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, 1995
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
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. [X]
The aggregate market value of the voting stock held by nonaffiliates of the
registrant was $249,898,000 based on the closing sale price per share for the
12,340,648 shares of Common Stock, $.50 par value, outstanding on June 1, 1995
and excluding the value of 2,400 shares of preferred stock which have no
quoted market value.
Documents Incorporated by Reference
Portions of Annual Report to Shareholders for the year ended March 31, 1995
incorporated by reference in Parts I and II
Portions of Proxy Statement dated June 27, 1995 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; Mechanical Power Transmission.
Following a decision made in March 1994, the steam generating manufacturing
facilities of the Power Systems segment were closed on August 31, 1994 because
of uncompetitive costs while marketing, design, and administrative activities
continue with subcontracting of production to third parties.
Financial Information About Industry Segments
"Industry Segment Data" on page 17 of the Annual Report to Shareholders for
the year ended March 31, 1995 is incorporated herein by reference.
Narrative Description Of Business
"Notes to Consolidated Financial Statements - Zurn Industries, Inc." on page
20 of the Annual Report to Shareholders for the year ended March 31, 1995,
excluding the last sentence of the first paragraph and the second and fourth
sentences of the second paragraph, is incorporated herein by reference.
Product Class Sales
Year Ended March 31
Segment And Products 1995 1994 1993
(Thousands)
Power Systems
Power plants and steam generating systems $146,844 $450,674 $336,593
Other products 14,537 11,375 14,460
Water Control
Plumbing products 121,133 99,496 88,051
Water resource and treatment systems 58,808 85,921 60,416
Other products 52,921 61,048 83,926
Power Systems - Design, engineering, construction, and operation of small- to
medium-sized 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.
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Water Control - Plumbing products, including roof, floor, and trench drains,
primers, traps, backwater valves, hair, grease, oil, and solids interceptors
and recovery systems, cleanouts, off-the-floor fixture supports, service
basins, 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; construction of
water resource and treatment systems and general construction services for
civil, structural, and mechanical piping fields; automatic interior fire
protection sprinkler systems; engineered concrete products including precast
prestressed concrete bridge components, box beam girders, pilings, panels,
support systems, underground wastewater pipe, and modular jail cells.
Lynx Golf - Golf clubs and accessories.
Mechanical Power Transmission - 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, plastics, 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
Power plant construction by the Power Systems segment requires significant
liquidity to support the performance of contracts involving payment retainage,
or letters of credit in lieu thereof, the payment of certain amounts from
projects' future cash flows, and loans to and equity investments in projects.
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
1995 1994
(Thousands)
Power Systems $ 65,000 $159,000
Water Control 122,000 69,000
Lynx Golf 23,000 5,000
Mechanical Power Transmission 11,000 11,000
$221,000 $244,000
Approximately 4% of the Power Systems and the Mechanical Power Transmission
backlogs are expected to be completed in fiscal years ending after March 31,
1996. The $90 million backlog at March 31, 1995 of a 50% owned joint venture
of the Power Systems segment is not included in the table.
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
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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.
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 2,430 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: 1995-$17,653,000; 1994-$20,073,000; 1993-$29,309,000.
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 71,000
Water Control 564,000 238,800
Lynx Golf 61,000 124,000
Mechanical Power Transmission 332,600 5,000
Corporate Headquarters and Others 233,300
1,284,900 438,800
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
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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.
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. 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
Robert R. Womack 57 Chairman 1995
Director and Chief
Executive Officer Since 1994
Independent Consultant 1993 - 1994
Vice Chairman and Chief Executive
Officer - Imo Industries, Inc.
(controls, pumps, and engineered
power products) 1990 - 1993
William A. Freeman 52 Director and President Since 1991
Senior Vice President-Finance
and Administration 1986 - 1991
Donald F. Fessler 64 Executive Vice President Since 1985
Donald L. Butynski 51 Group Vice President 1995
President - National Energy
Production Corporation
(a subsidiary of the Company) Since 1986
James A. Zurn 53 Senior Vice President Since 1981
John E. Rutzler III 54 Vice President-Controller Since 1989
Dennis Haines 42 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 Shareholders for the year ended March 31, 1995 is
incorporated herein by reference.
Holders
At March 31, 1995, there were 5,323 holders of record of the Company's Common
Stock.
Dividends
"Unaudited Quarterly Financial Data - Common Stock Cash Dividends Declared" on
page 13 and the first two sentences of the last paragraph of "Financial
Review" on page 15 of the Annual Report to Shareholders for the year ended
March 31, 1995 are incorporated herein by reference.
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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 Shareholders for the year ended March 31, 1995 are
incorporated herein by reference.
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 Shareholders for
the year ended March 31, 1995 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 Shareholders for the
year ended March 31, 1995 are incorporated herein by reference.
"Unaudited Quarterly Financial Data" on page 13 of the Annual Report to
Shareholders for the year ended March 31, 1995 is incorporated herein by
reference.
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders
Zurn Industries, Inc.
Erie, Pennsylvania
We have audited the consolidated financial statements and the financial
statement schedule of Zurn Industries, Inc. and subsidiaries listed in Item
14. These financial statements and schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements and schedule 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, 1995 and 1994, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended March 31, 1995, in conformity with generally
accepted accounting principles. Also, in our opinion, the related financial
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statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
/s/ Ernst & Young LLP
Erie, Pennsylvania
May 18, 1995
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 1996" on page 2 and "Directors Whose Terms of Office Continue
Until 1997" on page 3 of the Proxy Statement dated June 27, 1995 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.
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 pages 8 and 9, "Directors' Compensation" on page 9, "Management Development
And Compensation Committee Report" on pages 9, 10, and 11, and "Performance
Graph" on page 11 of the Proxy Statement dated June 27, 1995 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, 1995 is incorporated herein by reference.
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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.
