 4,440
Deferred compensation 1,750 1,540
State income taxes 290 390
Miscellaneous 2,840 1,100
54,200 35,780
Valuation allowance (680) (150)
Depreciation and amortization (5,770) (6,800)
$47,750 $28,830
TAXES PAID
Year Ended March 31 1994 1993 1992
(Thousands)
$9,357 $13,405 $17,355
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ANNUAL REPORT PAGE 23
PROVISIONS
Year Ended March 31 1994 1993 1992
(Thousands)
Current federal $ 6,770 $12,810 $11,870
Current state 1,630 3,160 3,130
Prior year state tax settlement (2,670)
8,400 13,300 15,000
Deferred federal (14,890) 270 (7,050)
Deferred state (1,260) (230) (1,440)
Deferred tax rate change (1,850)
(18,000) 40 (8,490)
$ (9,600) $13,340 $ 6,510
TAX RATE RECONCILEMENT
Year Ended March 31 1994 1993 1992
Federal statutory rate (35.0)% 34.0% 34.0%
Tax exempt investment income (4.6) (2.5) (6.1)
State income taxes, net
of federal tax benefit (4.0) 4.8 5.5
Deferred tax valuation allowance 2.3
Prior year state tax settlement (4.3)
Miscellaneous .4 .7 2.7
Effective rate (40.9)% 32.7% 36.1%
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EXHIBIT 21 - SUBSIDIARIES
State or Other
Jurisdiction
Subsidiary of Incorporation
Cosco Fire Protection, Inc. -A California
Environmental Energy Company California
Firetrol Protection Systems, Inc. Utah
Gary Concrete Products, Inc. -A Georgia
HL Capital Corp. California
Lynx Golf, Inc. California
Lynx Golf (Canada) Ltd. -B Ontario, Canada
Lynx Golf (Scotland) Limited -B United Kingdom
National Energy Production Corporation Washington
National Energy Production Corporation of Canada, Ltd. Ontario, Canada
La Corporation D'Energie Production Nationale
Du Canada, Ltee. -C
Nuevo Camino Constructors Co. California
Operational Energy Corp. -C California
Sharyn Steam, Inc. California
Zurn Constructors, Inc. California
Zurn Export, Inc. U.S. Virgin Islands
Zurn Industries Limited Ontario, Canada
Zurco, Inc. Delaware
A-Subsidiary of Zurn Constructors, Inc.
B-Subsidiary of Lynx Golf, Inc.
C-Subsidiary of National Energy Production Corporation
-44-<PAGE>
EXHIBIT 23 - CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement on
Form S-8 No. 33-19103 pertaining to the 1986 Stock Option Plan, the
Registration Statement on Form S-8 No. 33-30383 pertaining to the 1989
Directors Stock Option Plan, and the Registration Statement on Form S-8 No.
33-49224 pertaining to the 1991 Stock Option Plan of Zurn Industries, Inc. of
our report dated May 19, 1994 included in Item 8 with respect to the
consolidated financial statements and financial statement schedules
incorporated by reference or included in the Annual Report on Form 10-K of
Zurn Industries, Inc.
/s/ Ernst & Young
Erie, Pennsylvania
June 27, 1994
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