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 Shareholders for the year ended March 31, 1995 are incorporated herein by
reference:
Consolidated Financial Position - March 31, 1995 and 1994
Consolidated Operations - Years Ended March 31, 1995, 1994, and 1993
Industry Segment Data - Years ended March 31, 1995, 1994, and 1993
Consolidated Cash Flows - Years ended March 31, 1995, 1994, and 1993
Consolidated Shareholders' Equity - Years ended March 31, 1995, 1994,
and 1993
Notes to Consolidated Financial Statements
Financial Statement Schedules
The following consolidated financial statement schedule is included in this
Item:
Schedule II - 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. Management contracts and compensatory plan arrangements
are preceded by an asterisk ("*") in the Exhibit Index.
Reports on Form 8-K
No reports were filed during the last quarter of the period covered by this
report.
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<TABLE>
SCHEDULE II - 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, 1995
Allowance for doubtful accounts $ 6,203 $ 1,062 $152 -A $3,179 -B $ 4,238
Reserves:
Plant closings $ 7,729 $ 283 -A
5,131 -C
689 -D $ 1,626
Warranties 4,382 $ 113 944 -E 3,551
$12,111 $ 113 $7,047 $ 5,177
Year Ended March 31, 1994
Allowance for doubtful accounts $13,915 $(5,933) $ 1,779 -B $ 6,203
Reserves:
Plant closings $ 4,052 $ 6,927 $1,625 -C
1,625 -D $ 7,729
Warranties 4,157 1,089 864 -E 4,382
$ 8,209 $ 8,016 $4,114 $12,111
Year Ended March 31, 1993
Allowance for doubtful accounts $14,007 $ 1,797 $ 105 -A
1,784 -B
$1,889 $13,915
Reserves:
Plant closings $ 4,965 $171 -A $ 323 -C
761 -D $ 4,052
Warranties 3,684 $ 1,784 50 -A 1,361 -E 4,157
$ 8,649 $ 1,784 $221 $2,445 $ 8,209
<F1>
A-Account transfers.
<F2>
B-Uncollectible accounts written off, net of recoveries.
<F3>
C-Costs incurred.
<F4>
D-Credit to costs and expenses.
<F5>
E-Warranty claims allowed. -11-
</TABLE>
<PAGE>
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 5, 1995
/s/ Robert R. Womack
Robert R. Womack
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/ Robert R. Womack Director, Chairman, and June 5, 1995
Robert R. Womack Chief Executive Officer
/s/ W.A. Freeman Director and President June 5, 1995
William A. Freeman
/s/ John E. Rutzler III Vice President-Controller June 5, 1995
John E. Rutzler III
/s/ Zoe Baird Director June 5, 1995
Zoe Baird
/s/ William E. Butler Director June 5, 1995
William E. Butler
/s/ E.J. Campbell Director June 5, 1995
Edward J. Campbell
/s/ Alton S. Cartwright Director June 5, 1995
Alton S. Cartwright
/s/ David W. Wallace Director June 5, 1995
David W. Wallace
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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/A Registration Statement Amendment No. 1 by reference
dated June 27, 1995
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 10.1 to Form 10-Q for by reference
the quarter ended December 31, 1994
* 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
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* Agreements Relating to Employment dated June 5, 1989 with Incorporated
D.F. Fessler, W.A. Freeman, and J.A. Zurn filed as Exhibit by reference
10H to Form 10-Q for the quarter ended June 30, 1989;
dated October 17, 1994 with R.R. Womack filed as Exhibit
10.2 to Form 10-Q for the quarter ended December 31, 1994
* 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 10.3 to Form 10-Q for by reference
the quarter ended December 31, 1994
* Zurn Industries, Inc. Optional Deferment Plan for Incorporated
Incentive Compensation Plan Participants filed as Exhibit by reference
10.4 to Form 10-Q for the quarter ended December 31, 1994
* Zurn Supplemental Pension Plan filed as Exhibit 10.5 to Incorporated
Form 10-Q for the quarter ended December 31, 1994 by reference
* Indemnity Agreements dated August 14, 1986 with E.J. Incorporated
Campbell, A.S. Cartwright, D.W. Wallace, and J.A. Zurn by reference
filed as Exhibit 19J to Form 10-Q for the quarter ended
September 30, 1986; dated October 20, 1986 with D.F.
Fessler and W.A. Freeman filed as Exhibit 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; dated January 25,
1993 with W.E. Butler, April 1, 1993 with D. Haines, and
August 6, 1993 with Z. Baird filed as Exhibit 10A to Form
10-Q for the quarter ended June 30, 1993; dated October
17, 1994 with R.R. Womack filed as Exhibit 10.6 to Form
10-Q for the quarter ended December 31, 1994
* 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
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10.7 * 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
Shareholders for the Year Ended March 31, 1995
Incorporated by Reference
21 Subsidiaries Of The Registrant
Subsidiaries
23 Consents Of Experts And Counsel
Consent of Independent Auditors
27 Financial Data Schedule SEC Edgar
Filing Only
* - Management contracts and compensatory plan arrangements.
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EXHIBIT 10.7 - 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 nonfinancial
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.
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EXHIBIT 11 - COMPUTATION OF EARNINGS PER SHARE
(Thousands Except Per Share Amounts)
Year Ended March 31
1995 1994 1993
Primary Earnings Per Share
Net income (loss) $9,324 $(13,876) $27,488
Preferred stock dividends 3 3 3
$9,321 $(13,879) $27,485
Shares outstanding
Weighted average common shares 12,354 12,438 12,457
Net common shares issuable on Anti-
exercise of stock options 1 dilutive 64
Average common shares outstanding
as adjusted 12,355 12,438 12,521
Primary earnings (loss) per share $ .76 $ (1.12) $ 2.20
Fully Diluted Earnings Per Share
Net income $9,324 A $27,488
Interest on convertible debentures, n
net of applicable income taxes 8 t 37
$9,332 i $27,525
d
Shares outstanding i
Average common shares as adjusted l
for primary computation 12,355 u 12,521
Common shares issuable if the t
preferred stock and convertible i
debentures were converted at v
the beginning of the year 32 e 77
Additional common shares issuable
on exercise of stock options 1 13
Average common shares outstanding
as adjusted 12,388 12,611
Fully diluted earnings per share $ .75 $ 2.18
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EXHIBIT 13
ELECTRONIC FORMAT OF PAGES OF ANNUAL REPORT TO SHAREHOLDERS
FOR THE YEAR ENDED MARCH 31, 1995 INCORPORATED BY REFERENCE
ANNUAL REPORT PAGE 13
FIVE YEAR CONSOLIDATED FINANCIAL SUMMARY
Year Ended March 31 1995 1994 1993 1992 1991
(Thousands of Dollars Except Per Share Amounts)
OPERATING DATA
Net sales $463,181 $785,688 $669,841 $596,532 $696,728
Income (loss) before
accounting changes 9,324 (13,876) 27,488 11,512 30,737
Accounting changes (16,734)
Net income (loss) 9,324 (13,876) 27,488 (5,222) 30,737
Earnings per share:
Before accounting changes .76 (1.12) 2.20 .91 2.46
Accounting changes (1.33)
Net income (loss) .76 (1.12) 2.20 (.42) 2.46
Common stock cash dividends
declared per share .88 .88 .88 .88 .82
FINANCIAL POSITION AT YEAR END
Liquid assets $ 54,838 $ 65,433 $ 90,643 $ 69,723 $ 41,568
Working capital 155,535 160,516 183,778 171,497 159,727
Property, plant,
and equipment 56,162 57,003 70,423 67,138 73,131
Total assets 414,696 447,893 490,178 441,132 437,317
Debt and capital leases 11,553 13,806 20,934 18,164 13,121
Shareholders' equity 218,930 221,583 249,098 237,601 250,856
Per share of
common stock 17.73 17.86 20.03 18.90 20.22
GENERAL STATISTICS
Capital expenditures $ 8,863 $ 9,180 $ 14,318 $ 10,697 $ 8,925
Depreciation and
amortization 9,676 10,687 10,649 11,539 12,292
Shareholders of record 5,355 6,277 6,278 6,445 6,499
Average common shares
outstanding (thousands) 12,355 12,438 12,521 12,606 12,513
Common stock price range:
High 23 3/8 39 1/2 40 3/4 39 1/4 51 1/8
Low 16 3/4 22 3/4 27 3/4 30 1/4 29 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.
-18-<PAGE>
<TABLE>
ANNUAL REPORT PAGE 13
UNAUDITED QUARTERLY FINANCIAL DATA
<CAPTION>
Year Ended March 31, 1995 Year Ended March 31, 1994
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 $114,385 $112,169 $114,531 $122,096 $288,776 $215,493 $142,724 $138,695
Gross profit 23,893 25,475 22,761 29,332 35,314 29,462 28,865 22,587
Net income (loss) 1,944 2,472 1,362 3,546 (16,628) 6,825 4,922 (8,995)
Per share .16 .20 .11 .29 (1.34) .55 .40 (.73)
Common stock:
Cash dividends declared .22 .22 .22 .22 .22 .22 .22 .22
Market price:
High 23 3/8 20 3/8 19 5/8 19 1/2 39 1/2 35 33 29 3/4
Low 19 16 7/8 16 3/4 16 7/8 31 3/8 30 1/8 25 1/8 22 3/4
Fiscal 1995 unusual income items are interest ($546) and income taxes totaling $.07 per share in the fourth
quarter from the settlement of prior year state assessments and $.03 per share during the year from adjusting
plant closing provisions.
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.
Common stock market prices as reported in The Wall Street Journal.
-19-
</TABLE>
<PAGE>
ANNUAL REPORT PAGE 14
FINANCIAL REVIEW
Sales And Earnings
The single most significant factor affecting consolidated sales has been the
change in Power Systems segment revenues which dropped by $300.7 million in
fiscal 1995, reflecting the depressed domestic independent power market, after
increasing by $111.0 million in 1994 and $80.1 in 1993. The Water Control
segment's sales of plumbing products increased $21.6 million in 1995, almost
doubling 1994's growth, while water resource construction revenues were off
$27.1 million, slightly more than the fiscal 1994 increase. Lynx Golf sales
suffered in an extremely competitive market for premium-priced clubs until the
introduction of new irons in the fourth quarter of fiscal 1995.
Generally gross profit margin percentages have been affected from year to
year by the types and numbers of projects the Power Systems segment has under
construction. While the segment's margin was minimally higher this year, the
effect of the Water Control segment and Lynx Golf on the consolidated margin
increase was greater than their individual profit improvements because of the
lower Power Systems segment revenues. Last year the consolidated margin was
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. Inflation's effect on the Company's costs over the last three
years has not been as great as the consumer price index change due to cost
containment measures and, in fiscal 1995, outsourcing programs which reduced
the costs of many manufactured products. Most cost increases have been
recovered currently.
Marketing and administration expenses for the most part do not bear a
direct relationship to sales volumes. These expenses have increased in each
of the last two years as a result of the plumbing products sales growth and
new product introduction costs, but more than half of the fiscal 1995 effect
was offset by lower costs in the steam generating systems business. The fiscal
1994 increase almost equaled the $5.4 million incurred in fiscal 1993 by
businesses which have been sold. Compared to the two most recent years,
marketing and administration expenses in 1993, excluding the costs of disposed
businesses, was lower because Lynx Golf spent less for advertising and
promotion.
The unusual items are described in the notes to consolidated financial
statements and discussed elsewhere in this review. The items in the footnote
table increased income $.06 and $.02 per share in fiscal 1995 and 1993 and
they reduced income $2.74 per share in fiscal 1994. In addition, the income
tax refunds and adjustments associated with the 1995 and 1993 state tax
settlements increased income for those years by $.04 and $.14 per share,
respectively. The revaluation of net deferred tax assets resulting from a tax
law change added $.15 per share in fiscal 1994.
Interest income derived from financial instruments has not been
significantly affected by changing interest rates or amounts of liquid assets
available for investment over the last three years as rates increased when
cash declined. The higher income levels in 1995 and 1994 came from interest
on federal income tax refunds in the current year, the financing of equipment
-20-<PAGE>
ANNUAL REPORT PAGE 14
for customers' projects by the Power Systems segment in both years, and the
segment's long-term receivables in fiscal 1994. Interest expense on long-term
obligations has declined in each of the last three years, but the total has
increased as a result of providing for interest on the recorded litigation
liability.
Tax exempt investment income was a larger percentage of the lower pretax
income in fiscal 1995 and 1994 and, therefore, had a greater impact on the
effective tax rates. Also because of the income level, state taxes were a
greater percentage of the overall effective rate this year. Settlement of
prior year state tax assessments significantly reduced the effective tax rates
in fiscal 1995 and 1993.
The net income (loss) per share for the last three years was: 1995 - $.76;
1994 - $(1.12); 1993 - $2.20. Absent the unusual items, net income per share
would have been: 1995 - $.66; 1994 - $1.47; 1993 - $2.04.
Backlog 1995 1994 1993
(Millions)
Power Systems $ 65 $159 $422
Water Control 122 69 137
Lynx Golf 23 5 10
Mechanical Power Transmission 11 11 11
$221 $244 $580
Completion after fiscal 1996 is expected for 4% of the Power
Systems and Mechanical Power Transmission amounts at March 31,
1995. The $90 million backlog of a Power Systems segment 50%
owned joint venture is not included in the table for 1995.
Power Systems
The segment's design, engineering, and construction of power plants have made
it the Company's most significant source of revenues since 1989. The sharp
decline in fiscal 1995 revenues was the result of the weak domestic market,
and much of the work on plants completed in 1995 had been performed in fiscal
1994 which had a record high beginning of the year backlog. Six power plants
were completed in 1995, six in 1994, and three were completed in 1993. Weak
markets also have impacted the segment's equipment manufacturing businesses
which suffered a 26% sales decline in 1995 following a 21% decline in fiscal
1994.
The gross profit margin from construction of power plants in fiscal 1995
was affected by cost overruns. These included additional costs to complete
some projects that were started as early as fiscal 1992 which were
substantially offset by profit estimate revisions on other projects. Also,
greater than estimated subcontracting costs led to deferring until fiscal 1996
profit recognition from a project which contributed 27% of 1995's construction
revenues. Margins on steam generating systems improved as the result of
outsourcing high cost manufacturing that previously had been performed in
Company-owned facilities which, together with the sales decline, adversely
-21-<PAGE>
ANNUAL REPORT PAGE 14
affected the Company's overall gross profit margin in fiscal 1994. The Power
Systems segment's fiscal 1995 operating loss is attributable to the lower
revenues, cost overruns, and the higher cost of developing the international
markets for small- to medium-sized private power plants with long order lead
times. The segment had an operating loss in 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 an account receivable 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.
Power Systems revenues and operating profit from the domestic market are
expected to be substantially lower in the near term because of the excess
electric power generation capacity. For the balance of the decade, the North
American market for new capacity could be about half the size of the early
1990s. The segment will not reflect the entire amounts for international
projects in its revenues because they likely will be performed by a consortium
such as the 50% owned joint venture which is responsible for the first such
project being built in Australia. Rather, the segment's operating profit will
include its equity in the earnings of the ventures which may be lower as the
result of profit sharing with its partners and the highly competitive nature
of the international markets.
ANNUAL REPORT PAGE 15
Water Control
Plumbing products, the segment's largest business, had a 22% sales increase in
fiscal 1995 from higher prices and, to a lesser extent, new products
introduced over the last several years which drove the 13% sales gain in 1994.
Water resource construction project revenues were off 32%, after increasing
42% in fiscal 1994, as a result of the low beginning of the year backlog which
was only partially replenished by the end of fiscal 1995. Revenues from the
installation of fire protection sprinkler systems were lower in each of the
last two years, reflecting the depressed, highly-competitive West Coast
commercial construction market, after increasing in each of the earlier three
years. The segment's total fiscal 1994 sales were 14% greater than 1993's
after excluding the effect of businesses sold in the fourth quarter of that
year. The unusual items note to the consolidated financial statements
includes other information about changes in the Water Control segment's
operations resulting from dispositions and an acquisition.
The segment's fiscal 1995 operating profit improvement was dampened by
reduced margins on water resource construction projects, including the effects
of delays experienced in the fourth quarter caused by severe flooding in
California, and new product development costs. The fiscal 1994 operating
profit did not benefit from that year's sales increase because of lower
margins on those sales and the development costs for new plumbing products.
As a result of downsizing, the fire sprinkler systems business' 1995 operating
profit was more than double 1994's when it made a positive contribution after
a small loss in fiscal 1993.
While the plumbing products business has continued to outperform the
nonresidential construction market it serves, the Water Control segment's
-22-<PAGE>
ANNUAL REPORT PAGE 15
backlog changes from year to year are generally attributable to the water
resource construction business. 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.
Lynx Golf
Worldwide sales in an extremely competitive market were down 35% through
fiscal 1995's third quarter, but ended the year off 22%. The partial recovery
came from sales of new irons which have experienced the most successful new
product introduction in Lynx's history. In fiscal 1994, domestic sales of
golf clubs and accessories, 36% of which were derived from new metal woods
which subsequently lost their popularity, experienced a small decline that was
offset for the most part by a 28% sales increase in the European Union.
Advertising and promotion, new product introduction costs, and surplus
capacity in the last three years have been significant factors 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. While manufacturing difficulties
initially encountered in producing the new metal woods were solved in fiscal
1994, the excess costs contributed to the losses in both that year and fiscal
1993. Orders for the new irons accelerated during fiscal 1995's fourth
quarter driving the year-end backlog for spring and summer shipments to the
highest level in Lynx's history.
Mechanical Power Transmission
The $37 million sales level of the last two years is 7% greater than fiscal
1993 despite the continuing weak and competitive market for industrial
equipment in the United States. The fiscal 1995 operating profit was off
slightly, after excluding from 1994 the effect of an unusual item, as the
result of management and operating changes, including exiting some minor
product lines, and the costs of beginning an expansion into European and other
foreign markets. In 1994, the segment's profit was depressed by a $1.8
million charge for the write off of a minority investment in a product line
which no longer fit its future direction.
Corporate And Others
The sales in fiscal 1993 are attributable to businesses which have been sold.
Corporate income that year resulted from the reversal 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 ($4.6 million).
Financial Condition
Liquidity is important to the Company's ability to take on construction
contract commitments. Year-end liquid assets amounted to $54.8 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. Less cash was provided by fiscal 1995's operations as the result
of the lower earnings and the payment of accrued expenses, including most of
the plant closing costs provided for in fiscal 1994. The amount of cash
-23-<PAGE>
ANNUAL REPORT PAGE 15
provided by operations in fiscal 1994 was nominal partly because of the steam
generating systems business and Lynx Golf losses. Cash from operations also
was affected in both years by the reductions in advance billings on contracts
collected in fiscal 1993. The reductions offset the fiscal 1995 accounts
receivable collections and, in 1994, they were almost double the benefit of
utilizing inventories which had been purchased in the prior year.
The cash from investing activities in fiscal 1995 provided 51% of the funds
needed to pay dividends to shareholders. Dividend payments have been the
largest nonoperating use of cash in the last two years. Other significant
uses of funds have been for investments in facilities and equipment ($32.4
million over the last three years), treasury stock purchases, long-term
investments, including the purchase of a plumbing products business in fiscal
1994, and the payment of income taxes and interest in connection with the
fiscal 1993 settlement of prior year tax assessments.
Most of the working capital components were reduced in both fiscal 1995 and
1994 as construction activities slowed, and total working capital was
diminished as a result of the Lynx Golf and Power Systems losses, including
the litigation provision in fiscal 1994. Working capital amounted to $155.5
million at year end and the 2.1 to 1 current ratio was one-tenth point higher
than its historical level.
Power plant performance efficiency payments earned by the Power Systems
segment in fiscal 1994, 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. 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 four 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 Power Systems segment may find it necessary to make substantial equity
and debt investments in power plant projects if it is to successfully compete
in the domestic and international markets. Otherwise, no 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, net of the ensuing income tax payment reductions, could be more
than $34 million.
The $.22 per share quarterly dividend paid to shareholders since mid-fiscal
1991 was reduced to $.10 per share for the second quarter of fiscal 1996 as
the result of a decision made on June 8, 1995 that the Company needed greater
flexibility for growth opportunity investments in power plants or other
business expansion. Prospectively, dividend payments will be based on future
earnings trends and expectations and investment needs or, if it should occur,
the loss of the litigation appeal. Total capital employed at March 31, 1995
amounted to $230.5 million which includes $218.9 million ($17.73 per share of
common stock) of shareholders' equity. The March 1995 equity to debt ratio
was 19 to 1.
-24-<PAGE>
ANNUAL REPORT PAGE 16
CONSOLIDATED FINANCIAL POSITION
March 31 1995 1994
(Thousands)
ASSETS
Current Assets
Cash and equivalents $ 6,360 $ 4,137
Marketable securities 48,478 61,296
Accounts receivable 115,373 132,328
Inventories and contracts in progress 84,264 86,379
Income taxes 38,751 41,880
Other assets 5,153 5,642
Total Current Assets 298,379 331,662
Property, Plant, And Equipment 56,162 57,003
Investments 35,447 35,958
Other Assets 24,708 23,270
$414,696 $447,893
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Trade accounts payable $ 49,758 $ 47,948
Advance billings on contracts in progress 14,623 31,369
Litigation 27,501 25,937
Insurance 12,436 14,065
Salaries, wages, and payroll items 10,761 13,622
Income taxes 612 1,012
Other liabilities 27,153 37,193
Total Current Liabilities 142,844 171,146
Long-Term Obligations 9,525 10,972
Retirement Obligations 43,397 44,192
Shareholders' Equity
Common stock, $.50 par value per share
100,000 authorized - 12,570 issued 6,285 6,285
Capital in excess of par value 35,637 36,226
Retained earnings 182,393 183,670
Treasury stock - 230 and 166 shares (5,385) (4,598)
218,930 221,583
Commitments And Contingencies
$414,696 $447,893
See notes to consolidated financial statements.
-25-<PAGE>
ANNUAL REPORT PAGE 17
CONSOLIDATED OPERATIONS
Year Ended March 31 1995 1994 1993
(Thousands Except Per Share Amounts)
Net Sales $463,181 $785,688 $669,841
Cost of sales 361,720 669,460 542,993
Marketing and administration 92,935 90,278 89,636
Unusual items (1,191) 53,539 (384)
Interest income (5,037) (5,067) (3,907)
Interest expense 4,065 3,334 2,406
Other income (2,695) (2,380) (1,731)
Income (Loss) Before Income Taxes 13,384 (23,476) 40,828
Income tax expense (benefit) 4,060 (9,600) 13,340
Net Income (Loss) $ 9,324 $ (13,876) $ 27,488
Earnings (Loss) Per Share $.76 $(1.12) $2.20
-26-<PAGE>
ANNUAL REPORT PAGE 17
INDUSTRY SEGMENT DATA
Mechanical
Power Corporate
Power Water Lynx Trans- And
Systems Control Golf mission Others Total
(Thousands)
Year Ended March 31, 1995
Net sales $161,381 $232,862 $30,462 $37,486 $ 990 $463,181
Operating profit
(loss) (4,768) 28,441 (12,444) 3,159 410 14,798
Corporate expense (1,414)
Income before
income taxes 13,384
Identifiable assets 102,710 128,032 48,127 24,973 110,854 414,696
Capital expenditures 775 5,358 1,037 1,538 155 8,863
Depreciation and
amortization 1,553 3,962 1,796 1,627 738 9,676
Year Ended March 31, 1994
Net sales $462,049 $246,465 $39,284 $37,179 $ 711 $785,688
Operating (loss)
profit (31,699) 22,095 (14,424) 1,877 43 (22,108)
Corporate expense (1,368)
Loss before
income taxes (23,476)
Identifiable assets 122,021 124,042 48,482 26,902 126,446 447,893
Capital expenditures 1,599 3,923 2,244 1,190 224 9,180
Depreciation and
amortization 3,063 3,623 1,631 1,617 753 10,687
Year Ended March 31, 1993
Net sales $351,053 $232,393 $39,626 $34,717 $ 12,052 $669,841
Operating profit
(loss) 10,495 21,549 (3,124) 2,731 1,292 32,943
Corporate income 7,885
Income before
income taxes 40,828
Identifiable assets 139,592 109,659 54,642 28,094 158,191 490,178
Capital expenditures 4,373 4,491 2,601 2,329 524 14,318
Depreciation and
amortization 3,343 3,498 1,367 1,709 732 10,649
See notes to consolidated financial statements.
-27-<PAGE>
ANNUAL REPORT PAGE 18
CONSOLIDATED CASH FLOWS
Year Ended March 31 1995 1994 1993
(Thousands)
OPERATIONS
Net income (loss) $ 9,324 $(13,876) $27,488
Items not affecting cash from operations:
Litigation 34,317
Plant closings and asset write-offs (645) 22,277
Depreciation and amortization 9,676 10,687 10,649
Deferred income taxes 5,980 (18,000) 40
Miscellaneous (471) (429) (4,400)
Changes in operating assets and liabilities:
Receivables 3,251 (24,194) (13,362)
Inventories and prepaid expenses (2,096) 9,145 (3,018)
Trade accounts payable and accrued expenses (11,900) (18,533) 33,391
Income taxes and interest (1,532) 403 (7,915)
Total From Operations 11,587 1,797 42,873
INVESTING
Marketable securities 14,679 1,771 (22,888)
Capital expenditures (8,863) (9,180) (14,318)
Long-term investments (2,226) (1,143) (34)
Notes receivable 763 100 1,909
Property, plant, and equipment disposals 639 300 474
Sales of operations 521 2,716 7,453
Purchase of business (3,387)
Total From (Used For) Investing 5,513 (8,823) (27,404)
FINANCING
Dividends paid (10,888) (10,956) (10,992)
Debt payments (2,096) (2,309) (2,475)
Treasury stock purchased (1,926) (2,632) (5,563)
Stock options exercised 33 1,569 1,395
Borrowing 198
Total (Used For) Financing (14,877) (14,328) (17,437)
CASH AND EQUIVALENTS
Increase (decrease) 2,223 (21,354) (1,968)
Beginning of year 4,137 25,491 27,459
End Of Year $ 6,360 $ 4,137 $25,491
See notes to consolidated financial statements.
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ANNUAL REPORT PAGE 19
CONSOLIDATED SHAREHOLDERS' EQUITY
Capital in
Common Excess of Retained Treasury
Stock Par Value Earnings Stock Total
(Thousands)
Balance April 1, 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
Net income 9,324 9,324
Cash dividends declared -
$.88 per common share (10,870) (10,870)
Treasury stock purchased -
103 shares (1,926) (1,926)
Conversion of debentures -
37 shares (577) 1,095 518
Stock options - 2 shares (12) 44 32
Investment unrealized loss (823) (823)
Pension minimum liability 716 716
Currency translation 376 376
Balance March 31, 1995 $6,285 $35,637 $182,393 $(5,385) $218,930
See notes to consolidated financial statements.
-29-<PAGE>
ANNUAL REPORT PAGE 20
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ZURN INDUSTRIES, INC.
The Company and its subsidiaries operate in four industry segments. Its
products and services are marketed by the Company's sales organizations and
through factory sales offices and independent representatives and agents.
Generally credit is extended based on evaluations of customers' financial
condition.
The Power Systems segment designs, constructs, and operates small- to
medium-sized 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. While most contracts have been for plants in the United
States, recently the Company has focused on the Asia-Pacific and South
American markets. 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.
The Water Control segment manufactures and distributes plumbing products
for the nonresidential construction markets in the United States and Canada
with significant suppliers being located in China, Mexico, and the Pacific
Rim. It also constructs a wide variety of systems to control and treat water
and wastewater principally for government agencies in southern California and
designs and installs fire sprinkler systems in the states of California,
Hawaii, Texas, Utah, and Washington.
Lynx Golf manufactures golf clubs in Nevada which are finished and
assembled in California, Mexico, and Scotland for distribution with other
purchased accessories to country club professionals, golf specialty shops, and
distributors worldwide, with the principal markets being the United States,
European Union, and Japan. The Mechanical Power Transmission segment
manufactures and markets clutches, couplings, and universal joints in the
United States and Europe directly and through licensing agreements.
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. The reporting of amounts in the financial
statements and related disclosures in conformity with generally accepted
accounting principles requires management to make assumptions and estimates.
Actual results could differ from the estimates.
Investments Marketable and irrevocable trust securities are available-for-
sale and are carried at their estimated fair values with unrealized gains and
losses included in shareholders' equity as a component of retained earnings.
Debt securities maturing within three months of purchase are cash equivalents.
-30-<PAGE>
ANNUAL REPORT PAGE 20
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.
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.
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.
Advertising and Promotion Expense Commercial production and other advertising
and promotion costs are expensed when incurred or ratably in relation to sales
over the year in which the advertising is first used (1995 - $8,917,000; 1994
- - $8,222,000; 1993 - $5,164,000).
Foreign Currency Translation Translation adjustments of foreign
subsidiaries, whose local currencies are their functional currencies, are
included in shareholders' 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 (1995 - 12,355,000; 1994 - 12,438,000; 1993 - 12,521,000).
Industry Segment Data 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.
Change In Accounting Principles Statement of Financial Accounting Standards
No. 115, "Accounting for Certain Investments in Debt and Equity Securities,"
reduced fiscal 1994 shareholders' equity by $1,241,000.
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ANNUAL REPORT PAGE 21
UNUSUAL ITEMS, COMMITMENTS AND CONTINGENCIES
UNUSUAL ITEMS
Year Ended March 31 1995 1994 1993
(Thousands)
Litigation $38,902 $ 8,793
Plant closings and asset write-offs $ (645) 23,000
Doubtful account recovery (8,363)
Prior year state income tax settlement (546) (4,614)
Sales of businesses (4,563)
$(1,191) $53,539 $ (384)
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 $22,100,000, including interest on the unrecorded contingency
which is not being accrued.
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; Mechanical Power Transmission -
$1,840,000. Substantially all the cash expenditure provision has been
disbursed or allocated to retirement obligations and unused provisions were
included in fiscal 1995's income.
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
90-day note ($1,900,000) and, in fiscal 1993, it collected a $1,900,000 note
from the sale of a business in the prior year. Operating profits of the
businesses were nominal. It also purchased a plumbing products business in
December 1993. An Other segment business (fiscal 1993 sales - $11,123,000)
was sold effective with the beginning of fiscal 1994.
In fiscal 1994, the Power Systems segment recovered an account receivable
it had written off in fiscal 1992 and the revaluation of net deferred tax
assets because of a tax law change reduced the Company's net loss for the year
by $.15 per share. Interest from settlement of prior year state tax
assessments included in unusual items and the associated income taxes amounted
to $.07 per share in 1995 and $.14 per share in 1993.
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.
-32-<PAGE>
ANNUAL REPORT PAGE 21
FINANCIAL INSTRUMENTS
Unrealized
March 31, 1995 Cost Gain Loss Fair Value
(Thousands)
Statement Classification
Cash and equivalents $ 5,902 $ 5,902
Marketable securities 48,702 $ 2 $ 226 48,478
Other current assets 1,518 38 1,556
Investments 18,437 120 3,207 15,350
$74,559 $160 $3,433 $71,286
Investment Type
Certificates of deposit $ 1,017 $ 1,017
Debt securities:
United States Treasury 9,796 $ 1 9,795
States and subdivisions 33,453 $ 29 251 33,231
Tax exempt bond funds 21,128 131 3 21,256
Mortgage-backed 9,165 3,178 5,987
$74,559 $160 $3,433 $71,286
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 customers holding construction contract retainage. Debt securities
mature within three years except for mortgage-backed instruments maturing in
various subsequent years.
-33-<PAGE>
ANNUAL REPORT PAGE 21
ACCOUNTS RECEIVABLE
(Thousands)
At March 31, 1995 accounts receivable include retainage on long-term contracts
expected to be collected in fiscal 1996 - $9,233 and 1997 - $89.
Allowances deducted are: 1995 - $4,238; 1994 - $6,203.
INVENTORIES AND CONTRACTS IN PROGRESS
March 31 1995 1994
(Thousands)
Finished products $47,608 $44,208
Work in process 12,751 16,390
Raw materials and supplies 15,577 13,386
Contracts in progress 8,328 12,395
$84,264 $86,379
Last-in, first-out (LIFO) method 75% 71%
First-in, first-out (FIFO) method 25 29
Inventory increase if only the FIFO method, which
approximates replacement costs, had been used $13,100 $13,295
PROPERTY, PLANT, AND EQUIPMENT
March 31 1995 1994
(Thousands)
Land and land improvements $ 7,235 $ 7,297
Buildings and leasehold improvements 37,217 35,723
Machinery and equipment 99,154 95,761
143,606 138,781
Depreciation and amortization 87,444 81,778
$ 56,162 $ 57,003
INVESTMENTS
March 31 1995 1994
(Thousands)
Irrevocable trust securities for nonqualified
pension, deferred compensation, and
other employee plans $15,350 $15,611
Notes receivable 8,426 8,180
Sales-type lease 7,659 7,843
Business ventures 3,726 3,786
Other 286 538
$35,447 $35,958
-34-<PAGE>
ANNUAL REPORT PAGE 22
DEBT AND LINE OF CREDIT
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
letters of credit and 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. Outstanding
letters of credit issued under other arrangements amounted to $14,834,000 at
March 31, 1995.
Certain agreements contain restrictive covenants pertaining to the
maintenance of working capital and net worth and limit certain indebtedness.
Payment of the unsecured note is guaranteed by the lessee under a sales-type
lease.
LONG-TERM OBLIGATIONS
March 31 1995 1994
(Thousands)
Unsecured note - 8.46% interest $ 7,148 $ 7,493
Notes secured by various
properties - 2% to 7% interest 3,613 4,563
Capital lease obligations 792 915
5 3/4% Convertible Subordinated Debentures 835
11,553 13,806
Less current portion 2,028 2,834
$ 9,525 $10,972
Year Ended March 31 1995 1994 1993
(Thousands)
Interest incurred $4,089 $3,334 $2,406
Interest paid 1,530 1,603 5,366
Interest capitalized 24
Long-term obligation principal payments due in future fiscal years: 1996 -
$2,028; 1997 - $1,641; 1998 - $1,494; 1999 - $949; 2000 - $544; thereafter -
$4,909.
RETIREMENT OBLIGATIONS
Substantially all employees are covered by noncontributory Company sponsored
or multiemployer defined benefit plans. Benefits of stated amounts for each
year of service are provided by the multiemployer plans and to 17% of the
participants in the Company's plans, 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.
-35-<PAGE>
ANNUAL REPORT PAGE 22
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 1995 1994
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 $ 74,964 $10,990 $ 20,613 $ 69,483 $ 25,363 $ 22,664
Nonvested 897 249 4,570 424 402 6,663
Accumulated 75,861 11,239 25,183 69,907 25,765 29,327
Salary increases 6,682 1,495 8,264 1,617
Projected 82,543 12,734 25,183 78,171 27,382 29,327
Plans' assets 125,686 3,910 121,657 16,932
Asset excess
(deficiency) 43,143 (8,824) (25,183) 43,486 (10,450) (29,327)
Unrecognized:
Net (gain) loss (22,618) 521 (6,046) (23,136) 2,105 (966)
Initial asset (3,478) (155) (4,092) (187)
Prior service cost (331) (573) (329) (805)
Minimum liability (669) (1,958)
Prepaid (accrued)
cost $ 16,716 $(9,700) $(31,229) $ 15,929 $(11,295) $(30,293)
The fiscal 1995 declines in the actuarial present values of projected
benefits generally are attributable to the obligation discount rate increase
after a small reduction from adopting mortality tables established by the GATT
treaty. The pension plans' net gain was offset by the lower than projected
returns on assets included in the $15,056,000 of other pension costs. The
funded status of one pension plan changed from marginally underfunded to
overfunded in fiscal 1995. Most of the termination benefits and curtailment
gains were included in the fiscal 1994 plant closing cost provision.
-36-<PAGE>
ANNUAL REPORT PAGE 22
COSTS
Company Defined Benefit Plans
Pension Medical and Life
Year Ended March 31 1995 1994 1993 1995 1994 1993
(Thousands)
Service cost $ 2,747 $ 3,339 $ 3,194 $ 459 $ 541 $ 565
Interest 7,644 7,360 7,176 2,103 2,240 2,213
Termination benefits 1,111 2,652 142
Curtailment (gain)
loss (1,112) (116) 63
Loss (return)
on assets 3,764 (13,888) (13,516)
Other (15,056) 3,031 3,099 78
Net expense
(income) $ 210 $ 1,382 $ (47) $2,446 $2,986 $2,856
Other Plans
Year Ended March 31 1995 1994 1993
(Thousands)
Multiemployer $1,866 $ 2,535 $3,397
Defined contribution 223 341 272
ACTUARIAL ASSUMPTIONS
Year Ended March 31 1995 1994 1993
Obligation discount 8.5% 7.25% 7.25%
Compensation increase 4.85 to 8.0 4.35 to 7.5 4.35 to 7.5
Asset long-term return 9.0 9.0 9.0
Health care cost trend rate 12.5 13.0 13.5
The accumulated medical and life plan obligation is attributable to: retirees -
67%; fully-eligible employees - 15%; other active employees - 18%. The assumed
health care cost trend rate declines 1/2% each year to 5.25% in 2010. A 1%
greater rate would increase the accumulated obligation by $2,547,000 and the
annual expense by $373,000.
ANNUAL REPORT PAGE 23
SHAREHOLDERS' EQUITY
There are 1,998,000 shares of unreserved authorized preferred stock and
1,424,000 shares of common stock are reserved for the exercise of stock
options.
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 15% or more of the Company's common stock becomes beneficially owned by a
person or group (subject to the Board of Directors' authority to defer
-37-<PAGE>
ANNUAL REPORT PAGE 23
distribution and exercise of the rights until 20% is acquired), or if an
exchange or tender offer which would result in 15% or more ownership is
commenced, the rightholders, except such beneficial owners, may purchase one-
quarter share of the preferred stock at $65 per share or, for $65, they may
purchase shares of the Company's common stock at one-half their market value.
If other change in control events occur, the same rightholders may, for $65,
purchase shares of the acquirer's common stock at one-half their 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 provided for the annual distribution of nonqualified common
stock options to each director who was not employed by the Company. Outstand-
ing options expire on dates from June 1995 to January 2005. In lieu of cash,
common stock was received and distributed on exercise of certain stock options.
STOCK OPTIONS
Option Price
Shares Per Share
(Thousands of Shares)
Year Ended March 31, 1995
Granted 262 $18.25 - $22.00
Exercised 2 21.125
Canceled 15 21.125 - 21.25
At year end:
Outstanding 948 18.25 - 45.375
Average 31.26
Exercisable 465 28.75 - 45.375
Available for grant 476
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
-38-<PAGE>
ANNUAL REPORT PAGE 23
STOCK EXCHANGED
Year Ended March 31 1994 1993
(Thousands)
Options exercised 42 18
Shares received and distributed:
Number 30 11
Market value $884 $404
Additional shares issued 12 7
Charge to retained earnings $248 $ 41
RETAINED EARNINGS COMPONENTS
March 31 1995 1994 1993
(Thousands)
Investment unrealized loss $ (2,064) $ (1,241)
Pension minimum liability (291) (1,007) $ (884)
Currency translation (912) (1,288) (908)
Retained earnings 185,660 187,206 212,275
INCOME TAXES
NET DEFERRED TAX ASSET COMPONENTS
March 31 1995 1994
(Thousands)
Retirement obligations $14,140 $14,200
Litigation 10,090 9,550
Engineering and construction contracts 5,350 4,830
Insurance 4,650 5,480
Plant closings 3,690 6,850
Allowance for doubtful accounts 3,560 4,410
Warranties 2,900 4,000
Deferred compensation 1,660 1,750
State income taxes 100 290
Miscellaneous 2,420 2,840
48,560 54,200
Valuation allowance (380) (680)
Depreciation and amortization (6,440) (5,770)
$41,740 $47,750
TAXES PAID
Year Ended March 31 1995 1994 1993
(Thousands)
$3,525 $ 9,357 $13,405
-39-<PAGE>
ANNUAL REPORT PAGE 23
PROVISIONS
Year Ended March 31 1995 1994 1993
(Thousands)
Current federal $(1,510) $ 6,770 $12,810
Current state 320 1,630 3,160
Prior year state tax settlement (730) (2,670)
(1,920) 8,400 13,300
Deferred federal 4,830 (14,890) 270
Deferred state 1,150 (1,260) (230)
Deferred tax rate change (1,850)
5,980 (18,000) 40
$ 4,060 $ (9,600) $13,340
TAX RATE RECONCILEMENT
Year Ended March 31 1995 1994 1993
Federal statutory rate 35.0% (35.0)% 34.0%
Tax exempt investment income (6.1) (4.6) (2.5)
State income taxes, net
of federal tax benefit 8.6 (4.0) 4.8
Deferred tax valuation allowance (2.2) 2.3
Prior year state tax settlement (3.6) (4.3)
Miscellaneous (1.4) .4 .7
Effective rate 30.3% (40.9)% 32.7%
-40-
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
NEPCO of Australia, Inc. -C Washington
NEPCO of Canada, Inc. - C Delaware
NEPCO of Ford Heights, Inc. -C Illinois
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
-41-
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 18, 1995 included in Item 8 with respect to the
consolidated financial statements and financial statement schedule
incorporated by reference or included in the Annual Report on Form 10-K of
Zurn Industries, Inc.
/s/ Ernst & Young LLP
Erie, Pennsylvania
June 27, 1995
-42-
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EXTRACTED FROM THE STATEMENTS OF CONSOLIDATED FINANCIAL
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